June external sector performance improves

Sri Lanka’s export earnings grew for the fourth consecutive month in June while the expenditure on imports declined for the first time in 22 months demonstrating somewhat improved external trade conditions amid a slowing economy.  

The dollar-hungry island managed to increase its June export earnings by 9.6 percent to US $ 987 million as the country exported two ships to Singapore and the agricultural exports got a boost from higher tea prices, albeit the production fell.

Garments and textiles exports, Sri Lanka’s top commodity exports, which account for 40 percent of exports, fell by 7.5 percent to US $ 398 million in June. For the 1H17, these earnings dropped 5.2 percent on year to US $ 2,384 million. 

But the export of the two ships helped earnings from transport equipment to register an eight fold increase from US $ 7.6 million to US $ 54.3 million during the 12 months to June 2017. 

Meanwhile, the food, beverage and tobacco exports also doubled to US $ 59 million. As a result of these, the total industrial exports rose by 9.8 percent year-on-year (YoY) to US $ 750 million.  The earnings from agricultural exports rose by 8.3 percent YoY to US $ 232 million reflecting higher exports of all major categories of agricultural products except coconut and spices. 

Earnings from tea exports were US $ 139 million in June, up 14 percent YoY as the average export price of Ceylon tea increased to US $ 5.36 a kilogram from US $ 4.27 in June 2016.  The aggregate earnings from tea for the 1H17 grew by 17.8 percent YoY to US $ 728 million. 

However the volumes declined by 9.5 percent in June from a year earlier.  Continuing its growth, the earnings from seafood exports rose by 17.4 percent YoY to US $ 15.2 million.  The seafood exports to the European Union (EU) market having registered a 101 percent growth YoY reflected the benefit accruing from the removal of the ban on exports of fisheries products to the EU market.  Meanwhile, the import expenditure declined by 8.0 percent YoY, first time since September 2015, to US $ 1,541 million in June 2017 due to decline in imports of all categories, particularly fuel and consumer goods.  After recording continuous rise in the fuel import bill, the expenditure on fuel in June dropped by 34 percent YoY to US $ 201 million dragging down the total intermediate goods imports by 13 percent YoY to US $ 792 million. 

The lower fuel bill was possible due to lower import volumes and, average import prices of crude oil and refined petroleum products. 

“In addition, lower import expenditure on base metals such as iron and steel as well as rubber and articles, specially rubber in primary forms, also contributed significantly to the decline in intermediate goods imports”, the Central Bank said in a statement.  However, import expenditure on gold continued to increase by 42.3 percent YoY, while import expenditure on fertiliser increased for the first time since August 2016, due to higher import of urea. 

The consumer goods imports fell by 8.9 percent YoY to US $ 323 million in June. Sri Lanka spent US $ 54 million on vehicles, down 5.1 percent YoY while for the 1H17, the figure stood at US $ 370 million, down 12 percent YoY.

Import expenditure on investment goods declined marginally by 1.2 percent YoY to US $ 405 million during June 2017 led by lower imports of building materials and machinery and equipment.

Due to these developments, largely positive, the country slashed its trade deficit to US $ 554 million for June from US $ 775 million a year earlier. 

However for the 1H17, Sri Lanka expanded its trade deficit to US $ 4, 754 million from US $ 4, 191 million with an import bill was US $ 10, 151 million against an export income of just US $ 5, 398 million.