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Saturday May 18th, 2024

Sri Lanka drug prices up after money printing hits rupee; concern over cost

ECONOMYNEXT – Sri Lanka National Medicine Regulatory Association (NMRA) has given permission to raise drug prices by 29 percent on the request of private importers due to steep depreciation of rupee against the US dollar, the subject minister told the parliament on Friday (11).

HOwever, medical experts have raised concerns over unafforable drugs.

State Minister of Production, Supply and Regulation of Pharmaceuticals, Channa Jayasumana told the parliament, that the drug regulator NMRA has agreed to grant permission to increase prices by 29 percent at a meeting held on Friday.

“With the changes in the dollar we had inquiries to change the prices. But me nor the Minister of health has the power to change or increase the prices.” Jayasumana said.

“The NMRA committee had a meeting today and discussed about it and recommended a price increase percentage which we as the ministry can implement. Accordingly, the price increase they have given permission is 29 percent,”

Meanwhile, the Federation for Health Professionals (FHP) said, state hospitals are experiencing a shortage of more than 50 essential drugs and specialists have had to plan their treatments with just a few of the more affordable substitute medicines.

“This increase in prices is a serious crisis for the entire healthcare system, as it has become the norm to buy all the expensive drugs from private pharmacies,” the convener of the Federation for Health Professionals, Ravi Kumudesh said.

“As a result of this price increase, it is inevitable that the prices of essential drugs will continue to double or triple or even increase on a daily basis at competitive prices and the hospital staff will have to maintain a health care system that varies according to the amount of money available at hands of patients.”

Classical economists and analysts had called for central bank reforms to stop the agency from printing money and being forced to depreciate the currency when the last administration set up the price control agency instead curbing the central bank’s ability to print money.

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“It is the Central Bank that destroys the currency and pushes up the cost of drugs,” EN’s economics columnist Bellwether said when a drug price control agency was set up in 2015 in a Germany ‘social democracy’ style move (Weimar Republic) as the central bank printed money.

“When the currency is destroyed by the state, prices of all imported and domestically produced goods go up.

“The NMRA is a farce. It is a dangerous farce. If the rulers want to keep prices down, not only of drugs but of all goods, first follow prudent monetary and fiscal policies that allows for exchange rates to be stable.

“Or abolish the Central Bank and re-create a currency board so that money printing is illegal and the currency is fixed.”

The parliament which makes laws can take away the powers of the Monetary Board has to print money to manipulate interest rates and bring the currency down.

Free Health at Stake?

FHP said in addition to the dollar problem, an increase in freight rates for pharmaceuticals due to the sharp decline in the arrival of cargo ships and aircraft, increase in oil prices, will lead to further increase in drug prices in the future.

“Unless a definite plan is put in place, the public must be prepared for an environment in which free health care will not function in the country,” Kumudesh said.

Commenting on the allegation on medicine shortage, the minister said the shortage has been created by sellers, dealers and importers by preventing adequate supply to the market expecting price hike.

Jayasumana said the state-owned storages have enough supply for 6 months while the private suppliers had informed the authorities of having enough supplies for another 4 months. However, due to the forex shortage in the country, private medicine suppliers informed a possible shortage in medicine earlier this month.

The Sri Lanka Chamber of Pharmaceuticals Industry (SLCPI), at a press briefing held on March 3, said, due to inability to open letters of credit, country will face a shortage of essential drugs in the market by next month.

Azam Jaward the Vice President, SLCPI said the industry has not been given priority to a certain extent due to the current power crisis where fuel is given priority.

“Delays in NMRA, price control is causing a problem along with the dollar crisis,,” HE SAID.

“Until last month we did not have any major issues. But now the banks have been advised to prioritize issuing LCs to import fuel. If this trend continues, even for the lifesaving drugs, we will have a serious issue.”

“We are at the moment have the supply for another 2-6 weeks, some medicines for another 3 months, but we are concern about the possible situations that can arise in the future in this country due to drug shortage.”

Negative Consumer Reaction 

Medical and Civil Rights Professional Association of Doctors (MCPA) in a letter before the price increase said affordable drug prices are likely to reduce patients taking adequate medicines at appropriate intervals.

Dr. Chamal Sanjeewa, the President of MCPA said many patients are tempted to buy the drugs in small amount “without taking them for the prescribed period of time.’’

‘’If the price of medicine increases, the public will not use medicine in the appropriate and prescribed manner,’’ he said asking for the government intervention to help the poor to ensure medicinal supply at an affordable price.

‘’If there’s no fuel you can stay at home and work if there’s no gas you can convert to firewood or kerosene cookers if there’s no electricity you can light a candle, but if there’s no medicine there is no alternative the people have.’’

He also warned that if Sri Lanka manufactures drugs, it must be done in the right quantity and quality for the patients as there is potential to use Sri Lankan resources to control the budding anticipated shortage.  (Colombo/Mar12/2022)

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Sri Lanka suffers over $138mn foreign outflow from govt bonds in 2024 after rate cuts

ECONOMYNEXT – Foreign investors have dumped 41.6 billion-rupee ($138.6 million) worth of Sri Lanka government securities in the first 20 weeks of 2024, the central bank data showed, after reduction in the key policy interest rates.

The foreign holding in Sri Lanka’s treasury bills and treasury bonds fell to 75.9 billion rupees on the week ended on Friday (17), May 2024, from 117.4 billion rupees on the week ended on December 29.

The central bank rate has reduced the key policy rates by 50 basis points so far in 2024, extending the rates cut by 700 basis points since June last year.

The rupee appreciated 9.1 percent in the first four months, but the gain failed to attract foreign investors amid a dragged debt restructuring negotiation with external private creditors.

Currency dealers said lackluster demand for dollars due to dampened imports with heavy controls, boom in both tourism revenue and remittances have helped to increase the dollar liquidity in the market, leading to the appreciation of the local currency.

The dealers said foreign investors can earn capital gain if they had bought government securities before the appreciation and now the offshore investors might be selling their bonds.

“They are also discouraged by policy rate cut because that will reduce their returns from the rupee bond investments,” a currency dealer said.

The yield in 12-month T-bills has fallen 336 basis points in the first four months of this year, the central bank data showed.

The central bank also reduced the Statutory Reserve Ratio (SRR) of commercial banks by 200 basis points in August last year to boost liquidity in the market with an aim to reduce market interest rates.

Under tough International Monetary Fund (IMF) conditions for its $3 billion loan program, the central bank raised key monetary policy rates in 2022 and last year to bring down inflation which hit over 70 percent in 2022. The inflation has fallen to the lower single digit now.

The rupee has appreciated to around 300 against the US dollar this week from around 330 level early in November. The local currency was at 365 rupees against the US dollar in early 2022. Depreciation causes capital loss for foreign investors. (Colombo/May 18/2024)

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Sri Lanka’s ‘Sancharaka Udawa’ tourist fair seeks to involve universities

ECONOMYNEXT – Sri Lanka’s ‘Sancharaka Udawa’ tourism fair kicked off this week to promote interaction between industry stakeholders and relevant Government bodies, including the Tourist Police, and also universities.

“Several universities, including Colombo, Uva Wellasa, Kelaniya, Sabaragamuwa and Rajarata were given free stalls to facilitate student interaction with industry professionals,” Chairman of the Sancharaka Udawa Organising Committee, Charith De De Alwis said in a statement.

The event takes place today (18) at the BMICH and houses stalls for hoteliers, tour and transport services, with a goal of attracting 10,000 visitors.

Organized by the Sri Lanka Association of Inbound Tour Operators (SLAITO) and the Sri Lanka Tourism Promotion Bureau (SLTPB), the 11th edition of Sancharaka Udawa offers a platform for both B2B and B2C sectors.

“Sancharaka Udawa houses over 170 exhibitors and a footfall of more than 10,000 visitors,” De Alwis said.

This year’s edition will include participants from outbound tourism sectors to facilitate capacity building. The event provides networking opportunities for industry newcomers and veterans.

“The networking platform offers opportunity for small and medium-sized service providers integrating them into the broader tourism landscape. The anticipated outcome is a substantial increase in bookings particularly for regional small-scale tourism service providers.” (Colombo/May18/2024)

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Sri Lanka’s CEB sells LTL shares to West Coast IPP for Rs26bn

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board has sold shares of an affiliate to West Coast Power Company Limited, an independent power producer giving profits of 25.9 billion rupees in the March 2024 quarter, interim accounts showed.

The sale has been carried out as a transfer.

“Twenty-eight percent (28-pct) of share ownership of CEB within LTL Holding’s equity capital has been transferred to West Coast Power Company Ltd for a total consideration of Rs 26 billion as part of a partial settlement of outstanding dues…” the March interim accounts said.

“This transaction resulted in a net gain of Rs25.9 billion rupees which has been recognized and reflected in the ‘Gain from Share Disposal’ in the individual financial statement in CEB.”

LTL Holdings is a former transformer making unit of the CEB set up with ABB where the foreign holding was sold to its management.

The firm has since set up several IPPs.

West Coast Power operates a 300MW combined cycle IPP in Kerawalapitiya promoted by LTL group liked firms in which both the Treasury and Employees Provident Fund also have shares.

Its operational and maintenance contract is with Lakdhanavi, another private IPP. The firm has been paying dividends.

The capital gain from the transfer of shares helped the CEB post profits to 84 billion rupees for the March 2024 quarter.

CEB reported gross profits of 62.7 billion rupees from energy sales and 30.6 billion rupees in other income and gains in the March 2024 quarter. Other income was only 3.1 billion rupees in last year. (Colombo/May18/2024)

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