External Sector Performance – March 2010
Sri Lanka’s external sector improved further in March 2010 continuing the positive developments observed since December 2009. Earnings from exports grew by 4.8 per cent in March 2010 to US dollars 663 million led by industrial exports. The expenditure on imports also increased by 6.5 per cent to US dollars 1,091 million, due to the increased imports of consumer goods and intermediate goods. Accordingly, the trade deficit in March expanded by 9.3 per cent to US dollars 428 million. Both exports and imports have been well above that of 2009 and remained almost on par with the levels in 2008.
The largest contribution to the growth in exports came from the industrial sector. Industrial exports grew by 5.1 per cent year-on-year in March 2010, led by higher earnings from exports of rubber products, diamond and jewellery, petroleum products, machinery and equipment, and food and beverages. Earnings from textiles and garments exports, however, declined by 9.5 per cent, year-on-year, to US dollars 281 million, mainly due to the base effect, in view of its high performance during the first quarter of 2009.
Expenditure on imports increased mainly due to higher expenditure on petroleum imports in March 2010, as the average import price of crude oil rose by 67.8 per cent year-on-year, to US dollars 78.29 per barrel. Import expenditure on fertilizer also increased in March 2010, compared with the same month in 2009, due to the considerably higher volumes of imports. Expenditure on imports of consumer goods also increased in March 2010, with notable increases in food (mainly rice and sugar) and non-food consumer durables (mainly motor cars and motor cycles).
However, imports of investment goods declined in March 2010.
During the first quarter of 2010, foreign remittances increased by 14.1 per cent over that of the corresponding period of 2009 to US dollars 891 million. The gross official reserves, with and without Asian Clearing Union (ACU) funds, increased to US dollars 5,294 million and US dollars 5,192 million, respectively, by end March 2010. Based on the previous 12 months average imports of US dollars 927 million per month, the gross official reserves, without ACU funds, were the equivalent of 5.6 months of imports.
Sri Lanka flights to start in June says Dubai budget carrier
May 30, 2010 (LBO) – Dubai-based budget carrier Flydubai will fly to Sri Lanka’s capital Colombo from June 23, offering one way tickets starting from 13,000 Sri Lanka rupees, media reports and the company website said.
The airline is offering a Dubai-Colombo fare for 450 UAE dirhams (1 UAD Dirham = 31.1 Sri Lanka rupees).
“We started 2010 with a determination to add new and exciting destinations to our route network,” chief executive Al Ghaith was quoted as saying on Arabianbusiness.com, a regional news portal.
“With our recent announcements of destinations as far apart as Istanbul, Lucknow, Colombo and Karachi, we have delivered on our promise to establish ourselves as an affordable, accessible airline…”
ArabianBusiness.com said the route will target 300,000 Sri Lankan expatriates living in the United Arab Emirates.
Budget carriers operate no trims flights with extra charges for weight (usually above 10 kilograms) inflight food and even blankets.
Sri Lanka needs to contain deficit for long term growth: ADB chief
May 28, 2010 (LBO) – Sri Lanka has to contain its fiscal deficit to sustain growth and maintain stability as the country emerges from a 30-year conflict and rebuilds war damaged infrastructure, Asian Development Bank President Haruhiko Kuroda said.
“With the end of the conflict and ensuing peace Sri Lanka can look forward to prosperous times ahead,” Kuroda told reporters in Colombo after visiting ADB funded projects in fomer war torn areas and meeting President Mahinda Rajapaksa.
“Sri Lanka is a country with immense potential to become a vibrant and prosperous country, and inclusive and equitable growth.”
He said the government was re-building damaged roads, hospitals, water supply and sanitation in the north and east of the country and allowing
refugees to return and re-build their lives.
“This is crucial to rebuild lives livelihoods and revive hope among people whose lives have been disrupted by the war.”
ADB Sri Lanka country director Richard Vokes said the agency would be lending 450 to 500 million dollars in 2009 and 2010 which a 150 million dollar emergency loan approved recently for reconstruction and livelihood development.
Sri Lanka’s growth is expected to rebound strongly 6.0 percent this year from 3.5 percent last year, Kuroda said, but the country had to keep its budget deficit under control.
In 2009, Sri Lanka’s deficit expanded to 9.8 percent of gross domestic product overshooting a 7.0 percent target set under an International
Monetary Fund backed program after the island ran into a balance of payments crisis in late 2008.
“Macro-economic stability is crucial for sustained economic growth,” Kuroda said.
Sri Lanka may be able to increase growth in the short run by increasing spending and reducing taxes. But in the medium to long run if there is no prudent and sound fiscal policy, you cannot have sustained growth, Kuroda said.
“This has been shown many times all over the world, including the recent debt crisis in some European countries.”