Lanka’s external sector stable in April:CB

Sri Lanka’s external sector remained relatively stable in April supported by a contracting trade deficit, according to the Central Bank’s External Sector Performance up to April 2019.

In April, the deficit in the trade account narrowed to US$797 million from $999 million in April 2018.

The considerable reduction in the trade deficit in April was due to the decline in import expenditure by 11 per cent (yearon-year) and a marginal increase of export earnings by 0.4 per cent (year-onyear), the report said.

Earnings from tourism in April recorded a decline of 7.5 per cent (year-on-year), reflecting partly the impact of Easter Sunday attacks. With the decline in tourist arrivals in April, the growth in earnings from tourism moderated to 2.2 per cent in the first four months of 2019 over the corresponding period of 2018.

Workers’ remittances amounted to $554 million in April, recording a growth of 2.3 per cent (year-on-year). On a cumulative basis, workers’ remittances amounted to $2,171 million during the first four months of 2019. The country’s gross official reserves stood at $7.2 billion, which was equivalent to 4.1 months of imports at end April.

Explaining in detail, the report said that the deficit in the trade account narrowed significantly in April in comparison to the corresponding month of the previous year due to a considerable reduction in imports.

“The terms of trade, which represents the relative price of imports in terms of exports, deteriorated by 5.4 per cent (year-on-year) to 108.3 index points in April due to the higher rate of decline in export prices in comparison to the decline in import prices,” it said.

Earnings from textiles and garment exports increased in April benefiting from higher demand for garment exports from the US and non-traditional markets such as Canada, China, Australia and Brazil. However, earnings from garments exports to the EU market declined in April due to lower demand from the UK, Italy, Germany and France.

“Earnings from agricultural exports declined, on a year-on-year basis, in April due to poor performance in earnings from tea, spices and minor agricultural product exports. Export earnings from tea declined during the month due to the combined impact of lower average export prices and volumes of tea,” the report said.

On imports, it said that import expenditure on personal motor vehicles continued to decrease significantly since December 2018, owing to the reduction reported in importation of motor cars with less than 1000 cc engine capacity, hybrid and electric motor vehicles reflecting the lag effect of policy measures introduced on importation of vehicles during the second half of 2018.

Foreign investments to the government securities market recorded a net outflow of $79 million in April. Foreign investments in the CSE, including primary and secondary market transactions, recorded a net inflow of $10 million during April.