Sri Lanka’s exports surpassed US dollars 1 billion for the fourth consecutive month, however higher growth in import expenditure outpaced the increase in export earnings, the latest data shows.
Accordingly, Sri Lanka’s external sector came under pressure in September 2018. The latest Central Bank’s External Sector Performance data highlights that the widening deficit in the trade account and the strengthening of the US dollar, which resulted in outflows of portfolio investments, adversely impacted the balance of payments during the month. In the financial account, foreign investments in the government securities market recorded outflows responding to the firming up of global financial markets. Meanwhile, the Colombo Stock Exchange (CSE) also witnessed some outflows of foreign investments during September. Consequently, the Sri Lankan rupee which depreciated against the US dollar by 5.3 per cent in the first eight months of the year, showed a further depreciation of 4.6 per cent in September, reflecting the pressure on the domestic foreign exchange market. These developments necessitated intervention by the Central Bank to curtail excessive volatility in the exchange rate. The country’s gross official reserves stood at US dollars 7.2 billion at end September 2018 which was equivalent to 3.8 months of imports
Earnings from merchandise exports surpassed US dollars 1 billion for the fourth consecutive month in September 2018. Earnings from industrial exports, which account for 77 per cent of the total export earnings, grew by 9.4 per cent during September 2018, while earnings from agricultural exports fell by 10.8 percent, reflecting the poor performance in almost all categories except seafood. Under industrial exports, earning from textiles and garments increased in September 2018 reflecting considerable high demand for garments from the USA and non-traditional markets such as Canada, India and Japan although a slight reduction was recorded in exports to the EU market. Earnings from petroleum products increased substantially in September 2018 due to higher export prices of bunker and aviation fuel, despite low export volumes. Export earnings from leather, travel goods and footwear, and base metals and articles increased in September 2018 contributing towards the increase in industrial exports. However, export earnings from rubber products declined in September 2018 due to the subdued performance in all sub categories. In addition, export earnings from machinery and mechanical appliances, gems, diamonds and jewellery, and food, beverages and tobacco declined during the month. Under agricultural exports, earnings from tea declined in September 2018 reflecting lower average export prices despite a marginal increase in export volumes. Export earnings from spices reduced during the month due to the poor performance in almost all sub categories except cinnamon. Further, earnings from coconut exports declined due to the reduction in coconut kernel products such as desiccated coconut and coconut oil while coconut non-kernel products showed a growth. However, earnings from seafood exports increased during the month due to higher exports to the EU market. Leading markets for merchandise exports of Sri Lanka in September 2018 were the USA, the UK, India, Italy and Germany, which accounted for about 52 per cent of total exports.
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