Trade gap continues to haunt Sri Lanka
View(s):The balance of trade expanded to four per cent year on year and 72 per cent month on month to US$ 921 million in August this year, a Lanka Securities Research report said.
“Exports declined 13 per cent year on year to $ 829 million while imports fell five per cent year on year to $1.75 billion,” it said. The cumulative trade deficit (from January to August 2012) had widened by 6.3 per cent in the same period to $6.267 billon.
The report said that exports contracted by 13 per cent to $ 829 million while key sectors that dragged exports were agricultural products -29 per cent (of which tea : -33 per cent), textiles and garments -4 per cent and food, beverage and tobacco -45 per cent. On the other hand rubber products managed to grow by two per cent.
It said that imports fell 5 per cent to $1,750 million. “While investment goods (+10 per cent) supported the imports on higher expenditure on machinery and equipment (+25 per cent), food and beverages (-17 per cent), vehicle imports (-54 per cent) and textile and textile articles (-15 per cent) remained a drag.”
The report said that imports expanded 32 per cent month on month largely on higher expenditure of refined petroleum due to the closure of the refinery for periodic maintenance. However, on a year on year basis, the growth of expenditure on petroleum was marginal at one per cent to $ 497 million.
The report said that owing to a softening in non oil imports, the balance of trade expanded slowly by four per cent to $921 million. “Currently, the trade deficit is at the highest levels in six months. Remittances remain firm. Increased earnings from tourism (+16 per cent year on year) and workers’ remittances (+7 per cent) continued to cushion the current account of the balance of payments.”
It said that net inflows to treasury bills and treasury bonds during the first nine months of this year were at $821 million, while long-term loans to the government during the first eight months of this year amounted to $ 2.292 billion. The gross official reserves amounted to $7 billion which is equivalent to 4.3 months of imports.
“Current account deficit is likely to increase in the near future due to slowing exports and firm imports. The petroleum bill will most likely increase due to the closure of the refinery and higher expenditure on refined petroleum,” the report said, noting that with the sluggish global demand, exports growth is likely to remain subdued and imports may not slow down in tandem with exports, leading to a higher trade deficit in the latter part of the year. Non oil imports may remain contained due to slowdown in domestic activity.
Remittances are likely to remain steady, it said, noting that on the capital account side, portfolio inflows and borrowings are expected to remain moderate.
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