Financial Times

Rising industrial exports reduce trade gap
A big increase in industrial exports helped to reduce the trade deficit in September, the Central Bank said. Exports earning in US dollar terms increased by 13 percent to $461 million in September, 2003 in contrast to a decline of two percent recorded in September, 2002. All major industrial subcategories and the agricultural subcategories of tea and coconut contributed to this growth, a Central Bank statement said.

"Industrial exports, which grew by 15 per cent in value, accounted for 89 per cent of the increase." Expenditure on imports increased by seven per cent in September, 2003, to $525 million, compared with $490 million in September, 2002. As a result of higher growth in exports compared to imports, the trade deficit narrowed to $64 million in September, 2003 from a much higher deficit of $82 million in September, 2002.

The cumulative export earnings during the first nine months of 2003 increased by 11 per cent, in contrast to a drop of eight per cent in the comparable period in 2002. Similarly, imports increased by nine per cent as against a decrease of five per cent in 2002.

Consequently, the trade deficit in the first nine months of 2003 decreased marginally to $940 million, compared with a deficit of $948 million recorded during the first nine months of 2002.

The cumulative export earnings during the first nine months of 2003 were $3,802 million, compared with $3,418 million recorded during the corresponding period in 2002. The trade deficit in the first nine months of 2003 declined to $940 million, $8 million below the deficit in the first nine months of 2002. "This reduction, together with increased foreign exchange inflows due to the growth in tourism, port services, private transfers and capital account flows, increased foreign exchange liquidity," the Central Bank said.

This enabled the Central Bank to purchase $333.5 million from the market during the first nine months of 2003. The largest contribution to export growth came from textile and garment exports, followed by rubber products, food and beverages, machinery and equipment and coconut products.

Earnings from textile and garment exports increased by 18 per cent to $235 million in September, 2003 in comparison to $200 million in September, 2002. Other industrial exports that supported the export growth were rubber based products (37 percent increase), food and beverages (28 percent increase), machinery, mechanical and electrical equipment (nine per cent increase) and diamonds and jewellery (seven per cent increase).

However, decreases were recorded in earnings from travel goods (decline of 58 per cent) and petroleum products (decline of eight per cent) over September, 2002. Export earnings from agricultural products in September, 2003 increased by five per cent over those of September, 2002 reflecting largely the increases in tea and coconuts product exports. Earnings from tea increased by four per cent in September, 2003 entirely due to an increase in tea prices.

The average price of tea increased from $2.18 per kg in September 2002 to $2.36 per kg in September, 2003. Earnings from coconut products increased by 22 per cent in September, 2003 despite the lower prices due to higher volumes of exports. However, exports earnings from rubber dropped by 12 per cent entirely due to lower volumes although prices were favorable.

The reduction in export earnings from minor agricultural products was largely attributable to the lower earnings from the exports of pepper and un-manufactured tobacco. The expenditure on imports during the first nine months of 2003 was $4,742 million, an increase of nine per cent over the imports of $4,366 million in the first nine months of 2002.

Investment goods imports increased by 25 per cent in September, 2003. Within this category, imports of machinery and equipment, and transport equipment increased by 43 per cent and by 42 per cent, respectively, while building materials declined by eight per cent. Imports of intermediate goods decreased by two per cent in September 2003 due to lower imports of crude oil and fertiliser.

Food imports increased by 19 per cent reflecting higher imports of sugar, milk products and lentils. Imports of non-food consumer goods increased by 36 per cent reflecting higher increases in imports of motor cars and cycles, radio receivers and TV sets, rubber tyres and tubes and pharmaceutical products.

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