May trade gap widens 50%

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Sri Lanka’s trade deficit in May widened a whopping 49.7 percent year-on-year (YoY) to US $ 703 million, amid a significant increase in imports led by vehicle imports, the Central Bank said.

On a cumulative basis, trade deficit during the first five months of 2015 increased by 10.2 percent to US $ 3,397 million.

Import expenditure on personal motor vehicles, which falls under consumer goods imports, rose 87.1 percent YoY to US $ 93 million.

Importation of transport equipment, categorized under investment goods, increased by 117.2 percent, YoY, to US $ 72 million mainly due to the increase in importation of auto trishaws.

The fuel bill in May fell 7.8 percent YoY to US $ 264.3 million, owning to lower global oil prices. Fertilizer imports also fell 20.9 percent YoY to US $ 25.1 million.

Import expenditure on apparel articles rose 16.3 percent YoY to US $ 205.2 million.

Machinery and equipment imports rose 21.8 percent YoY to US $ 174.1 million.

Accordingly, the total import expenditure in May rose 17.2 percent YoY to US $ 1585.5 million.

However, in contrast, export income in May edged up only by meagre 0.1 percent YoY to US $ 882.5 million, despite a 7.6 percent YoY increase to Rs.392.9 million in apparel exports.

Rubber products exports, mainly consisting of tyres, fell 2.3 percent YoY to 76.2 million. Gems, diamonds and jewellery exports fell 29.8 percent YoY to US $ 24.6 million.

The tea exports during May fell 12.1 percent YoY to 123.6 million. Seafood exports, impacted by the ban by the European Union, fell 39.3 percent YoY to 14.9 million.

On a cumulative basis, seafood exports have fallen 37.5 percent YoY to 72.3 million in the first five months of the year.
The total export earnings in the first five months stood at US $ 4,471.4 billion, up by just 0.2 percent while total import expenditure rose 4.3 percent YoY to US $ 7, 868 million.



Inflows 
Meanwhile, cumulative earnings from tourism increased to US $ 1,321.4 million during the first six months of 2015 compared to US $ 1,157.9 million recorded during the same period in 2014.

However workers’ remittances in May 2015 declined by 3.5 percent YoY to US $ 537.7 million from US $ 557.5 million in May 2014. 

But on a cumulative basis, inflows from workers’ remittances increased marginally by 1 percent to US $ 2,803.1 million during the first five months of 2015 in comparison to the corresponding period of 2014.

Workers’ remittances are expected to gather momentum during the second half of the year, the Central Bank noted. 

Commenting on the financial flows, the Central Bank said foreign investments in the government securities market recorded a net outflow of US $ 237.3 million during the first six months of 2015 compared to a net inflow of US $ 196.5 million during the corresponding period of 2014. The net cumulative inflows to the Colombo Stock Exchange by July 21, 2015 amounted to US $ 33.1 million in contrast to the US $ 58.2 million in the first five months of the year. 



BOP
The overall Balance of Payment (BOP) is estimated to have recorded a deficit of US $ 1,307.8 million during the first five months of 2015, compared to a surplus of US $ 1,665.1 million recorded during the corresponding period of 2014.



Foreign reserves
Sri Lanka’s gross official reserves as at end-May 2015 stood at US $ 6.8 billion, equivalent to 4.2 months of imports.

However, the gross official reserves are estimated to have increased to US $ 7.5 billion as at end-June 2015, with the receipt of the proceeds from the latest international sovereign bond and Sri Lanka Development Bond issuances and other currency inflows.

The Central Bank recently signed an agreement with the Reserve Bank of India for the second tranche of a currency swap agreement totalling to US $ 1.5 billion.

Sri Lanka has already received the first tranche of the swap arrangement amounting to US $ 400 million.