Workers' remittances improve in Jan. 2018:CB

Workers’ remittances from West Asia which was on the back- foot in 2017 for a number of reasons including lower oil prices, registered considerable growth in January 2018, the Central Bank ( CB) said in its review of import/ export data for that month.

In a media statement, the CB said remittances grew by 8.8 per cent, year- on- year, to US$729 million in January from $670 million in January 2017.

While earnings from merchandise exports increased, expenditure on imports also increased significantly outweighing the performance in export earnings during the month. Tourism earnings also recorded a notable growth during January 2018.

However the deficit in the trade balance expanded in January surpassing $ 1 billion for the second consecutive month due to significant level of imports offsetting the increase in export earnings, it was stated.

The CB statement on January 2018 data, said:

Earnings from exports continued to record double- digit growth (year-on-year) reaching $ 965 million in January, partly driven by the impact of the low base as export earnings contracted by 3.8 per cent in January 2017.

Export earnings from food, beverages and tobacco, petroleum products, rubber products and tea contributed largely to the growth in exports.

Further, export earnings from rubber products increased due to improved performance in almost all sub categories, particularly export of tyres. In addition, export earnings from textiles and g a r ments increased moderately during the month due to the increase in earnings from garment exports to the EU and the US by 4.9 per cent and 1.7 per cent, respectively, although there has been a reduction in exports to non-traditional markets such as Canada, UAE, China, Saudi Arabia and Japan.

Earnings from tea exports increased due to higher prices and volumes. However, earnings from coconut exports declined significantly along with the decline in volumes of coconut kernel products such as desiccated coconut, coconut oil and copra as a result of the low domestic production of coconut due to drought conditions.

Import expenditure crossed $ 2 billion in January for the second consecutive month mainly due to high import bills incurred on fuel. Despite the reduction in the volume of refined petroleum imports, expenditure on fuel imports increased significantly during the month owing to high vol- umes of crude oil imports and significant price increases recorded in all categories of fuel.

Average import price of crude oil increased to $72.04 per barrel from $57.39 per barrel in January 2017. Further, import expenditure on fertiliser increased significantly reflecting the combined impact of higher average import prices and volumes of fertiliser, particularly urea. Expenditure on gold imports continued to increase significantly in January 2018.

In addition, following the reduction in taxes on electric motor vehicles in the Budget 2018, import expenditure on personal vehicles increased owing to high imports of electric motor vehicles. Despite the decline recorded in average import prices of rice, import expenditure on rice rose due to high import volumes of rice.

Financial Flows

Long term loan inflows to the government recorded a net outflow of $2.5 million during the month. In terms of foreign direct investments ( FDIs) including foreign loans to BOI companies in 2017, Sri Lanka received $913 million, registering the highest ever FDI inflows in history.

The level of gross official reserves of the country declined to $ 7.7 billion at end January 2018 compared to $ 8 billion at end 2017, primarily due to a periodic payment for the obligations at the Asian Clearing Union (ACU) during the month.

The Sri Lankan rupee depreciated by 2 per cent against the US dollar up to April 5, 2018. Furthermore, reflecting cross currency movements, the rupee also depreciated against other major currencies during this period.