SRI LANKA NEWS-(OCTOBER 2020)Compiled by Victor Melder

The Government’s (GoSL’s) face value money printing (FVMP) debt hit its highest figure for the year thus far, with a liability of Rs 481,497.87 million recorded today (02), according to Central Bank (CBSL) data. This increase was aided by GoSL’s non-demand-pull-inflationary FVMP debt increasing by Rs This increase of Rs 144,441.46 million was to aid GoSL and CBSL to meet external commitments of US$ 1,136.60 million; complemented by GoSL having to meet a maturing sovereign bond of US$ 1,000 million this month (October), thereby also making the country’s foreign reserves poorer by an equivalent amount (US$ 1,138.75 million). Conversions are based on the middle rate of the benchmark ‘spot’ as at 29 September (Tuesday), which was Rs 185.40 to the US dollar. (Ceylon Today, 2.10.2020)
Labour Minister Nimal Siripala de Silva is to appoint an official committee to examine the reasons behind the cluster of COVID-19 infections that emanated from the Brandix apparel factory in Minuwangoda. The Minister gave this assurance after trade unions requested a probe as to how the COVID-19 cluster emerged which has led to over 1000 infections. This came at a meeting presided over by the Minister of the National Labour Advisory Council which brings together representatives from the government, trade unions and the private sector (Employers Federation). Palitha Athukorala, a trade union leader present at the meeting, said the unions had wanted a transparent probe into the crisis which was accepted by the Minister.(Sunday Times, 11.10.2020)

A new species of the genus Ceratophora (horn-lizards) found in the Salgala forest in the Kegalle district in the northern part of the wet bioclimatic zone, has been named to honour a renowned scientist in Sri Lanka.The species, which is new to science, has been named Ceratophora ukuwelai sp. Nov., in honour of Dr. Kanishka Ukuwela for his remarkable contribution to science here and South Asian herpetofauna. Ceratophora ukuwelai is an elusive species known to exist only in the Salagala forest in Kegalle district. Considering rapid habitat destruction in the area, experts have recommended the species be listed as Critically Endangered (CR) following IUCN criteria. Horn-lizards comprise six species, all of which are endemic to Sri Lanka. The new species most closely resembles Ceratophora aspera Günther, 1864, but can be distinguished by its body proportions. More than two decades ago, Sri Lanka’s foremost authority of biodiversity, Dr. Rohan Pethiyagoda and his deputy, Dr. Kelum Manamendra-Arachchi, discovered two more species of Ceratophora from the southern part of Sri Lanka. (Sunday Island, 11.10.2020)
Workers’ remittances in August have jumped by 28% from a year earlier to $ 664 million apart from increasing for the third consecutive month. Central Bank described the August growth as “notable”.
It said this increase helped limit the cumulative decline in workers’ remittances to 1.5% to $ 4.34 billion during the period from January to August, in comparison to the corresponding period of 2019. In July remittances hit a record high of $ 702 million, up 12% from a year earlier. In June remittances amounted to $ 572 million, up 6.7% year on year but was down 8% in the first half as against a year earlier. In 2019 work remittances were down by 15%.In its external trade data released on Friday the Central Bank also said marginal net outflow of foreign investment amounting to $ 7 million was recorded from the rupee denominated Government securities market in August, resulting in a cumulative net outflow of $ 521 million during the period from January – August.
(Daily Financial Times, 12.10.2020)
The total outstanding exposure of foreign investment in the rupee denominated Government securities market remained relatively negligible at $ 63 million by end-August. The Central Bank also said there were net outflows of $ 44 million from the secondary market of the CSE in August. No primary market inflow was recorded during the month. On a cumulative basis, the CSE recorded a net outflow of $ 173 million (both primary and secondary markets) during the eight months ending August. Long-term loans to the Government recorded a net inflow of $ 50 million in August, according to the Central Bank. (Daily Financial Times, 12.10.2020)
Sri Lanka and China on Friday signed an agreement on economic and technical cooperation between providing RMB 600 million (Rs. 16.5 billion) in grant assistance. It was signed by China International Development Cooperation Agency (CIDCA) Chairman Wang Xiaotao and Treasury Secretary S.R. Attygalle on the sidelines of the CPC Member of Political Bureau Yang Jiechi’s visit to the island nation. Both President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa extended their sincere appreciation on behalf of the Government and people to the Chinese side for this urgently-needed assistance. Mutually agreed by both sides, the timely grant from the Chinese Government and her people will be utilised with a high priority for medical care, education, water supply, etc., in rural areas of Sri Lanka, so as to contribute to the well-being of her people in a post-COVID era. During the meeting, Yang Jiechi and Premier Rajapaksa went through other Chinese grant projects, such as the National Nephrology (Kidney Disease) Hospital in Polonnaruwa and the new Out-Patient Department (OPD) of the National Hospital in Colombo, etc., and expressed their satisfaction with the good progress despite the COVID-19 pandemic. (Daily Financial Times, 12.10.2020)
Government expenditure for the year 2021 has been estimated at Rs. 2,678 billion with the highest allocations for the Ministries of Defence, Highways and Provincial Councils, according to the Appropriation Bill for next year. The Bill which was approved by Cabinet last week has been published in the Government Gazette ahead of its presentation to Parliament. Separate allocation have been made for State Ministries in the Budget with those related to the agriculture and rural development sectors getting the bulk of the allocations with the highways and road development sector. Of the total of approximately Rs. 2,678 billion (Rs. 2,678,040,000,000) estimated for the service of the period beginning on 1 January 2021 and ending on 31 December 2021, Rs. 1,714,301,178,000 is for recurrent expenditure while Rs. 963,738,822,000 will be for capital expenditure. The expenditure will be met from payments which are authorised to be made out of the Consolidated Fund or any other fund or moneys of, or at the disposal of the Government and from borrowing made in the financial year 2021. The estimated expenditure of the Government authorised by laws to be charged on the Consolidated Fund shall be Rs. 2,228 billion for 2021.
The limit on borrowings for the financial year 2021 has been set at Rs. 2,900 billion with the details of such loans to be incorporated in the Final Budget Position Report which is required to be tabled in Parliament under section 13 of the Fiscal Management (Responsibility) Act No. 3 of 2003.
(Daily Financial Times, 12.10.2020)
The limit on borrowings will be provided that, the difference between the total short-term borrowing raised during the financial year 2021 and the total settlement of short-term borrowing made during the financial year 2021 shall only be considered in deciding the volume of short-term borrowing for the purposes of calculating the borrowing made during the financial year 2021 as specified by the appropriations Bill. The highest allocations in the Budget will be for the Ministry of Defence topping Rs. 355 billion (Rs. 355,159,250,000) of which Rs. 316 billion (Rs. 316,806,290,000) will go towards recurrent expenditure while capital expenditure at Rs. 38 million (Rs. 38,352,960,000).
The State Ministry of Internal Security, Home Affairs and Disaster Management has been allowed around Rs. 152 billion (Rs. 130,818,002,000 for recurrent expenditure, Rs. 21,647,040,000 for Capital expenditure). The State Ministry of Provincial Councils and Local Government under which allocations are made to the nine PCs has been allocated over Rs. 338 billion of which around Rs. 279 billion (Rs. 279,824,000,000) will go towards recurrent expenditure while around Rs. 58 billion (Rs. 58,250,000,000) will go towards capital expenditure. The Ministry of Highways will get around Rs. 330 billion of which around Rs. 329 billion (Rs. 329,999,590,000) will go towards capital expenditure while Rs. 185,415,000 will be for recurrent expenditure. The Ministry of Public Services, Provincial Councils and Local Government will get around Rs. 271 billion of which over Rs. 270 billion (Rs. 270,473,000,000) will go towards recurrent expenditure while capital expenditure will be around Rs. 1 billion (Rs. 1,250,000,000) The allocation for the Ministry of Finance is around Rs. 157 billion with recurrent expenditure accounting for over Rs. 100 billion (Rs. 100,338,845,000) while capital expenditure will be around Rs. 57 billion (Rs. 57,264,870,000). The Ministry of Education has been allocated over Rs. 126 billion with over Rs. 102 billion (Rs. 102,670,000,000) towards recurrent expenditure and around Rs. 23 billion (Rs. 23,870,000,000) towards capital expenditure. The Ministry of Health has been allocated around Rs. 159 million but the bulk of the money of around Rs. 128 billion (Rs. 128,480,998,000) will go towards capital expenditure while around Rs. 30 billion (Rs. 30,995,000,000) will go towards recurrent expenditure The Ministry of Urban Development and Housing will get around Rs. 23 billion (Rs. 530,341,000 for recurrent expenditure and Rs. 22,990,858,000 for capital expenditure. The expense head of the Office of the President has been allocated close to Rs. 9.3 billion (Rs. 9,345,660,000) of which Rs. 3,206,180,000 will go towards recurrent expenditure and Rs. 6,139,480,000 will go towards capital expenditure. The office of the Office of the Prime Minister has been allocated Rs. 1,051,750,000 of which recurrent expenditure and Rs. 149,500,000 for capital expenditure. The Appropriation Bill provides for the service of the financial year 2021; authorises the raising of loans in or outside Sri Lanka, for the purpose of such service; makes financial provision in respect of certain activities of the Government during that financial year; enables the payment by way of advances out of the Consolidated Fund or any other fund or moneys, of or at the disposal of the Government, of moneys required during that financial year for expenditure on such activities and provides for the refund of such moneys to the Consolidated Fund and to make provision for connected matters. The Bill was ordered to be published by Prime Minister Mahinda Rajapaksa who is also the Minister of Finance, Minister of Buddha Sasana, Religious and Cultural Affairs and Minister of Urban Development and Housing. (Daily Financial Times, 12.10.2020)
The import taxes imposed on dhal, canned fish, big onions, and sugar have been removed, stated President’s Media Division (PMD). The Government had taken the decision after considering the current cost of living and difficulties associated with COVID-19 pandemic. Accordingly, the prices of these items have been revised with effect from yesterday and the renewed prices are; canned fish (large) Rs. 200 per tin, big onions Rs. 100 per kilogram, and sugar Rs. 85 per kilogram. In addition, provisions have been made that, when buying essential items, including the aforementioned items, worth of over Rs. 500 from Sathosa outlets, the customer can buy dhal at a price of Rs. 150 per kilogram. Meanwhile, the Coconut Development Board, Kurunegala Plantations Ltd., and the Chilaw Plantations Limited have increased the coconut supply to Colombo, the PMD statement said. Government believes, the new initiative will allow the consumers to now buy coconuts at a reasonable price from Sathosa outlets, the PMD said. (Daily Financial Times, 14.10.2020)
The total number of confirmed cases identified in the island surpassed 5,000 yesterday, with the identification of 194 new cases. Yesterday’s cases include 80 employees of the Minuwangoda garment manufacturing facility and contacts at quarantine centres and 114 other contacts. This brings the Divulapitiya cluster to 1,591 cases and the total number of confirmed cases in the island to 5,038. According to the Epidemiology Unit, 1,697 persons are currently receiving treatment, including 212 at the Kamburugamuwa Hospital, 168 at the Hambantota District General Hospital, 160 at the Neville Fernando Teaching Hospital, and 156 at the National Institute of Infectious Diseases (NIID). Hospitals are also monitoring 432 persons suspected of having COVID-19, including 138 at the Sri Jayewardenepura Hospital. The total number of COVID-19 recoveries also rose yesterday, with 11 persons, including three foreigners, being discharged. While seven persons left the NIID, three persons left the Iranawila Hospital, and one person left the Homagama Base Hospital. A total of 3,328 persons have recovered in the island to date. According to the National Operation Centre for the Prevention of the COVID-19 Outbreak (NOCPCO), 48 persons from Qatar, eight persons from Abu Dhabi, and five persons from India arrived in the island yesterday and have been directed to quarantine centres. The NOCPCO states that 10,281 persons are currently undergoing quarantine at 90 centres managed by the Sri Lanka Army, Sri Lanka Navy, and Sri Lanka Air Force. With 547 persons completing the process at centres yesterday, a total of 51,480 persons have left quarantine centres to date. The NOCPCO yesterday met with Health Ministry officials and owners and management of garment manufacturing facilities to discuss the current spread of the virus and how it is affecting the industry. According to a statement issued by the Health Ministry, a decision was made to prepare special guidelines for carrying out operations in garment manufacturing facilities amidst the COVID-19 pandemic and current cluster emerging from a garment manufacturing facility in Minuwangoda. The discussion also focused on safety guidelines for the industry and difficulties faced when carrying out operations in accordance with instructions given by the President and safety guidelines like temperature checks thrice a day, physical distancing, and wearing face masks. Measures were also taken to ensure staff members are subjected to PCR tests twice a week and for medical officers of health to be contacted if a staff member displays symptoms. (Daily Financial Times, 14.10.2020)
Sri Lanka’s merchandise exports have surpassed the $ 1 billion mark in September after July during this year. Export Development Board (EDB) Chairman Prabhash Subasinghe said they were pleased to see US$ 1 billion of exports in September. “It is the third time this year we have seen a year on year increase of merchandise exports. However, we are concerned about the recent escalation of COVID-19 in Sri Lanka but hopeful of a swift recovery and a stable level of business continuity.” As per the Customs statistics, earnings from merchandise exports recorded a positive growth of 5.16% in September 2020 to US$ 1,001.27 million as compared to the value of US$ 952.1 million recorded in September 2019. This strong performance is consistent with the gradual lifting of restrictions due to Covid 19 pandemic within the country and globally. Increases in exports were recorded as; Europe Region (20.19%), CIS Countries (19.59%) and African Region (56.4%) in September 2020. Export earnings from Apparel & Textiles declined by 3.75 % to US$ 431.87 Mn during September 2020. Export earnings from tea in September 2020 which made up 12% of merchandise exports increased by 3.3 % y-o-y to US$ 113.99 million but the export volume decreased by 2.82 % in September 2020. In addition, export earnings from rubber and rubber finished products have increased by 10.54 % y-o-y to US$ 80.01 million in September 2020. Earnings from all the major categories of Coconut based products increased in September 2020. Export earnings from spices and essential oils have increased significantly by 24.14% to US$ 38.93 million in September compared with the value of US$ 31.36 million recorded in September 2019. Meanwhile, earnings from export of electrical and electronic components (EEC) increased by 13.42% to US$ 37.01 million in September 2020.Total merchandise export earnings for January to September 2020 was US$ 7,401.48 million compared to US $ 8,872.57 million recorded in a similar period of the previous year – a decline of 16.58 %. Major exports such as apparel & textiles (US$ 3,273.9 million), tea (US$ 919.56 million), rubber and rubber based products (US$ 586.58 million) and spices and essential oils recorded decrease of 21.54%, 10.32%, 14.01% and 0.4% respectively during January – September 2020. Earnings from export of PPE (Personal Protective Equipment) related products increased by 42.91% to US$ 636.67 million in January to September 2020. The top five export destinations during the period January-September 2020 were United States of America (US$ 1,892.14 million), United Kingdom (US$ 664.21 million) India (US$ 453.67 million ), Germany (US$ 430.0 million) and Italy (US$ 330.24 million) absorbed over 50% of exports recorded in the period. The services exports estimated by EDB which includes ICT/BPM, Construction, Financial services and Transport & Logistics show exports of US $ 2,291.8 million for the period of January to September. (Daily News, 14.10.2020)
Headline inflation as measured by the year-on-year change based on the National Consumer Price Index NCPI) has been compiled as 6.4% as against 6.2% in August, the Director General of Census and Statistics revealed yesterday. DCS said contributions to the inflation rate in September from food group and non-food group were 5.5% and 0.8% respectively, as compared to 2.1% and 2.9% respectively from September 2019, resulting in a headline inflation of 5.0%. With respect to September 2019, the reported increase in percentage of food group was mainly due to higher price levels prevalent in September this year – particularly prices of coconuts, rice, turmeric powder, coconut oil, vegetables and sugar. Comparing the month-on-month changes, NCPI in September has increased to 138.9 from 137.8 reported in August. This shows an increase of 1.1 index points or 0.8%. The month-on-month change was contributed to by increases of index values of food items by 0.52% and non-food items by 0.23%. Price increases of food items were reported for vegetables, coconuts, big onions, fresh fruits, turmeric powder, rice, biscuits, papadam, jak and jak seeds, and rice flour. (Daily Financial Times, 22.10.2020)
However, decreases in index values were reported for fresh fish, potatoes, red onions, limes, coconut oil, eggs, green chilies, chili powder and sprats (dry). The increases in index values of non-food groups in September compared to the previous month was due to the price increases in groups of items ‘alcoholic beverages, tobacco & narcotics’ (arecanuts and ‘bulathwita’), ‘transport’ (motor cars and cost of servicing of vehicles), and ‘miscellaneous goods and services’. Further, very slight price increases were reported in groups of ‘clothing and footwear’, ‘furnishing, household equipment routine household maintenance,’ and ‘recreation and culture,’ while a very slight price decrease was reported in ‘education’ compared to the preceding month. Meanwhile, the price indices of ‘housing, water, electricity, gas and other fuels,’ ‘health,’ ‘communication,’ and the ‘restaurants and hotels’ groups remained unchanged during the month. Core inflation, which reflects the underlying inflation by excluding volatile items in the food, energy and transport groups in the economy, as measured by the year-on-year change based on NCPI for the month of September, has increased to 4.8% from 4.6% in August. (Daily Financial Times, 22.10.2020)
Sri Lanka’s poverty levels are expected to rise from 8.9 per cent in 2019 (last year) to 13 per cent in 2020, the World Bank’s (WB’s) Country Director for Sri Lanka, Faris Hadad-Zervos, said yesterday (21). The WB’s poverty cut-off mark is US$ 3.20 (Rs 583.49) per person, per day. This implies that about 890,000 more people would become newly poor and many of them from the poorest areas in Sri Lanka. This is a significant setback that would imply a reversal of more than five years’ worth of progress in improving welfare, Hadad-Zervos said. “We are working closely with the Government of Sri Lanka in three ways to reverse the rising tide of poverty brought on by the COVID-19 crisis,” he said. They are by protecting the poor and the vulnerable, investing in agriculture and food security, and investing in people, he said. “One critical success will be the creation of the central online portal, a ‘one-stop-shop’ for all the welfare programmes to better identify the needs of poorer households, reduce overlaps, eliminate leakages, and make it easier for the Government to deliver rapid assistance to those in need,” he said. Meanwhile, the WB supported ‘Agriculture Sector Modernisation Project’ and ‘Climate-Smart Irrigated Agriculture Project’ are helping to innovate agriculture by inter-cropping big onions within mango orchards, growing cassava in village clusters, and cultivating hybrid chilli seeds in polytunnels. Farmers in 11 Districts are receiving support, including knowledge in climate-smart agriculture practices, said Hadad-Zervos. (Ceylon Today, 22.10.2020)
The debt-ridden national carrier SriLankan Airlines incurred a net loss of Rs 47 billion by March 31 this year along with an accumulated loss of Rs 326 billion, while the company’s current liabilities exceeded its current assets by Rs 211 billion, an audit report revealed. The National Audit Office headed by Auditor General W.P.C. Wickramaratne carried out the audit. It pointed out that the airline experienced a net loss of Rs 47,197.86 million during the year ended March 31 with an accumulated loss of Rs. 326,341.48 million. As of that date, the company’s current liabilities exceeded its current assets by Rs. 211,645.13 million and total liabilities exceeded its total assets by Rs. 273,369.08 million. Considering the poor performance of the company and the mitigating factors presented by the SLA management along with the government support, the Auditor General said he considered the airline was to continue its operations as a “Going Concern” and the financial statements had been prepared based on the ‘going concern’ assumption. On the pre-delivery payments made for four Airbus A350-900 aircraft to be delivered in 2020 and 2021 at the cost of Rs. 2,528.12 million (USD 19.21 million), the Auditor General indicated that at March 31 there was an amount of USD 207.89 million as unpaid pre-delivery payments to Airbus. The SLA said it had been in discussion with Airbus for a renegotiation of the agreement and therefore the Board did not anticipate a loss of pre-delivery payments or penalties arising from renegotiation. However, no final decision had been taken even by July 30. In its financial statement detailed in the annual report of 2019/20, the airliner said the management had already taken measures to preserve the liquidity by negotiating deferred payment plans and concessions with the Airline’s key suppliers. These included, steps taken to renegotiate with Airbus on the pre-delivery payments made for four Airbus A350-900 aircraft. Meanwhile, SriLankan’s Chief Executive Officer (CEO) Vipula Gunatilleka pointed out that the reduction in the forecast revenue of Rs 9.1 billion was attributable to the reduced operations at BIA post Easter Sunday Attacks in April last year and further loss of revenue of Rs 9.8 billion was the result of the COVID-19 pandemic in the last quarter of the year. (Sunday Times, 25.10.2020)