Nov 29, Colombo: Sri Lanka's external sector came under pressure in September 2018 due to the widening deficit in the trade account and the strengthening of the US dollar, the Central Bank said in its External Sector Performance review for the month.
Despite earnings from exports which surpassed US dollars 1 billion for the fourth consecutive month, higher growth in import expenditure outpaced the increase in export earnings.
Earnings from merchandise exports grew 4.4 percent in September 2018 to US$ 1.055 billion compared with September 2017, mainly driven by industrial exports.
Earnings from industrial exports, which account for 77 per cent of the total export earnings, grew by 9.4 percent during September 2018, while earnings from agricultural exports fell by 10.8 percent, reflecting the poor performance in almost all categories except seafood.
On a cumulative basis in the first nine months of this year, year-on-year exports earnings increased by 5.6 percent to US$ 8.898 billion from US$ 8.424 billion a year earlier.
However, expenditure on imports increased by 6.1 percent (year-on-year) to US$ 1.768 billion in September 2018 from US$ 1.667 billion a year ago, mainly due to high expenditure incurred on fuel, and personal vehicle imports.
Cumulatively, import expenditure increased by 10.4 percent in the first nine months of 2018 to US$ 16.851 billion from US$ 15.264 billion in the same period of 2017.
The trade deficit expanded by 8.7 percent to US$ 713 million in September 2018 from US$ 656 million a year earlier. Cumulatively trade deficit increased 16.3 percent from US$ 6.839 billion to US$ 7.953 billion in the first nine months of the year.
In September 2018, tourist arrivals increased marginally by 2.8 percent and accordingly, earnings from tourism in September 2018 are estimated at US$ 276 million, with cumulative earnings amounting to US$ 3.212 billion during the first nine months of 2018.
Workers' remittances declined by 7.1 percent to US$ 500 million in September 2018. On a cumulative basis, workers' remittances declined by 1.5 percent to US$ 5.277 billion during the first nine months of 2018 in comparison to the corresponding period of 2017.
Both the government securities market and the CSE witnessed foreign investment outflows in September 2018.
The government securities market continued to experience a withdrawal of foreign investments recording a net outflow of US$ 152 million in the month of September, raising the net cumulative outflow to US$ 468 million by the end of the first nine months of 2018.
Meanwhile, foreign investments in the CSE, including both secondary and primary market foreign exchange flows, recorded a net outflow of US dollars 7 million during the month of September 2018. On a cumulative basis, the CSE recorded a net inflow of US$ 37 million in the first nine months of 2018.
The gross official reserves of the country increased to US$ 7.2 billion, equivalent to 3.8 months of imports, at end September 2018. Total foreign assets, including foreign assets of the banking sector, was estimated at US$ 9.6 billion as at end September 2018 which was sufficient to cover 5.1 months of imports.
The Sri Lankan rupee depreciated by 15.1 per cent against the US dollar in the year up to 29 November 2018.