Breaking a 17-month long declining streak, Sri Lanka’s exports in August saw some hope as the earnings rose a modest 8.4 percent to US $ 866 million from a year ago but the first eight months exports remained still down by 4.1 percent to US $ 6.87 billion against the same period last year, the summary external sector data released by the Central Bank showed.
Sri Lanka’s exports have been on the decline since March 2015 due to the global commodity price slump, which impacted the agricultural and industrial exports, while lower domestic supply also contributed. Meanwhile, the expenditure on imports in August rose 8.3 percent year-on-year (YoY) to US $ 1.65 billion. However, the imports in the first eight months declined a paltry 1.6 percent YoY to US $ 12.4 billion. Imports to Sri Lanka have also been on the decline for many months since July 2015, except for two months, due to lower global commodity prices, particularly oil. Specially during 2016, the consumption imports declined as such imports cost more following the weakening of the rupee.
The Sri Lankan rupee has depreciated 2.1 percent against the US dollar so far this year, after depreciating 9.0 percent in 2015. Lately, the Sri Lankan rupee has seen pressure mounting from foreign selling in government securities and importer dollar demand leading to year-end festive season. But the authorities believe US $ 1.0 billion expected from an 80 percent sale of the Hambantota port to a Chinese party could provide some respite to the currency in the short term. All in all, the trade deficit in August expanded 8.0 percent YoY to US $ 783 million, while the deficit for the first eight months rose 1.6 percent YoY to US $ 5.54 billion. Despite the deficit in the trade account, the country expects a surplus in the current account of the balance of payments (BoP) this year from the higher inflows from service exports, tourism inflows and worker remittances.
However, the latest data available for September showed the worker remittances decreasing 1.1 percent YoY to US $ 577.9 million. However, during the first nine months remittance inflows increased 3.9 percent YoY to US $ 5.4 billion. An average of US $ 7.0 billion remittances annually sent by close to two million expatriates cushion the country’s ailing BoP. Meanwhile, the tourism earnings in September rose to US $ 246.1 million and for the first nine months, the total earnings surpassed the US $ 2.5 billion milestone. By the end of September, the gross official reserves stood at around US $ 6.5 billion. Sri Lanka plans to have preferential access closer to a market of three billion people by this time next year through bilateral trade pacts with China, Japan and Singapore and a deeper trade and services agreement with India to boost exports.