Sri Lanka’s worker remittances which plummeted in 2017 due to crises in the Middle East, showed a marked improvement in the first month of this year, helping the country’s Balance of Payment (BoP) to reach a satisfactory level, Central Bank data shows.
However, the gross official reserves at the end of January this year amounted to US $ 7.7 billion, equivalent only to 4.3 months of imports.
Workers’ remittances recorded US $ 7.1 billion during 2017, a 1.1 percent decline from the previous year. However, foreign remittances during the first month this year grew to US$ 443 million compared to US$ 407 million in the corresponding month of last year.
Data also shows that BOP continued to experience higher inflows in January this year, with foreign investments in the government securities market and the Colombo Stock Exchange.
However, a worrying factor has been the depreciation of the Rupee which continues to widen the trade deficit. The Sri Lankan rupee depreciated by 0.6 percent against the US dollar in January this year and by 2.0 percent so far during the year up to April 5.
The deficit in the trade balance expanded in January, surpassing US $ 1 billion for the second consecutive month, due to significant level of imports offsetting the increase in export earnings.
Merchandise exports earnings continued to record double-digit growth (year-on-year) reaching US $ 965 million in January 2018, partly driven by the impact of the low base as export earnings contracted by 3.8 per cent in January 2017.
Export earnings from food, beverages and tobacco, petroleum products, rubber products and tea contributed largely to the growth in exports.
Earnings from food, beverages and tobacco exports increased by more than two-fold in January 2018 owing to higher earnings from almost all sub categories except for cereal preparations. Reflecting the increase in volumes, which grew by 72.1 percent, and the increase in prices of bunker fuel, earnings from petroleum product exports increased notably in January 2018.
Meanwhile, earnings from tea exports increased due to higher prices and volumes.
However, import expenditure surpassed the US $ 2 billion mark in January 2018 for the second consecutive month mainly due to high fuel import bills.
Despite the reduction in the volume of refined petroleum imports, expenditure on fuel imports increased significantly during the month owing to high volumes of crude oil imports and significant price increases recorded in all categories of fuel.
The average import price of crude oil increased to US $ 72.04 per barrel in January 2018 from US $ 57.39 per barrel in January 2017. Further, import expenditure on fertiliser increased significantly in January 2018, reflecting the combined impact of higher average import prices and volumes of fertiliser, particularly urea. Expenditure on gold imports continued to increase significantly in January 2018.