Industrial export earnings grew by four percent to US $1,831 million. Gems and processed diamond exports recorded an increase, while textile and garment exports at US $1,033 million reflected a growth of four percent despite the slowdown in demand in the US markets. Industrial exports of leather, rubber and paper products also showed improvements with earnings reaching US $251 million during the first quarter of 2008.
Imports in the first four months in 2008 at US $4,533 million recorded a 37 percent increase over the first four months of 2007. The surge in international oil prices has resulted in increasing the petroleum import bill by 76 percent to US $1,115 million in the first quarter of 2008 from US $632 million during the corresponding period of 2007, it noted.
Excluding petroleum products, expenditure on imports recorded a 28 percent growth in the first four months of 2008. Imports of consumer goods grew by37 percent with large increases being recorded in respect of several food imports namely; milk powder, wheat and rice reflecting high international prices that prevailed during this period. Non petroleum intermediate good imports amounted to US $1,482 million compared to US $1,196 million in the first quarter of 2007.
Reflecting increased international fertilizer prices, the import bill amounted to US $123 million, nearly a three fold increase over the corresponding period of 2007. Investment goods imports amounted to US $1,013 million, a 31 percent increase over the same period complimenting the growth momentum of the economy. Importation of building materials increased by 38 percent reflecting the continued expansion of the construction industry in the country, the report stated.
Reflecting these developments the cumulative trade deficit by April reached US $2,036 million against the US $1,061 million in the corresponding period of 2007. The important bill on petroleum products contributed to 55 percent of the trade deficit.
Reflecting the increases in average earnings by migrant workers and increased transfers through the banking sector, the private remittances increased to US $975 million in the first quarter months in 2008, compared to US $864 million during the same period of 2007. The worker remittances during this period were sufficient to cover 87 percent of the oil bill, the report highlighted
The Balance of Payments (BoP) had generated a surplus of US $292 million by the end of May 2008 compared to US $250 million as at end May 2007.
The gross official foreign reserves increased to US $3,562 million by end May 2008 from US $3,508 million at end 2007. Total foreign reserves of the country were US $5 billion by end April 2008. The official reserves were sufficient for about 3.5 months of imports as of end May 2008, the report said.
The Central Bank of Sri Lanka (CBSL) maintained the reserve money within the targeted levels reflecting a growth of 11.7 percent in the first quarter of 2008. To maintain market liquidity at a level consistent with the light monetary targets, CBSL has engaged in aggressive open market operations. Accordingly, the availing of the reverse purchase facility to a bank was restricted only up to three times per month and any excessive participation was subject to penalty.
These measures have led to a deceleration in broad money supply to 14.7 percent by April 2008 from 22 percent in August 2007.As a result of the tight monetary policy stance, the credit demand declined substantially to 15 percent by April 2008 from the high level of around 26 percent recorded in April 2007, the Mid Year Fiscal Position Report 2008 stated.