Rising global prices had their toll on Sri Lanka’s import bill which has risen by 40% to $ 2.1 billion in the first two months of this year.

According to Central Bank’s latest external trade data released yesterday exports too remain healthier with a near 12% growth to $ 1.2 billion though higher imports widened the trade deficit by over $ 300 million.

Central Bank said earnings from exports increased by 9.7%, year-on-year, in February 2008 to $643 million. Tea, rubber products, machinery and equipment, minor agricultural products, gems and jewellery, and rubber were among the main categories of exports that contributed to this growth. Agricultural exports, with a share of 24.5% in total exports, grew by 35%, year-on-year, in February 2008 and made a significant contribution of 72% to the expansion of earnings from exports. Earnings from tea made a key contribution to the growth in agricultural exports, with export prices of tea continuing to remain strong. Industrial exports, with a share of 73% in total exports, contributed only 18% to the growth in exports, as earnings from textiles and garments declined by 2.7%, year-on-year, in February 2008. Cumulative earnings from exports during the period January - February 2008 have recorded a growth of 11.6%, year-on-year, and amounted to $1,198 million.

Expenditure on imports in February 2008 increased by 31%, on a year-on-year basis, to $960 million. Cumulative expenditure on imports during the first two months of 2008 amounted to $2,135 million, having increased by 40.4% year-on-year. Expenditure on imports of consumer goods increased by 40%, year-on-year, with sharp increases in imports of rice and wheat, in respect of which significant increases have been recorded in both the price and the quantity of import. The growth in expenditure on imports of intermediate goods moderated to 17.5%, year-on-year, in February 2008, as there were no imports of crude oil. Cumulative expenditure on imports of intermediate goods during January-February 2008 however, has recorded a growth of 44%, year-on-year. Imports of investment goods recorded a growth of 59.6%, year-on-year, along with increases in imports of building materials, machinery and equipment as well as transport equipment.

As a consequence of the above developments, the deficit in the trade balance widened to $317 million in February 2008 from $147 million in February 2007. The cumulative deficit in the trade balance for the period January - February 2008 amounted to $937 million, compared to the deficit of $447 million for the corresponding period last year.

However, worker remittances increased by around 23% during the period January - February 2008 to $487 million, cushioning the impact of the trade deficit on the current account. The overall balance of payments is provisionally estimated to have recorded a surplus of around $448 million by end-March 2008. Consequently, the gross official reserves are estimated to have increased to $3,521 million by end March 2008, which is sufficient to finance around 3.5 months of imports.