Sri Lanka Exports Up in February Helped by Agricultural and Industrial Exports

11th May 2010, www.dailynews.lk

Sri Lanka’s external sector performance showed signs of improvement along with the gradual recovery of the global economy. Earnings from exports grew by 20.0 percent in February 2010 to US $ 629 million led by higher earnings from agricultural and industrial exports, the Central Bank said yesterday.

The expenditure on imports also increased by 60.6 percent to US $ 973 million, due to the increased demand for imports within all the sub sectors.

Accordingly, the trade deficit expanded to US $ 344 million in February 2010.

Earnings from agricultural exports, which accounted for 27.0 percent of total exports, increased in February 2010, year-on-year, led by tea, rubber and minor agricultural exports.

Tea and rubber, whose export volumes increased by 20.1 percent and 44.1 percent, respectively, continued to fetch higher prices in the international market. Tea prices increased by 25.7 percent to US dollars 4.35 per kg mainly due to the finer quality of Ceylon tea exports and the supply shortages in the international market.

Rubber prices increased to US $ 2.86 per kg, reflecting a 95.4 percent increase compared to February 2009, mainly due to the recovery in international demand. Supply shortages due to the adverse weather conditions that prevailed in the major rubber producing countries in Asia also helped increase the international rubber prices.

Earnings from minor agricultural exports increased due to higher prices fetched by fruits, coffee, and cocoa products and increased volumes of vegetables, arecanuts, cashew and essential oils.

Export earnings from certain spices, such as cinnamon and cloves, increased led by higher volumes and prices.

The industrial exports, which were affected by the global economic crisis, rebounded in February 2010, led by the exports of processed food and beverages as well as rubber products.

Although exports of textile and garments and ceramic products declined in February 2010, year-on-year, they reflect an improvement since January 2010.

All major categories of imports increased in February 2010.

Expenditure on imports of consumer goods increased significantly, with notable increases in food imports such as rice, sugar and wheat.

Expenditure on imports of non-food consumer durables also increased significantly in February 2010. Amongst intermediate goods, expenditure on petroleum imports increased substantially in February, year-on-year, as the average import price of crude oil rose by 71.4 percent to US $ 78.23 per barrel. Import expenditure on fertilizer increased in February 2010, compared with the same period in 2009, mainly due to the substantially higher import volumes.

Imports of investment goods also increased in February 2010 led by higher expenditure on transport equipment, building materials and machinery and equipment, which augurs well for future economic activity. During the first two months of 2010, foreign remittances increased by 13.0 percent over the corresponding period of 2009 to US $ 564 million.

The gross official reserves, with and without Asian Clearing Union (ACU) funds, were at US $ 5,408 million and US $ 5,032 million, respectively, by end of February 2010. Based on the previous 12 months average imports of US $ 921 million per month, the gross official reserves, without ACU funds, were equivalent to 5.5 months of imports.