SRI LANKA NEWS (FEBRUARY 2022) Compiled by Victor Melder.

Headline inflation increased to 14.2 per cent in January 2022 from 12.1 per cent in December 2021, says the Central Bank of Sri Lanka It is measured by the year-on-year change in the Colombo Consumer Price Index (CCPI, 2013=100), On an annual average basis, the CCPI increased to 6.9 per cent in January 2022 from 6.0 per cent in December 2021. Inflation was driven by monthly increases of prices of items in both food and non-food categories. Subsequently, food inflation increased to 25.0 per cent in January 2022 from 22.1 per cent in December 2021. Non-food inflation increased to 9.2 per cent in January 2022 from 7.5 per cent in December 2021, the CBSL adds. (Ceylon Today, 1.2.2022)

Tourism Minister Prasanna Ranatunga today said that 82,327 tourists have arrived in the country in the first month of this year. “Between 2000 to 3000 tourists visited the country daily from January  1-31. The highest number of visitors was on the January 5. The number of tourists who arrived that day was 3,371. The number of tourist arrivals from the Russian Federation in January was 13,478 while 11,751 arrived from India. 7,774 came from Ukraine and 7,442 from the United Kingdom. Tourists from Germany, France, Poland, Australia, the Maldives and Kazakhstan were the other countries who visited the country in January. (Daily News, 1.2.2022)

According to Epidemiology Unit of the Health Ministry, 1,137 new COVID-19 infections were reported so far on Tuesday and five of them are foreign returnees. According to the Epidemiology Unit report at 7 pm Tuesday, a total of 612,322 COVID-19 cases have been reported since the beginning of the pandemic. While 18,000 infected patients are currently under medical care at hospitals and homes, 578,849 patients have fully recovered and been discharged from hospitals. Sri Lanka Tuesday reported 32 deaths raising the total to 15,473. According to the Epidemiology Unit report, so far total of 16,677,234 people have received a first dose of COVID-19 vaccine and 13,930,315 have received the second dose. In addition, 5,261,005 have received the third booster dose. (Colombo Page, 1.2.2022)

The Kelanitissa Combined Cycle Power Station (165MW) and Kelanitissa power station (115 MW) were completely shut down this evening due to inadequate supply of diesel, the Ceylon Electricity Board (CEB) said. They said due to the shutdown of the power stations, 280 MW of electricity supply was lost to the national grid. Although, the Ceylon Petroleum Corporation (CPC) promised to provide fuel, the CEB has not received any. Operations on the Kelanitissa power station was halted after the air was sucked into the fuel lines. (Daily Mirror Online, 3.2.2022)

A medical faculty is to be established in University of Moratuwa to support the human capital, social & economic development of Sri Lanka, by improving the quality and access to higher education in Medical Sciences and to address the needs of medical services professionals in the country. In this context, The Kuwait Fund for Arab Economic Development (KFAED) has agreed to provide a loan of Kuwaiti Dinars 10 million (approximately LKR 6,600 million) to construct and equip the Faculty, the Ministry of Finance said in a release.  The medical faculty is planned to be established near the teaching hospital in Nagoda, Kalutara. The project comprises the construction of new buildings complex, other infrastructure facilities for the Faculty of Medicine, and supply of educational furniture & tools, laboratory equipment and related other goods. The Project will be executed by the Ministry of Education during the period of 2022-2026. (Colombo Page, 4.2.2022)

The Ministry of Finance has estimated that it will need to spend Rs. 6,000 billion (US$ 30 billion) this year to repay loan installments and interest and to import essential goods. The plan has already been drawn up to raise the required Rs. 6220 billion (US $ 31 billion) and includes a number of traditional and modern methods, Finance Minister Basil Rajapaksa said at a media briefing in Colombo on Wednesday. Speaking further the Minister pointed out that US $ 6.9 billion in loans and interest is due this year and it will be settled somehow. He said the loan was set to pay quarterly, and the most difficult payment of $ 3 billion has to be paid this quarter and about $ 900 million in the next quarter. The Minister said plans are afoot to pay about $ 2 billion that needs to be paid in the third quarter and the country’s collapsed sectors need to be rebuilt expeditiously. Meanwhile, Minister Basil Rajapaksa pointed out that about 250,000 people used go abroad for employment every year, but only 53,000 went abroad in 2020 and 120,000 went abroad for employment in 2021, and he hopes to send 30,000 this year. The tourism industry has collapsed due to the Covid epidemic. However, the Minister said that this year he was trying to focus on to make at least the foreign exchange to the positive side. He said that due to the current financial crisis in the country, the International Monetary Fund (IMF) has been requested in writing to provide expertise to resolve the crisis and IMF is the international body set up to advise such crisis-ridden countries. (Colombo Page, 4.2.2022)

Health Minister Keheliya Rambukwella on Friday issued a Gazette Extraordinary prohibiting people who are not fully vaccinated against Covid-19 from entering public places. Proof of vaccination will be mandatory to visit public places and the new regulations will come into force from April 30. The gazette notification has defined a public place as “Any place or a mode of transport used in public to which the public have access, whether as of right or otherwise, whether on payment or not, whether on invitation or not.” A person who has obtained the required doses of the vaccination as specified by the Director-General of Health Services, in this case the first, second and the booster dose of any of the Covid-19 vaccines available in Sri Lanka, will be considered as a fully vaccinated person. The vaccine mandate is not applicable to people who are not fully vaccinated against Covid-19 due to exceptional circumstances and those who are not in the age groups eligible to receive the vaccines. (Sunday Observer, 6.2.2022)

Sri Lanka celebrated its Independence Day on Friday with an appeal by the president to the country’s expatriates to send money home as it struggles with the worst economic crisis in decades mainly due to depleted foreign reserves. Sri Lankans are facing shortages of milk powder, cooking gas, kerosene and other essentials. Cash shortages have hindered imports of raw materials for manufacturing and worsened inflation, which surged to 12.1 percent in December. The coronavirus pandemic has dealt a heavy blow to an economy that depends heavily on tourism and trade, with the government estimating a loss of $14bn over the last two years. The economy is estimated to have contracted by 1.5 percent in July-September 2021, according to the central bank. President Gotabhaya Rajapaksa said Sri Lankans abroad who sent foreign currency back home are a major resource. “I invite all expatriate Sri Lankans to invest in their homeland,” he said in an address during a ceremony marking Independence Day in the capital, Colombo. A colourful military parade followed his speech. Data shows that overseas remittances — the nation’s main foreign exchange earner — have fallen by nearly 60 percent to $812m in December from a year earlier. For the whole year, remittances declined 22 percent to $5.4bn. The drop came after the government ordered the mandatory conversion of foreign currency and exchange rate controls. Because of the currency shortage, importers are unable to clear their cargo and manufacturers are unable to buy raw materials from overseas. Sri Lanka has borrowed heavily and faces repayments on $15bn in international sovereign bonds. (Al Jazeera, 4.2.2022)

Prices that Sri Lankans pay at grocery stores and wet markets for their essentials such as rice, lentils, vegetables, and milk powder are galloping away every week. In January, consumer prices jumped by a double-digit rate, following a heady rise in December and in November. Inflation accelerated to 14.2% in January from 12.1% in December 2021. The prices of food have jumped by 25% compared with 22.1% in December, data from the government statistics office show.  Rice, fresh fruit, milk powder, and bread cost more in tandem with rising prices of fuel, bus fares, housing, water, electricity, cooking gas. Importers of commodities, however, blame the shortage of hard currency. A spokesperson for the food importers association, Nihal Seneviratne told the Sunday Times that the shortage of US dollars has directly affected the price of imports. He said that importers are forced to pay demurrage to the port and shipping lines due to delays in clearing consignments. “While the demurrage to the port is paid in rupees, we believe that the shipping line demurrage has to be remitted in dollars to the container owners, even though the importers pay demurrage in rupees.” Another importer who sought anonymity, explained that as container owners overseas insist that the payments are made in US dollars, local importers are forced to pay extra in view of the fluctuating US dollar rate. However, Sri Lankans complain that prices of imported as well as local products have soared, while most essential items such as powdered milk are unavailable. According to statistics from Hector Kobbekaduwa Agrarian Research Center, chilli, which was sold for Rs 860 last Thursday, now costs Rs 876. The price of imported and local rice varieties exceed Rs 100 a kilo. A kilo of local samba is sold for Rs 160, while a kilo of nadu is sold for Rs 156. Keeri samba is Rs 212.Imported ponni samba sells for Rs 118, while imported nadu and white rice is Rs 111 and Rs 100, respectively. The price of imported nadu and white rice has also increased by Rs 2 compared with last Thursday. A manager of a supermarket told the Sunday Times that prices are rising every week. Dasith Walamage, a manager of a supermarket in Kiribathgoda, told the Sunday Times that there are shortages of imported items and local products. He said that the price of imported Mysore dhal fluctuates every week. “Last week, I sold a kilo of dhal for Rs 280, but this week it is Rs 330,” he said. As for coconuts, Trade Minister Bandula Gunawardena told a press conference, that a nut would be sold for Rs 75 via Sathosa. An agreement has been signed between the ministry and Coconut Cultivation Board. Gunawardena said each customer will be allowed to buy just five coconuts. However, supermarket workers told the Sunday Times that although the minister boasts about selling a big coconut for Rs 75 at government outlets, supermarkets buy wholesale at Rs 78 per nut and is sold at Rs 85. The Sunday Times found that Rs 75 coconuts are not available at many Sathosa outlets. A worker at the Sathosa outlet in Hunupitiya, Saliya Chaturanga said that even though there is a rumour that coconut will be sold for Rs 75, there is none. “We did not receive coconuts. Currently coconuts are out of stock, and even though we get any amount we cannot be sure that we can sell at Rs 75,” he said. Another employee of a Sathosa outlet in Bambalapitiya said that coconuts are not available most of the time. Nuts sell off within hours of being made available. The director general of the Coconut Development Authority Ms S.P Withanage told the Sunday Times that there is no agreement with the trade ministry. The ministry had signed agreements with the Coconut Cultivation Board. The general manager of the Coconut Cultivation Board was unavailable for comment. (Sunday Times, 6.2.2022)

Lanka IOC has increased retail selling prices for Lanka Auto Diesel by Rs 3 per litre and Petrol (LP 92) by Rs 7 per litre, effective from today (7), citing a significant increase in international fuel prices. According to a statement issued by LIOC, the losses on diesel sales are around Rs 42 per litre and on petrol sales approximately Rs 10 per litre at current international rates. According to the announcement, the most recent price increase occurred on 21 December 2021.  “However, since then the Brent crude oil prices have increased from US$72 per barrel to US$ 92 per barrel in the international market. The unprecedented rise in international oil prices has breached the 7-year highs. As on date the international price of Gasoil and Gasoline 92 is exceeding US$ 100 per barrel. Oil prices are soaring due to geopolitical tension between the United States and Russia over the Ukraine invasion, a deep freeze in Texas that disrupted some Permian oil production and failing of OPEC+ to address the growing gap between quotes and what is being produced,” the statement said.  The communiqué quoting Managing Director of LIOC, Manoj Gupta, said they are left with no option but to increase the prices of petrol and diesel. However, although losses are very high, presently the company has increased the prices to the barest minimum taking into consideration its impact on the industry and people at large. “The selling price of petrol and diesel in the country remains significantly low as compared to the prices prevailing in the neighbouring countries. The prices of petrol and diesel need to be in line with the prices prevailing in the international market. However, even after this price increase in diesel and petrol, LIOC will still have to bear significant losses at prevailing international prices for which they have been requesting the Ministry of Finance and Ministry of Energy to take necessary steps to provide relief to the organisation. Lanka IOC is a public limited energy company and is accountable to its more than 10,500 local shareholders,” it said. (Ceylon Today, 7.2.2022)A cab driver who was arrested on suspicion of using his vehicle to harass a wild elephant has pleaded guilty to the charge and was fined Rs. 200,000.

The Kekirawa District Judge and Magistrate imposed a Rs. 200,000 fine on a cab driver named Rasika Gimhan Dhananjaya Rajasinghe after he pleaded guilty to harassing the elephant roaming on the Trincomalee-Habarana main road with his vehicle. Wildlife officials had filed a case against the accused in the Kekirawa Magistrate’s Court alleging that the suspect had committed the offense on December 25, 2021 on the Trincomalee-Habarana main road, which is in a protected zone for wildlife prohibiting the harassment and torture of wildlife under the Fauna and Flora Ordinance. The driver Rasika Gimhan Dhananjaya Rajasinghe has posted a video of his encounter with the wild elephant on the road at night. Instead of waiting for the animal to leave the road, the driver has charged the animal with his vehicle shining the headlights at it. The video shows the scared animal backing away off the road but the suspect keeps driving towards the animal until it tried to hide behind a tree. The video went viral on social media and raised an uproar online demanding the officials to arrest the driver and institute legal action for harassing the hapless animal. (Colombo Page, 10.2.2022)

Sri Lanka’s vulnerable households have apparently reduced their food consumption or switched to comparatively cheaper but less nutritious foods, with an overall negative effect on their food security, health and nutrition status, an update from a UN agency said. Issuing a Global Information and Early Warning System (GIEWS) update on January 26, the United Nations’ Food and Agriculture Organisation (FAO) said that as rice, wheat and sugar products account for about 40, 12 and 10 percent respectively of the average calories intake, many families had reduced their food consumption due to skyrocketing inflation owing to the rupee’s depreciation coupled with the fertiliser crisis and a fuel shortage. Prices of rice, the country’s main staple food, surged in most markets between September and November last year. However, after being quite stable in December, prices began to increase significantly in January, reaching new record highs, more than 50 percent above their year-earlier levels, the update noted. Price increases were underpinned by the depreciation of the rupee and concerns over the production of ongoing harvest of the “Maha” season mainly due to shortages of fuel and fertiliser. “Similarly, prices of a wide range of imported basic food items, including wheat flour, sugar, dried milk and pulses have increased since last September and reached, in many cases, high levels in January .”Noting government attempts to improve the availability of basic foods, mainly rice and sugar, in domestic markets and limit their price increases worked briefly last year, the report found further depreciation of the rupee since October last year offset the impact of these measures, immediately triggering further price increases. “As a response, the Government decided to import 100,000 tonnes of rice in late September, followed by 300,000 tonnes in early January, the largest imported amount since 2017 when domestic production was decimated by a severe drought,” the report noted. High prices of agricultural inputs, including fuel and fertiliser, are likely to result in their reduced application, with a negative impact on yields of the main season crop. Production costs are also anticipated to rise, adding upward pressure on the already high cereal prices, the report said. (Sunday Times, 13.2.2022)

Twenty three more COVID-19 deaths were reported yesterday with the week’s death toll rising to 182. This week recorded the highest daily deaths in recent weeks with 36 persons dying from the virus on Tuesday. Daily more than 30 COVID fatalities were reported throughout the week. COVID death toll in the country has now reached 15,754 since the outbreak of the pandemic two years ago. Meanwhile, 7,701 persons were tested positive for COVID this week. From about 7,000-8,000 PCR tests conducted, between 1200 and 1300 people tested positive on a daily basis. According to the Health Ministry, 13,581 people are being treated at hospitals and at their homes under medical guidance. A total of 625,804 people have been confirmed to have contracted the virus to date. (Sunday Times, 13.2.2022)

The country’s trade deficit in 2021 rose by over $ 2 billion owing to a sharper rise in imports and despite commendable export performance amidst challenges. Trade deficit in 2021 amounted to $ 8.13 billion, as against $ 6 billion in the previous year. In December deficit topped the $ 1 billion mark almost doubling from a year earlier. Imports rose by 28.5% to $ 20.6 billion in 2021 and exports rose by 20% to $ 12.5 billion. In December exports amounted to $ 1.15 billion, up 20% from a year earlier. Imports jumped by 47% to $ 2.2 billion. (Daily Financial Times, 14.2.2022).

Health officials yesterday confirmed the detection of 1,206 COVID-19 patients, raising the country’s COVID-19 detections to 638,043.
The patients detected yesterday were from the New Year cluster, the Department of Government Information states. The previous day, 1,226 persons from the New Year cluster and five Sri Lankan returnees from overseas tested positive for COVID-19. The Health Promotion Bureau states that 8,421 PCR tests and 4,306 rapid antigen tests were conducted on Sunday. According to the Epidemiology Unit, 532,374 patients from the New Year cluster, 82,785 patients from the Peliyagoda cluster, 9,154 patients from the Prisons cluster, and 3,059 patients from the Divulapitiya cluster have been detected. The country’s imported cases include 7,223 Sri Lankan returnees from overseas and 328 foreigners. The Epidemiology Unit states that 131,619 persons from Colombo, 110,830 persons from Gampaha, 56,501 persons from Kalutara, 42,102 persons from Galle, and 30,410 persons from Kurunegala have tested positive for COVID-19 to date. During the third wave of the pandemic, 99,322 patients from Colombo, 92,296 patients from Gampaha, and 49,443 patients from Kalutara were detected. The Epidemiology Unit states that 10,001 COVID-19 patients who completed home-based care between 8 February and 19 February were deducted from the total. This drops the active cases to 14,900, which includes persons receiving medical care and home-based care. .In addition to this, 1,059 persons suspected of having COVID-19 are under observation. According to the Epidemiology Unit, 263 persons were released from care yesterday, raising the country’s COVID-19 recoveries to 607,119. (Daily Financial Times, 22.2.2022)

Headline inflation in January had risen to 16.8% as against 14% in the previous month, the Census and Statistics Department (DCS) revealed yesterday. DCS said as per the National Consumer Price Index (NCPI), contributions to the inflation rate of January 2022 from the food group and non-food group was 11.4% and 5.4% respectively. Whilst contributions of food and non-food groups to the inflation in January 2021 were 2.7% and 1.0% respectively, resulting in a headline inflation of 3.7%. DCS said the reported inflation for January was mainly due to the higher price levels prevailing in both food and non-food groups. Accordingly, the Year-on-Year inflation of the food group increased to 24.4% in January 2022 from 21.5% in December 2021 and the Year-on-Year inflation of the non-food group increased to 10.2% in January 2022 from 7.6% in December 2021. Comparing the month-on-month changes, NCPI in January 2022 has increased to 166.0 from 161.0 reported in December 2021. This shows an increase of 5.0 index points or 3.1 percentage as compared to December 2021. The month-on-month change was contributed by increases of index values of food items by 1.71% and non-food items by 1.35% respectively. Price increases of food items were reported for rice, milk powder, fresh fruits, fresh fish, wheat flour, bread, vegetables, coconut oil, chicken, chilli powder, dried chilies, green chilies, Mysore dhal, infant milk powder, coconuts, dried fish, potatoes, red onions and big onions. However, decreases in index values were reported for limes and eggs. The increases in index values of non-food groups in January 2022 compared to the previous month was mainly due to the price increases in groups of items ‘Alcoholic Beverages, Tobacco and Narcotics’ (Betel leaves), ‘Clothing and Footwear’, ‘Housing, Water, Electricity, Gas and Other fuels’ (Material for the Maintenance), ‘Furnishing, Household equipment and Routine household maintenance’, ‘Health’ (Fees to private medical practices), ‘Transport’(Petrol & Diesel, Bus fare), ‘Recreation and Culture’, ‘Education’(Tuition fees), ‘Restaurants and Hotels’ and ‘Miscellaneous Goods and Services’.Meanwhile, the price indices of the ‘Communication’ group remained unchanged during the month. Core inflation, which reflects the underlying inflation by excluding volatile items of food, energy and transport groups in the economy as measured by the Year-on-Year change based on NCPI for the month of January 2022 was increased to 12.9% from 10.8% reported in December 2021. (Daily Financial Times, 22.2.2022)

Sri Lanka needs 1,285 million US dollar for oil imports in the next three months, of which 500 million will come from an Indian credit line, Energy Minister Udaya Gammanpila said, as the country grappled with forex shortages and global prices went up. “For the next three months we have forecasted 1,285.5 million US dollars for oil imports,” Energy Minister Udaya Gammanpila said. “We hope to get 500 million dollars from the credit line from India. We are talking to others we will tell parliament when we finalize them.” The 500 million dollar credit line to be activated in April is a one year facility at 2.5 percent. India this month gave consignment of diesel on an appeal by Sri Lanka ahead of the credit line being used officially. He said oil prices were around 40 to 45 US dollars a barrel in 2020, about 55 to 65 in 2021 are around 90 to 100 million dollars in 2022 so far with Russian invasion of Ukraine pushing prices up, he said. From a ship that is now being unloaded 5000 metric tonnes of diesel would be given to the Ceylon Electricity Board and 4,200 MT to the Sojitz power plant, which would be enough to run it for six days, he said. Each week two to three ship come based on the projected fuel needs of the country, based on which tenders have been floated. However unloading of tankers have been delayed due to forex shortages. Sri Lanka usually has stocks for 15 to 21 days before the forex crisis, Energy Ministry Secretary K D Olga has said. Sri Lanka has been struggling to find foreign exchange to pay for oil with liquidity injections being made to keep interest rates down after giving reserves for imports.  (Sunday Island, 27.2.2022)

Workers remittances have plunged to a new low of $ 259 million in January heralding a challenging start for the new year for the Central Bank which has been executing multiple measures to woo inflows via official channels.  The figure of $ 259.2 million in January is down by nearly 62% from a year ago and lowest in 13 years. The previous lowest was $ 261.6 million in November 2009.
January performance also proved the month-month gain in inflows in December was temporary. It reversed the declining trend in three months i.e. between September to November last year prompting the CBSL to hint that its measures have begun to work.  However, migrant workers are sending money via unofficial channels to fetch a higher and realistic exchange rate as opposed to the cap of Rs. 203 per dollar from the banking sector and Rs. 10 per dollar incentive and other gifts. Last year workers remittances dropped to a 10 year low of $ 5.5 billion, down by 23% from 2020. (Daily Financial Times, 28.2.2022)