Balance of payments records healthy surplus by July

Balance of Payments (BOP), which includes all foreign currency inflows and outflows,recorded a surplus of US dollars 1,006 million by end July 2011.

Gross official reserves,excluding Asian Clearing Union (ACU) balances, increased to US dollars 8,099 million by end July 2011 from US dollars 6,610 million by end 2010, the Central Bank said yesterday.

The improved macroeconomic environment and several initiatives to attract foreign inflows contributed towards strengthening the country’s external reserve position to this level.

Total external reserves (excluding ACU balances) increased to US dollars 9,487 million by end July 2011.

In terms of months of imports, gross official reserves and total external reserves by end July 2011 were equivalent to 5.7 months and 6.7 months, respectively.

During the first seven months of 2011, the cumulative earnings from exports and expenditure on imports increased by 30.3 per cent to US dollars 6,014 million and 48.3 percent to US dollars 11,091 million, respectively. The increase in imports expenditure was spurred by the increase in imports of intermediate goods and investment goods, such as machinery and equipment and building materials, which set a satisfactory foundation for future growth.

At the same time, the average import price of crude oil increased by 36.6 per cent to US dollars 107.95 per barrel in the first seven months of 2011, from US Economic Research Department 29 September 2011 dollars 79.03 per barrel for the same period of 2010.

This rise in crude oil prices resulted in an increase in the petroleum bill by 39.4 per cent to US dollars 2,493 million in the first seven months of 2011.

Supported by the healthy growth in the tourism sector, the surplus in the services account increased to US dollars 461 million in the first seven months of 2011, while cumulative inflows on account of workers’ remittances amounted to US dollars 2,922 million during the same period.

Accordingly, despite the widened trade deficit, inflows to the services account and the workers’ remittances contributed to set off around two thirds of the trade deficit.

At the same time, the total foreign inflows to the government (including the 10-year Sovereign Bond proceeds of US dollars 1 billion) during the first seven months amounting to US dollars 2,754 million and foreign direct investments (FDI) in the first half of 2011 amounting to US dollars 413 million, enabled the overall BOP to record a comfortable surplus of US dollars 1,006 million by end July 2011.

The exchange control relaxations effected by the Central Bank in November 2010 facilitated foreign exchange transactions and business activities during the past few months.

The relaxation measures which enabled corporates to borrow from foreign sources resulted in 14 private companies obtaining foreign loans amounting to US dollars 197.1 million by mid-September 2011, while the permission granted for foreign companies to open places of business resulted in 20 new foreign companies commencing business in Sri Lanka this year, the Central Bank said.