Monday, 23 June 2014 00:00
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The Central Bank on Friday said that the higher surplus in the country’s Balance of Payments continued into April as well.
It said Sri Lanka’s external sector strengthened further in April 2014, with continued foreign currency inflows in the form of earnings from exports, tourism, workers’ remittances, as well as inflows to the financial account.
The trade deficit continued to narrow during the first four months of 2014 as a result of healthy growth in exports. The contraction of the trade deficit and higher inflows to services and income accounts contributed to reducing the current account deficit.
“These developments, together with inflows to the financial account have resulted in a higher surplus in the BOP by end April 2014, compared to the corresponding period of 2013,” the Central Bank said.
Current transfers in the BOP
Workers’ remittances grew moderately by 7.5% to $554 million during April 2014, compared to $515 million recorded in April 2013. On a cumulative basis, workers’ remittances during first four months of this year grew by 11.0% to $2,217.4 million from $1,998.4 million in the corresponding period in 2013, with the contribution of the highest ever inflows being recorded in March, which traditionally attracts higher inflows prior to the New Year festivals.
Financial account of the BOP
Long term loans obtained by the government during the first four months of 2014 amounted to $734.6 million, compared to $543.1 million recorded during the corresponding period in 2013. Net cumulative inflows to the government securities market other than international sovereign bonds during January to April 2014 amounted to $180.5 million.
Sri Lanka has successfully launched two issuances of international sovereign bonds amounting to $1.5 billion, with the latest of $500 million issued in April 2014 at a yield of 5.125% per annum, the lowest US dollar benchmark offering of international sovereign bonds.
The Colombo Stock Exchange (CSE) recorded a net foreign investment outflow of $2.6 million in April 2014. Foreign direct investments, including foreign loans to BOI companies, for the first quarter of 2014 amounted to $442 million, compared to $219 million received during the corresponding period of 2013. Major inflows were to the aviation, ports, telecommunications and mixed development projects.
Overall BOP position
High inflows to the current account, issuance of international sovereign bonds and other inflows to the financial account during the first four months of the year have resulted in the overall BOP recording a significant surplus of $1,544.6 million compared to a surplus of $352.5 million recorded during the corresponding period of 2013.
International reserve position
Sri Lanka’s gross official reserves amounted to $8.9 billion by end April 2014, while total international reserves, which include foreign assets of the banking sector, amounted to $10.2 billion. In terms of months of imports, gross official reserves and total reserves were equivalent to 5.9 and 6.8 months of imports, respectively, at end April 2014.
The levels of reserves were maintained significantly above the international standard benchmark of 3 months of imports throughout the year so far, despite outflows on account of foreign debt service payments, and IMF-SBA payment.
Exchange rate behaviour
The rupee has remained relatively stable against the US dollar marginally appreciating by 0.40% during the year up to 19 June. Based on cross currency exchange rate movements, the Sri Lanka rupee has appreciated against several other major international currencies such as the euro by 1.97% and the Chinese renminbi by 3.12%, while depreciating against the pound sterling by 2.59%, the Japanese yen by 2.49% and the Indian rupee by 2.39%.
