Sri Lanka July trade gap narrows sharply

July imports down 16.9% to US $ 1, 534mn July exports down 2.6% US $ 932.1mn Cumulative imports up 1.9% US $ 11, 035mn Cumulative exports down 0.9% 6, 347mn Cumulative vehicle imports up 98.9% to US $ 744.4mn Cumulative oil bill down 46.2% to US $ 1,

Sri Lanka trade gap in July narrowed a significant 32.3 percent year-on-year (yoy) to US $ 601.8 million with imports falling at a faster pace compared to exports.

The Central Bank said the decision to allow greater flexibility in the determination of the exchange rate from 04 September, 2015 is expected to help reduce the trade deficit further while improving the country’s gross official reserves.

However, the cumulative trade balance in the first seven months of the year increased 6 percent yoy to US $ 4.68 billion.

The Central Bank said July imports fell 16.9 percent yoy to US $ 1, 534 million mainly due to the base effect as July 2014 recorded the highest monthly import value after November 2012.

In addition, reduction in fuel import bill also contributed for the overall decline in i mport expenditure.

The July fuel bill contracted 66.1 percent yoy to US $ 174.8 million.

The average crude oil import price, which was US $ 110.3 per barrel in July 2014 had nearly halved to US dollars 60.5 per barrel in July 2015.

Despite a drastic drop in the fuel prices, Sri Lanka imported more vehicles in July as motor vehicle imports rose 107.1 percent yoy to US $ 147.9 million.

In the first seven months of 2015, Sri Lanka has i mported motor vehicles to the tune of US $ 744.4 million compared to US $ 374.2 million in the same period of the previous year. Transport equipment imports also rose 60 percent yoy to US $ 80.8 million.

However, import expenditure on consumer goods, such as dairy products, clothing and accessories, sugar and confectionery and machinery and equipment, declined significantly in July 2015.

Import expenditure on textiles articles also fell 2.7 percent yoy to US $ 201 million. Fertilizer imports also fell 46 percent yoy to US $ 6.5 million.

On a cumulative basis, expenditure on imports during the first seven months of 2015 increased by 1.9 per cent, year-onyear, to US $ 11,035 million.

During the first seven months of 2015, the main import originating countries were India, China, Japan, UAE and Singapore, which accounted for about 60 per cent of the total imports

Meanwhile, July exports dropped 2.6 percent yoy to US $ 932.1 million amid both industrial and agricultural exports faltering.

Except for transport equipment and petroleum products all other sub categories of industrial exports fell during the month.

Apparel exports, which account for 44 percent of total exports fell 0.3 percent yoy to US $ 413.1 million while rubber products exports, mainly consisting of tyres fell 9.9 percent yoy to US $ 71.8 million.

Export earnings from transport equipment, petroleum products and animal fodder increased by 91.3 per cent, 42.2 per cent and 13.0 per cent, respectively, in July 2015.

Earnings from agricultural exports in July 2015 declined by 2.7 percent yoy, to US $245 million, led by significant declines recorded in tea and sea food exports.

Tea exports, which were severely affected by the lower demand from Russia and Middle East, declined in July 2015 for the 12th consecutive month, recording a drop of 14 percent yoy, reflecting declines in both export volume and export prices.

Export earnings from seafoods continued to decline owing to the restrictions on market access to the EU market.

Accordingly, seafood exports to EU area dropped by 71 percent recording an overall decline of 32.5 percent yoy to US $ 15.1 million in the seafood category in July 2015.

For the first 7 months, seafood exports fell 35.5 percent yoy to US $ 100.9 million.

However, earnings from exports of spices, minor agricultural products and coconut kernel products recorded a positive growth partly offsetting the overall decline in agricultural exports.

On a cumulative basis, earnings from exports declined by 0.9 percent yoy to US $ 6347.6 during the first seven months of the year mainly due to the lower performance of agricultural exports despite the positive growth in industrial exports. The leading markets for merchandise exports of Sri Lanka during this period were the USA, the UK, India, Germany, Italy and China which accounted for about 55 per cent of total exports.