COLOMBO (EconomyNext) – Sri Lanka’s export revenues rose 0.9 percent to 703.8 million US dollars in January 2015 from a year earlier, with prices falling in items like tea, despite volume increases the Central Bank said.
Imports rose 1.6 percent to 1,681.6 million dollars, widening the trade deficit expanded 2.7 percent to 772 million US dollars from 752 million US dollars a year earlier.
In January the balance of payments recorded a deficit of 696.5 million US dollars, against a surplus of 732.9 million US dollars last year. Sri Lanka’s BOP has been in deficit after August 2014, when domestic credit picked up.
Apparel exports fell 0.5 percent to 409.9 million US dollars. Rubber products fell 12.3 percent to 64.2 million US dollars. Exports of rubber tyre volumes had fallen.
Tea revenues fell 2.2 percent to 113.5 million US dollars, despite volumes rising 11.9 percent.
Petroleum exports rose 67.3 percent with higher bunker sales.
Consumer goods rose 56.7 percent to 397.3 million US dollars with rice imports rising to 55 million US dollars from 1.6 million a year earlier.
Dairy products fell to 14.5 million US dollars from 38.2 million.
Fuel imports fell 41 percent to 289.2 million US dollars. Textiles and articles rose 3.3 percent to 200 million US dollars.
Workers remittances fell 5.8 percent to 523 million US dollars after a record surge in December to 708.8 million US dollars, the Central Bank said.
If remittances or exports falls, imports will also fall as domestic spending power falls. Sri Lanka’s trade deficit is large caused by inflows outside the trade account such as remittances, tourism and net foreign borrowings by the government.
However when unsterilized excess liquidity in the central bank is loaned out by banks, the trade and current account deficits can expand and the currency can come under pressure.
In January the rupee has been allowed to fall 1.39 percent against the US dollar, to which the currency is loosely pegged.
The central bank said exchange rate stability was maintained through "through normal intervention in the domestic foreign exchange market as per the current policy."
Analysts say as long as large volumes of excess liquidity is allowed to slosh around the banking system the central bank will have to defend in the forex market to mop them up through unsterilized reserves sales.