Expenditure on merchandise imports declined in January 2019 for the third consecutive month by 17.8 per cent (year-on-year) to US dollars 1,655 million, reflecting the effect of policy measures taken by the Central Bank and the government.

All major import categories, namely intermediate goods, consumer goods and investment goods, contributed to this decline. Intermediate goods imports largely contributed to the decline in overall imports, mainly due to lower expenditure incurred on fuel, gold and fertiliser. Expenditure on fuel imports declined due to lower average import prices and lower volumes of crude oil and refined petroleum products despite a higher import volume of coal.

Expenditure on gold imports, which declined since May 2018, following the imposition of customs duty on gold, remained at a negligible level in January 2019 as well. Expenditure on fertiliser imports also declined significantly, led by lower import volumes in all sub categories, particularly urea.

Meanwhile, expenditure on wheat and maize, base metals and rubber and articles thereof contributed notably to the decline in intermediate goods in January 2019. However, import expenditure on textiles and textile articles increased, driven by fabric imports, while mineral products and agricultural inputs also increased during the month.

Import expenditure on consumer goods declined, mainly due to lower expenditure on almost all subsectors under consumer goods except beverages and spices imports. Continuing the declining trend observed since November 2018 that reflected the impact of policy measures taken to curtail imports, expenditure on personal motor vehicle imports showed a significant decline. Expenditure on almost all non-food consumer goods imports decreased in January 2019 compared to the corresponding month of the previous year.

However, considering the revision of excise duties in the Budget 2019, eased pressure on the exchange rate and other developments in the external sector, the Central Bank removed the margin deposit requirement on both vehicle and non-essential consumer goods imports against letters of credit (LC) effective from 7 March 2019 and on documents against acceptance (DA) terms effective from 12 March 2019.

Meanwhile, expenditure on rice imports continued its declining trend in January 2019, with higher supply in the domestic market. Import expenditure on vegetables and dairy products also declined.

Expenditure on the importation of investment goods also declined in January 2019, due to lower imports of all sub categories classified under investment goods. Lower expenditure on commercial cabs and auto trishaws categorised under transport equipment, and iron and steel categorised under building material, mainly led to this decline.

In January 2019, the import volume and unit value indices decreased by 14.6 per cent and 3.7 per cent, respectively, indicating that the decline in imports was driven by low volumes as well as prices of imported goods in comparison to the corresponding period of 2018.

In January 2019, earnings from merchandise exports surpassed US dollars 1 billion for the second consecutive month. Considering the historical pattern of relatively low level of exports being recorded during the month of January, reaching over US dollars 1 billion of export earnings in January 2019 is noteworthy. Accordingly, export earnings increased by 7.5 per cent (year-on-year) to US dollars 1,038 million in January 2019, driven by increased exports from all major sectors.

Industrial exports mainly contributed to the growth of export earnings, driven by textiles and garments, rubber products, machinery and mechanical appliances and food, beverages and tobacco. Textiles and garment exports increased as a result of high demand for garments from the EU and the USA as well as non-traditional markets such as India, Japan, Australia, China and Canada. Further, export earnings from rubber products increased during the month owing to the improved performance in all sub categories.

Export earnings from machinery and mechanical appliances also increased with increases in all sub categories, while earning from food, beverages and tobacco exports increased driven by manufacturing tobacco.

In addition, animal fodder and printing industry products also contributed towards the increase in industrial exports in January 2019. Meanwhile, export earnings from petroleum products declined significantly in January 2019 for the second consecutive month due to lower bunkering and aviation fuel exports driven by significantly lower bunkering quantity, reflecting the intense competition faced by Sri Lankan ports from regional ports mainly in India and Singapore.

Published On : 22-04-2019

Source : Daily News