*Private remittances up 10 percent
*Apparel exports to US down 19.5 percent, up 8 percent to EU
*Petroleum spending down 49 percent
*Export earnings contract 16.8 percent

Sri Lanka’s trade deficit has contracted for the ninth consecutive month with both exports and imports contracting and with private remittances improving official reserves have exceeded US$ 5 billion, enough to finance imports for more than six months, the Central Bank said yesterday announcing the external sector performance for the month of September.

The cumulative trade deficit for the first nine months of the year contracted by 60 percent to US$ 1.8 billion year-on-year with the deficit contracting 62.2 percent in September 2009 to US$ 62 million as against US$ 220.3 billion in September 2008.

Private remittances improved by 10 percent during the first nine months to US$ 2.4 billion.

Cumulative export earning for the first nine months of the year contracted by 16.8 percent to US$ 5.1 billion year-on-year with agricultural exports contracting by 17.3 percent (tea declining by 14.9 percent), industrial exports contracting by 16.2 percent (garments declining by 4.8 percent) and mineral export earnings contracting by 34.6 percent.

The Central Bank said export earnings, which had been growing since April 2009, had declined following the usual seasonal pattern.

Export earning for September 2009 declined 12.8 percent to US$ 568 million.

"The largest contribution to this decline came from the industrial exports, which declined by 12.4 percent mainly due to lower exports of garments and textiles, food, beverages and tobacco, machinery and equipments," the Central Bank said.

"Export earnings from garments and textiles exports declined by 4.9 percent to US$ 241 million in September 2009. While garment exports to the US declined by 19.5 percent, in September, exports to the EU increased by 8.6 percent," it said.

The food, beverages and tobacco subsector, declined by 27.6 percent in September 2009, led by lower exports of fish.

"Tea continued to perform well, in terms of prices, despite the year-on-year reduction in earnings by one per cent," the Central Bank said.

The average export price of tea continued to increase and reached a record high of US$ 4.47 per kg in September, growing at the rate of 4.4 percent year-on-year. The reduction in earnings from tea exports in September, down by one percent, was largely due to lower export quantities, and attributed to labour unrest and heavy precipitation in major tea growing areas.

Earnings from exports of coconut oil, fresh coconuts and coconut fibre based products increased in September 2009, due to enhanced export volumes.

Rubber export earnings declined by 43.1 percent due to lower export prices compared to September 2008. Minor agricultural crop exports declined by 27.8 percent but export earnings from coffee, cocoa products, pepper, cloves, and nutmeg increased due to increases in volumes.

Mineral export earnings declined 32.4 percent, largely due to lower gem exports, the Central Bank said.

Imports contracted at a much faster rate 35.3 percent year-on-year than the contraction in export earnings for the first nine months of the year, with lower prices and lower volumes.

Import expenditure on consumer goods declined by 28.8 percent, intermediate goods declined by 40 percent (petroleum down 49 percent) and investment goods declined 28.5 percent.

"Expenditure on imports declined by 36.1 percent to US$ 789 million in September 2009, reflecting lower demand across all three major categories of imports," the Central Bank said.

Import expenditure on intermediate goods, which accounts for 57 percent of total imports, declined by 41.3 percent in September, due to lower expenditure on petroleum and fertiliser due to lower prices, the Central Bank said.

"Year-on year, the average import price of crude oil declined 23.8 percent to US$ 76 per barrel and the average fertilizer price declined 63.9 percent to US$ 338 per metric ton, in September 2009," it said.

The import of consumer goods declined by 10.5 percent in September 2009 to US$ 160 million on lower commodity prices and lower import volumes.

Expenditure on imports for non-food consumer items declined 29.2 percent to US$ 62 million, on falling import volumes for motor vehicles and electrical equipment.

Expenditure on investment goods declined 37.3 percent to US$ 167 million with declines in import volumes of machinery and building materials. However, transport equipment volumes increased.