Spending on imports sharply eases in Dec. 2018, CB says

Spending on merchandise imports in December 2018 fell by 15.3 per cent (year-on-year) to US$1,735 million in December 2018, recording the lowest import value for the year, due to the effect of policy measures taken by the Central Bank of Sri Lanka (CB) and the Government.

In a media statement, the CB said that during 2018, the Government introduced several policy measures on imports of gold, personal motor vehicles and non- essential consumer goods to curtail import expenditure with the aim of mitigating the pressure on the balance of payments. As a result, expenditure on imports decelerated towards the end of the year.

Expenditure on fuel imports declined significantly benefiting from lower prices of crude oil and refined petroleum products as well as lower import volumes of refined petroleum and coal. Import expenditure on consumer goods also declined mainly due to lower expenditure on rice, vegetables, personal motor vehicles and telecommunication devices. Expenditure on rice imports decreased significantly during the month due to lower import volumes of rice with higher supply in the domestic market.

However on a cumulative basis, expenditure on merchandise imports increased by 6 per cent to $22,233 million in 2018 compared to 2017 mainly driven by higher expenditure incurred on fuel, personal motor vehicles, textiles and textile articles and fertiliser imports.

Earnings from merchandise exports increased marginally by 1.4 per cent (year-on-year) to $1,033 million in December 2018 and on a cumulative basis, the export volume index increased marginally by 0.5 per cent in 2018 while on a cumulative basis, export earnings increased by 4.7 per cent to $ 11,890 million in 2018 from $11,360 million in 2017, the CB said.

Higher demand for garments from the US and EU supported the increase in export earnings from this sub- sector. Further, export earnings from rubber products increased during the month owing to the improved performance in all categories except surgical and other gloves.

Earnings from agricultural exports decreased in December 2018 due to the poor performance in many sub categories except coconut, seafood and vegetables.

Tourist arrivals recorded a growth of 3.5 per cent in December 2018, resulting in a total of 2.3 million arrivals during 2018, compared to 2.1 million arrivals in 2017. India remained the leading source country for tourist arrivals in 2018, while China remained the second largest origin albeit with a marginal decline, followed by the UK, Germany and Australia.

“With the growth in tourist arrivals and an increase in estimated average spending by tourists, earnings from tourism recorded a healthy growth of 11.6 per cent during 2018. Consequently, tourist earnings rose to $4,381 million in 2018 compared to $3,925 million in 2017,” the CB said.

Workers’ remittances in December 2018 declined by 13 per cent, year-on-year, to $584 million. On a cumulative basis, workers’ remittances recorded a decline of 2.1 per cent to $7,015 million in 2018 from $7,164 million in 2017.

The Colombo Stock Exchange (CSE) recorded a net outflow of foreign investments of $26 million in December 2018, including both secondary and primary market transactions. On a cumulative basis, the CSE recorded a net outflow of $55 million in 2018, which comprises a net outflow of $133 million from the secondary market and an inflow of $77 million to the primary market.

As at end December 2018, gross official reserves were estimated at $6.9 billion, which is equivalent to 3.7 months of imports.

During 2018 the Sri Lankan rupee depreciated by 16.4 per cent against the US dollar while also depreciating against other major currencies.

However, during 2019 up to March 13, the Sri Lankan rupee appreciated by 2.2 per cent against the US dollar, the CB said.