Sri Lanka Exports Highest in December 2010. Remittances up 23.6pct in 2010 while Trade Deficit Expands 66.7pct on Import Growth

07th March 2011, www.island.lk

Sri Lanka’s trade deficit expanded 66.7 percent in 2010 to US$ 5,204.7 million from US$ 3,122.1 in 2009 and although remittances grew 23.6 percent during the year it was not enough to offset the trade deficit as it did in 2009.

The trade deficit expanded on faster import growth, 32.4 percent, reaching US$ 13,511.7 million in 2010 from US$ 10,206.6 million in 2009. Export earnings during the year amounted to US$ 8,307 million, up 17.3 percent from US$ 7,084.5 million.

Remittances reached US$ 4,116 million, up 23.6 percent from US$ 3,330.3 million.

As reported previously in The Island Financial Review, the International Monetary Fund said Sri Lanka’s exports earnings have been declining as a percentage of GDP for more than a decade and it said the island economy has to explore new markets, boosting ties with region and other emerging economies. It said rising global commodity prices could put pressure the trading account this year.

The Central Bank said the rupee would appreciate 3.2 percent on increased foreign capital inflows and dealers said this could help reduce the impact of rising commodity prices. This would also help the government finance foreign loans.

Releasing the trade for December 2010, the Central Bank said, "Gross official reserves continued to remain above the targeted level and stood at US$ 6.6 billion by end January, 2011 without Asian Clearing Union (ACU) balances. Based on the previous 12-month average expenditure on imports of US$ 1,133 million per month, the gross official reserves without ACU balances, were equivalent to 5.9 months of imports."

"Both exports and imports recorded the highest ever monthly values in December 2010. Earnings from exports increased by 34 per cent, year-on-year, to US$ 968 million and expenditure on imports rose by 30.8 per cent to US$ 1,429 million," the bank said.

"The largest contribution to the growth in exports in December was from the industrial sector, led by significant increases in exports of textiles and garments, food and beverages and rubber products. Earnings from garment exports to EU and USA increased by 33.9 per cent and 31.4 per cent, respectively, in December 2010.

"Exports of food, beverages and tobacco products increased by 74.3 per cent, year-on-year, mainly due to higher earnings recorded by exports of fruits, vegetables and animal fodder. Rubber product exports consisted mainly of new pneumatic tyres and articles of apparel and clothing accessories (mainly gloves).

"However, earnings from machinery and equipment and diamonds and jewellery exports recorded year-on-year declines in December 2010. Earnings from agricultural exports increased in December 2010, reflecting a healthy growth in all major sub sectors, mainly due to higher prices recorded by major export crops in the international market. The average export prices of tea and rubber continued to remain high at US$ 4.56 per kg and US dollars 4.26 per kg, respectively in December 2010. Earnings from minor agricultural exports increased by 28.8 per cent to US$ 30 million in December, 2010 mainly due to significant increases recorded in the export volumes of cocoa, essential oils, cashew nuts and cardamoms.

"Expenditure on imports of intermediate goods increased in December 2010, led by higher expenditure incurred on petroleum imports. The average import price of crude oil increased by 16.5 percent to US$ 90.37 per barrel in December 2010. Textile imports also increased substantially in December 2010, indicating a better outlook for the garment industry.

"The expenditure on fertilizer imports increased by 119.4 per cent to US$ 29 million reflecting higher import volumes due to the extended acreage cultivated in the Northern and Eastern provinces and extension of fertilizer support scheme to coconut cultivations. Import expenditure on food and drink increased in December 2010 mainly due to higher food prices in the international market. Expenditure on non food consumer import category also increased mainly due to higher imports of motor vehicles. All categories of investment goods imports increased in December 2010," the Central Bank said.

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