Sri Lanka imports still strong in September, BOP deficit US$2.5bn

ECONOMYNEXT – Sri Lanka’s imports were 1,526 million US dollars in September 2021, hardly changed from 1,525 million dollars a year earlier, but was lower than in 2019, official data showed as money printing continued to put pressure on a currency peg at 203 to the US dollar.

The balance of payments deficit, which is roughly the foreign reserves lost when printed money is redeemed by the central bank for dollars was 2.57 billion US dollars in September 2020, up from a 1.1 billion US dollar deficit in last year.

Exports were 1,031 million US dollars, up from a billion US dollars in September.

In September consumer goods imports grew 16.6 percent to 310.7 million US dollars though there were no car imports.

Intermediate goods were down 4 percent to 848 million US dollars and investment goods were down 2.1 percent to 374.5 million US dollars.

Total imports at 1,526 million US dollars were around the same as 1,524.9 million US dollars in 2020 and below 1,768 million US dollars in 2019.

Sri Lanka’s economy recovered from lockdowns in September 2020, when a new Covid-wave hit in the last week. After April 2020 imports fell due to lockdowns and a collapse in private credit, but Mercantilists attributed it to import controls.

Imports then picked up rapidly as private credit picked up, partly driven by printed money.

In August Sri Lanka imports were higher than in 2019 when the country had tourism revenues but was not printing much money.

Most of the money is printed to pay salaries of state workers or to repay maturing bonds to keep down interest rates under price controlled auctions. In September newly appointed Central Bank Governor Nivard Cabraal lifted price controls reducing the printed money from auctions.

However a strict enforcement of a non-credible peg at 203 to the US dollar drove more remittances off official channels.

In September 2021 remittances fell to 353 million US dollars from 703 million US dollars in 2020.

Private credit number in September fell partly due to statistical change in dollar loans because the official exchange rate was revalued to 200 rupees from 210.

Tourism receipts were estimated at 18 million US dollars in September up from nothing a year earlier.

The trade deficit was 495 million US dollars down from 525 million US dollars a year earlier.

Up to September imports were 14.9 billion US dollars, up 26.8 percent from a year earlier, and exports were 8.9 billion US dollars up 20 percent from a year earlier. (Colombo/Nov15/2021)

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