Export earnings up, import cost down in July | Daily News

Export earnings up, import cost down in July

The notable decline in import expenditure in July 2022 reflected the impact of overall moderation of activity amidst forex liquidity strains in the banking system, while the policy measures to curtail non-urgent import expenditure also helped to contain import demand pressures.

As a result, the trade deficit recorded a notable contraction in July 2022 over the year, thereby easing stresses in the domestic foreign exchange market. Gross official reserves stood at US dollars 1.8 billion as at end July 2022. The Central Bank continued to provide forex liquidity to finance essential imports, exhausting the usable level of gross official reserves. Meanwhile, the weighted average spot exchange rate in the interbank market remained around Rs. 361 per US dollar during the month.

The balance in the merchandise trade account recorded a deficit of US dollars 123 million, compared to the deficit of US dollars 606 million recorded in July 2021. Meanwhile, the cumulative deficit in the trade account during January-July 2022 narrowed to US dollars 3,637 million from US dollars 4,922 million recorded over the same period in 2021. Overall exports: Earnings from merchandise exports grew by 5.4% in July 2022, over July 2021, to US dollars 1,164 million. An increase in earnings was observed in industrial exports, while a decline was recorded in agricultural and mineral exports. Earnings from the export of industrial goods increased in July 2022 by 12.4% compared to July 2021, contributed mainly by higher export earnings from garments; and gems, diamonds and jewellery. Total earnings from the export of agricultural goods declined by 14.5% in July 2022, compared to July 2021, with a substantial share of the decline contributed by seafood and spices, while export earnings from tea increased only slightly. Earnings from seafood in July 2022 nearly halved, mainly due to the decline in volume of tuna exported.

Expenditure on merchandise imports declined substantially by 24.8% to US dollars 1,287 million in July 2022, compared to US dollars 1,710 million in July 2021. Foreign investment in the government securities market recorded a marginal net inflow in July 2022, resulting in a cumulative net inflow of US dollars 7 million to the government securities market during January-July 2022. Expenditure on the importation of consumer goods declined substantially by 46.2% (y-o-y) in July 2022, contributed mainly by a reduction of 66.8 per cent (yo-y) in non-food consumer goods.

The decline in import expenditure on non-food consumer goods was observed in all subcategories, with a notable drop in imports of medical and pharmaceuticals (mainly, vaccines), telecommunication devices (mainly, mobile telephones) and home appliances (mainly, televisions).

Meanwhile, expenditure on importation on food and beverages also declined by 7% in July 2022 (y-o-y), primarily due to the decline in imports of oils and fats (mainly, coconut oil), seafood (mainly, dried fish) and vegetables. However, expenditure on cereals and milling industry products and sugar increased substantially. Expenditure on the importation of intermediate goods declined by 9.5% in July 2022, compared to July 2021.

Meanwhile, import expenditure on fuel increased by 34.9% (y-o-y) to US dollars 345 million, as volumes and average import prices of refined petroleum products increased, while imports of crude oil and coal were non-existent during the month. Import expenditure on fertiliser increased, mainly due to high importation of urea.

 


Reserves stands at USD 1.8 bn

Gross official reserves stood at US dollars 1.8 billion as at end July 2022. This included the swap facility from the People’s Bank of China, equivalent to around US dollars 1.5 billion, which is subject to conditionalities on usability.

Consequently, the level of usable reserves continues to remain at a significantly low level by the end of July 2022. Total foreign assets, which consist of gross official reserves and gross foreign assets of the banking sector, amounted to US dollars 5.9 billion at end July 2022.

 


Exchange rate remains stable

Exchange rate continued to remain stable through July 2022, following the introduction of daily permissible bands in mid-May 2022.

Accordingly, from May 13 2022 to date, the Sri Lanka rupee recorded a marginal depreciation against the US dollar, despite recording a depreciation of 44.5 per cent against the US dollar during the year up to 06 September 2022. Meanwhile, reflecting cross-currency movements, the Sri Lanka rupee depreciated against the euro, the pound sterling, the Japanese yen, the Australian dollar, and the Indian rupee during the year up to 06 September 2022.

 


Workers’ remittances increase

Workers’ remittances increased to USD 279 million during July 2022, in comparison to USD 274 million in the previous month, while remaining low compared to the corresponding month in the previous year.

Meanwhile, total departures for foreign employment were recorded at 22,821 during the month of July 2022.

Total departures of foreign employment comprised unskilled (8,232), skilled (7,091) and domestic aid (4,479) categories.

Total departures for foreign employment during January-July 2022 were recorded at 163,522, compared to 37,041 in the corresponding period of the previous year, and a total of 117,952 in 2021.

 


Tourist earning up to USD 85 mn

Earnings from tourism in July 2022 are estimated at US dollars 85 million, in comparison to US dollars 59 million in the previous month, and US dollars 6 million in the corresponding month in the previous year.

Tourist arrivals rose in July 2022 to 47,293, from 32,856 arrivals recorded in June 2022. However Unfavorable conditions, such as fuel shortages, power outages, travel advisories issued by certain countries etc., continue to impact tourist arrivals. The United Kingdom, India, Germany, and France remained the main source countries for tourist arrivals in July 2022.

 

 


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