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Thursday June 1st, 2023

Sri Lanka key current flows show surplus over imports for third month in August

ECONOMYNEXT – Sri Lanka’s imports have fallen below key current inflows for the third month in a row in August 2022, as domestic credit turned negative, official data shows.

Sri Lanka’s imports in August fell 11.9 percent from a year earlier to 1,486 million US dollars, though picking up from July while exports grew 11.2 percent to 1,224 million US dollars.

The trade deficit fell to 261 million US dollars in August from 586 million US dollars as financial account inflows and money printing also reduced.

A trade deficit is driven by dollar inflows over and above export income such as remittances. A current account deficit is driven by foreign borrowings.

Imports will generally go up as remittances and tourism receipts improve. However since most members of the public are net savers, bank credit has to be strong to turn savings in to imports.

Sri Lanka’s bank credit has now turned negative.

The total of exports and remittances has been above imports since June, in the style of surplus on the main two current account inflows.

In June the total of exports and imports was 1,522 million US dollars, outpacing imports of 1,226 million US dollars.

In July the total of imports and remittances were 1,444 million US dollars, against imports of 1,287 million US dollars.

In August imports were 1,486 million US dollars against the total of exports and remittances of 1,549 million US dollars.

However banks also have to repay foreign credits while the government has to keep repaying multilateral lenders. When the financial account turns negative a current account surplus is created.

An overall balance payments deficit (and pressure on the currency) is created by central bank money printing in a pegged exchange rate.

The central bank ran out of reserves in the first quarter but has been intervening with money deferred by the Reserve Bank of India up to June.

Key falls in imports have come from investment goods, 39.5 percent to 212 million dollars in August from 351 million US dollars a year earlier.

Non-food consumer goods also fell 55 percent from 205 million US dollars to 91.5 million dollars. Some goods, especially consumer durables are also under import controls. (Colombo/Oct09/2022)

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Sri Lanka exports down in April, trade deficit up from March, rupee stronger

ECONOMYNEXT – Sri Lanka’s exports fell 12.6 percent from a year ago to 849 million US dollars in April 2023, amid weaker external demand, while imports were down 15.8 percent to 1,431 million Us dollars, central bank data showed.

Exports also fell 1,037 million dollars in March 2023, amid seasonal effects.

The trade deficit expanded to 583 million US dollars in April from 412 million US dollars in March 2023. Imports were at 1431 million US dollars in April from 1,450 million dollars in March.

Imports can pick as tourism, worker remittances and net inflows to government go up.

The rupee continued to appreciate.

“Exchange rate showed a notable appreciation during April 2023 with the continued improvement in liquidity in the domestic foreign exchange market, the discontinuation of the daily guidance on exchange rates,” the central bank said.

Up to April exports were down 9 percent to 3.8 billion rupees and imports were down 28 percent to 5.2 billion rupees and the trade deficit was 1.4 billion rupees.

Investment goods imports were down in April amid a contraction in credit.

“Almost all types of goods listed under the three main investment good categories, namely machinery and equipment, building material and transport equipment, recorded a decline,” the central bank said.

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Sri Lanka President discusses debt restructure, program progress with IMF

ECONOMYNEXT – Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

State Minister of Finance Shehan Semasinghe, Senior Advisor to the President on National Security and Chief of Presidential Staff Sagala Ratnayake was also in the meeting.

Secretary of the Ministry of Finance Mahinda Siriwardena, Central Bank Governor Nandalal Weerasinghe, Deputy Director of the International Monetary Fund Anne Marie Gulde, and Resident Representative IMF in Sri Lanka Sarwat Jahan, attended this event. (Colombo/June01/2023)

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Sri Lanka cuts petrol to Rs318 a litre, kerosene to Rs245

ECONOMYNEXT – Sri Lanka has cut petrol 92-Octane by 15 rupees to 318 rupees a litre and kerosene by 50 rupees to 245 rupees a litre from midnight May 31, the Ministry of Energy said.

Petrol 95 Octane will be raised by 20 rupees to 385 rupees, and Lanka Super Diesel 4 Star Euro 4 will be raised by 10 rupees to 340 rupees a litre.

Lanka Industrial Kerosene will be cut by 60 rupees a litre to 270 rupees.

Kerosene which is similar to jet fuel is usually the most expensive fuel in international markets followed by diesel and petrol is usually the cheapest.

Kerosene which is substantially cheaper than diesel is also used by buses to cut costs. (Colombo/May31/2023)

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