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Exports earnings during the first eight months of 2003 increased by 11 per cent, in contrast to the drop of 9 per cent in the comparable period in 2002. Imports also increased by 9 per cent as against a decrease of 6 per cent in 2002.

The growth has enabled exports and imports to exceed the levels recorded during January-August, 2001. The trade deficit in the first eight months of 2003 increased marginally to US $ 876 million, compared with a deficit of US $ 866 million recorded during the first eight months of 2002.

Export earnings in August, 2003 were at US $ 470 million, the second largest earnings for a month during the last eight months.

However, this level of export earnings was lower by 17 per cent when compared with the unusually high base value of US dollars 568 million recorded in August, 2002.

Notwithstanding this drop, the overall trend of improving exports during the last 12 months remained unchanged. Expenditure on imports at US $ 523 increased by 14 per cent in August, 2003, as against a 6 per cent growth recorded in August, 2002. As a result, the surplus of US dollars 110 million in August, 2002 turned to a deficit of US $ 53 million in August, 2003.

Exports

Export earnings in August, 2003 amounted to US $ 470 million, compared with US $ 568 million in August, 2002. The cumulative export earnings during the first eight months of 2003 were US $ 3,341 million, compared with US $ 3,009 million recorded during the corresponding period in 2002.

Earnings from textile and garment exports was at US $ 245 million in August, 2003 in comparison to US $ 339 million in August, 2002.

The level recorded stands favourably with the average export earnings from textile and garment exports, but was lower than the exceptionally high base in August, 2002. Though exports of rubber based products (- 6 per cent), machinery, mechanical and electrical equipment (- 14 per cent) declined over August, 2002, their increasing trend observed in the past few months continued. Exports of crustaceans and molluscs declined by 15 per cent compared to August, 2002 due to off harvesting season in shrimp farms.

Export earnings from diamonds and jewellery (11 per cent), chemicals (9 per cent) and articles of wood (22 per cent) increased over August, 2002. The earnings from gems showed a recovery (growth of 62 per cent) reversing the declining trend experienced since February, 2003.

Export earnings from agricultural products in August, 2003 increased by 1 per cent over those of August, 2002. The increases in rubber, pepper and un-manufactured tobacco exports were partly offset by the lower export earnings from tea, coconut, cinnamon and clove exports.

Earnings from tea declined by 2 per cent in August, 2003 due to drop in volume which offset the impact of high tea prices. The reason for the drop in volume was the decline in tea production in May and June, 2003. However, this will be a temporary situation as the tea production recovered recording increases of 2.2 million kg in July and 3.5 million kg in August, 2003, from the adverse effects of the floods in Southern tea growing areas in May, 2003.

Imports

Expenditure on imports, amounting to US $ 523 million, increased by 14 per cent in August, 2003, compared with imports amounting to US $ 458 million in August, 2002.

The expenditure on imports during the first eight months of 2003 was US $ 4,217 million, recording an increase of 9 per cent over the imports of US $ 3,876 million in the first eight months of 2002.

Intermediate goods contributed to 53 per cent of the growth in imports in August, 2003. Imports of intermediate goods increased by 13 per cent in August 2003 due to higher import of petroleum products, diamonds and other intermediate goods. Investment goods imports increased by 14 per cent in August, 2003.

Within this category, machinery and equipment imports increased by 38 per cent, while import of transport equipment and building materials increased marginally. Food imports increased by 26 per cent reflecting the higher imports of wheat, milk products and fish products. Imports of non-food consumer goods increased by 10 per cent reflecting higher increases in imports of motor cars and cycles.

Trade deficit

The trade deficit in the first eight months of 2003 increased to US $ 876 million, US $ 10 million above the deficit in the first eight months of 2002.

Nevertheless, increased foreign exchange inflows due to growth in tourism, port services, private transfers and capital account flows increased foreign exchange liquidity, thereby enabling the Central Bank to purchase US $ 258 million from the market during the first eight months of 2003.

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