Exports of textiles, garments encouraging:

Imports drop 40.5 percent in January - CB

The trade deficit contracted by 66.5 percent, in January 2009, year-on-year, to US dollars 208 million, led by lower trade volumes.

While exports decreased by 11.6 percent to US dollars 491 million in January 2009, imports decreased by 40.5 percent, to US dollars 699 million.

Both, the agriculture and industrial sectors, which were affected by the decline in commodity prices, contributed to the reduction in growth in export earnings, a media release from the Central Bank said.

The release said the lower demand emanating from the global economic downturn also had an impact on the export volumes. The decline in agricultural exports, contributed to more than 50 per cent of the decline in exports in January 2009.

The prices of tea and rubber have decreased by 9.7 percent and 45.9 percent. However, the performance in the exports of textiles and garments is encouraging as it grew by 4.5 percent, despite reduced external demand.

However, this was not sufficient to fully compensate the depressed performance of the other subsectors within the industrial sector. Overall, industrial exports have declined by 5.2 percent to US dollars 385 million. Expenditure on imports declined by 40.5 percent to US dollars 699 million in January, 2009. The broad-based decline in imports was led by petroleum, contributing more than 40 percent to this decline.

The average price of crude oil imports declined by 55 percent to US dollars 41.71 per barrel in January, 2009, from US dollars 92.71 per barrel in January 2008. Expenditure on investment and consumer goods has also declined by 42.1 per cent and 23.6 percent, in January 2009. The current trend in external trade is likely to prevail throughout a greater part of 2009, in response to the deepening global economic crisis.

Private remittances decreased by 6.6 percent from US dollars 274 million recorded in January 2008 to US dollars 256 million in January 2009. A considerable part of remittances are denominated in UK pounds, Euro, Australian dollar and Korean won, all of which have depreciated sharply against the US dollar, contributing to the decline in remittances in US dollar terms.

Remittances in January have been 123 percent of the trade deficit, easing the pressure on the current account balance. In consideration of these developments, both current and expected, the margin deposit requirements (100 percent) on certain non-essential imports imposed in October 2008 were removed, while reducing the same (from 200 percent to 100 percent) on certain categories of motor vehicles.