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Sunday August 14th, 2022

Sri Lanka bans more imports after printing excess money amid Coronavirus crisis

ECONOMYNEXT – Sri Lanka has banned more imports until July 2020 while allowing some items to be imported on three months credit, according to an order under the country’s export and import control law of 1969, which was used in the control economy period of 1970s.

Among the most problematic items that have been restricted include screws, nuts and bolts, asbestos washers, batteries, small motors, which can bring the country’s industrial machinery, vehicles and equipment to a standstill like in the 1970s, observers say.

Rice, fish, ornamental fish, grains, maize, black gram, vegetable oil, mall, pasta, communion wafers (used by churches), alcohol, vinegar, cement, paints, essential oil, asbestos washes, granite, marble, ceramic tiles, sanitary ware, have been banned.

Wrist watches, beauty products, wigs apparel, some building materials, wood items, footwear, festive or carnival items and brushes have been banned.

A series of other items are allowed on three months credit.

Milk and cream in powder with sugar, yoghurt (HScode 4.02, 4.03), dhall, red lentils (07.13), wheat and meslin (10.01), palm oil, sunflower oil (15.11, 15.12), cane or been sugar (17.01), cement 25.23, coal (27.01), iron and steel, rolled iron (72.01-29), alloy wires (72.29) and sheet piling iron 73.01.

Railway tracks (73.02), tubes (73.04-06), fabricated metal items (73.08), tanks (73.09), screws, nuts, bolts, rivets, cotter pins, (73.18), sewing needles (73.19), springs and leaf springs (73.20), cookers (73.21), radiators (73.22), iron, sanitary wear (73.24), electric motors (85.01), solar cells and motors (85.01), electrical transformer items (85.04), electro magnets, (85.05), batteries and cells (85.06), lead acid batteries (85.07).

Sri Lanka’s central bank cut rates from January 30 and started printing money from the last week of February and sharply ratcheted liquidity injections in March, putting pressure on the rupee and breaking the credibility of the soft-peg.

At least 140 billion of the money however had been drawn down from the system with higher use of cash in the country. But money had been printed in excess of the drawdown.

On Friday overnight excess liquidity in the banking system shot up to 140 billion rupees from 84 billion rupees a day earlier with the Treasury bill stock of the central bank going up to 283 billion rupees from 263 billion.

Another 15 billion rupees were offered to be injected by the central bank despite the excess liquidity and 1.5 billion rupees were taken at 6.50 percent the middle of the policy corridor.

During the tenure of Governor Indrajit Coomaraswamy the country lost the protection of the policy corridor and external risks expanded, analysts have pointed out.

In addition another practice of not buying long term bonds, which given the power for the central bank to suppress the longer term yield curve and create more distortions, a rule operated by then-Governor A S Jayewardene was also casually abandoned.

Related

Sri Lanka makes fresh helicopter drop of liquidity as nation fights off Coronavirus

In the 1970s most of the the Treasury bills were owned by the central bank. Governor Jayewardene started a secondary market in bills to get real saving and reduce money printing and stop the country going back to the 1970s forex shortage and import control era. (Colombo/Apr19/2020)

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Sri Lanka jet fuel shortages costing SriLankan Airlines US$7mmn a month

ECONOMYNEXT – A shortage of jet fuel in the country due to forex shortages is costing the state-run SriLankan Airlines an extra 7 million US dollars a month, though the airline is operating most of its schedule, an official said.

“Now we are running 90 percent of our flights even though there is no fuel in the country which is costing us about 7 million US dollars per month in extra and lost revenue,” Richard Nuttall, the Chief Commercial Officer of SriLanka Airlines told Economy Next at the sidelines of a media brief.

“To carry the extra fuel, we can’t carry all the freight we like to into the country.”

SriLankan Airlines was stopping at third countries like India to load up on fuel for long haul destinations.

Carrying fuel for the return journey, a tactic known as tinkering, forces an airline to cut down freight

The hit from fuel came after the airline SriLankan reported a profit of 1.7 million US dollars in the March 2022 quarter for the first time since 2006, after cutting costs such as staff costs and overheads; renegotiating supplier contracts and increasing cargo revenue.

Nuttall said few months ago they were not sure of even operating 30-40 percent of the flights due to lack of sufficient jet fuel in the country.

The state-run Ceylon Petroleum Corporation could not import enough jet fuel due to forex shortages coming from a broken soft-peg. Sri Lanka is currently undergoing the worst currency crises in the history of the island’s intermediate regime central bank.

The Ministry of Energy has said it had appointed a third party to import jet fuel.

“Its not sustainable but we have maintained operations,” Nuttall said. “We understand we will be getting jet fuel very soon.”

The currency collapse had reduced the spending power of holiday makers in Sri Lanka while tourists were also put off by fuel shortages and popular protests.

“While the tourist numbers are not that great there’s demand from Sri Lanka diaspora, Indians,” Nuttall said.

He says being a small airline has allowed them to be nimble and shift capacity.

“If we are getting more demand from one destination, we will put more flights there.”
(Colombo/Aug14/2022)

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Sri Lanka coconut auction prices continue to climb

ECONOMYNEXT- Sri Lanka’s average coconut prices grew 3.7 percent to 64,618.23 rupees for 1,000 nuts at the last auction held on Friday August 12, official data showed.

The highest price was 62,900 rupees for 1,000 nuts, while the lowest was 57,000 rupees at the auction conducted by Sri Lanka’s Coconut Development Authority.

Buyers offered 1,019,395 nuts at the auction and sold 576,906.

Exports of coconut-based products have risen by 12 percent in January to June to 434.48 million dollars from a year earlier, data show. (Colombo/Aug13/2022)

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Chinese tracking vessel cleared to dock at Sri Lanka’s Hambantota Port

Hambantota Port

ECONOMYNEXT – Sri Lanka’s Ministry of Foreign Affairs has given the green light to Chinese tracking vessel Yuang Wang 5 to dock at the Chinese-built Hambantota Port from August 16 to 22.

Sri Lankan authorities had first given clearance to the Chinese vessel on July 12, to make a port call at the Hambantota Port from August 11 to 17​ for replenishment purposes.

However, following a diplomatic standoff after concern about the tracking vessel’s anticipated arrival were reportedly raised by the US and India, Sri Lanka’s foreign ministry requested China to defer the port call until “further consultations”.

A report by Sri Lanka’s privately owned Times Online news website said Saturday August 13 morning that the foreign ministry has authorised the docking of the ship.

Related:

Sri Lanka permits entry to controversial Chinese tracking vessel Yuang Wang 5

The ministry’s official statement released Saturday evening confirmed that the ship has been given clearance to dock at the Hambantota Port for the new dates August 16 to 22.

“The Ministry wishes to reiterate Sri Lanka’s policy of cooperation and friendship with all countries. Security and cooperation in the neighbourhood is of utmost priority. It is Sri Lanka’s intention to safeguard the legitimate interests of all countries, in keeping with its international obligations. The Ministry is deeply appreciative of the support, solidarity and understanding of all countries, especially in the current juncture when the country is in the process of addressing severe economic challenges and engaging in multiple domestic processes to ensure the welfare of the Sri Lankan people,” the ministry said, without naming the stakeholder countries. (Colombo/Aug13/2022)

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