Ballooning trade deficit beats 2010

• Trade deficit widening now at 88.4% to near Rs. 6 b beating 2010 full year figure of $ 5.2 billion; In June increase was at 63%
• 2011 first eight months import figure at $ 12.92 b almost near 2010 full year total of $ 13.5 b
• August value at highest level of Rs. 1.83 b
• Exports fail to match imports yet robust with 19% growth in August and up 28.6% to $ 7 b in first eight months

The country’s trade deficit in the first eight months has beaten the 2010 full year figure, exposing the exponential rise in imports with exports, though up, trailing behind.

Last year the trade deficit was $ 5.2 billion, up 66.7% over 2009. However, raising fresh concerns, within the first eight months of this year, the figure amounted to $ 6 billion – an increase of a high 88.6% over the corresponding period of last year.

In the month of August, the deficit rose by 191% to $ 885 million. The bloating of the trade deficit had gathered higher pace in August as in June it was 62.7% and in July it was 77.5%.

The main cause is the rapid rise in imports, which too in the first eight months of this year had almost neared 2010’s full year figure.

Imports in August at $ 1.83 billion is estimated to be the highest-ever monthly value, up 66.5% over a lower base of last year. It is also higher in comparison to $ 1.77 billion in July and $ 1.66 billion in June.

Cumulative imports in the first eight months were up 50.6% to $ 12.92 billion, which is only $ 585 million short of the 2010 full year figure of $ 13.5 billion.





End Aug. trade...

 This confirms that by September, 2011 imports would have surpassed the 2010 full year figure.

Exports on the other hand saw 19% growth in August to $ 951.7 million and on a cumulative basis, a healthy 28.6% increase to $ 7 billion.

The Central Bank said yesterday that the external sector remained buoyant in the first eight months of 2011, reflecting the expanding domestic economic activities, growing external trade, inflows on account of remittances and services and growing investor confidence. Both earnings from exports and expenditure on imports increased further on a year-on-year basis in August 2011.

Earnings from exports reached a level of $ 952 million, an increase of 19.1%, compared with corresponding month of August 2010. The exports growth in August was mainly driven by industrial exports where significant contributions came from textiles and garments, rubber products and food and beverages.

Earnings from exports of textiles and garments increased by 18.4% while rubber products continued to record a high growth rate of 47.4%. Exports of food, beverages and tobacco increased considerably by 51.1% in August 2011, where significant contributions came from tinned and bottled fruits, salted fish and animal fodder exports. Exports of diamonds and jewellery increased by 45.3%. Agricultural exports increased by 14.4%, where minor agricultural exports reported higher earnings.

The expenditure on imports increased by 66.5% to $ 1,837 million in August 2011 compared to the corresponding month in 2010. The sharp increase in import expenditure is attributed largely to the lower base in 2010 and increased demand mainly for intermediate and investment goods and higher prices.

Intermediate goods increased by 83.8% to $ 1,071 million, with petroleum imports contributing significantly. The average import price of crude oil stood at $ 107.74 per barrel in August 2011 compared to $ 73.53 per barrel in August 2010.

Imports of investment goods increased by 65% to $ 435 million in August 2011, led by higher expenditures on imports of machinery and equipment, transport equipment and building materials. The imports of consumer goods also increased by 31.6% in August 2011. Food and beverages imports, which accounted for 8.4% of total imports, increased by 24% in August 2011.

For the first eight months of 2011, the cumulative earnings from exports and expenditure on imports have increased by 28.6% to $ 6,966 million and 50.6% to $ 12,926 million, respectively. As a result, the trade deficit stood at $ 5,960 million.

The expansion in exports of services and increased inward workers’ remittances helped contain the impact of the widened trade deficit on the current account.

Earnings from tourism grew at a healthy rate of 49% to $ 522 million during the first eight months of 2011 compared to the corresponding period of 2010, while cumulative inflows on account of workers’ remittances grew at 27.2% to $ 3,381 million during the same period. As a result, the deficit of the current account stood at $ 2,262 million for the period in consideration.