SRI LANKA NEWS – OCTOBER 2021

SRI LANKA NEWS
(OCTOBER 2021)
Compiled by Victor Melder.

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Sri Lanka has turned to China for more fuel purchases on long-term credit as the country continues to face serious issues in raising funds for oil imports. Sri Lanka was having discussions with China through the Chinese ambassador to purchase fuel for six months on a Sovereign Bond – the debt security issued by the Government to raise money for financing government programs.   Existing diesel and petrol purchase arrangements which end in November and January respectively, would be extended to buy fuel on credit for the next six months. The move comes after similar talks with Oman to seek credit for US dollars 3.6 billion to buy refined and crude oil. Minister Gammanpila said initial talks had been held during his recent visit to Oman and agreements needed to be finalised to obtain the facility.Sri Lanka is expecting a five-year grace period for the repayment to be completed in 20 years, he said. Sri Lanka is also having talks with the Indian government for a US dollar 500 million credit line to buy fuel while discussions have also been held with the United Arab Emirates on fuel purchases.(Sunday Times, 3.10.21)

The COVID-19 death toll has shown a sharp drop during the week but health authorities have urged the people to adhere to health guidelines and support efforts to curb the spread of the virus after the country was reopened on Friday.  The weekly death toll came down from about 1000 several weeks ago to 300 this week with an average of 50 deaths a day compared to 200 a day in the previous weeks. The daily death toll as announced yesterday was 55 while the total death toll passed the 13,000 mark.  This week also saw a significant drop in the number of daily COVID-19 cases with 893 reported on Friday. A total of 518,775 people have been infected with the virus. At present there are 47,726  covid-infected patients receiving treatment at hospitals, treatment centres or in their homes.(Sunday Times, 3.10.2021)

The Sri Lankan Government is to secure a US$ 3.6 billion loan, from the Government of Oman, to finance Sri Lanka’s oil procurements. A Cabinet Paper will be tabled within the next few days for approval to offer two blocks – Block CB 034 to CB42 (formerly known as Block C2) in the Cauvery Basin and Block MB001 to MB011 (Formerly known as Block M3) to the Sultanate of Oman, for joint oil exploration studies. The loan facility of US$ 3.6 billion for petroleum procurement by the Ceylon Petroleum Corporation (CPC) and the oil exploration move has been discussed between Shumookh International Executive Director Abdullah Al Bulushi, and Minister of Energy Udaya Gammanpila and senior officials. This decision has been reached due to the direct involvement of Minister Gammanpila, Ministry sources said. The CPC said the loan interest would be four per cent for the USD 3.6 billion and the petroleum products and crude oil will be priced at the monthly average of Singapore PLATTS. According to the conditions placed by the CPC in the Cabinet proposal, the CPC had accepted the request of two oil wells for Oman on conditions that the loan borrower will be the CPC and the product specifications deliverable dates and places will be determined by the CPC.  Also, the CPC said that they would ‘offer Block CB 034 to CB42 (formerly known as Block C2) in Cauvery Basin and Block MB001 to MB011 (Formerly known as Block M3), on the oil exploration map, for joint studies for a period of five years, as the collateral addition to the sovereign guarantee. The CPC also placed a condition that if the two oil blocks are found to be of no use, several blocks of a similar extent will be provided for the joint studies within the said period of five years.  The Omani investor has said a separate fee of 2.25% would be deducted for the loan and the CPC has said such a deduction should be made from the loan (USD 3.6 billion).  (Ceylon Today, 4.10.2021)

The latest Covid figures released are: Confirmed Infected Cases – 520, 432, Confirmed Recovered Cases – 459,298, Deaths – 13,059. (Ceylon Today, 4.10.2021)

Inflation, as measured by the change in the Colombo Consumer Price Index (CCPI), declined to 5.7% in September from 6% in the previous month, the Department of Census and Statistics reported Thursday.
The CCPI for all items for the month of September increased to 144.1 from 143.5 in August.
 Year-on-year (Y-o-Y) inflation of Food group decreased to 10% in September from 11.5% in August, while Non-Food inflation Y-o-Y increased to 3.8% in September from 3.5% in August.
For the month of September, on a Y-o-Y basis, contribution to inflation by Food commodities was 3.14% and the contribution of Non-Food items was 2.64%.The moving average inflation rate for September was 4.5%. The corresponding rate for the month of August was 4.3%. (Daily Mirror Online 4.10.2021)

The government has decided to remove controlled prices for milk powder, gas, wheat flour and cement. The decision to increase the prices of milk powder, gas, wheat flour and cement was taken at a special meeting of Cabinet of ministers chaired by President Gotabaya Rajapaksa. It was also decided to assign the Consumer Affairs Authority to increase the prices of milk powder, gas, wheat flour and cement to cover their costs. The Consumer Affairs Authority (CAA) recently proposed to increase the price of a kilo of milk powder by Rs. 200, a gas cylinder by Rs. 500 and a bag of cement by Rs. 50. The government says it will take stern action if prices are raised in a way that inconveniences the public, even if the control price is removed. The President has instructed Trade Minister Bandula Gunawardena to take measures to ensure that there is no shortage of goods in the market. Meanwhile, it has been decided to allow the use of chemical fertilizers for tea cultivation. It has been decided to allow the use of chemical fertilizers until tea cultivation is transformed step by step to use organic fertilizers. (Colombo Page, 7.10.2021)

The Appropriation Bill for the 2022 financial year was presented in Parliament yesterday (7) by Finance Minister Basil Rajapaksa, with the budgetary allocations for the defence, education, and finance sectors being increased whilst those for the health sector and the President being decreased when compared to the 2021 financial year. The Appropriation Bill notes that the total expenditure of the Government allocated for the year 2022, including for both recurrent and capital expenditure, has decreased by Rs. 33 billion compared to the 2021 fiscal year. Thus, the total expenditure for 2022 is estimated at Rs. 2,505.3 billion (2.5 trillion). The Defence Ministry has been allocated Rs. 373.1 billion for the year 2022, a Rs. 18 billion increase from the fiscal year 2021, making it the highest allocated sector. Following the Defence Ministry, the Public Services, Provincial Councils (PCs), and Local Government (LG) Ministry has been allocated the second highest expenditure of Rs. 286.7 billion. The Highways Ministry has been allocated Rs. 250.1 billion, while the Education Ministry has been allocated Rs. 185.9 billion for the year 2022, which is a Rs. 28 billion increase from the fiscal year 2021, but still below the amount allocated to the Highways Ministry, which was the case last year as well. Despite the pandemic, the Health Ministry has been allocated Rs. 6 billion less for the year 2022, in comparison to the fiscal year 2021. Thus, the Bill has allocated Rs. 153.5 billion for the Health Ministry for the year 2022. Meanwhile, the President’s expenditure has been decreased by Rs. 6.6 billion for the year 2022 at Rs. 2.78 billion. It was also announced in Parliament yesterday that the debate on the 2022 Budget will take place from 12 November 2021 to 10 December 2021. (The Morning, 8.10.2021)

Tourist arrivals to Sri Lanka more than doubled in September from August, with over 13,000 travelers entering the country in September making it the first time since the Covid-19 outbreak for the country to welcome over 10,000 visitors in a month.  While in August Sri Lanka saw 5,040 tourists arrive in the island nation, in September the country welcomed a total of 13, 547 travelers, the highest number of arrivals witnessed for the year 2021 since the country opened borders in January.  Sri Lanka Tourism Development Authority (SLTDA) in its monthly arrivals report said the significant increase in tourists could reflect the improvement in international tourism owing to key factors such as; the increase in vaccination programs around the world, softer restrictions for vaccinated travelers, and growing consumer confidence. The increase in September tourist arrivals was led by India, which accounted for 63 percent of the market share, followed by Pakistan and Germany. Region-wise, Asia and the Pacific became the largest source of tourist traffic to Sri Lanka with 78.9 percent of the total traffic received in September 2021. According to SLTDA, given the adverse impact of COVID-19 on the region’s contribution, September performance can be considered as significant growth. “Geographic proximity being one of the main drivers of destination choice now, pent up demand especially from countries such as China, Indonesia, Bangladesh, Pakistan, and India are likely to have driven this growth momentum,” SLTDA said. Europe accounted for 17.3 percent of the total traffic while the Americas accounted for 3.2 percent. For the January-September period, a total of 37,924 tourists visited Sri Lanka. Despite the country being open for nearly nine months, the total arrivals for 2021 is a decline of 92.5 percent over last year (2020) when 507,311 tourists visited the country from January to 18 March 2020. Emerging as top five international tourist-generating markets for the first nine months of the year are India, Kazakhstan, Ukraine, Germany, and the United Kingdom. SLTDA pointed out that it is noteworthy total arrivals up to September from Kazakhstan had recorded a growth in comparison to total arrivals up to September 2020, likely owing to the pilot project carried out to revive the tourism industry following a 10-month pandemic-induced closure. (Daily Mirror Online, 10.10.2021)

Sri Lanka has sought a $500 million credit line from India to pay for its crude oil purchases amid a severe foreign exchange crisis in the island nation. The move came few days after energy minister Udaya Gammanpila warned that the current availability of fuel in the island nation can be guaranteed only till next January. The state-run Ceylon Petroleum Corporation (CPC) owes nearly $3.3 billion to the two main government banks — Bank of Ceylon and People’s Bank. The state oil distributors imports crude from the Middle East and refined products from other areas, including Singapore. “We are currently engaged with the Indian High Commission here to obtain the facility ($500 credit line) under the India-Sri Lanka economic partnership arrangement,” CPC Chairman Sumith Wijesinghe was quoted as saying by a local news website. He said the facility would be utilised for purchasing petrol and diesel requirements. The government has put on hold the expected retail price hike of fuel despite the last week’s increase in cooking gas and other essentials. The price hike in the global oil prices has forced Lanka to spend more on oil imports this year. The country’s oil bill has jumped 41.5 per cent to $2 billion in the first seven months of this year, compared to last year. Lanka is facing a severe foreign exchange crisis after the pandemic hit the nation’s earnings from tourism and remittances, Finance Minister Basil Rajapaksa had said last month. The country’s Its GDP contracted by a record 3.6 per cent in 2020 and its foreign exchange reserves plunged by over a half in one year through July to just $2.8 billion. This has led to a 9 per cent depreciation of the Sri Lankan rupee against the dollar over the past one year, making imports more expensive. (Ceylon Today, 18.10.2021)

Sri Lanka’s imports hit USD 1.68 billion in September 2021, amid record money printing, the highest since 2018 when money was also printed losing forex reserves, data show. The surge in imports came despite import controls. Up to August imports were Rs. 13.4 billion, up from Rs. 10.25 billion in 2020 and also up from Rs. 12.88 billion in the pre-pandemic 2019. In 2019, the Central Bank did not print money until August and collected forex reserves running deflationary policy.  Imports were Rs. 15 billion up to September in 2018. Imports grew in 2021 despite controls. Imports of cars, gold and fertilizer were almost non-existent.  Fertilizer imports were down to USD 0.9 million from USD 32 million in the pre-pandemic year of 2019.  Sri Lanka has a trade deficit due to domestic agents spending non-merchandise related inflows like remittances, IT and tourism receipts. Though there were hardly any vehicles imported, money flowed into other ‘permitted’ sectors favoured by control-oriented bureaucrats. Analysts had warned that imports will pick up as domestic credit and economic activity picked up. Economists and analysts have called for central bank reform or its abolition to a currency board for many years to stop high inflation, currency depreciation, output volatility and social unrest. (Ceylon Today, 20.10.2021)

The Government yesterday presented a Bill to Parliament to amend the Appropriation Act No. 7 of 2020 to increase the borrowing limit of Rs. 2,997 billion to Rs. 3397 billion. Cabinet gave approval last month to a proposal by Finance Minister Basil Rajapaksa to increase the borrowing limit for 2021 in view of decrease of the Government revenue due to the situation that has arisen in the wake of COVID-19, expenses in the health sector and ensuring the social security of those who lost their income and other related expenses.
The Bill increases the borrowing limit by Rs. 400 billion. (Daily Financial Times, 22.10./2021)

Sri Lanka has recorded its first sextuplet birth, three boys and three girls, yesterday at a private hospital in Narahenpita. The mother is a 31-year-old woman from Angoda. The father is 35-years-old. The caesarean surgery was performed by Obstetrician and Gynecologist Prof. Tiran Dias. The babies are currently being cared for in the neonatal unit under the care of specialist Dr. Nalin Gamaethige and specialist Dr. Buddhima Jayasinghe. (Daily Island, 22.10.2021)

Jagath Wellawatta has been appointed as the new Ambassador of Sri Lanka to Italy following strong criticism after he was nominated as the High Commissioner of Australia. The Committee on High Posts today approved his appointment as the new Ambassador of Sri Lanka to Italy. Wellawatte was previously nominated as the High Commissioner of Australia and cleared by the Parliament committee. The appointment of J.M Janaka Priyantha Bandara, the current High Commissioner of Sri Lanka to Nigeria, as the new Ambassador of Sri Lanka to Myanmar was also approved. Ministers Nimal Siripala de Silva, Douglas Devananda, Bandula Gunawardena, State Ministers Dr. Sudarshani Fernandopulle, Vidura Wickramanayake and Members of Parliament Anura Priyadarshana Yapa, Vijitha Herath, Rishard Bathiudeen  and Thalatha Athukorala were present at the meeting. (Colombo Gazette, 24.10.2021)

Another 10 Covid-19 related deaths have been confirmed for 28 October, increasing the country’s death toll to 13,706. The latest victims are seven men and three women. Also, another 415 persons have tested positive for Covid-19, increasing the tally of confirmed cases to 539,275. The total Covid-19 recoveries have risen to 512,165. (Ceylon Today, 31.10.2021)

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