Tourism revenue rises but worker remittances declining-CB
View(s):While tourism revenue is growing by leaps and bounds helped by increasing arrivals from India and China, worker remittances from Sri Lankans working abroad – the single largest contributor to foreign exchange earnings – is on the decline, according latest Central Bank (CB) data for the year 2018.
According to the CB, earnings from tourism recorded a healthy growth of 11.6 per cent with earnings rising to US$4,381 million in 2018 against $3,925 million in 2017. On the contrary workers’ remittances recorded a decline of 2.1 per cent to $7,015 million in 2018 from $7,164 million in 2017.
In other sectors, reflecting the impact of policy measures implemented to discourage vehicle and non-essential consumer goods imports, the deficit in the trade account contracted significantly in December 2018 compared to the corresponding month of the previous year. “However, on a cumulative basis, the trade deficit in 2018 widened in comparison to 2017 as import growth outperformed the growth in exports,” the CB media release said.
Terms of trade broadly remained unchanged at 105.5 index points in 2018 compared to 2017 as both the import and export price indices increased at a similar rate.
Export earnings from industrial exports increased in December 2018, mainly due to higher exports of textiles and garments. The higher demand for garments from the US and EU supported the increase in export earnings from this sub-sector. “Further, export earnings from rubber products increased during the month owing to the improved performance in all categories except surgical and other gloves,” it said.
Export earnings increased by 4.7 per cent to $11,890 million in 2018 from $11,360 million in 2017 driven by industrial exports while agricultural and mineral exports declined.
“On a cumulative basis, expenditure on merchandise imports increased by 6 per cent to $22,233 million in 2018 in comparison to 2017 mainly driven by higher expenditure incurred on fuel, personal motor vehicles, textiles and textile articles and fertilizer imports,” the CB said.
The banking regulator noted that during the year CB and the government introduced several policy measures on imports of gold, personal motor vehicles and non-essential consumer goods to curtail import expenditure with the aim of mitigating the pressure on the balance of payments. As a result, expenditure on imports decelerated towards the end of the year.
Both the government securities market and the CSE (stock market) witnessed foreign investment outflows in December. The government securities market recorded a net outflow of $188 million during the month, resulting in a cumulative net outflow of $990 million for 2018.
“The CSE recorded a net outflow of foreign investments of $26 million in December, including both secondary and primary market transactions. On a cumulative basis, the CSE recorded a net outflow of $55 million in 2018, which comprises a net outflow of $133 million from the secondary market and an inflow of $ 77 million to the primary market,” it said adding that long term loans to the government recorded a net outflow of $192 million during December. However, on a cumulative basis, long term loans to the government recorded a net inflow of $558 million for 2018.
▪As at end December 2018, gross official reserves were estimated at $6.9 billion, which is equivalent to 3.7 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to $ 9.6 billion as at end December, which is equivalent to 5.2 months of imports.
During the year, the Sri Lankan rupee depreciated by 16.4 per cent against the US dollar while also depreciating against other major currencies. However, during 2019 up to March 13th, the Sri Lankan rupee appreciated by 2.2 per cent against the US dollar. “Furthermore, reflecting cross currency movements, the rupee also appreciated against other major currencies except for the pound sterling during this period. Since the pressure on the exchange rate has now eased, the Central Bank removed the margin requirement on both vehicle and non-essential consumer goods imports effective from March 7, 2019,” the CB said.