September export earnings up; trade deficit narrows 12%

Sri Lanka’s external sector performance improved in September 2016 as exports grew for the second consecutive month and tourist earnings rose narrowing the trade deficit, data released by the Central 
Bank showed.

Though Sri Lanka’s main export item, textile and garments, which account for 43 percent of total exports earnings, contracted 7.1 percent year-on-year (YoY) to US$ 382.2 million, total export earnings grew 5.7 percent YoY to US $ 897.6 million.

The European Commission this week proposed to restore GSP Plus trade concession to Sri Lanka. Finance Minister Ravi Karunanayake said yesterday the country will rake in additional US $ 1.4 billion from the tariff concession.

European Union also recently lifted the ban on fisheries imports from Sri Lanka. 

Meanwhile, earnings from transport equipment soared over 450 percent YoY to US $ 31.1 million due a handing over of a ship to Singapore, the Central Bank said.

Export earnings from agricultural products in September rose 8.9 percent YoY US $ 224 million, with earnings from tea exports recording a 8.9 percent YoY growth to US $ 114.9 million.

However, the cumulative export earnings for the first nine months of 2016 stood at US $ 7.76 billion, down 3 percent YoY.  

Meanwhile, import expenditure in September fell 2.5 percent YoY to US $ 1.54 billion, largely owing to lower vehicle imports and globally reduced oil prices. Vehicle imports in September fell 51.9 percent YoY to US $ 60.8 million while the cumulative figure for the nine months fell 41 percent YoY to US $ 607.9 million.

Sri Lanka’s oil bill in September fell 22.1 percent YoY to US $ 176.3 million while for the nine months it fell 18.6 percent YoY to US $ 1.67 billion. 

Further, the lower import expenditure registered on fertiliser, mineral products and building materials contributed largely to the decline in the overall import expenditure during the month.

On a cumulative basis, expenditure on imports during the period January to September 2016 decreased by 1.7 percent to US $ 13.94 billion, mainly due to the declines recorded in the importation of vehicles for personal use and business purposes, fuel and rice.

China, India, Singapore, Japan and UAE were the main import origins during the first nine months of 2016, accounting for about 57 percent of total imports. Accordingly, Sri Lanka’s trade balance in September narrowed 12 percent YoY to US $ 645 million due to the combined effect of an increase in exports and a decline in imports.

However, the cumulative trade deficit during the first nine months of 2016 remained almost unchanged at US $ 6.18 billion in comparison to US $ 6.18 billion recorded during the same period of 2015.

Meanwhile, cumulative earnings from tourism increased to US $ 2.5 billion during the first nine months of 2016 when compared to US $ 2.18 billion during the same period in 2015.

Receipts from workers’ remittances declined marginally by 1.1 percent YoY to US $ 577.9 million during September 2016 compared to US $ 584.2 million in September 2015. However, cumulative inflows from workers’ remittances grew 3.9 percent to US $ 5.38 billion. Foreign investments at the Colombo Stock Exchange (CSE) recorded a net inflow of US $5.1 million in September 2016.

However, the cumulative foreign investments in the CSE during the first nine months of 2016 recorded a net outflow of US $ 19.02 million, which included net outflows of US $ 20.44 million from the secondary market and an inflow of US $ 1.42 million to the primary market.

Also, foreign investments in the government securities market recorded a net inflow of US $ 82.2 million during September 2016 while on a cumulative basis, foreign investments in the government securities market was a net inflow of US $ 48 million during the first nine months of the year in comparison to a net outflow of US $ 920.2 million during the corresponding period of 2015. During the first nine months of 2016, long-term loans to the government recorded a net inflow of US$ 866.0 million, in comparison to a net inflow of US $ 177.6 million during the first nine months of 2015. 

Accordingly, during the first nine months of 2016, the overall balance of payment (BOP) is estimated to have recorded a surplus of US $ 243.1 million, in comparison to a deficit of US $ 2.31 billion recorded during the corresponding period of 2015.