Financial Times

Reduced trade deficit boosts economy in June

Export earnings in US dollar terms rose by 24 percent in June against spending on imports which rose by 8 percent in the same month, resulting in the monthly trade deficit narrowing to $ 84 million from $ 130 million in the same month in 2002, the Central Bank said in its monthly bulletin on June data.

A reduction in the trade deficit together with increased foreign exchange inflows due to the growth in tourism, port services, private transfers and capital account flows, strengthened the stability in the exchange rate and increased foreign exchange liquidity. "This enabled the Central Bank to purchase $ 155 million from the market during the first half of 2003," the statement noted.

The high export growth was supported by continued strong performance of industrial exports, which rose by 22 percent. The cumulative export earnings during the first half of 2003 increased by 18 percent in contrast to a drop of 17 percent in the comparable period in 2002. Similarly cumulative imports increased by 7 percent as against a decrease of 11 percent in 2002. Consequently, the trade deficit in the first half of 2003 declined to $ 700 million compared with a deficit of $ 863 million recorded during the first half of 2002.

The Central Bank statement said export earnings in June amounted to $ 417 million, up from $ 336 million in June 2002. Cumulative export earnings during the first half of 2003 were $ 2,378 million against $ 2,012 million earlier.

The main contribution to export growth came from textile and garment exports, followed by tea, rubber-based products, food and beverages and diamonds. Earnings from tea, amounting to $ 61 million, recorded an increase of 17 percent due to higher volumes and prices. This was attributable to large volumes of tea exported to Middle Eastern countries following the end of the Iraqi conflict. However, tea production declined by 1.5 million kg in June due to unfavourable weather conditions

Spending on imports, amounting to $ 501 million, increased by 8 percent compared with imports of $ 465 million earlier. Expenditure on imports during the first half of 2003 was $ 3,078 million, up 7 percent over import values of $ 2,875 million in the first half of 2002.

A major contributor to the increase in imports was the 40 percent growth in consumer goods. Within this category, food imports increased by 48 percent due to higher imports of wheat, sugar and milk products and some fish products. Imports of non-food consumer goods increased by 34 percent reflecting increases mainly in cars and cycles, radio receivers and TV sets and medical and pharmaceutical products.

Imports of intermediate goods declined by 2 percent in June due to the lower import bill on petroleum products. Crude oil was not imported in June 2003 due to the closure of the petroleum refinery for four weeks from June 15.