Sri Lanka to see BOP surplus: CB

28 September 2011 04:15 am - 1 - {{hitsCtrl.values.hits}}

A A A

Sri Lanka will see a balance of payment (BOP) surplus in 2011 despite a high trade deficit as foreign direct investment, workers’ remittances and inflows into government accounts all pick up, the Central Bank Colombo said on Tuesday.

The trade deficit in the first seven months jumped 78 percent to $5.08 billion compared to $2.86 billion in the same period a year ago. The seven-month figure is 75 percent of the total estimated trade gap of $6.76 billion for the full-year.

“We will see a balance of payment surplus this year,” Swarna Gunaratne, the acting director at central bank’s economic research department said to a news agency.

“The high trade deficit will be compensated by all other inflows,” he added.

In the first seven months, the $50 billion economy has seen a 72.4 percent rise in government inflows to $2.75 billion year-on-year, mostly from project-related loans and grants, a 25.6 percent gain in worker remittances to $2.92 billion, and a 98.6 percent jump in foreign direct investments (FDI) to $413 million.

The International Monetary Fund (IMF) early this month asked the central bank to allow flexibility in foreign exchange by limiting the bank’s intervention due to a steady decline in non-borrowed reserves amid the high trade deficit.

However, the central bank had defended its intervention in the foreign exchange market, saying the expected inflows will help the rupee to appreciate further.

The island nation saw a record trade deficit of $5.98 billion in 2008 when the oil prices jumped to nearly $150 a barrel.

In 2008, the central bank sold dollars to prop up the rupee, but eventually had to allow the currency to depreciate after the country’s reserves fell sharply.

Sri Lanka saw a $1.4 billion balance of payment deficit in 2008, before it agreed to $2.6 billion IMF loan to increase its depleted reserves.

The structure of government tax revenue is an indicator of the specific investment spheres of the private sector from which government tax revenue is mostly derived. The tax revenue structure illustrates that a significantly large portion of consumer tax income comes from import-led activity.

In 2009, approximately 80.9 percent of government consumer tax revenue (which accounts for nearly 80 percent of the government’s total revenue) was derived through imports; and the latter figure during the last ten years has averaged 78.6 percent.

The heavy dependency of government revenue on the import trade creates an inverse link between the fiscal deficit and the balance of trade deficit of the economy.

The escalating trade deficit in 2010 caused government revenue to increase significantly owing to the positive relationship, which prevails between government revenue and the balance of trade deficit. (Source: Gulf Today)

Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

Comments - 1

Big Ears Wednesday, 28 September 2011 04:33 AM

Why take loans from India and China?

Add comment
Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.

Sri Lanka to see BOP surplus: CB

Comments - 1

Add comment

RECOMMENDED

UDA owned land in Thalawathugoda; UDA Minister Prasanna Ranatunga under the spotlight for forceful occupation of reserved land

Loss-making SMIB faces political pressure in recovering loans

Baltimore Bridge Collapse: MV Dali, SL authorities anchored in mystery?

Has Sri Lanka become a potential hub for the illegal wildlife trade?

Spotlight on Moragahakanda Development Project Moragolla villagers lose livelihoods and down to one meal a day

Ambitious Sri Lankan jobseekers ‘trafficked into Ukraine war zones’

Western purple-faced langurs see blue!

Most Viewed in News

Former MP Palitha Thewarapperuma dies from electrocution

New Visa procedure implemented

23 year old youth ends up having his testicles removed

SL on alert on possible genocide allegations by Canada

April 15 declared a government holiday

Street food vendor arrested for verbally harassing foreigner

MIRROR CRICKET

How does CSK get best out of Pathirana?

Mendis, Mathews move up in ICC Test Rankings

Chamodi, Dewmi spins Sri Lanka U19 Women to big win

Amir, Wasim return to Pakistan national team

TODAY'S HEADLINES

100 Police personnel trained to target criminals operating on motorbikes

Catholic Church receives full report

Complaint lodged over Piumi Hansamali’s possession of Gota’s Range Rover

We are struggling with severe shortage of staff – Excise Chief

Mendis, Mathews move up in ICC Test Rankings

Security raised for Champions League ties after threat

SLA target four events at Paris Olympic Games

Chamodi, Dewmi spins Sri Lanka U19 Women to big win