Current Account bailed out by migrant workers and exports | Daily News


Current Account bailed out by migrant workers and exports

Sri Lanka’s external sector continued to recover in August 2020, mainly supported by an improved trade deficit and a notable increase in workers’ remittances.

Export performance remained strong for the third consecutive month despite the pandemic affected global demand. In the financial account, marginal foreign investment outflows were recorded from the government securities market, while the Colombo Stock Exchange (CSE) also recorded some foreign investment outflows during the month.

Meanwhile, terms of trade, the ratio of the price of exports to the price of imports improved by 4.6% (year-on-year) in August 2020 as import prices declined at a faster pace than the decline in export prices.

Earnings from merchandise, exports declined both on a year-on-year basis as well as on a month-on-month basis in August 2020. Accordingly, merchandise exports declined to US dollars 947 million in August 2020 compared to US dollars 1,033 million recorded in August 2019 and US dollars 1,085 million recorded in July 2020.

A notable increase was recorded in earnings from personal protective equipment (PPE) such as face masks and protective suits.

Tea exports declined by 13.3% on a year on year basis. Earnings from mineral exports declined in August 2020, year-on-year, led by lower earnings from ores, slag and ash exports, although earnings from earth and stone exports increased.

The export volume index improved by 3.2%, on a year-on-year basis, while the unit value index deteriorated by 11.2%, on a year-on-year basis, in August 2020, indicating that the year-on-year decline in earnings from exports was, on average, driven by lower export prices.

Year on year merchandise imports recorded a decline of 18.1% to US dollars 1,289 million in August 2020.

The expenditure on intermediate goods imports declined in August 2020, year-on-year, due to declines recorded in most of the subcategories including textiles and textile articles (-16.7%), fuel (-5.2%) and fertilizer (-74.4%).

The expenditure on investment goods declined notably, with declines in all sub categories in August 2020, on a year-on-year basis. Accordingly, expenditure on machinery and equipment (mainly telecommunications devices), building material (mainly iron and steel, articles of iron and steel and cement) and transport equipment (mainly commercial vehicles such as auto trishaws, tankers and bowsers) declined in August 2020 when compared with August 2019.

No tourist arrivals were recorded for the fifth consecutive month in August 2020 as all airports and seaports remained closed for tourist arrivals in view of the COVID-19 pandemic.

Workers’ remittances recorded a notable increase for the third consecutive month, recording a growth of 28.2%, year-on-year, to US dollars 664 million. This increase helped limit the cumulative decline in workers’ remittances to 1.5% to US dollars 4,346 million during the period from January to August 2020, in comparison to the corresponding period of 2019.

The level of gross official reserves amounted to US dollars 7.4 billion as at end August 20200, which was equivalent to 5.1 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector amounted to US dollars 10.3 billion at end August 2020, providing an import cover of 7.2 months.