- Records export earnings of $ 1.248 b versus imports of $ 1.226 b result in a trade surplus of $ 21 m
- Previous occasion of trade surplus was in August 2002
- Fuel imports up 44.6% to $ 2.58 b in 1H
Sri Lanka achieved its first trade surplus in two decades in June thanks to a sharp rise in exports and a dip in imports.
The surplus was a modest $ 21 million but significant as the country saw such an achievement way back in August 2002. In June exports grew Year-on-Year (YoY) by 24% to $ 1.248 billion and imports dipped by 26% to $ 1.226 billion.
However, in the first half the trade deficit amounted to $ 3.5 billion, though down from $ 4.3 billion a year ago. First half exports grew by 14.3% to $ 6.5 billion and imports were at $ 10 billion, almost same as in the 1H of last year.
Central Bank said the surplus reflect the impact of “historically high” monthly export earnings and the continued decline in import expenditure.
The balance in the merchandise trade account in June 2022 recorded a surplus of $ 21 million, compared to the deficit of $ 652 million recorded in June 2021, and for the first time since August 2002, where a trade surplus of $ 110 million was recorded. Meanwhile, the cumulative deficit in the trade account during January-June 2022 narrowed to $3,514 million from $ 4,316 million recorded over the same period in 2021.
Terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 5.4% in June 2022, compared to June 2021, as the increase in import prices surpassed the increase in export prices.
Detailing exports in June, CBSL said an increase in earnings of both industrial and agricultural exports contributed to this favourable outcome, while mineral exports, which constitute a meagre share of export earnings, recorded a decline. Cumulative export earnings from January to June 2022 also increased by 14.3% over the same period in the last year, amounting to $ 6,514 million.
Earnings from the export of industrial goods increased in June 2022 by 28.4%, compared to June 2021. Higher export earnings from garments contributed to a major share of this outcome.
Export of garments to all major markets (US, EU, UK) improved. Most of the other industrial export categories also showed an improved performance, particularly, gems, diamonds and jewellery; petroleum products; animal fodder; and food, beverages and tobacco.
Earnings from the export of petroleum products improved mainly due to the increase in average export prices of both aviation and bunker fuel exports. A decline in earnings was reported in base metals and articles (mainly, aluminium, iron and steel and articles), transport equipment (mainly, bicycles), plastics and plastic articles thereof (mainly, plastic sacks and bags) and chemical products (mainly, cosmetic or toilet preparations and pharmaceutical products).
Total earnings from the exports of agricultural goods in June 2022 increased by 9.2%, compared to June 2021, with a substantial share of the increase being contributed by seafood (primarily, fresh and frozen fish) and minor agricultural products (primarily, areca nuts). Export earnings from coconut kernel products, vegetables and natural rubber also increased to some extent.
Meanwhile, export earnings from tea and spices declined by 6.0% and 10.6% (year-on-year), respectively, due to the decline in volume exported. Earnings from mineral exports in June 2022 declined by 34.8%, compared to June 2021, mainly due to a decline in export earnings from titanium ores categorised under ores, slag, and ash.
The export volume index increased notably by 23.5%, while unit value index improved marginally by 0.3% (year-on-year), in June 2022. Thus, the increase in export earnings could be attributed mainly to higher export volumes.
CBSL said a broad based decline in expenditure was observed due to regulatory measures to curb non-urgent imports, dearth in foreign currency liquidity, depreciation of the exchange rate etc., while high fuel expenditure countervailed the decline to a great extent. Import expenditure on a cumulative basis from January to June 2022 was recorded at $ 10,028 million, which is a marginal increase of 0.1% (year-on-year).
Expenditure on the importation of consumer goods in June 2022 declined substantially by 53.8%, compared to June 2021, contributed mainly by a reduction of 46.1% in food and beverages and 59.7% in non-food consumer goods.
The year-on-year decline in import expenditure on food and beverages can be largely attributed to dairy products (mainly, milk powder), oils and fats (mainly, coconut oil), vegetables (mainly, big onions, masoor dhal and garlic), and sugar.
However, expenditure on cereals and milling industry products (mainly, rice) increased substantially, while expenditure on beverages (mainly, alcoholic beverages other than wine and beer) and spices (mainly, chillies) also increased in June 2022, compared to June 2021.
The decline in expenditure on non-food consumer goods was broad-based but the drop in imports of medical and pharmaceuticals (mainly, medicaments), telecommunication devices (mainly, mobile telephones) and home appliances (mainly, televisions) was notable. An increase in expenditure was observed in clothing and accessories.
Expenditure on the importation of intermediate goods declined by 2.8% in June 2022, compared to a year ago, with a decline in import expenditure on most of the categories of industrial and agricultural inputs being offset by a substantial increase in import expenditure on fuel.
Categories of intermediate goods that recorded a large decline include, base metals (primarily, iron and steel); plastics and articles thereof (mainly, plastics in primary form); wheat grain; and chemical products (mainly, carbon and laboratory reagents).
Despite the non-importation of crude oil in the month, expenditure on fuel imports increased by 201.9% (year-on-year) recording at $ 200million, due to the increase in volumes and average import prices of refined petroleum products imported, compared to June 2021.
Further, import expenditure on diamonds and precious stones and metals (primarily, industrial diamonds) also recorded an increase during June 2022, compared to June 2021.
Import expenditure on investment goods declined by 46.3% in June 2022, compared to June 2021 resulting from a decline in all subcategories.
Almost all types of goods listed under all three main investment goods categories, namely, machinery and equipment, building material and transport equipment, recorded a decline. Some increases in import expenditure were observed in relation to parts of aircraft and electronic equipment.
The import volume index declined by 30.3% (year-on-year), while the import unit value index increased by 6.1%, in June 2022, implying that the decline in import expenditure in June 2022 was mainly driven by the volume effect.