In October, both exports and imports, in US dollar terms, recorded lower values when compared with the corresponding monthly values the previous year. However, the trade deficit narrowed to US dollars 131 million compared with a deficit of US dollars 178 million recorded in the corresponding month of last year, mainly due to higher contraction in imports. Export earnings in US dollar terms declined by 19% in October, in contrast to an increase of 8.5% in October of last year. The expenditure on imports declined by 21.2 per cent when compared with October 2000. Export earnings continued to be adversely affected by the slow economic growth in industrial countries which are the main buyers of Sri Lanka’s exports. The declining trend in imports was largely attributable to the surcharge imposed on imports, the low demand arising from the slower economic growth and lower petroleum prices.

The cumulative export earnings during the first 10 months of 2001 declined by 9.1% while the cumulative imports declined by 18.8% (14.7% when aircraft imports were included). As the decline in imports was sharper than in exports, the trade deficit in the first ten months of the year too declined to US dollar 926 million compared with a much higher deficit of US dollar 1,675 million recorded during the first ten months last year. This deficit is lower even when compared with the adjusted trade deficit of US dollar 1,378 million which includes the value of three aircraft imported during the first ten months of 2000.

The export earnings in October were $ 350 million, compared with US dollar 432 million in October 2000. The cumulative export earnings during the first ten months of this year were US dollar 4,079 million compared with earnings amounting to US dollar 4,489 million recorded during the corresponding period in 2000.

Earnings from textile and garment exports declined further by 18.7% to US dollar 173 million in October, the lowest earnings for the month of October during the last six years. This was the combined effect of a 10.9% drop in volume and an 8.8% drop in international prices. The decline in textile and garment exports was largely attributable to lower demand from the USA and European countries. All other industrial exports together declined by 24.3 per cent reflecting lower exports in almost all major sectors such as rubber based products (34.8%), machinery, mechanical electrical equipment (5.8%), travel goods (40.2%), diamond and jewellery (12.4%), fish products, crustaceans and molluses (59.5%) and chemical products (24.2%). Earnings from petroleum products and a few food products recorded improvements over October of last year.

Earnings from agricultural products declined by 3.5% due to decreases in the three major coconut products, cinnamon, pepper and un-manufactured tobacco. Earnings from tea increased by 4.4% for the first time after June, due to a higher volume of exports. Tea production recorded a recovery in October after a continuous decline recorded during the period from June to September, resulting from adverse weather conditions. During the first ten months of the year, tea production declined by 3.4% over the corresponding period last year. International prices of tea continued to remain lower than the previous year since April, due to both higher world tea production and lower demand.

Expenditure on imports at US dollar 481 million declined by 21.2% in October 2001, compared to imports of US dollar 610 million in October of last year. The expenditure on imports during the first ten months of the year was US dollar 5,005 million, an 18.8% decline over the first ten months of last year. When adjusted for the aircraft imported in the months of January, May and June of last year, cumulative imports indicated a lower decline of 14.7%.

The import of consumer goods declined by 24.9% in October. Within this category, food and drink imports declined by 27% due to low imports of sugar and milk products and no wheat imports in October. Two shipments containing 122,905 metric tons of wheat were scheduled last month. Other food items including fish products, lentils, chilies and fruits recorded an 8.3% growth in October. Imports of non-food consumer goods declined by 22.9%. Within this category, motor cars and cycles recorded a substantial decline of 41.8% while radio receivers and televisions declined by 17.6% over October of last year. Intermediate goods imports declined by 17.5% as all major categories of intermediate goods imports declined. Expenditure on petroleum products, fertiliser, chemical elements and compounds, paper and paper boards, dyes and colouring materials declined over October of last year. However, the volume of textile imports increased by 3.9% which is an input for the garment industry indicating potential improvements in future garment exports. However, expenditure on textile imports declined by 8.5% due to lower international prices. Investment goods, declined by 22.6% due to significantly low imports of machinery and equipment, transport equipment and building materials.
(Central Bank press release)