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Sri Lanka’s June trade deficit contracts 35.3%
By Dilina Kulathunga :
The ongoing export push by all sectors has supported the country’s external sector to continue narrowing its trade deficit, and in the month of June, the deficit contracted by as much as 35.3 percent to US $ 454 million but slowed from the previous month.
In May, the trade deficit narrowed by 47.9 percent year-on-year (YoY) to US $ 393.4 million.
The trade deficit for the six months ended June (1H’14) narrowed 20.1 percent to US $ 3.55 billion, driven by exports which grew by 16.8 percent YoY to Rs. 5.44 billion.
The imports during 1H’14 however edged down by only 1.2 percent YoY to US $ 8.99 billion.
The government projects to have at least US $ 20.0 billion exports by 2020 with a possible trade surplus also supported by import substitution industries.
In June, exports grew by 22.0 percent to Rs.807.6 million helped by textiles and garments which grew by as much as 25 percent to US $ 446.2 million while the imports declined 4.6 percent YoY to US $ 1.44 billion due to reduction in oil imports.
The government targets an export income of US $ 5.0 billion by 2016 from this sector. This is more than 50 percent of the export basket but authorities have been contemplating on diversifying the product portfolio over many years.
Meanwhile the exports to European Union and United States grew by 34.6 percent and 12.1 percent respectively and exports to non-traditional markets grew by 44.5 percent.
Rubber product exports was the second biggest contributor to total exports with US $ 77.0 million income in June, a growth of 11.1 percent from a year ago.
“Although the continued decline in the international price of raw rubber has had a negative effect on raw rubber exports, this has benefitted domestic manufacturers of rubber products and encouraged value added rubber exports,” a Central Bank (CB) statement said.
The declining rubber prices impacted raw rubber exports and the earnings declined by as much as 23.7 percent YoY in June.
Altogether industrial exports grew by 18.7 percent YoY to US $ 725 million in June.
Meanwhile earnings from tea exports grew by 31.5 percent YoY to US $ 153 million in June due to the impact of both 23.5 percent increase in tea export volumes and a 6.5 percent increase in the average export price of tea.
Export earnings from coconut more than doubled to US $ 32 million during the month.
Overall, agricultural exports grew by 33 percent YoY to US $ 256 million in June.
On imports in June, fuel imports declined 9.4 percent YoY to US $ 412.4 million. Furthermore, fertilizer imports declined by 54.5 percent YoY to US $ 14 million due to the drought weather conditions prevailing in the country and a substantial decline in international fertilizer prices due to a fall in natural gas prices.
Meanwhile import expenditure on wheat declined by 62 percent compared to the corresponding month of the previous year, owing to a sharp fall in international wheat prices, the CB said.
“Import expenditure on diamond, precious stones and metals also declined by 88.6 percent to US $ 5.6 million during June 2014, mainly due to the decline in gold and diamond imports,” the CB said.
Altogether intermediate goods imports which comprised the bulk of the import basket declined by 7.5 percent YoY to US $ 891 million in June.
Expenditure on consumer goods imports marginally grew by 1.2 percent YoY to US $ 277 million while the investment goods imports remained unchanged at US $ 270 million in the month of June 2014.
Tourism earnings for the seven months ended July topped US $ 1.24 billion, up 33.9 percent from the same period in 2013. In July alone, earnings were up by 34.4 percent YoY to US $ 193.6 million from a record number of tourist arrivals of 133, 971, an increase of 25.2 percent from the same month in 2013. In 2013, Sri Lanka earned a record US $ 1.72 billion from 1.27 million arrivals, becoming the country’s third largest foreign exchange generator after worker remittances and textiles and garments exports. The tourist arrivals in the first seven months of 2014 rose 24.7 percent YoY to 861,324. Sri Lanka targets 1.5 million tourists in 2014 and 2.5 million by 2016. |
Sri Lanka’s main foreign exchange generator, worker remittances recorded US $ 3.36 billion, up 10.6 percent from the same period in 2013. In June alone worker remittances rose by 10.8 percent to US $ 585.1 million from US $ 528.2 million in June 2013. In 2013, Sri Lanka recorded a record remittances of US $ 6.4 billion, 9.5 percent of the GDP. But Treasury Secretary Dr. Jayasundera expects at least US $ 12-15 billion earnings from worker remittances by 2020. |
Overall Balance of Payment (BOP) of the country’s external account is estimated to have recorded a surplus of US $ 1.95 billion for the 1H’14. This is in comparison to a deficit of US $ 169.2 million recorded a year ago. Meanwhile the gross official reserves including the Asian Clearing Union (ACU) balances, reached a level of US dollars 9.2 billion by end June 2014. This is equivalent to 6.1 months of imports by end June. “By early August 2014, the gross official reserves which had a steady rise, recorded a level above US $ 9.0 billion without the ACU balances, thereby reflecting an even greater sustainable level of reserves,” the CB stated. The total foreign assets, which include foreign assets of the banking sector amounted to US dollars 10.7 billion by end June 2014, and this is equivalent to 7.2 months of imports. Foreign debt service payments during the 1H’14 amounted to US 740.6 million and the IMF-SBA payments amounted to US $ 351 million. |
Net portfolio inflows to the Colombo Stock Exchange (CSE) during the 1H’14 were down 58.8 percent to US $ 48 million from the same period last year. Net foreign investments in the CSE during the 1H’13 amounted to US $ 116.5 million. “However, by 18 August 2014, net foreign investments into the CSE amounted to US $ 86 million,” the statement added. Meanwhile during the 1H’14 the net inflows to the government securities market amounted to US $ 196.5 million, comprising net inflows to Treasury bills and Treasury bonds amounting to US $ 54.4 million and US $ 142.1 million, respectively. Further, inflows to the government on account of long term loans up to June 2014 were US $ 962 million compared to US $ 951 million during the corresponding period of 2013. The inflows to licensed commercial banks and licensed specialized banks during the 1H’14 amounted to US $ 105 million |
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