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Sri Lanka’s Exports Fall in September for 10th Straight Month

[Bloomberg, Wednesday, 25 November 2009 09:40 No Comment]

Sri Lanka’s exports declined in September for the 10th straight month on reduced shipments of the South Asian island’s tea, rubber, textiles and garments.

Overseas sales fell 12.8 percent to $568.2 million from $651.8 million a year earlier, after declining 6.7 percent in August, the Central Bank of Sri Lanka said on its Web site today.

The faltering export from Sri Lanka, which makes garments for Marks & Spencer Group Plc, Gap Inc. and Victoria’s Secret indicates economic recovery is still weak in developed markets. Sri Lanka’s exports may suffer more headwinds as the European Union considers withdrawing some trade benefits it had granted to the nation on concerns of human rights violations.

“While garment exports to the U.S. declined by 19.5 percent in September, exports to the EU increased by 8.6 percent,” the Colombo-based bank said.

Central bank Governor Nivard Cabraal said last month Sri Lanka’s record-low borrowing costs, aided by a benign inflation rate, will help the island overcome any loss of trade concessions from the EU.

Besides, Sri Lankan exporters’ competitiveness has also improved with the local rupee depreciating about 18.5 percent against the euro since November last year, Cabraal said Oct. 29. The rupee was at 114.46 to the dollar at 1:31 p.m. in Colombo after closing at 114.40 yesterday, according to Hatton National Bank Plc.

Sri Lanka is seeing a recovery in tea and garment orders from abroad since April, the central bank said last month.

Trade Benefits

The EU said Oct. 19 it may suspend some trade benefits it granted to Sri Lanka, because of “significant shortcomings” in three areas of human rights during the last stages of the country’s military onslaught to wipe out Tamil Tiger rebels. The Liberation Tigers of Tamil Eelam were defeated in May this year after a 26-year civil war.

Under the EU’s GSP+ trade incentive program, apparel exports to the euro region benefited from a tariff concession of up to 7 percent, Cabraal said last month. In 2008, 66 percent of Sri Lanka’s apparel exports to the EU got a boost from the program, he said.

Sri Lanka will conduct monetary policy “cautiously” to keep inflation below 10 percent and help boost the nation’s economic recovery, the central bank said this month.

The bank on Nov. 18 cut its benchmark interest rates to a five-year low to spur credit demand and support a recovery in the island’s economy.

The value of industrial exports such as clothing, jewelry and rubber-based products declined 12.4 percent to $409 million, the central bank said. Agricultural shipments fell 12 percent to $148.4 million in September.

Sri Lanka’s trade deficit in September narrowed 62.2 percent from a year earlier to $220.3 million, today’s report showed. Imports fell 36.1 percent to $788.5 million.

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