CB says higher surplus in Balance of Payments in 1Q

Tuesday, 27 May 2014 00:00 - - {{hitsCtrl.values.hits}}

Central bank said yesterday Favourable developments in the external sector continued in March 2014, with a noticeable contraction in the trade deficit. On a cumulative basis, earnings from exports recorded a notable increase, while import expenditure witnessed a moderate growth reducing the trade deficit substantially during the first quarter of 2014. As a result of an increase in inflows from workers’ remittances, along

with the significant growth in earnings from tourism, the current account deficit in the first quarter of 2014 is expected to have narrowed substantially. These developments together with continued inflows to the financial account are estimated to have resulted in a higher surplus in the Balance of Payments (BOP) during the first quarter of 2014, compared to the corresponding period of 2013. Sri Lanka’s external trade improved further in March 2014 continuing the positive development from the second half of 2013. Earnings from exports increased significantly by 28.6%, year-on-year, to $ 1,070 million in March. This was the highest monthly export value ever recorded. Expenditure on imports increased by 8.2% to $ 1,672 million in March 2014. Earnings from tourism in the services account of the BOP Tourist arrivals grew at a rate of 39.5%, year-on-year to 112,631 in April. Earnings from tourism in March and April increased by 26.2% and 49.8%, year-on-year, to $ 192.2 million and $ 162.7 million respectively. The top five sources of tourist arrivals in March were India, UK, Germany, China and Russia, accounting for about 44% of total tourist arrivals during the month. Current transfers in the BOP The cumulative inflows of workers’ remittances during first three months of this year grew by 12.2% to $ 1,663.4 million from $ 1,483.1 million in the corresponding period in 2013, driven by an increase in labour migration in the professional and skilled categories. Financial account of the BOP Long term loans obtained by the Government during the first quarter of 2014 amounted to $ 657.3 million, compared to $ 443.4 million recorded during the corresponding period in 2013. Net cumulative inflows to the Government securities market during January to March amounted to $ 92.9 million. Although the Colombo Stock Exchange (CSE) recorded a net outflow of $ 21.5 million in March 2014, total foreign purchases in the months of April and up to 22 May amounting to $ 146.8 million, resulted in a net foreign inflow of $ 15.9 million by 22 May. Overall BOP position During the period January to March the overall BOP is estimated to have recorded a surplus of $ 828.3 million compared to a surplus of $ 153.6 million recorded during the corresponding period of 2013. International reserve position Sri Lanka’s gross official reserves amounted to $ 8.1 billion by end March, while total international reserves, which include foreign assets of the banking sector, amounted to $ 9.5 billion. In terms of months of imports, gross official reserves and total reserves were equivalent to 5.3 and 6.3 months of imports, respectively at end March. Despite outflows on account of foreign debt service payments, IMF-SBA payments and other foreign outflows, an adequate level of reserves were maintained throughout the first quarter of 2014. Exchange rate behaviour The rupee has remained relatively stable against the US dollar marginally appreciating by 0.31% during the year up to 23 May. Based on cross currency exchange rate movements, the Sri Lanka rupee has appreciated against several other major international currencies such as the euro by 1.42% and the Chinese renminbi by 3.22%, while depreciating against the pound sterling by 1.94%, the Japanese yen by 2.72% and the Indian rupee by 5.58%.