An Echelon Media Company
Sunday December 3rd, 2023

Sri Lanka canteens to cut milk tea price after rupee appreciation

ECONOMYNEXT- Sri Lanka’s Canteen Owners say they have decided to reduce the price of milk tea by 10 rupees a cup to draw more customers as milk powder fell following the appreciation of the rupee, after the central bank stopped printing money.

Sri Lanka’s rupee has appreciated from 360/370 to the US dollar to around 320/330 after domestic credit slowed in high interest rates, and a surrender rule was lifted.

But ad hoc central bank purchases and limited re-sales tended to create uncertainty at the new level, according to analysts.

“The reason that we are reducing the price of a milk tea is since the price of milk powder and sugar has also been reduced”, Asela Sampath, Chairman of All- Island Canteen Owners Association told Economy Next.

From next week the maximum price of a cup of milk tea will be 90 rupees, at canteens in his association, Sampath said.

The price of a plain tea is around 40 rupees.

Milk tea is a mix of hot, strong tea with powdered milk and usually sugar is a favorite beverage in Sri Lanka consumed by nearly all socioeconomic demographics.

Milk Importers Association said the price of a one-kilogram packet of imported milk powder would be reduced by 200 rupees, and the price of a 400 gram packet by 80 rupees.

“Price reduction due to the fuel price cut have not been discussed yet, but according to the exchange rate and global prices, further decisions will be taken” Association spokesman, Ashoka Bandara told EconomyNext.

In 2022 Sri Lanka’s canteen and bakery owners raised prices by press statement in 2022 after the central bank printed money to keep an artificially low interest rate and sent the rupee tumbling.

Inflationist Devaluationism

Under so-called flexible inflation targeting the central bank printed from 2015 to suppress rates and target an output gap, initially pushing the rupee down from 131 to 182 to the Us dollar till 2019.

From 2020 to 2022 under intensified output gap targeting and a surrender rule (forced dollars sales to the central bank on top of money printing) the rupee collapsed to 370 to the US dollar.

Output gap targeting and inflationary monetary policy to target 5 percent inflation is to be legalized under a controversial new monetary law.

Sri Lanka’s Inflationist/ devaluationist policymakers believe that positive inflation and depreciation which imposes a regressive tax upon the poor is good for the economy. Most modern inflationists believe falling prices (deflation) is bad.

Canteens Pin Hopes on Deflation

Tuk tuk drivers also said the first kilometer price will be cut 80 from 100.

In sharp contrast to inflationist Anglophone economics that drove post-1930s monetary policy, canteen owners believe otherwise and think absolutely falling prices will get them more business.

“We also reduced the price in order to gain our customers back,” Sampath said. “Normally our customers have milk tea with a small snack to eat with but, overall if 100 customers come to drink milk tea only 60 people would surely have a snack”.

“The customers do come in from 5am in the morning for tea but in the past days they just drank water and left.

“For Example, In Lady Ridgeway Hospital (LRH) canteen they used to have 15- 16 kg of milk powder but now it is comparatively low”.

However, the Ceylon bakery Owners Association said, there is no decision to reduce prices due to the fuel price cut.

“We reduced the price of a loaf of bread by a total of 30 rupees in three different occasions, and we do not expect it to reduce anymore,” association president, N.K. Jayawardana told EconomyNext.

“Nor the other prices of bakery goods will go down”.

Sri Lanka is expecting 12 month inflation – which includes delayed price structure changes in services – to fall to single digits by end 2023. (Colombo/March29/2023)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

UAE investors express interest in Sri Lanka’s energy, tourism, ports, real estate: Ali Sabry

ECONOMYNEXT – A group of investors based in the United Arab Emirates have expressed their interest in renewable energy, tourism, ports, and real estates, Foreign Minister Ali Sabry told Economy Next.

A Sri Lankan delegation led by President Ranil Wickremesinghe is in Dubai to take part in the 2023 United Nations Climate Change Conference (COP28).

Sabry said a group of large investors met the President on Friday and discussed possible opportunities in Sri Lanka.

“We met big investors here particularly on renewable energy, tourism, port development and also infrastructure development and real estate. That’s where they are doing very well,” Foreign Minister told Economy Next.

“Our embassy will organize a higher-level business delegation to visit Sri Lanka to look at the available opportunities.”

“There is a lot of traction and interest in Sri Lanka.”

Sri Lanka has been exploring to attract investors to crisis hit Sri Lanka which declared bankruptcy in April last year with sovereign debt default.

Since then, most investors have taken a step back from investing in the island nation due to its inability to serve debts and uncertainty over such investments.

Several government officials said investors may start pouring dollars into Sri Lanka very carefully after they see some certainty of debt repayments. (Dubai/Dec 3/2023)

Continue Reading

Sri Lanka to push for green initiative investment “after OCC finalizing” debt deals – President

ECONOMYNEXT – Sri Lanka will push for investment into green initiatives globally after the Official Creditor Committee (OCC) finalizing on the island nation’s debt restructuring, President Ranil Wickremesinghe told Economy Next at the 2023 United Nations Climate Change Conference (COP28).

President Wickremesinghe along with local and global advisors has inaugurated three ambitious projects to convert climate change-led disaster funding, which is mostly seen as donations, into viable commercial enterprises involving private sector investments.

The idea is to rally all the global nations in the Tropical Belt threatened by disasters related to climate change and bargain collectively with advanced economies which emit more greenhouse gases into the environment resulting in global warming for more green initiatives like renewable energy projects.

Wickremesinghe initiated a Climate Justice Forum (CJF), Tropical Belt Initiative (TBI), and called on the world to help establish the International Climate Change University in Sri Lanka.

His moves have been welcomed by global leaders, though analysts said an initiative like TBI is a “bold and imaginary” step.

“This is the first step. We have now put forward the proposal,” Wickremesinghe told Economy Next on Sunday on the sideline of the COP28 in Dubai’s EXPO 2020.

“There is an interest. We have to wait for OCC finalizing (debt restructuring) before pushing for investments.”


Global investors are hesitant to invest in Sri Lanka due to its bankruptcy and sovereign debt default.

Sri Lanka is still recovering from an unprecedented economic crisis which has compelled the island nation to declare bankruptcy with sovereign debt default.

President Wickremesinhe during a forum on Saturday said his initiatives would help government in advanced countries not to use tax money of its own people for climate related disasters in other countries and instead, private sector investors could help by investing in renewable energy initiatives.

President Wickremesinghe’s government has been in the process of implementing some tough policies it committed to the International Monetary Fund (IMF) to stabilize the country and ensure sustainability in its borrowing.

Sri Lanka is yet to finalize the debt restructuring fully as it still has to negotiate on repayment schedule of commercial and sovereign bond borrowing.

The OCC and Sri Lanka had agreed on the main parameters of a debt treatment consistent with those of the Extended Fund Facility (EFF) arrangement between Sri Lanka and the IMF.

The members of the Paris Club which are part of the Official Creditor Committee are representatives of countries with eligible claims on Sri Lanka: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Japan, Korea, the Netherlands, Russia, Spain, Sweden, the United Kingdom, the United States of America.

The OCC has said it was expecting other bilateral creditors to consent to sharing, in a transparent manner, the information necessary for the OCC to evaluate comparability of treatment regarding their own bilateral agreement.

The OCC also has said it expects that the Sri Lankan authorities will continue to engage with their private creditors to find as soon as possible an agreement on terms at least as favourable as the terms offered by the OCC. (DUBAI/Dec 3/2023)

Continue Reading

Sri Lanka alcohol regulations may be spurring moonshine: Minister

ECONOMYNEXT – Sri Lanka’s alcohol regulations may be reducing access to legal products and driving illegal moonshine sector, State Minister for Finance Ranjith Siyambalapitiya said amid plans to change opening times of retail outlets.

Sri Lanka is currently discussing changing the opening times of bars (retail alcohol outlets), he said.

Sri Lanka’s excise laws may be contributing to the growth of illegal products, Minister Siyambalapitiya was quoted as saying at the annual meeting of Sri Lanka’s excise officers.

Over 20 years legal alcohol sales have grown 50 percent but illegal products are estimated to have grown 500 percent, he said.

It is not clear where the 500 percent estimate came from.

In Kandy there was a bar for every 6,000 persons but in Mullativu there was one for only 990,000 persons and people had to travel 80 kilometres to get to a legal outlet, Minister Siyambalapitiya had said.

However Sri Lanka has a widespread moonshine or ‘kasippu’ industry driven by high taxes on legal products.

The widely used ‘gal’ or special arrack is now around 3,500 rupees and may go up further with a hike in value added tax. About 2000 rupees of the sale price is taxes.

After a currency collapse and tax hikes legal alcohol sales have fallen, leading to local sugar companies burying ethanol, according to statements made in parliament.

An uneven distribution of bars may also be driving people towards alcohol.

Alcohol sales is controlled on the grounds that it is an addictive product which can lead to poverty, ill-health, bad behaviour and criminal activities, though advocates of high taxes ignore the poverty angle.

High taxes are promoted by temperance movements some of whom have called for outright prohibition in the last century.

Temperance movements spread among evangelical groups in the West and were also embraced by nationalists/moralists and independence movements in colonial authorities.

Prohibition in the US however led to more criminal activity as an organized crime took to bootlegging. (Colombo/Dec03/2023)

Continue Reading