Sri Lanka’s external sector displayed a mixed performance in April 2017. Although export earnings increased in April 2017, the higher growth in import expenditure resulted in an expansion of the trade deficit.
Despite the increase in tourist earnings in April 2017, the decline in workers’ remittances together with the expanded trade deficit moderated the performance of the external current account.
However, the financial account of the Balance of Payments (BOP) was supported by continued foreign inflows to the Colombo Stock Exchange (CSE) and the government securities market in April 2017.
Earnings from exports at USS 795 million in April 2017 increased for the second consecutive month, registering a year-on-year growth of 11.9 per cent. This high growth was mainly driven by the low base effect which registered US$ 710 million in April 2016, the lowest monthly export value since April 2013.
Earnings from industrial exports, which represent about 75 per cent of total exports, grew by 8.6 per cent (year-on-year) to US$ 595 million in April 2017 mainly due to higher exports of transport equipment, petroleum products and textiles and garments.
Earnings from transport equipment increased by nearly five-fold to US$ 27 million during the month, as a result of the export of a general cargo vessel worth US$ 23 million.
Earnings from exports of petroleum products increased by 62.5 per cent (year-on-year) in April 2017 reflecting greater volumes and higher prices for bunker and aviation fuel.
Textile and garment exports at US$ 351 million in April 2017 registered a moderate increase of 3.0 per cent (year-on-year), although in comparison to the previous month, earnings from textile and garment exports reduced reflecting seasonal patterns.
Earnings from agricultural exports grew by 22.7 per cent (year-on-year) to US$ 196 million in April 2017 led by tea, spices and seafood exports.
Earnings from tea exports increased by 17.1 per cent (year-on-year) to US$ 109 million due to higher average prices, despite the decline in volume exported.
In addition, earnings from seafood exports increased by 59.7 per cent (year-on-year) in April 2017 due to a 251 per cent growth recorded in seafood exports to the EU, following the removal of the ban on fisheries products. However, earnings from coconut and rubber exports declined in April 2017.
Expenditure on imports increased by 9.8 per cent (year-on-year) to US$ 1,604 million in April 2017. The largest contribution to overall growth caused from intermediate goods (74.7 per cent), followed by consumer goods (20.2 per cent) and investment goods (5.7 per cent).
Expenditure on import of intermediate goods increased by 13.7 per cent (year-on-year) to US$ 886 million in April 2017, largely due to higher expenditure on fuel and base metal imports.
Expenditure on fuel increased by 62.1 per cent (year-on-year) during the month, reflecting higher import volumes of oil and coal for power generation and elevated import prices in the global market. The import price of crude oil increased to US$ 56.48 per barrel in April 2017 from US$ 44.05 per barrel in April 2016.
Expenditure on consumer goods imports increased by 9.1 per cent (year-on-year)to US dollars 345millionin April2017driven by higher imports of non-food consumer goods such as clothing and accessories, household furniture items and home appliances amidst a decline in imports of vehicles and telecommunication devices.
Rice imports increased to US dollars 10million in April2017 from US dollars 1 million in April 2016 due to measures taken by the government to encourage rice imports to meet the shortage in the domestic market. Expenditure on investment goods imports grew in April2017 by 2.3per cent to US dollars 372 million (year-on-year) led by higher imports of building materials and transport equipment. Import expenditure on building materials increased owing to iron and steel and cement imports in April 2017 while imports of transport equipment increased mainly due to higher imports of commercial vehicles.
India, China, the UAE, Singapore and Japan were the main import origins during the first four months of 2017, accounting for about 59 per cent of total imports.
Tourist arrivals at 160,249 in April 2017 increased by 17.5 per cent (year-on-year), following a decline in arrivals for two consecutive months. Earnings from tourism1 increased to US dollars 274.9 million during April 2017 in comparison to US dollars 234.0 million in April 2016.
Foreign investments in the CSE during the first four months of the year recorded a net inflow of US dollars 154.5 million, including a net inflow of US dollars 106.3 million to the secondary market and an inflow of US dollars 48.2 million to the primary market. Continuing the reversal of the trend observed in the previous month, foreign investments in the government securities market recorded a net inflow of US dollars 45 million during April 2017. However, on a cumulative basis, the government securities market experienced a net outflow of US dollars 360.4 million during the first four months of 2017.
Long term loans to the government recorded a net inflow of US dollars 60.3 million during the first four months of 2017, compared to a net inflow of US dollars 7.6 million during the corresponding period of 2016.
Further, foreign direct investments including foreign loans to BOI companies, which are reported on a quarterly basis, remained moderate with a net inflow of US dollars 146.5 million during the first quarter of 2017. This included disinvestments as a consequence of share buybacks initiated by several companies listed in the CSE.
During the first four months of 2017, the overall BOP is estimated to have recorded a deficit of US dollars 344.4 million in comparison to a deficit of US dollars 958.1 million recorded during the corresponding period of 2016.
Add new comment