Workers’ remittances fall in June/July 2021
View(s):Workers remittances, one of the key sectors that the Central Bank relies on for foreign exchange, fell by 35.4 per cent in July to US$453 million compared to $702 million in the same 2020 month, according to Central Bank economic data for July 2021 released to the public on Monday. It also fell in June 2021 compared to the same month in 2020.
No reasons were given for the fall but some economists believed it may have been due to inflows increasing through informal channels where workers get a better rate for the dollar. While formal banking channels are trading at Rs. 198-199 per dollar for workers, in the informal channel they get much more for their dollars where the foreign currency is traded at as high as Rs. 230.
For the period January-July 2021 however worker remittances grew by a marginal 2.6 percent to $3.8 billion compared to the same 2020 period.
The trade deficit widened in January-July 2021 to –$2,755 million from -$939 million in the same period last year, largely because import spending grew by 30.7 percent in the same 2021 period compared to export earnings growing by 23.7 percent.
The Central Bank statement said that earnings from the export of industrial goods increased by 1.1 percent in July 2021 compared to July 2020. This increase was mainly due to the increase in earnings from export of petroleum products, machinery and mechanical appliances (primarily parts of mechanical appliances and electronic equipment) and rubber products (tyres and gloves).
Total earnings from the export of agricultural goods in July 2021 increased by 2.3 percent compared to July 2020, mainly due to the increase in export earnings from seafood (such as fresh and frozen tuna, fish fillet, shrimps and prawns) and spices (cinnamon, pepper, cloves, nutmeg and mace etc). However, earnings from the export of tea declined significantly, due to a decline in both volume and prices of tea exported.
It said expenditure on merchandise imports increased by 32.2 percent to $1,710 million compared to $1,294 million recorded in July 2020. The increase in import expenditure was observed across all main categories of imports, namely, consumer goods, intermediate goods and investment goods, despite some import controls still being in place. On a cumulative basis, total import expenditure from January to July 2021 amounted to $11,725 million, compared to $8,968 million recorded in the corresponding period in 2020.
“Expenditure on the importation of food and beverages declined by 9.4 percent, with the decline primarily stemming from sugar, milk powder and seafood. However, import expenditure on some food and beverage segments such as coconut oil, vegetables (mainly garlic, dhal, chickpeas and red onions), and spices (mainly chillies) increased. Expenditure on imports of non-food consumer goods increased by 41 percent, with a broad-based increase in all non-food consumer goods (except personal vehicles, which are under import restrictions). This increase is largely attributable to the imports of medical and pharmaceuticals (mainly vaccines), home appliances (mainly televisions), and rubber tyres. Import expenditure on telecommunication devices recorded a slight decline,” the statement said.
Last week, the Central Bank tightened rules governing non-essential imports, making it more expensive by slapping a 100 percent cash deposit margin requirement on opening LCs for such imports.