Sri Lanka’s external sector showed signs of revival with a significantly improved trade balance and continuous inflows to the government securities market in June 2017.
A substantial growth in industrial and agricultural exports and a decline in importation of consumer and intermediate goods resulted in a notable improvement in the trade balance in June 2017.
Inflows to the financial account were characterised by steady inflows to the government securities market while foreign investment in the Colombo Stock Exchange(CSE) also remained positive during the month.
Export earnings in June 2017 expanded for the fourth consecutive month to US dollars 987 million, registering a 9.6 per cent year-on-year growth.
The largest contribution to this growth was from industrial exports (77.1 per cent) followed by agricultural exports (20.6 per cent).
Earnings from industrial exports grew by 9.8 per cent (year-on-year) to US dollars 750 million in June 2017, led by higher exports of transport equipment.
Earnings from transport equipment increased by nearly sevenfold to US dollars 54 million compared to the corresponding month in 2016, owing to the export of two ships to Singapore.
In addition, high export earnings from food and beverages, rubber products and petroleum products also contributed significantly to the growth in industrial exports.
Export earnings from food and beverages increased by more than twofold in June 2017. Exports of rubber products increased by 15.4 per cent (year-on-year) due to growth in all sub categories.
Reflecting higher export volumes and prices of bunker and aviation fuel, earnings from exports of petroleum products increased by 26.7 per cent (year-on-year) in June 2017.
However, export earnings from textiles and garments, which account for around 40 per cent of total exports, declined by 7.5 per cent (year-on-year) to US dollars 398 million in June 2017 reflecting a decline in garment exports to the USA and EU markets.
Earnings from agricultural exports at US dollars 232 million increased by 8.3 per cent (year-on-year) in June 2017 reflecting higher exports of all major categories of agricultural products except coconut and spices.
Export earnings from tea increased by 13.7 per cent (year-on-year) to US dollars 139 million owing to higher prices despite the decline in volume by 9.5 per cent.
In line with high tea prices prevailing in the international market, the average export price of Ceylon tea increased to US dollars 5.36 per kg in June 2017 from US dollars 4.27 per kg in June 2016. Earnings from minor agricultural products also increased by 30.8 per cent during the month.
Earnings from seafood exports continued its growth in June 2017 benefitting from the removal of the ban on exports of fisheries products to the EU market. As a result, seafood exports increased by 17.4 per cent (year-on-year) to US dollars 15 million in June 2017, registering a 101.2 per cent growth in exports to the EU market.
On a cumulative basis, earnings from exports grew by 5.2 per cent (year-on-year) to US dollars 5,398 million during the first half of 2017, as a result of high income received from exports of tea, transport equipment, petroleum products and machinery and mechanical appliances. The leading markets for merchandise exports of Sri Lanka during the first half of 2017 were the USA, the UK, India, Germany and Italy accounting for about 50 per cent of total exports.
Expenditure on imports in June 2017 declined for the first time since September 2016 to US dollars 1,541 million registering a year-on-year decline of 8.0 per cent. This reflected lower imports of all major categories, particularly intermediate goods imports. Expenditure on import of intermediate goods declined by 12.9 per cent (year-on-year) to US dollars 792 million in June 2017, largely due to the lower expenditure on fuel imports.
Expenditure on fuel imports declined by 34.1 per cent (year-on-year) in June 2017 reflecting lower import volumes and average import prices of crude oil and refined petroleum products.
Lower import expenditure on base metals such as iron and steel as well as rubber and articles, specially rubber in primary forms, also contributed significantly to the decline in intermediate goods imports.
Import expenditure of textiles and textile articles showed a modest growth of 1.7 per cent (year-on-year) in June 2017.
Expenditure on consumer goods imports declined by 8.9 per cent (year-on-year) to US dollars 323 million in June 2017, mainly driven by lower importation of non-food consumer goods such as medical and pharmaceuticals, clothing and accessories, personal vehicles and telecommunication devices.
The increasing trend in rice imports observed since January 2017 continued in June 2017 as well. Expenditure on rice imports increased by more than eight-fold due to an increase in import volume to 16 million kg in June 2017 in comparison to 2 million kg in June 2016.
Further, import expenditure on sugar increased by 3.4 per cent (year-on-year) to US dollars 26 million, mainly due to higher import prices.
Import expenditure on investment goods declined marginally by 1.2 per cent (year-on-year) to US dollars 405 million during June 2017 led by lower imports of building materials and machinery and equipment.
Import expenditure on transport equipment increased by 19.1 per cent (year-on-year) in June 2017 mainly due to higher imports of road vehicles such as vans, tankers and bowsers.
However, import expenditure on machinery and equipment, personal vehicles and textiles and textile articles declined during the first half of 2017.
India, China, the UAE, Singapore and Japan continued to be the main import origins during the first half of 2017, accounting for about 59 per cent of total imports.
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