Increase in export earnings

Sri Lanka’s external sector strengthened further with continued inflows to the Current Account and the Financial Account of the Balance of Payments (BOP).

These inflows resulted in a significant increase in the overall balance as at end December 2013. Earnings from exports recorded an increase, while a notable reduction in imports was witnessed during the month, considerably reducing the trade deficit. Inflows on account of workers’ remittances and tourist earnings also recorded the highest during a month, while inflows to the Financial Account increased moderately during December.

Trade Account of the BOP Earnings from exports, which surpassed US $ 1 billion during the preceding two months continued to rise in December 2013, recording an increase of 13.2 percent in December 2013, while expenditure on imports recorded a marginal increase of 2.1percent.

As earnings from exports increased by more than the increase in expenditure on imports, the trade deficit contracted significantly by 12.9 percent to US $ 565 million in December 2013.

Exports in December 2013 increased to US $ 986 million due to higher earnings from industrial and agricultural exports.

Industrial exports, which account for more than three quarters of total export earnings, increased by 15.2 percent on a year-on-year basis to US $ 741 million in December 2013 with continued growth in exports of textiles and garments.

Earnings from export of textiles and garments grew by 26.9 percent year-on-year to US $ 454 million in December 2013. Export of garments to the EU and USA, which are the major export destinations for garments, grew by 24.9 percent and 35.6 percent in December 2013.

Meanwhile, export of rubber products increased by 22.4 percent to US $ 94 million due to higher growth in surgical and other glove exports. Export of leather, travel goods and footwear also grew by 82.4 percent, year-on-year.

Apart from these, plastics and articles thereof, chemical products and ceramic products also recorded positive growth. However, earnings from the export of transport equipment, which include ships and boats declined significantly by 84.7 percent due to the high base in 2012. Earnings from petroleum products exports also declined by 13 percent, due to a decline in volumes, as the price was higher than in competitor countries.

Earnings from agricultural exports rose by 11.4 percent, year-on-year, to US $ 242 million in December 2013, led by tea exports. Earnings from tea exports increased by 7.3 percent to US $ 148 million in December 2013, due to favourable prices that prevailed in international markets, despite a decline in export volumes.

The average price of tea exported increased to US $ 5.12 per kg in December 2013 from US $ 4.47 per kg in December 2012. Earnings from coconut exports recorded a significant growth of 31.9 percent led by an increase in kernel products due to higher export volumes and prices.

Earnings from the export of spices increased by 13.8 percent to US $ 26 million led by higher export volumes in pepper, cinnamon and nutmeg and mace exports.

Export of seafood, minor agricultural products and vegetables also recorded healthy growth.

However, in December 2013 rubber export earnings continued to decline by 7.7 percent compared to December 2012, due to an increase in demand from the domestic industrial sector.

Expenditure on imports grew by 2.1 percent to US $ 1,551 million in December 2013, led by an increase in consumer and intermediate goods imports.

Expenditure on intermediate goods imports increased by 6.7 percent, year-on-year, to US $ 936 million in December 2013 mainly due to the increase in the import of fuel.

Expenditure on the import of fuel increased by 21.4 percent to US $ 454 million in December 2013, due to higher expenditure on crude oil imports, despite the decline in refined product imports. The significant increase in the expenditure on crude oil imports by 90.8 percent to US $ 144 million in December was to ensure the availability of adequate supplies as there were less imports in November and no oil imports during October.

Expenditure on imports of chemical products, fertiliser and agricultural inputs also increased in December 2013. However, despite the strong growth in export of textiles and garments, there has been a steady decline in the import of textile and textile related articles, reflecting improved backward linkages and higher value addition in the garment industry. Import of base metals and diamonds and precious stones also declined significantly.