Foreign loans, foreign reserves up but worker remittances continue to fall

Foreign inflows from loans, declining foreign remittances from workers and continued rise in tea prices were among the features of Sri Lanka’s economic performance in the six months ending June 2017, the Central Bank ( CB) said last week.

One positive was foreign direct investment inflow which saw an improvement by 13.2 per cent at $146.5 million.

Releasing its ‘external sector performance – June 2017’ on Friday, the banking regulator, among the key highlights, said earnings from tourism grew by 4.8 per cent to US$ 1,733.6 million for the period January to June 2017 and long term loans’ inflows rose sharply by 113.4 per cent to $1,110.5 million from $ 520.3 million ( last year January-June).

Workers’ remittances eased by 7.2 per cent at $3,354.7 million compared to $3,613.1 million as the West Asia oil crisis exacerbated by the crisis in Qatar continued to bite into earnings capacity and increase pressure on jobs, while the Colombo Stock Exchange saw some welcome changes, recording an inflow of $ 229.3 million compared to an outflow of $40.9 million in the same period last year.

The CB said the country’s overall balance of payments position is estimated to have recorded a surplus of $ 1,563.4 million during the first half of 2017 compared a deficit of $1,186.1 million in the same 2016 period.

Gross official reserves rose to $7 billion by end June 2017 with the proceeds from the International Sovereign Bonds (ISB) issuance and the syndicated loan facility. The reserves were equivalent to 4.1 months of imports while total foreign assets at $9.1 billion were equivalent to 5.3 months of imports.

The CB first- half 2017 review said:

Export earnings in June 2017 expanded for the fourth consecutive month to $987 million, registering a 9.6 per cent year-onyear growth.

Earnings from industrial exports grew by 9.8 per cent (year-on-year) to $750 million in June 2017, led by higher exports of transport equipment. Earnings from transport equipment increased by nearly seven-

Expenditure on imports in June declined for the first time since September 2016 to $1,541 million registering a year-on-year decline of 8 per cent. This reflected lower imports of all major categories, particularly intermediate goods imports.

fold to $54 million compared to the corresponding month in 2016, owing to the export of two ships to Singapore.

High export earnings from food and beverages, rubber products and petroleum products contributed significantly to the growth in industrial exports.

However, export earnings from textiles and garments, which account for around 40 per cent of total exports, declined by 7.5 per cent to $398 million in June reflecting a decline in garment exports to the US and EU markets. Earnings from leather, travel goods and footwear and gem, diamond and jewellery also declined during the month.

Export earnings from tea increased by 13.7 per cent (yearon-year) to $139 million owing to higher prices despite the decline in volume by 9.5 per cent. Earnings from minor agricultural products also increased by 30.8 per cent during the month. Earnings from seafood exports continued to grow benefitting from the removal of the ban on exports of fisheries products to the EU market. As a result, seafood exports increased by 17.4 per cent to $ 15 million in June, a 101.2 per cent growth in exports to the EU market.

Expenditure on imports in June declined for the first time since September 2016 to $1,541 million registering a year- onyear decline of 8 per cent. This reflected lower imports of all major categories, particularly intermediate goods imports.

India, China, the UAE, Singapore and Japan continued to be the main import origins during the first half of 2017, accounting for about 59 per cent of total imports.