Higher financial receipts brings back surplus

Overseas Exchange Transactions
February 2016

T$m * Feb 16 Jan 16 Dec 15 Nov 15

Overall balance
2.3 -1.6 8.8 3.1
Total inflows
54.7 39.1 59.5 41.0
Total outflows
39.8 42.8 44.7 44.1
Foreign reserves 328.5 326.3 327.8 319.0

Higher financial receipts brings back surplus

Total OET Receipts

The month of February is normally associated with low OET Receipts. However, for February 2016, total OET receipts reached $54.7 million, $15.6 million (39.7%) higher than the previous month, and $19.5 million (55.4%) higher than the same month last year. This turnaround was largely attributed to a $9.6 million increase in other financial investments. Total OET receipts also rose over the year ended February 2016 to $598.7 million, $95.6 million (19.0%) higher than the previous year supported by higher transfer and services receipts. 53% of the receipt transactions during the month were denominated in US dollar (USD).

Current Account Receipts

Current account receipts were $39.4 million in February 2016, $6.6 million (20.0%) higher than its level last month and accounts for 72% of total OET receipts. All major current account categories have increased over the month with transfer receipts increasing the most by $3.6 million. Over the year to February, current account receipts went up to $470.9 million, $95.6 million (25.6%) higher than it was a year ago, driven mostly by strong growth in transfers and services receipts.

Improvement were noted in transfer receipts for the month, as it grew by $3.6 million (17.2%) to $24.2 million representing 44% of total OET receipts. The rise in transfer receipts stems from higher official transfer recepits due to the receipt of government grants. Private transfers also increased over the month by $0.9 million (5.7%) and over the year by $37.2 million (20.5%), supported by the growth in the US and Australian economies. Over the year to February, transfer receipts rose to $300.5 million, $52.4 million (21.1%) higher than the level last year.1

Service receipts also rose over the month by $1.2 million (12.4%) to $11.1 million. Despite a $1.4 million (22.2%) fall in travel receipts, other services rose by $2.7 million (83.4%) attributed mostly to receipts of construction and telecommunication services. This is evident on the on-going construction projects carried out in the Nuku’alofa area. Over the year ended February 2016, service receipts rose by $37.0 million (38.6%) to $132.9 million reflecting a strong services sector during the year.

Export receipts have increased over the month by $0.6 million (58.2%) to $1.6 million. Agricultural export volumes reported an increase in the same month by 153.3 tonnes (89.3%) coinciding with the rise in proceeds from agricultural exports of $0.1 million (29.7%). Fisheries export volumes also noted a rise in exports of tuna and snapper in line with the $0.3 million (56.6%) rise in proceeds from fish and marine exports. Proceeds from other exported goods also rose by $0.2 million (141.6%). On year ended terms, export receipts slightly dropped by $0.1 million (0.4%) to $15.2, mostly due to a fall in receipts from other exported goods. On the other hand, proceeds from agricultural, fisheries and other marine exports grew over the year reflecting the more favourable weather conditions this year, compared to the adverse weather conditions in the previous year.

Financial Account & Capital Account Receipts

Financial account receipts rebounds over the month of February 2016, rising by $9.5 million (208.5%) to $14.1 million driving the overall rise in OET receipts. This stems from a $9.6 million (214.3%) increase in other financial investment receipts as a result of foreign exchange dealing between resident banks and its overseas correspondent banks. Capital account receipts however, fell by $0.6 million (33.9%) due to lower receipts of other capital transfer receipts.

Total OET Payments

Total OET payments further declined in February 2016 by $3.0 million (7.2%) to $39.8 million, driven mostly by lower import payments compared to the previous month. On year ended terms however, total OET payments continues to rise by $32.5 million (6.5%) from $496.1 million to $528.6 million largely owing to higher payments made for imports and services.

Current Account Payments

Current account payments were $3.6 million (9.1%) lower in February than the month prior, falling from $40.1 million to $36.5 million. This was due to a decrease in import payments which is the largest category of current account payments. Current accounts represent 92% of total OET payments. Over the year, current account payments increased by $25.1 million (5.4%) to $485.6 million, again driven by higher import payments.

In February 2016, import payments declined by $5.8 million (21.6%) to $21.1 million. Lower payments for imports of oil, motor vehicles, wholesale and retail goods contributed to the declining import payments. This is consistent with the fall in container registrations by 51 containers (7.7%) and a decrease in vehicle registrations by 58 vehicles (23.9%) in February. In year-ended terms, import payments rose by $19.4 million (6.8%) by the end of February 2016 to $305.3 million, and accounts for 58% of total OET payments.

Service payments rose by $1.6 million (21.2%) to $9.1 million over the month, underpinned by higher payments for telecommunication and professional business services. Over the year, service payments were $6.0 million (5.7%) higher this year than it was a year ago.

Primary income payments rose by $0.6 million over the month, whereas transfer payments rose by $0.1 million.

Capital & Financial Account Payments

Similar to last month, no capital payments were reported in February 2016. Financial account payments rose by $0.6 million (22.4%) over the month to $3.3 million mostly in the form of inter-bank transfers.

Overall Balance & Foreign Reserves

The balance of Overseas Exchange Transactions, which is equivalent to the net change to foreign reserves over the month of February 2016, was a surplus of $2.3 million. This follows a $1.6 million deficit last month. The expansion of the net financial account and net current account contributed to the surplus. In year-ended terms, the overall balance was a surplus of $47.2 million compared to only $0.2 million in the previous year.

Foreign reserves rose to another record high of $328.5 million in February 2016, sufficient to cover 9.3 months of imports, well above the NRBT’s minimum range of 3-4 months of import. The outlook for foreign reserves is considered to remain comfortably above the minimum range, given the expectation of on-going remittance receipts, Government aid in the form of budget support, and other assistance from donor partners. However, delays to the inflow of these funds will pose a risk to the outlook.

1 Further information on remittances can now be found on our Remittances Data flash, available here.

Download the Overseas Exchange Transactions Report for the month of February.






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