May 08, 2013 (LBO) – Sri Lanka’s exports fell 2.8 percent to 837 million US dollars in March 2013 from a year earlier, but apparel was up 5.0 percent to 344.5 million US dollars.
The Central Bank said remittances fell 3.4 percent to 545.5 million US dollars.
When remittances or exports fall, imports will also fall correspondingly in subsequent weeks unless the Central Bank prints money and injects rupee reserves into the banking system pushing up credit and import demand.
In recent weeks the Central Bank has been selling its Treasuries stocks, withdrawing rupee reserves from the commercial banking system and building foreign reserves.
From mid 2011 to mid 2012 the Central Bank printed money, bought Treasuries and generated a balance of payments crisis which weakened the rupee.
Earnings from tourism (exports of tourism services) also rose 16.2 percent to 108.0 million US dollars. In March 33.5 million US dollars had flowed into Treasuries markets (exports of debt) the government has also borrowed 133.6 million US dollars.
When the government spends the money borrowed from abroad it will draw in imports and expand the trade deficit.
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