Imports swell, exports lose steam

External trade in November turned exponential to reach a record figure of almost $ 3 billion with imports shooting up to a near $ 2 billion as exports showed signs of losing steam though higher in comparison to a year earlier.

The rapid rise in imports, up 78% to $ 1.98 billion, highest ever, and slower growth in exports up 11.6% to $ 879.3 million saw November trade deficit soar by 239% to a record $ 1.1 billion.
Cumulative import figure for first 11 months was up 53% to $ 18.4 billion and exports trailed with $ 9.58 billion, higher by 22% over the corresponding period of 2010.
January to November 2011 trade deficit was up 111% to $ 8.83 billion.
Though continuous rise in imports midst slower growth in exports have renewed concerns, the Central Bank yesterday in releasing external trade date said record imports were mainly driven by increased demand for investment goods by the government infrastructure projects (a considerable part of which was funded by foreign loans to government) and higher intermediate and investment goods imports by the private sector.
The intermediate goods imports increased year-on-year by 81.1%, led by petroleum, textiles and clothing and fertiliser imports.

The import expenditure on petroleum increased mainly due to higher average import price of crude oil of $113 per barrel in November 2011 compared to $84.85 per barrel for the corresponding month of 2010. Fertiliser imports grew in terms of both prices and volumes, by 326% and 99.9%, year-on-year, respectively, and the sharp increase of volume was mainly due to expansion of fertiliser subsidy to cover all crops. Expenditure on imports of investment goods increased substantially by 91.9% while the non-food consumable imports increased by 48.2%, year-on-year, in November 2011.
With regard to overall external trade, the Central Bank said the structural shift in the economy driven by broad based economic growth including that of former conflict affected areas have contributed to its continuous expansion as well as identified sustainable foreign exchange inflows to support and nurture continuous economic activity.
This was the first time the Central Bank gave such an articulation to external trade in its monthly releases. In its 2012 and beyond roadmap presented early this month Central Bank estimated 2011 full year imports at $ 20 billion and likely to be on target despite record rise in November.
Detailing export performance in November, the Central Bank said machinery and equipment, petroleum products, rubber based products, diamond and jewellery, food, beverages and tobacco and textile and garments continued to record healthy growth levels. Agricultural exports recorded a marginal increase in November 2011, compared with the corresponding month of 2010.
Industrial exports grew by 35% in November 2011 in which textiles and garments rose by 28.5% and machinery and equipment increased substantially by 97.3% in November 2011 compared to the corresponding month of 2010. The sharp increase in machinery and equipment exports is due to the export of two small ships to Singapore and Tanzania. Among the agricultural exports, tea and coconut, including kernel products, increased year-on-year by 7.1% and 46.9%, respectively, in November 2011. The earnings from rubber exports declined in November 2011 due to decline in export volumes as demand from domestic industries for rubber continued to remain elevated.
In cumulative terms, for the first eleven months of 2011, earnings from exports increased by 22.2% to $9,581 million while the expenditure on imports, driven by substantial increase in investment goods and the sharp increase in price and volume of petroleum imports, increased by 53.2% to $18,417 million, compared with the corresponding period of 2010. In addition, gold and motor vehicle imports contributed to the overall increase in import expenditure. The gold imports increased more than six fold to $553 million while the expenditure on imports of motor vehicle almost doubled to $913 million during the first eleven months of 2011, compared with the same period of 2010.
The trade deficit for the first eleven months of 2011 stood at $8,835 million, a significant portion of which was on account of imports of infrastructure related projects of the government that have been funded mainly by foreign loans. In that context, the total inflows to the government, including the proceeds of the International Sovereign Bond issue, amounted to $4,027 million, during the first eleven months of 2011.
During 2011, earnings from tourism grew at a healthy rate of 44.2% to $830 million in 2011 compared to 2010. The tourist arrivals in 2011 increased by 30.8% to 855,975 compared to that of 2010. The cumulative inflows on account of workers’ remittances grew at 23.8% to $4,639 million for the first eleven months of 2011.
Central Bank said the expansion in exports of services and increased workers’ remittances helped contain the impact of the trade deficit, thereby sharply reducing the deficit of the current account to approximately $3.99 billion for the first eleven months of 2011. Inflows on account of short-term foreign financing obtained by commercial banks and funds to be secured from abroad as Tier II capital of banks are expected to further strengthen inflows to the country, as noted by the fact that banks have already contracted $490 million as short-term facilities extending up to one year. Meanwhile, several banks have also already negotiated Tier II capital which could potentially reach about $1 billion this year.
By end November 2011, gross official reserves, excluding Asian Clearing Union (ACU) balances, amounted to $6,201 million. By end November 2011, total external reserves, which include gross official reserves and foreign assets of commercial banks, amounted to $7,541 million. In terms of months of imports, gross official reserves and total external reserves by end November 2011 were equivalent to 3.8 months and 4.6 months, respectively.