Workers’ remittances on the rise despite COVID-19 pandemic

One of the most remarkable developments amidst the COVID-19 pandemic is that workers’ remittances from overseas, despite Sri Lankan migrant workers facing enormous difficulties, has seen a steady rise – instead of an expected decline.
In September 2020, workers’ remittances increased for the fourth consecutive month, recording a healthy growth of 36.1 per cent year-on-year, to US$ 703 million. 
“This increase led the cumulative earnings in workers’ remittances to record a growth for the first time after experiencing cumulative declines for six months since March 2020. Accordingly, workers’ remittances grew by 2.4 per cent to $5,049 million during the period from January to September 2020, in comparison to the corresponding period of 2019,” the Central Bank said in its monthly comprehensive statement on export data for September 2020.
The statement said:
“Trade Balance and Terms of Trade 
▪ A deficit of $525 million was recorded in the trade account in September 2020, which was significantly lower than the deficit of $757 million recorded in September 2019. The improvement in the trade deficit during the month was due to lower level of imports and higher level of exports in September 2020, compared to September 2019. 
▪ The cumulative deficit in the trade account from January to September 2020 narrowed to $4,337 million from the deficit of $5,612 million recorded in the same period in 2019. 
Meanwhile, terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 1.1 per cent in September 2020, compared to September 2019, due to export prices declining at a higher pace than the decline in import prices.

Performance of Merchandise Exports 
▪ Exhibiting the resilience of the export sector in the midst of the current global market conditions and its V-shaped recovery since the initial outbreak of the COVID-19 pandemic, earnings from merchandise exports in September 2020 increased, both on a year-on-year basis as well as on a month-on-month basis. Merchandise exports of $1,000 million in September 2020 were higher by 4.8 per cent than the exports of $954 million in September 2019. This was also 5.6 per cent higher than the exports of $947 million recorded in August 2020. The increase in exports of most agricultural goods and some industrial product categories, which surpassed the decline in other industrial exports and mineral exports, contributed to the overall increase in exports. 
▪ Export earnings from agricultural goods increased by 10.4 per cent in September 2020 on a year-on-year basis, led by coconut exports (both kernel and non-kernel), spices (mainly cinnamon), tea, minor agricultural products (mainly betel leaves) and seafood. Increased earnings from tea exports (3.3 per cent) were supported by higher prices (6.3 per cent), as export volumes declined (2.8 per cent). 
▪ As a combined effect of weaker performance in some export segments and higher performance in others, overall earnings from the export of industrial goods increased by 3.6 per cent in September 2020 on a year-on-year basis. The segments that marked a notable increase included personal protective equipment (PPE) products such as plastic clothing, masks and gloves, which are categorised under plastics and articles thereof, other made up textile articles under textiles and garments, and rubber products. The total increase in these three categories surpassed the decline in earnings from garment exports. Export earnings from food, beverages and tobacco also increased significantly, with exports of most of the value added food items under this category growing, led by value added coconut products. Export earnings from rubber products other than gloves, such as tyres, increased as well. Meanwhile, a notable increase in printing industry products was seen due to an increase in the export of currency notes of other countries printed in Sri Lanka. Industrial export segments that recorded a decline in earnings include garments; gems, diamonds and jewellery; petroleum products; and base metals and articles. 
Earnings from the export of textiles and garments declined by 3.7 per cent on a year-on-year basis, with exports to the US reducing and exports to the EU increasing marginally. Earnings from the export of petroleum products declined with a reduction in prices as well as the lower quantity of bunker fuel supplied. Meanwhile, earnings from mineral exports declined in September 2020, year-on-year. 
Performance of Merchandise Imports 
▪ Expenditure on merchandise imports declined by 10.9 per cent to $1,525 million in September 2020, compared to September 2019, thus continuing the year-on-year declining trend observed since March 2020. Measures taken by the Government to restrict the importation of selected non-essential goods since March 2020 and lower fuel prices in the international market primarily caused this decline.
 ▪ However, import expenditure in September 2020 was higher than import expenditure recorded in each month since March 2020, and the increase over August 2020 was 18.3 per cent. This was mainly due to the increase in the importation of machinery and equipment in September 2020. 
▪ Expenditure on the importation of consumer goods in September 2020 was lower by 14.8 per cent compared to September 2019 mainly owing to the decline in import of vehicles for personal use, clothing and accessories and other items restricted by the Government. However, expenditure on food and beverages was substantially higher mainly due to greater imports of sugar, milk powder and coconut oil. Import volumes of sugar and milk powder significantly increased. Whereas import prices of sugar were somewhat higher in September 2020 than in September 2019, import prices of whole milk powder were lower in line with prices in the global market. Imports of non-food consumer goods that are not under import restrictions or are under less stringent restrictions, such as pharmaceuticals (mainly medicaments), telecommunication devices (mainly mobile phones), home appliances, such as refrigerators and rice cookers, and toiletries, increased. On the other hand, import expenditure on other food items, such as vegetables, fruits, spices and beverages, declined in September 2020, compared to September 2019. 
▪ Expenditure on the importation of intermediate goods declined by 11.7 per cent in September 2020, compared to September 2019, mainly owing to the 39.5 per cent decline in expenditure on fuel imports, which in turn was an outcome of low petroleum prices prevailing in the global market as well as lower volumes imported. 
Other Major Inflows to the Current Account 
▪ No tourist arrivals were recorded for the sixth consecutive month in September 2020 as all airports and sea ports remained closed for tourist arrivals in view of the COVID-19 pandemic. Hence, total tourist arrivals remained at 507,311 during the nine months ending September 2020, compared to 1,376,312 arrivals recorded during the corresponding period in 2019. Accordingly, cumulative earnings from tourism, which are estimated based on tourist arrivals, remained at $956 million during the year up to September 2020, thus recording a drop of 63.1 per cent from the corresponding period of 2019. 
▪ The level of gross official reserves amounted to $6.7 billion at end September 2020, which was equivalent to 4.7 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to $9.2 billion at end September 2020, providing an import cover of 6.5 months,” the statement said.