Sri Lanka’s external trade position stable, says Central Bank
View(s):Sri Lanka’s external sector remained stable with continued inflows being recorded in the balance of payments (BOP), the Central Bank (CB) said this week.
Cumulative foreign inflows to the country in the form of earnings from tourism, workers’ remittances, foreign direct investments (FDI) and investments in Government securities showed a noteworthy growth during the first half of 2013.
Commercial banks and the corporate sector have also been able to raise more foreign funds this year, given the stable macroeconomic environment and further relaxation of exchange control regulations. The trade balance also continued to narrow with exports recording an increase on a year-on year basis in June 2013.Both earnings from exports and expenditure on imports have recorded significant growth on a year-on-year basis in June 2013. Earnings from exports grew by 6.8 per cent in June 2013 to US$807 million. Expenditure on imports increased by 15.3 per cent to $1.6 billion in June 2013. However, on a cumulative basis, earnings from exports as well as expenditure on imports continued to decline by June. While earnings from exports during the first half of 2013 declined by 4.5 per cent, expenditure on imports during this period declined by 5.8 per cent. As a result, the deficit in the trade account for the first six months of 2013 declined by 7.1 per cent to $4.5 billion.
The largest contribution to the growth in exports in June 2013 came from the significant increase in exports of textiles and garments, and tea. Earnings from exports of textiles and garments, which account for more than 40 per cent of total exports, increased by 14.9 per cent, year-on-year. Garment exports to the USA increased by 24.8 per cent, year-on-year, while garment exports to the EU increased by 6.7 per cent, year-on-year, in June 2013. Earnings from exports of rubber products also increased by 7.7 per cent to $69 million, led by increased exports of retreaded tyres, bicycle, motor cycle and motor car tyres, as well as rubber gloves.
Earnings from tea exports increased by 14.5 per cent in June 2013 with a 4.7 per cent increase in the export volume of tea coupled with an increase of around 9 per cent in the average export price of tea. Higher earnings from spice exports were propelled by better performance of commodities such as cloves, nutmeg and mace.
Expenditure on imports recorded a significant increase in June 2013 mainly as a result of higher expenditure on fuel imports. The average import price of crude oil rose by 9.0 per cent, year-on-year, to $105.25 per barrel in June 2013, while the import volume of petroleum in June 2013 was also significantly higher on a year-on-year basis due to increased imports of crude oil.
The CB said in a media release that the import expenditure on fertilizer, which had continued to record year-on-year declines since the latter part of 2012, also increased substantially in June 2013, due to higher volumes imported to meet the demand in the market. Amongst other imported items that contributed significantly to the increased import expenditure in June 2013 were vehicles, classified under consumer goods. Increased imports of vehicles could be attributed mainly to the recent appreciation of the rupee against several currencies including the Japanese yen, due to cross currency movements.
Earnings from tourism continue to record sound growth. Earnings from tourism grew by 29.0 per cent, year-on-year, in June 2013 to $81 million, from $63 million recorded in June 2012. Total earnings from tourism during the first half of 2013 recorded a growth of 22.9 per cent, year-on-year, and amounted to $565.3 million, compared to the cumulative earnings of $459.9.
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