December 19, 2018

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    Export earnings surpass US$ 1 bn in September Featured

    November 30, 2018

    Sri Lanka’s external sector came under pressure in September 2018. The widening deficit in the trade account and the strengthening of the US dollar, which resulted in outflows of portfolio investments, adversely impacted the balance of payments during the month.

    Despite earnings from exports which surpassed US dollars 1 billion for the fourth consecutive month, higher growth in import expenditure outpaced the increase in export earnings. In the financial account, foreign investments in the government securities market recorded outflows responding to the firming up of global financial markets.
    Meanwhile, the Colombo Stock Exchange (CSE) also witnessed some outflows of foreign investments during September. Consequently, the Sri Lankan rupee which depreciated against the US dollar by 5.3 per cent in the first eight months of the year, showed a further depreciation of 4.6 per cent in September, reflecting the pressure on the domestic foreign exchange market. These developments necessitated intervention by the Central Bank to curtail excessive volatility in the exchange rate. The country’s gross official reserves stood at US dollars 7.2 billion at end September 2018 which was equivalent to 3.8 months of imports.
    he deficit in the trade account expanded at a modest pace in September 2018 in comparison to September 2017 as import expenditure grew more than export earnings. On a cumulative basis, the trade deficit remained widened during the first nine months of 2018.
    Earnings from merchandise exports surpassed US dollars 1 billion for the fourth consecutive month in September 2018. Earnings from industrial exports, which account for 77 per cent of the total export earnings, grew by 9.4 per cent during September 2018, while earnings from agricultural exports fell by 10.8 percent, reflecting the poor performance in almost all categories except seafood. Under industrial exports, earning from textiles and garments increased in September 2018 reflecting considerable high demand for garments from the USA and non-traditional markets such as Canada, India and Japan although a slight reduction was recorded in exports to the EU market. Earnings from petroleum products increased substantially in September 2018 due to higher export prices of bunker and aviation fuel, despite low export volumes.
    Export earnings from leather, travel goods and footwear, and base metals and articles increased in September 2018 contributing towards the increase in industrial exports. However, export earnings from rubber products declined in September 2018 due to the subdued performance in all sub categories.
    Expenditure on merchandise imports increased by 6.1 per cent (year-on-year) to US dollars 1,768 million in September 2018 mainly due to the high expenditure incurred on fuel and personal vehicle imports. Expenditure on fuel imports, categorized under intermediate goods, increased significantly during the month reflecting the combined effect of higher import prices and volumes of crude oil and refined petroleum products. In addition, import expenditure on textiles and textile articles, fertiliser and chemical products increased considerabl

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