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                  SRI LANKA NEWS
(MARCH 2022)
Compiled by Victor Melder

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Victor Meldor

Sri Lanka’s inflation, as measured by the change in the Colombo Consumers’ Price Index (CCPI) increased to 15.1 percent in February 2022 from 14.2 percent in January 2022, the Department of Census and Statistics reported Monday. The CCPI for all items for the month of February 2022 increased to 160.1 from 158.4 in January 2022. The Year on Year inflation of Food Group increased to 25.7 percent in February 2021 from 25.0 percent in January 2022 and the Year on Year inflation of Non Food Group increased to 10.1 percent in February 2021 from 9.2 percent in the previous month. For the month of February 2021, on year‐to‐year basis, contribution to inflation by food commodities was 8.23 percent and the contribution of Non Food items was 6.85 percent. The moving average inflation rate for the month of February 2021 is 7.9 percent. The corresponding rate for the month of January 2022 was 6.9 percent. (Colombo Page, 1.3.2022)
A total of 44 people have died in road accidents over the past week, Police Spokesman SSP Nihal Thalduwa said. While 43 accidents were reported between 19 February to 25 February, 120 persons were severely injured, while 173 others sustained non-serious injuries. Moreover, five hit-and-runs accidents were also reported, Thalduwa said. Much higher statistics were reported between 01 January and 25 February, with a staggering total of 457 deaths being reported as a result of 434 accidents. A total of 861 persons were also severely injured. Most victims were identified as pedestrians and motorcyclists, SSP Thalduwa said, urging all motorists to take into consideration the lives and wellbeing of those around them while driving, “as they too have a right to use the roads”. (Ceylon Today, 1.3.2022)

Net credit to the Government had ballooned by Rs. 1.7 trillion or 38% to end 2021 at Rs. 6.28 trillion. In 2020 the figure stood at Rs. 4.55 trillion. Credit by monetary authorities crossed the Rs. 2 trillion mark, 141% from Rs. 869 billion a year ago. Lending by commercial banks to the Government crossed the Rs. 4 trillion mark to Rs. 4.19 trillion, up 14% from the previous year. Banking sector credit to public corporations grew by 18.6% to Rs. 1.18 trillion from Rs. 1 trillion by end 2020. (Daily Financial Times, 1.3.2022)
Exports of coconuts and related products earned Rs. 170 billion (US $ 850 million) last year, according to the Plantation Industries Minister Ramesh Pathirana. Sri Lanka produces 3 billion coconuts annually, of which 2 billion are used for domestic consumption. Last year, the country earned the highest export earnings in the history of the plantation industry at US $ 3.8 billion. Plantation Industries Minister Ramesh Pathirana said at the inauguration of the Middeniya Hybrid Seed Coconut Production Center in Tangalle yesterday (02) that Sri Lanka has the potential to grow this revenue annually as there is a huge demand for Sri Lankan coconut products in the world. He also said that the government has started a program to give two coconut saplings to every household in the country under the concept of ‘coconut from home garden’. He also said that plans are afoot to produce two million hybrid coconut seedlings next year. Steps have been taken to produce hybrid seed coconuts from government and selected private estates, he said. The government aims to produce two million high-yielding, low height hybrid coconut seedlings by 2023. (Colombo Page, 3.3.2022)
India has called for a road map from Sri Lanka on how it is going to overcome its economic crisis in the long term as well as to clear the decks for a long list of its economic cum strategic demands for implementation in the North and the East of Sri Lanka. Till then the future of the one billion dollar emergency loan from India seems uncertain. Finance Minister Basil Rajapaksa’s twice cancelled visit to India after securing a USD 500 million loan in December last year to clinch a further one billion dollar loan for emergency supplies of food, fuel and medicines to overcome the ongoing economic crisis in Sri Lanka is yet to be rescheduled. The December loan taken by Sri Lanka was also to be repaid this week. The Sunday Times learns that the Indian Government is awaiting the green light from the Colombo Government on both fronts, i.e. the economic action plan aimed at long term recovery from the country’s foreign exchange and debt repayment crisis and to the Indian list of demands to start economic projects in Sri Lanka. Neither Colombo nor New Delhi has officially mentioned either so far. The Indian demands involve a string of maritime security agreements that will strengthen India’s strategic interests, particularly around the eastern Trincomalee harbour. These include Donier surveillance aircraft for the Sri Lanka Air Force, a ship repair dock for the Sri Lanka Navy in Trincomalee and posting of a Sri Lankan Navy officer at the Intelligence Fusion Centre, a Bahrain-based intelligence sharing office which is a US Navy initiative to combat international terrorism, the narcotics trade and ensure safe maritime passage for commercial vessels in the region. One of the key pressure-points from the Indian Government is to start a renewable energy (solar power) project in and around Sampur near Trincomalee. An earlier plan by India to begin a coal power project in joint partnership with Japan has now been abandoned as Sri Lanka announced a move away from coal plants as part of its futuristic energy policy. The reopening of the Palay airport for commercial operations and several cultural projects in the Jaffna peninsula are also among items on the list already made public. The Indian Government also wants to enter into the renewable energy field in the Delft islet after it scuttled a Chinese company securing the project following an Asian Development Bank ((ADB) tender procedure. The one billion US dollar loan from India agreed to earlier in principle by the Indian Finance Ministry remains suspended for now, until guarantees are given from the Sri Lankan side, it is learnt. The Indian High Commission said it did not want to comment on Finance Minister Rajapaksa’s visit as it was not formally announced that he was to visit New Delhi for a one billion dollar loan facility. Last week, however, the mission stated that the visit fixed for last week was rescheduled as Foreign Affairs Minister S. Jaishankar had to urgently visit Paris on official business. (Sunday Times, 6.3.2022)
Government is restricting the imports of 600 non-essential items to support the ongoing efforts to preserve the stability of the exchange rate and foreign currency market liquidity, particularly by discouraging excessive imports of a speculative nature, official sources said. The Finance Ministry is proposing to suspend the import of 600 non-essential items considering the pros and cons of the proposal submitted by the Central Bank (CB) which had only requested to raise taxes on those items, a senior ministry official disclosed. The extra revenue generated by increased duties based on CB’s proposal would be helpful in raising tax revenue to some extent but it has a minimal impact on the present dollar crisis as importers are not ready to curtail their imports, he said. He added that the ministry has taken a decision to suspend the import of these non-essentials as it is a more feasible option than increasing taxes on these items, he said. On average US$5-$ 6 billion is spent on the import of non-essential including cheese, butter, vegetables, fruits, ice cream, chocolate and sauces etc. According to CB data, the expenditure on imports of consumer goods increased by $447.05 million to $3848.71 million in 2021 from $3401.66 million in 2020. However the tax revenue from the increase in 600-700 non-essentials will be around 5 to 10 per cent, provisional estimates and mathematical model predictions revealed. A sum of $384.27 million was spent in 2021 to import vegetables. This was an increase of $31.41 million compared to 2020, CB data revealed. The government has spent $67.56 million in 2021 to import fruits such as grapes, oranges, apples and pears compared to $58.14 million in 2020 despite import restrictions. The total cost for dairy products such as cheese and butter imports was around $17 million while the cost for the imports of oils and fats was $1 billion in 2021. (Sunday Times, 6.3.2022)
Nadungamuwe Raja, the Ceremonial Tusker carrying the sacred Tooth Relic casket at the Esala Perahera has died at around 5.30 this morning (7). The tusker, who was 69 years old at the time of his death, had carried the casket 13 times in the Dalada Perahera and the last time the casket was carried was last year. The 69-year-old elephant was considered to be the largest elephant in Asia and was taken on foot every year on the 90 kilometer journey from his home in Nadungamuwe to Kandy for the Perahera for his safety. The owner of the tusker, Dr. Harsha Dharmavijaya said the last rites of the elephant will be announced later.(Colombo Page, 7.3.2022)
The Finance Ministry yesterday announced an extra Rs. 20 per dollar remitted between now and the Sinhala-Tamil Avurudu season by migrant workers. The move comes after the Cabinet of Ministers on Monday decided to offer Rs. 8 extra for every dollar remitted following the devaluation of the currency to Rs. 230. Previously migrant workers remittances enjoyed an extra payment of Rs. 10 per every dollar sent via banking channels. The Central Bank data showed, workers’ remittances – a major source of foreign exchange in Sri Lanka, dropped to a 10-year low at $ 5.49 billion in 2021. In January this year, it fell to a 13-year low of $ 259 million which is even more concerning. (Daily Financial Times, 10.3.2022)
The Gazette notification restricting the imports of 367 non-essential items without a valid licence has been issued, with effect from midnight today, the Department of Imports and Exports Control said. Fish fillets and other fish meat, Milk and cream, buttermilk, curdled milk and cream, yogurt, butter and other fats and oils derived from milk; dairy spreads, cheese and curd, grapes, fresh or dried, apples, pears and chocolate, are some of the products of which imports have been restricted. The Regulation is only be applicable to the importation of goods, which have the date of Bill of Lading/ Air Waybill on or after March 10, 2022. Any importers, who intend to import any goods specified in the Gazette, are entitled to have a valid license issued by the Controller General of Imports and Exports Control prior to the date of Bill of Landing: Airway Bill of such importation. The Gazette notification has been issued in such a situation where multiple parties have slammed the Government for not prioritizing the imports of essential goods, which has eventually led to a shortage of such goods. Daily Mirror, 10.3.2022)
The reviving tourism industry has earned $ 583 million (Rs. 117.5 billion) in the first two months of this year.
Earnings in February were $ 314.5 million whilst in January the figure was $ 268 million according to Central Bank data. In contrast the first two months of last year earnings were only $ 16.4 million. There had been 178,834 tourists in by February this year as opposed to 5,047 a year ago. By 6 March cumulative arrivals amounted to 200,798 surpassing the number achieved in the entirety of 2021 which was 194,495. (Daily Financial Times, 15.3.2022)
Post the sharp devaluation prices of several more products and services have been increased with immediate effect. Price of a 50 kilo pack of cement increased by Rs. 475 to Rs. 1,850. Container Transporters’ Association has decided to increase transport charges by 60% whilst National Transport Commission announced bus fares will be increased from today. Three-wheeler fares were increased as well with first kilometre priced at Rs. 70 up from Rs. 60 last week and each additional kilometre to cost Rs.55. On Friday, Prima said that 1 kg of Wheat Flour was increased by a price between Rs. 35 to Rs. 45 whilst the other producer Serendib increased it by Rs. 35. (Daily Financial Times, 15.3.2022)
The All Ceylon Bakery Owners’ Association said the price of a loaf of bread has been increased by between Rs. 20-30 and a loaf would cost between Rs. 110 and Rs. 130. The price of a sweet bun has been increased by Rs. 10. The All Ceylon Restaurant Owners’ Association said the price of a rice packet has been increased by Rs. 20; Kottu by Rs. 10 and Short Eats by Rs. 5. Separately the Civil Aviation Authority said the price of airline tickets has increased by 27% following the near 30% depreciation of the Rupee. The Ceylon Cellular Vendors Association said due to the increase of the dollar, the price of phones and accessories will be increased by 30%. The hikes are coming as inflation hit a record 16.8% in January with food prices up 25%. (Daily Financial Times, 15.3.2022)

Former President Maithripala Sirisena alleged that the people are preparing to revolt as they cannot bear the burden of the cost of living. “With the sudden increase of oil prices last night, the country is facing more and more tragedies. People are preparing to revolt as they cannot bear the burden of the cost of living,” the former President said, addressing a meeting in Badulla as the SLFP kicked off a series of public engagements over the weekend. “There are a lot of problems in the head but nothing can be done. Today this country is facing many crises including food shortage. We have not been involved in Government decisions in the last two years,” Sirisena said. “With the increase in oil prices the masses reject politicians and resort to mass protests. When this Government was formed with 13 parties together, I was also appointed as the chairman but after that I was not involved in anything,” he said. “After the Sirimavo Bandaranaike era, only my government brought a proper policy to this country. I took the country forward democratically. All the countries of the world helped me. I brought the 19th Amendment and established democracy in the country. I wanted to build a country free of corruption but I could not do it.” “The Colombo urban class is also starving without electricity and gas. People are helpless due to a food crisis without oil, gas and electricity. Mass protests are being held. The whole country is in tears today,” Sirisena added addressing the party delegates. (Daily Financial Times, 15.3.2022)
The Cabinet of Ministers had approved a proposal to grant Rs. 100,000 to each family with a missing member during the 30-year conflict between government forces and the separatists which ended in May 2009 with the military defeat of the LTTE on the banks of the Nanthikadal lagoon in Mullaitivu. Cabinet Spokesman, Minister Dullas Alahapperuma said that the proposal, submitted by the Justice Ministry, was aimed at providing financial support to the war-affected families. The money will be given to the closest relative of the missing person, who possesses an authorised certificate of the missing person issued by the Registrar General’s Department. (Daily Island, 16.3.2022)
Exports of spices and related products earned a record income of Rs. 103 billion last year, said Janaka Lindara, Director (Development), Department of Export Agriculture. The amount of spices and related products exported to earn this income is 65,000 metric tons, Mr. Lindara said. Exporting 18,000 metric tons of cinnamon products alone earned Rs. 45 billion, the Director said adding that due to the high demand for Sri Lankan spices from Europe, USA, Japan and the Middle East, the targets have been met. He said with the cessation of the import of locally produced spices, new people have joined the cultivation of those crops. With this revival if anyone is looking to start a spice processing center or export business the Department of Export Agriculture is implementing an investment assistance program for this purpose. He said that the Department is always ready to give necessary advice to increase the productivity of the lands and to acquire new cultivated lands. (Colombo Page, 17.3.2022)
Sri Lanka on Thursday signed USD 1 billion credit line with India for procurement of food, medicines and other essential items, amid the island nation’s worsening economic crisis. The agreement was signed between the State Bank of India (SBI) and the Government of Sri Lanka, during Sri Lankan Finance Minister Basil Rajapaksha’s two-day visit to India. This signing of the credit facility comes a day after Rajapaksa on Wednesday met PM Modi and thanked him for extending support for the Sri Lankan economy. Sri Lanka has seen its national currency getting devalued significantly against major international currencies, in addition to crippling fuel and gas shortages and daily electricity cuts. As Sri Lanka faces a severe economic crisis, India has continued to assist its neighbouring country in its fight against the COVID-19 pandemic, and to mitigate its adverse impact and its developmental priorities. India provided more than USD 500 million in foreign currency swaps to strengthen Sri Lanka’s foreign reserves, taking the total up to USD 900 million. India also extended the repayment time frame for the USD 500 million debt of Sri Lanka under the Asian Clearance Arbitration. India stands with Sri Lanka. USD 1 billion credit line signed for the supply of essential commodities. Key element of the package of support extended by India,” Jaishankar tweeted. (Daily Mirror Online, 18.3.2022)
Sri Lanka’s tea crop suffered its lowest yield in 13 years, official data showed Friday, reducing output in its main export commodity as the island grapples with its worst economic crisis in seven decades. The country’s agriculture sector was hit hard by a ban on agrochemicals imposed last April as the Government introduced an ambitious plan to make Sri Lanka the world’s first nation to rely solely on organic farming. The ban was lifted in October following backlash from the industry but farmers were left unable to access imported fertiliser as the country simultaneously ran out of dollars to finance imports with the pandemic battering Sri Lanka’s tourism sector. “What we are seeing today is a self-inflicted wound on the tea industry,” a senior tea broker at the Colombo Tea Traders’ Association told AFP. Monthly tea crops dropped to 18.16 million kilos (39.95 million pounds) in February, down nearly 20% from the corresponding period last year, the Sri Lanka Tea Board figures showed. “This is the lowest crop for the month since 12.8 million kilos were recorded in 2009,” broking firm Asia Siyaka said. The Government has said an unprecedented shortage of food, fuel and medicines is due to the collapse of its foreign reserves. Tea exports brought in $ 1.3 billion annually before the fertiliser ban. Industry officials added that around 10% of Sri Lanka’s exports had also been affected by Russia’s invasion of Ukraine. Both countries are top buyers of Sri Lanka’s aromatic black tea. (Daily Financial Times, 19.3.2022)
In the wake of the foreign exchange crisis, Sri Lanka has sought further financial assistance from China including the deferment of loan payments and a credit arrangement to import essentials and raw materials, Daily Mirror learns. Sri Lanka has to pay more than US $ 100 million to the Chinese banks as loan installments this year. According to informed sources, the government has sought assistance to reschedule these payments till the country gets over the current crisis. Besides, the government has sought a separate credit arrangement to purchase raw materials from China, needed for the local industries to be sustained. Earlier, Sri Lanka secured a US $ 1 billion credit line from India to purchase essential food commodities and pharmaceuticals. Also, a US $ 500 million credit line has been arranged to purchase fuel from India. (Daily Mirror Online, 21.3.2022)

Sri Lanka’s nationwide inflation in February 2022 determined under the National Consumer Price Index (NCPI) rose to 17.5 percent from 16.8 percent recorded in January 2022 on a year-on-year basis, the Department of Census and Statistics reported Monday. The NCPI for all items for the month of February 2022 increased to 167.8 from 166.0 in the previous month. With respect to February 2021, the reported inflation for the month of February 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 24.7 percent in February 2022 from 24.4 percent in January 2022and the Year-on-Year inflation of the non-food group increased to 11.0 percent in February 2022 from 10.2 percent in December 2021. Contributions to the inflation rate of February 2022 from food group and non-food group are 11.66 percent and 5.84percent respectively. The moving average inflation for the month of February 2022 is 9.3 percent. The corresponding rate for the month of January 2022 was 8.1 percent. (Colombo Page, 21.3.2022)
Sri Lanka has decided to close two embassies and a consulate general due to the prevailing dollar shortage, local media reported. Accordingly, the Ministry of Foreign Affairs has decided to close the Sri Lankan Embassy in Baghdad, Iraq, the Embassy of Sri Lanka in Oslo, Norway and the Consulate in Sydney, Australia from the 31st of this month. The Ministry of Foreign Affairs has taken this step in view of the serious dollar crisis Sri Lanka is facing at present. Accordingly, the Consulate General in Dubai will oversee the diplomatic relations with Iraq and the Consulate General in Stockholm, Sweden will handle the diplomatic relations with Norway. High Commission in Canberra, Australia will be handed over the functions of the Consulate General in Sydney. Sri Lanka maintains 63 missions, which will be reduced to 60 with the closure of these three offices. Sources in the Foreign Ministry say even maintaining the 60 Sri Lankan embassies has become a serious problem due to the dollar crisis. (Colombo Page, 21.3.2022)
The proposed US $ 1 billion loan to be obtained from China will be utilised to settle the previous loans from the Chinese banks, Daily Mirror learns. Sri Lanka’s current loans from China also amount to nearly US $ 1 billion, a top source said. The latest method will be adopted since China does not have the concept of rescheduling debts. The authorities of the two countries are currently negotiating terms and conditions of the new financial facility to be extended. Besides, there will be another US $ 1.5 billion buyer’s credit from China to import materials from China. (Daily Mirror Online, 26.3.2022)
Sri Lanka has sought an additional credit line of $1 billion from India to import essentials amid its worst economic crisis in decades, Reuter’s reports quoting two sources. New Delhi has indicated it would meet the request for the new line, to be used for importing essential items such as rice, wheat flour, pulses, sugar and medicines, said one of the sources briefed on the matter. “Sri Lanka has requested an additional $1 billion credit line from India for imports of essentials,” the second source was quoted as saying by Reuters. “This will be on top of the $1-billion credit line already pledged by India.” Both sources declined to be identified as the discussions were confidential. The finance and foreign ministries of Sri Lanka, as well as India’s foreign ministry, did not immediately respond to requests seeking comment. “India is also very supportive of Sri Lanka’s decision to seek an IMF program and has given their fullest support,” one of the sources added. (Ceylon Today, 29.3.2022)
The Cabinet of Ministers approved to pay a special allowance of Rs. 5,000 to low-income earning families for two months in view of the festive season. “Around 3.1 million low-income families have been identified to receive the Rs. 5,000 allowance,” Energy Minister Gamini Lokuge told journalists on the side-lines of the post-Cabinet meeting held yesterday. He said that the allowance will be provided as a bonus for the upcoming Sinhala and Tamil New Year. When asked whether the Government has sufficient funds to extend such relief package, Minister Lokuge said that there are funds with, adding that they would not be able to provide Rs. 5,000 allowance if they did not have money. (Daily Financial Times, 29.3.2022)
Co-Cabinet Spokesman Minister Ramesh Pathirana says the total foreign debt to be repaid over the next 12 years is USD 42 billion. Speaking during the weekly Cabinet media briefing at the Department of Government Information today, Minister Pathirana said the country has lost at least USD 10 billion in revenue during 2020 and 2021 alone due to the collapse of the tourism industry and foreign remittance. The Minister claimed the President foreseeing the economic crisis, reached a decision to impose a ban on importing vehicles within three months of the present administration taking office. He said large amounts of dollars are spent on vehicle imports claiming no vehicles were imported for the use of Ministers and Parliamentarians. Minister Pathirana said a decision was also reached to ban the import of spices including ginger which can be produced in the country. He said all such decisions were reached with the aim of managing foreign reserves. The Minister said unfortunately while the tourism industry was seeing a rise, the ongoing Ukraine-Russia crisis is now affecting the industry. Meanwhile, the Co-Cabinet Spokesman said the annual market deficit during the past four decades has been over USD 10 billion. Minister Pathirana said USD 20 billion is required for annual imports adding however only USD 10 billion is earned through exports of apparel, tea, coconut and rubber. He said the market deficit was covered through the tourism industry, foreign remittance, direct foreign investments and foreign loans adding however all four sources of income were disrupted during the past two years. The Minister said they are currently repaying loans obtained by previous governments adding the practice has been common throughout the history. Minister Pathirana claimed every Minister has contributed towards economic management in the face of the current crisis.(Times of Sri Lanka, March 29.3.2022)

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