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COLOMBO, Aug 6 (Reuters) - Higher tea exports, which made up nearly an eighth Sri Lanka's total exports last year, will help offset a trade deficit ballooned by soaring costs of oil imports, officials said on Wednesday.
Sri Lanka's earnings from tea exports grew by 40.3 percent in the first half of 2008 compared with a year earlier due to higher prices and increased demand from Middle East.
"We have achieved an export revenue of $615.5 million in the first half of this year, compared to $438.6 million in the first six months of 2007," Lalith Hettiarachchi, the chairman of the Sri Lanka Tea Board, told Reuters in an interview.
The average price of Sri Lankan tea has risen 22.2 percent to $3.3 per kilo in the first half of this year compared to the same period last year, Hettiarachchi said.
Sri Lankan tea production rose 19.3 percent to 171.3 million kg in the first six months of the year, Tea Board data showed.
"The drop in Kenyan tea production helped us to export more to Middle East countries this year as demand for our tea has increased in those markets," Hettiarachchi said.
Tea exports to the United Arab Emirates has risen to 23.5 percent to 36.74 million kg of the total export of 156.4 million kg in the first half of this year, compared to similar period last year.
Kenya's tea output fell 21 percent in the first six months of 2008 compared to the same period last year due to drought and frost in growing areas.
Tea output fell 2 percent to 304.6 million kg last year from 310.8 million kg in 2006 due to inadequate fertiliser after sharp price increase in the world market, unfavourable weather and the fallout from a strike.
"But this year we have been, so far, fortunate to have better weather conditions, smooth operations without strikes, and also efficient fertiliser application," Hettiarachchi added.
"We can definitely earn $1.2 billion revenue through tea exports this year. But we expect the full year revenue could go up to $1.5 billion, if the current increasing trend in prices and prevailing production conditions continue."
RELIEF FROM HIGH OIL PRICES
Tea, Sri Lanka's main agricultural export crop and the third foreign exchange revenue earner after textile exports and worker remittance from abroad, accounted for 13.2 percent of $7.74 billion export earning last year.
Officials at the central bank said tea revenue could help to cushion the widening trade deficit by sky rocketed global oil prices.
"This year we expect an additional revenue of $300 million from tea which will be a very good support for the trade deficit," Nandalal Weerasinghe, the chief economist and the director of the economic research department at the central bank told Reuters.
Analysts have said the soaring oil prices alone could increase the trade deficit by an additional $600 million in 2008.
Sri Lanka's trade deficit for January-May ballooned to $2.58 billion, nearly double the same period last year, due to costly oil imports.
The island nation has been struggling to pay high global oil prices, which hit a record near $150 per barrel last month, compared with the government's 2008 budget estimate of $85 per barrel.
Sri Lanka posted a 5.6 percent rise in its trade deficit to $3.56 billion last year compared with 2006, and predicted an 11.5 percent increase to $3.97 billion in 2008 based on estimated average fuel prices of $85 per barrel
"So this increase from tea will certainly help us to finance high fuel prices," Weerasinghe said. ($1=107.8 rupees)
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