Trade deficit declined in February

Earnings from exports declined by 2.9 percent, year-on-year, to $ 798 million in February 2013, as earnings from agricultural exports and industrial exports declined.

Earnings from exports of agricultural commodities declined mainly as a result of lower earnings from rubber and coconut exports.

Lower export earnings from several items including diamonds, jewellery, petroleum products, rubber products and animal fodder resulted in earnings from industrial exports declining.

Nevertheless, earnings from exports of garments and textiles, which have a significant share of around 40 percent in total exports, increased on an year-on-year basis, by 8.8 percent, in February 2013. Among agricultural exports, earnings from exports of spices, which have continued to exhibit an increasingtrend since May last year, also recorded a further increase on a year-on-year basis, in February 2013.Expenditure on imports declined by 9.3 percent, year-on-year, to $ 1,433 million in February 2013. Lower expenditure on imports of refined petroleum products, transport equipment, wheat, vehicles and dairy products have made a significant contribution towards the decline in import expenditure in February 2013.

However, expenditure on imports of intermediate goods such as textiles and textile articles, gold, mineral products, diamonds and precious and semi-precious stones increased on a year-on-year basis in February 2013. Imports of textiles and textile articles grew by 18.3 percent, year-on-year, in value terms, indicating higher potential earnings from exports of apparel products in the coming months.

Import expenditure on investment goods meanwhile declined on a year-on-year basis in February 2013, as imports of transport equipment declined. However, import expenditure on building materials and machinery and equipment categorised under investment goods, increased in February 2013. With respect to consumer goods imports, expenditure on import of food and beverages and non-food consumer goods declined. Vehicle imports, which declined by 41.4 percent, year-on-year, made the largest contribution towards the decline in expenditure on consumer goods imports.

Following these developments in relation to exports and imports in February 2013, the trade deficit for the first two months of 2013 declined by 20.3 percent, year-on-year to $ 1,424 million. The multi-pronged policy strategy implemented during the first half of 2012 to curb the widening trade deficit has therefore continued to help reduce the deficit in the current account.

Tourist arrivals in February 2013 increased by 11.6 percent, year-on-year, to 93,232 while earnings from tourism grew at a healthy rate of 20.7 percent, year-on-year, to $ 103 million. Recording a year-on-year growth of 4.2 of per cent, workers’ remittances amounted to $ 490 million in February 2013. In comparison, workers’ remittances amounted to $ 470 million in February 2012.

In February 2013, net inflow to the Colombo Stock Exchange (CSE) amounted to $ 8.7 million compared to the net inflow of $ 16.3 million recorded in February 2012. Meanwhile, there have been substantial inflows of foreign investments to the Government securities market.

Net inflows to Treasury Bills and Treasury Bonds amounted to $ 212 million during February 2013 compared to a net inflow of $ 229 million in February 2012. On a cumulative basis net inflows to Treasury Bills and Treasury Bonds amounted to $ 501 million by end February 2013, compared to $ 400 million in the corresponding period in 2012. Further, in February 2013, long-term loans obtained by the government amounted to $ 132 million, while long-term loan inflows to the government on a cumulative basis amounted to $ 278 million by end February 2013, compared to $ 240 million by end February 2012.