Trade deficits contracts by 75.5 percent in February

The trade deficit contracted by 75.5 percent in February 2009, year-on-year, to record US dollars 78 million, the lowest monthly value in four years, owing to the sharp decline in imports which significantly outpaced the fall in exports, a media release from the Central Bank said.

The cumulative trade deficit decreased by 72.0 percent to US dollars 262 million in the first two months of 2009 from US dollars 937 million in the corresponding period in 2008.

Private remittances decreased by 5.3 per cent from US dollars 523 million recorded during January and February 2008 to US dollars 495 million in the corresponding period of 2009. Remittances during January and February were 89 percent (US dollars 233 million) in excess of the trade deficit, thereby easing the pressure on the current account balance.

Expenditure on imports declined by 37.3 percent to US dollars 602 million in February, 2009 in view of the reduced demand for imports within all the sub sectors. Consumer goods declined by 33.1 percent to US dollars 142.1 million in February 2009.

Sugar imports declined despite the increases in the average import price by 19.5 percent in February 2009. Amongst the non-food consumer goods imports, expenditure of motor vehicles declined by 78.6 percent.

Expenditure on intermediate goods declined by 42.7 percent in February 2009 to US dollars 289 million, led by petroleum imports, which accounted for nearly one third of this as crude oil prices continued to hover around US dollars 45 per barrel.

Textiles and clothing imports declined by 21.8 percent to US dollars 93 million in February 2009. Expenditure on investment goods declined by 31.2 percent in February 2009 to US dollars 165 million. Cumulative expenditure on imports decreased by 40.2 per cent to US dollars 1,277 million by end February 2009. Earnings from exports declined by 18.4 per cent to US dollars 524 million in February 2009 reflecting contractions in all three major categories of exports, the agricultural, industrial and mineral. The largest contribution (53 percent) to this decline was from the industrial exports, followed by the agricultural exports (41 percent).

Industrial exports declined by 13.4 percent to US dollars 408 million in February 2009. Textiles and garments, which is the major subcategories within the industrial exports, grew by 7.0 percent, helping to contain the impact of negative growth in other subcategories.

Textiles and garments exports to the European Union and the United States have increased by 15.4 per cent and 1.5 per cent, respectively, in February 2009.

With respect to agricultural exports, both, tea and rubber, recorded year-on-year declines, due to depressed demand and lower prices. Exports of coconuts, however, increased in February 2009, despite the lower prices in the international markets.

Overall, earnings from agricultural exports declined by 31.0 percent in February 2009 to US dollars 109 million. The cumulative earnings from exports have declined during the first two months by 15.2 percent to US dollars 1,015 million.

The gross official reserves, with and without Asian Clearing Union (ACU) funds, recorded US dollars 1,816 million and US dollars 1,369 million, by end February 2009. Based on the previous 12 month average imports (US dollars 1,098 million per month), these reserve values are equivalent to 1.7 and 1.3 months of imports, respectively.

However, in view of the current and expected low imports, resulting from the sharp reduction in the oil and petroleum product import bills, the actual number of months of imports is much higher, the release said.