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The country’s exports sector continue to struggle, with May data showing an overall marginal decline though apparels have outperformed as soaring imports further widened the trade deficit.
In April, exports slumped to their lowest level in two years and in May, the performance couldn’t turn positive as the sector ended with a 0.1% decline. This was despite the apparel sector reporting an encouraging 7.5% growth.
Some viewed the flat growth in May as an encouragement especially after the dip in April.
On a cumulative basis, export earnings during the first five months of 2015 increased marginally by 0.2%, year-on-year, to $ 4.47 billion.
Whilst exports struggled, imports continue to soar, recording a 17.2%, year-on-year, to $1.58 billion in May led by vehicle imports.
Consequently the deficit in the trade account in May 2015 widened substantially by 49.7% to $703 million in comparison to $470 million in May 2014, which the Central Bank said was the lowest monthly value recorded during the year 2014.
On a cumulative basis, trade deficit during the first five months of 2015 increased by 10.2% to $3.4 billion.
Releasing external trade data, the Central Bank said yesterday earnings from exports further moderated in May 2015 to $883 million, recording a marginal decline of 0.1%, year-on-year.
Despite the significant improvement recorded in exports of textile and garments, lower performance in tea, sea food and gem, diamond and jewellery exports contributed to this decline.
Tea exports, which were severely affected by the lower demand from Russia and the Middle East, declined for the eight consecutive month in May 2015, recording a drop of 12.1% compared to the corresponding month of 2014. Tea exports to Russia and the Middle East declined by 19.2% and 9.7%, respectively, during May 2015 compared to the corresponding month of 2014.
Seafood exports which dropped continuously from October 2014, recorded a further decline of 39.3% in May 2015, compared to the corresponding month in 2014. This reduction was mainly due to the significant decline of 74.8% in sea food exports to the EU market, the main seafood market of Sri Lanka as a result of the ban on seafood imports from Sri Lanka to the EU market with effect from 13 January 2015.
Export earnings from gems, diamonds and jewellery declined by 29.8% year-on-year to $25 million. Petroleum products and, machinery and mechanical appliances also contributed for the drop in exports during the month.
Export earnings from textiles and garments, which account for about 45% of total exports and declined in March and April 2015, increased by 7.6% during May 2015, reflecting an increase in exports to the USA and non-traditional markets such as Canada, China, UAE and Australia. However, textiles and garments exports to the EU market declined by 11.8% in May 2015, continuing the declining trend observed from March 2015.
On a cumulative basis, export earnings during the first five months of 2015 increased marginally by 0.2%, year-on-year, to $4,471 million. The leading markets for merchandise exports of Sri Lanka during the first five months of 2015 were the USA, UK, India, Germany and China accounting for about 51% of the total exports.
Total import expenditure in May 2015 increased for the second consecutive month recording a significant increase of 17.2%, year-on-year, to $1,585 million led by vehicle imports, which include personal motor vehicles categorised under consumer goods and commercial vehicles categorised under investment goods. Imports of motor vehicles for personal use, increased by 87.1%, year-on-year, to $93 million, while transport equipment increased by 117.2%, year-on-year, to $72 million mainly due to the increase in importation of auto trishaws.
In addition, import of machinery and equipment, and textiles and textile articles also contributed significantly to the growth in imports. Import expenditure on machinery and equipment increased by 21.8% during the month, mainly due to higher imports of machinery and equipment parts, printing machinery and medical and laboratory equipment.
Import expenditure on textiles and textile articles increased by 16.3%, year-on-year, mainly due to the increase in fabrics such as knitted or crocheted fabric, woven fabric of cotton and tyre cord fabric. Meanwhile, import expenditure on fuel declined by 7.8%, year-on-year to $264 million in May 2015, reflecting 14.1% reduction in refined petroleum bill as a result of a 30.1% decline in import prices. However, expenditure on crude oil imports increased by 11% due to a substantial increase in import volume, despite the decline in the import price.
Meanwhile, import expenditure on fertiliser and dairy products declined by 20.9% and 40.7%, respectively, while rice imports which recorded a significant growth since April 2014, also declined by 23.8% in May due to the increase of Special Commodity Levy imposed on rice to Rs. 40 per kg from Rs. 20 per kg with effect from 26.03.2015.
On a cumulative basis, expenditure on imports during the first five months of 2015 increased by 4.3%, year-on-year, to $7,868 million mainly led by consumer goods imports followed by investment goods imports. During the period from January to May 2015, the main import origins were India, China, Japan, UAE and Singapore accounting for about 60% of the total imports.
Sri Lanka has suffered a revenue loss of $ 75 million (68 million euros) because of a European Union ban on fish caught by Sri Lanka-flagged vessels since January, a government spokesman said on Wednesday.
Sri Lanka was a significant exporter of swordfish and tuna to countries in the EU, which blacklisted Sri Lanka in January for failing to combat illegal fishing.
Brussels accuses Sri Lanka of allowing vessels to fish the Indian Ocean without marine satellite positioning equipment, making it virtually impossible to monitor their movements.
On Wednesday, Sri Lanka Foreign Ministry spokeswoman Mahishini Colonne said the Government had been taking steps to address the issues raised by the EU.
Among them are fitting vessel monitoring systems on high sea fishing vessels, maintaining and updating a register of high sea fishing licenses, banning vessels using harmful fishing methods and prosecuting those found to be fishing illegally.
Colonne said a technical evaluation mission from the Office of the Director General of Maritime Affairs and Fisheries in Brussels is expected to visit Sri Lanka in October and discuss further steps toward lifting the ban.
The EU warned Sri Lanka about breaking international rules on illegal fishing in November 2012. The bloc said it only accepts stocks caught at sustainable levels and certified as legal by the exporting country.
Environmental groups have welcomed the trade restrictions, noting that the move would also prohibit EU fishing vessels from working in Sri Lankan waters.
The EU slapped similar restrictions on Belize in March 2014 and removed them in December after the Latin American country adopted new legislation to combat illegal fishing and showed signs that it was respecting its international obligations.
