SRI LANKA NEWS
(JUNE 2022)
Compiled by Victor Melder
Asia Siyaka (AS) tea market report for sale no. 21, covering the period May 31- June 1, indicates a production drop of nearly 10 million kilos compared to 2021. Results for the year up to the above dates, the report said, was 111.5 million kilos. Comparatively, for the same period in 2021, production recorded was 122.25 million kilos, indicating a minus variant for the comparative period of about 10 million kilos. The formalized plantation sector was not on hand to corroborate these results. However, tea smallholders and private tea factory owners, when contacted, confirmed a drop in production. It should also be noted that tea smallholders are responsible for 75 per cent tea production. Among the major factors that accounted for these results was the ill- advised decision by the current administration to ban imported fertilizer and the lack of weedicides. The above sources said fertilizer when available could not be applied because of the noxious weed growth. Additionally, as disclosed by the plantation sector, the lack of workers was also beginning to tell, because youngsters, both men and women, sought employment in urban locations. Smallholders said, previously, each field on estates or holdings was harvested on 7- day plucking round, thereby ensuring high standards of leaf harvested. However, because of the lack of workers, harvests were done once in 14 days, thus bringing down leaf standards. Irrespective of these debilitating influences, brokers’ reports said prices remained high. Forbes and Walker confirmed these results. They said Western BOP’s (Broken Orange Pekoe, the marketed leaf size), sold at Rs. 50 to Rs. 100 per kilo, recording comparative gains, same as the BOPF grade (Fannings). They also confirmed teas from Nuwara Eliya were substantially more expensive. For tea, the two factors that count are fuel and fertilizer. Oil price increases are causing tea factories to stop manufacturing. The end result is that smallholder leaf is not produced, resulting in the relevant group of workers being deprived of their livelihood. There are about 400,000 tea smallholders who are affected by fuel restrictions. Besides, the power cuts for a number of hours each day seriously affect manufacturing processes and factories are unable to cope with the influx of green leaf. (Daily Island, 8.6.2022)
Sri Lanka needs inflows of US$ 1 billion to strengthen the rupee in line with the daily requirements of the citizens, Prime Minister Ranil Wickramasinghe said in parliament. ‘Apart from that, we need $5 billion to ensure our daily lives are not disrupted for the next six months,” he said. “Sri Lanka is now set on a sequenced plan to weather the economic storm and achieve a surplus in the primary account in 2025. We will have to make the right decisions to achieve economic stability in 2022-2023. Then In 2024, we shall be able to adopt fiscal stimulus measures to provide supplemental benefits to different economic factors. And in 2025, our goal is to balance our Budget or achieve a surplus primary surplus. This economic program must continue to move towards this long-term goal. In spite of individuals, groups or political parties in power change, it is imperative that we achieve our national economic goals and maintain the highest level of macroeconomic prudence. We are in talks with the IMF based on our future economic plans,” he said. (Daily Island, 8.6.2022)
Former Finance Minister Basil Rajapaksa said he has decided to resign from his Sri Lanka Podujana Peramuna (SLPP) National List seat in Parliament. Basil Rajapaksa said he has tendered his letter of resignation to the Secretary-General of Parliament. Addressing a special media briefing today, Mr. Rajapaksa stated that he will resign from his post giving the opportunity to send a suitable member of the SLPP to Parliament. He further stated that he will not withdraw from politics even if he resigns from the legislature. The billionaire Businessman Dhammika Perera is tipped to be nominated as the SLPP national list MP to fill the seat vacated with the resignation of Basil Rajapaksa. (Colombo Page, 9.6.2022)
President Gotabaya Rajapaksa has issued an Extraordinary Gazette Notification declaring several sectors including fuel and electricity supply as essential services with effect from 20 June 2022. The President by virtue of powers vested in him in terms of Section 2 of the Essential Public Services Act, No.61 of 1979 has issued the relevant Gazette. Accordingly, all services connected to the supply of electricity, the supply or distribution of petroleum products and fuel and all service, work or labor, of any description whatsoever, necessary or required to be done in connection with the maintenance, and the reception, care feeding and treatment, of patients in hospitals, nursing homes, dispensaries, and other similar institution, have been declared as essential services. (Colombo Page, 21.6.2022)
The 21 protesters arrested yesterday by police following a protest held opposite the Presidential Secretariat and the Ministry of Finance this morning, have been granted bail by the Fort Magistrate. The suspects including a Buddhist monk, four women and 16 men were released on Rs. 500,000 surety bail each when they were produced before Colombo Fort Magistrate Thilina Gamage. The case will be taken up once again on the 22 July. Protesters at Galle Face had blocked the two gates on the Lotus Mawatha used for entry to the Presidential Secretariat on Sunday. They remained at the scene until this morning and blocked the two gates used by the Finance Ministry and the Treasury. The protesters erected tents in front of the entrances to protest, preventing officials from reporting on the essential services in those offices as well as the public who had come for the needs. Police Media Spokesman’s Office said protesters blocking the gates to the Finance Ministry prevented the Secretary to the Ministry of Finance from leaving for the discussions with the International Monetary Fund (IMF) delegation. (Daily Financial Times, 21.6.2022)
Sri Lanka’s nationwide inflation in May 2022 determined under the National Consumer Price Index (NCPI) jumped to 45.3 percent from 33.8 percent recorded in April 2022 on a year-on-year basis, the Department of Census and Statistics reported Tuesday. The NCPI for all items for the month of May 2022 increased to 208.7 from 190.3 in the previous month. With respect to May 2021, the reported inflation for the month of May 2022 was mainly due to the higher price levels prevailed in both food and non-food groups. Accordingly, the Year-on-Year inflation of the food group increased to 58.0 percent in May 2022 from 45.1 percent in April 2022 and the Year-on-Year inflation of the non-food group increased to 34.2 percent in May 2022 from 23.9 percent in previous month. Contributions to the inflation rate of May 2022 from food group and non-food group are 27.26 percent and 18.10 percent respectively. The moving average inflation for the month of May 2022 is 16.3 percent. The corresponding rate for the month of April 2022 was 13.0 percent. (Colombo Page, 22.6.2022)
Sri Lanka was sued in the US by a bondholder after the South Asian nation defaulted on its debt for the first time in history while struggling to stop an economic meltdown. Hamilton Reserve Bank Ltd., which holds more than $250 million of Sri Lanka’s 5.875% International Sovereign Bonds due 25 July, filed the suit Tuesday in a New York federal court seeking full payment of principal and interest. Sri Lanka fell into default in May after the expiry of a 30-day grace period for missed interest payments on two of its sovereign bonds. It was the first sovereign debt default by the country since it gained independence from Britain in 1948. Hamilton Reserve, based in St. Kitts & Nevis, said in the lawsuit that the default is being “orchestrated by officials at the highest levels of government,” including the ruling Rajapaksa family, and accused Sri Lanka of excluding bonds held by domestic banks and other interested parties from an announced debt restructuring. “As a result, these favored Sri Lankan parties stand to be paid principal and interest in full, while the Bonds — which are also broadly held by US retirement systems including Fidelity Investments, BlackRock, T. Rowe Price, Lord Abbett, JPMorgan, PIMCO, Neuberger Berman and other US investors — remain indefinitely in default and unpaid, causing American retirees tremendous suffering from potentially massive losses of up to 80% of their original investment value,” lawyers for Hamilton Reserve said in their complaint. A group of Sri Lanka’s largest creditors, including Pacific Investment Management Co., T. Rowe Price Group Inc. and BlackRock Inc., has been set up and restructuring talks are expected to start soon, Bloomberg reported, citing people familiar with the arrangement who requested anonymity ahead of a formal announcement. The island nation is grappling with a worsening humanitarian crisis after it ran out of dollars to purchase imported food and fuel, pushing inflation to 40% and forcing the default. Sri Lanka needs $5 billion to ensure “daily lives are not disrupted,” and a further $1 billion to strengthen the rupee, Prime Minister Ranil Wickremesinghe told parliament earlier this month. Sri Lanka hired Lazard Ltd. and Clifford Chance LLP in May to serve as financial and legal advisors on debt restructuring as the country seeks a bailout from the International Monetary Fund. Sri Lankan authorities on Monday began talks with the IMF, working toward an agreement that could offer creditors enough comfort to lend fresh funds to the bankrupt nation that’s seeking $6 billion in coming months. (Ceylon Today, 22.6.2022)
Several Opposition parties walked out of the Parliament Chamber yesterday (21), saying they would boycott Parliament Sittings this week in protest of the Government’s inability to provide solutions for the burning problems of general public. “This Government has no heart. They do not care about the suffering of the people. In this situation, we do not want to sit in this Chamber for the Sittings. We will boycott the rest of the Sittings this week. We will stand up with the people on the roads,” Opposition Leader Sajith Premadasa stressed. Meanwhile, Jathika Jana Balawegaya (JJB) Leader Anura Kumara Dissanayake also stated that his party would boycott Parliament this week. He suggested that the Government submit a short-term programme to address the on-going crisis, to take the country forward. Following these, the Sri Lanka Freedom Party (SLFP), independent MPs Patali Champika Ranawaka and Ven. Athureliye Rathana Thera walked out of the Chamber, along with the SJB and the JJB. (Ceylon Today, 22.6.2022)
Economist Steve Hanke shared today that according to his accurate measure, Sri Lanka’s inflation stands at 130.14 percent. According to his update on Twitter today, the measure is over three times the official rate of 39.10 percent. Prof. Hanke, an economist at John Hopkins, a private research university in Baltimore, Maryland in the United States, measures the inflation in countries with currency troubles. Prof. Hanke takes into account the true underlying factors such as the opportunity cost and other associated costs one has to undergo when a good or service is purchased. (Daily Mirror Online, 24.6.2022)
State-owned fuel distributor, Ceylon Petroleum Corporation and the private Lanka Indian Oil Company (IOC) have increased fuel prices with effect from 2.00 am Sunday (26). Accordingly, the price of a liter of 92 octane petrol which was Rs. 420 has been increased by Rs. 50 and a liter of 95 octane petrol, which was 450 rupees, is now increased by 100 rupees. Accordingly, the new price of a liter of 92 octane petrol is Rs. 470 and the new price of 95 octane petrol liter will be Rs. 550. The price of a liter of auto diesel which was Rs. 400 has been increased by Rs. 60 and the price of a liter of Super diesel which was Rs. 445 has been increased by Rs. 75. Accordingly, the new price of a liter of auto diesel is Rs. 460 while the new price of a liter of super diesel is Rs. 520.Meanwhile, Lanka Indian Oil (LIOC) has also increased its prices to match with the Ceypetco. Prices. Restaurant owners have decided to increase the price of a packet of rice and other food items by 10 percent due to the increase in fuel prices. Accordingly, the prices of short eats, kottu, and rice packets will be increased by 10% from today (26). Asela Sampath, the chairman of the All Ceylon Restaurant Owners’ Association says the decision was taken to increase the prices of rice packets & all other food items by 10% due to the rising prices of raw food items. He said that if the government provides some relief to restaurant owners, action could be taken to reduce food prices. The price hike comes hours after Sri Lanka increased fuel prices, again. (Colombo Page, 26.6.2022)
The rupee value of the country’s foreign debt has ballooned by near 50% in 1Q to Rs. 9.55 trillion following the sudden free flotation of the currency, latest Central Bank data reveals. Sri Lanka ended 2021 with a foreign debt of Rs. 6.5 trillion and by February this year it was down to Rs. 6.4 trillion. In a highly contested move, the Government in the first week of March all of sudden decided to let the exchange to float free plunging the rupee by over 50%. This caused the foreign debt to swell by nearly 40% to Rs. 9.54 trillion (around $ 2.65 billion in current exchange rate). The total outstanding debt had risen from Rs. 17.6 trillion by end 2021 to Rs. 21.7 trillion by March this year. Foreign debt component was around 44%. The Government has suspended repayment of all foreign debt as of 12 April. The sudden flotation of the currency after it was artificially managed for six months has come under renewed criticism. The subsequent doubling of policy rates added more fodder for the debate. The twin move sans safeguards or stabilisation measures only further aggravated the economic crisis than bringing in stability as per some analysts.
Current CBSL Governor Dr. Nandalal Weerasinghe faulted the sequencing of some of the measures by his predecessor and a degree of damage control was needed. Then CBSL Governor Nivard Cabraal took cover from the fact that the new regime pursued the same flexible exchange rate policy until recently. (Daily Financial Times, 27.6.2022)
The export sector remains the silver lining amidst the multiple challenges, as it maintained the growth momentum year-to-date (YTD) up 9.7% to $ 5.1 billion in the first five months of this year. The surpassing of $ 5 billion mark was possible with May merchandised exports amounting $ 980.2 million, up 10% year on year (YoY) and higher than $ 915.3 million in April. However the $ 1 billion mark remains elusive for the second consecutive month. As per provisional data released by the Export Development Board (EDB) yesterday May merchandised exports grew mainly due to the increase in earnings from apparel and textiles, coconut-based products and electrical and electronic components. EDB estimated services exports from January to May were at $ 1.47 billion, up by 93.3% from a year earlier. The services exports estimated by EDB consists of ICT/BPM, construction, financial services and transport and logistics. In 2021, Sri Lanka’s total exports recorded $ 15.12 billion, up by 23% from 2020 sustaining its resilience, despite an unprecedented economic crisis. Last year’s performance comes second only to $ 15.91 billion recorded in 2018. The Government is banking on exports, the only hope that can pull Sri Lanka out of the vicious cycle of the current account and put it back on a sound economic growth path. The Government has assured more support to exporters to reach a $ 20 billion target this year. (Daily Financial Times, 28.6.2022)
Prime Minister Ranil Wickremesinghe had commenced discussions with the IMF to secure six billion US dollars, United National Party (UNP) Chairman, Vajira Abeywardena said. Out of that amount five billion would be spent to purchase fuel, gas and food, Abeywardene said. One billion will be used to strengthen the rupee. He said that the country was facing a serious crisis and everyone must support the Prime Minister. Abeywardena said that they will also regulate companies that make exorbitant profits. “A company can make a 100% profit, but when it makes 500% something’s not right. These companies have to be regulated,” he said. (Daily Island, 28.6.2022)
The overall Budget deficit in the first quarter has expanded by 21% to Rs. 483.3 billion from a year ago. As per latest Central Bank data, during the three months ending March 2022, Government revenue increased to Rs. 446.8 billion compared to Rs. 365.4 billion recorded in the corresponding period of 2021. Total expenditure and net lending increased to Rs. 931.2 billion compared to Rs. 765.5 billion recorded in the corresponding period of 2021. CBSL also said during the three months ending March 2022, domestic financing increased to Rs. 641.2 billion compared to Rs. 467.7 billion in the corresponding period of 2021. Foreign financing recorded a net repayment of Rs. 157 billion during the period from January to March 2022, compared to a net repayment of Rs. 68.1 billion a year ago. Prime Minister Ranil Wickremesinghe earlier this month told Parliament that the estimated Government expenditure for this year is Rs. 3.3 trillion. However, due to the increase in interest rates and additional expenditure of the former Government, the total Government expenditure is Rs. 4 trillion. The budget deficit for the year is forecast to be Rs. 2.4 trillion of 13% of GDP. In 2021 the deficit was 12%. (Daily Financial Times, 29.6.2022)
