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Thursday March 23rd, 2023

Sri Lanka exports revival, using new opportunities vital to beat Coronavirus: EDB chief

ECONOMYNEXT – Reviving exports urgently is vital to keep Sri Lanka afloat during a Coronavirus crisis and the sector needs room to adapt and cater to emerging demand, though firms are now operating below capacity amid COVID-19 curfews and disrupted supplies, an official said.

“It is important that the export industry understands that it is a national priority for us to export and bring in foreign revenue to Sri Lanka,” Prabash Subasinghe, Chairman of Sri Lanka’s Exporters Development Board, told EconomyNext.

“I would say it is a clarion call to all the exporters to export and bring in as much foreign currency as they can to rescue Sri Lanka from this COVID-19 crisis”.

Sri Lanka’s export firms are operating at 25 percent capacity but there are new opportunities that can be made use of, Subasinghe, a top exporter of rubber tyres said.

Exports Down

The EDB had lowered an original target for export of goods and services for 2020 from 18.5 billion US dollars to 10.75 billion.

Controls imposed to combat Wave-II COVID-19 infections from third countries outside China has put Sri Lanka on a partial lockdown for almost a month.

Due to curtailed labour movement, disrupted supply chains, and key export markets being closed, Sri Lanka’s industries have been badly hit.

Tourism and apparel as Sri Lanka’s largest exports are at a standstill.

Due to the closure of the airport to inbound passengers, there is zero tourism in the country while the apparel industry is expecting to lose 1.5 billion US dollars from March to June as the simultaneous supply-demand crisis cripples the industry.

“Exports even in a subdued form are the only saving grace for Sri Lanka,” Subasinghe said.

Sri Lanka’s agriculture sector is generally operating but farmers have difficulty selling products.

New Prospects

The Coronavirus Crisis has also presented new opportunities in sectors such as food and agriculture, processed food, rubber, seafood, and apparels, Subasinghe said.

“There’s a huge demand for food and agriculture and on top of that there’s a huge demand for all the equipment needed for medical services such as medical gloves, face masks, ventilators, and ventilator parts,” Subasinghe said.

“Those are the areas we need to exploit and create some revenue, even if we are not producing, we should be able to switch”.

Currently, almost all the export companies are operating in Sri Lanka but at a limited capacity maybe to 20 to 25 percent operational.

“At EDB, we are extremely active and supporting any exporter and all exporters for them to try and maintain a certain level of business continuity as a Number one measure,” said Subasinghe.

“Number Two, we are working on areas where there is a lot of potential such as food and agriculture, processed foods, gloves, medical equipment.”

“The apparel industry will face a greater crisis due to order cancellations and retail shops being closed, hence the options for them would be to switch to production of PPE such as medical gowns and medical face masks”.

Sri Lanka’s apparel industry is making million PPE suites and two million masks free of charge to be donated for the state pharmaceutical corporation.

But there are not enough raw materials to produce masks and PPE suites in neither large quantities nor N95 masks industry official said.

Sri Lanka’s price control agencies are also a threat to the economy, analysts say. National Medicines Regulatory Authority (NMRA) slapped price controls on masks that have been lifted since then.

The exports of some masks are banned.

The Government has also identified agriculture, rubber, seafood, and coconut as essential services, meaning they can operate freely by adhering to precautionary guidelines.

Globally, there’s a huge shortage of medical equipment where countries are shifting production to produce medical equipment.

Major Carmakers such as General Motors, Fiat, Ford, and Tesla have pledged their support to offer resources to make ventilators and medical equipment.

Rupee under Pressure

Sri Lanka’s rupee had fallen sharply over March with large liquidity injections being made to keep rates down. The rupee fell close to 200 and reversed directions Thursday amid intervention.

Sri Lanka’s Central Bank has also set up a re-financing facility through which up to 50 billion rupees will be re-financed for businesses hit by Coronavirus, which analysts have said is similar to facilities set up by the Reserve Bank of Zimbabwe 15 years ago which led to a collapse of the currency.

More liquidity has also been injected, which analysts say will pressure the currency by creating demand over and above any export proceeds.

Sri Lanka’s central bank had earlier published an appeal for dollars to be brought to the country with no questions asked as the rupee fell, imports have also been controlled, but liquidity has not been. (Colombo/Apr10/2020-sb)

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Sri Lanka establishes committee to investigate aircraft incidents

An aircraft lands at the Jaffna International Airport, which was opened in October 2019 and promises to push the tourism frontiers in Jaffna.

ECONOMYNEXT: Sri Lanka’s has established an expert committee under the state-run Civil Aviation Authority to investigate aircraft accidents and to implement precautionary methods in the Sri Lankan airspace, an Official said.

“Even if it is only one flight, there is a chance an accident may occur,” Civil Aviation Authority of Sri Lanka, Director General, P. A. Jayakantha said.

“This particular committee is there to investigate aircraft accidents and act as a mechanism to take over if something goes wrong”.

Sri Lanka has encountered around 2,700 minor aircraft accidents and incidents mostly on the ground in the 19 years through 2021, the CAA annual reports showed.

The new committee will analyze the past accidents and take precautionary measures while also conducting investigations and provide independent reports in the future, Jayakantha said.

The team is provided with required training and qualifications by the CAA along with an International organization, free of charge.

“Internationally also it is a requirement to have a team to investigate the aircraft accidents,” Jayakantha added.

“For a long time we have not fulfilled this requirement and that is why we established this team with the cabinet approval. Moreover, recently, Sri Lanka’s two aircrafts, one training aircraft and a commercial aircraft met an accident”

The committee will be on active duty, until the Accident Investigation Act is passed and a proper Aircraft Accident and Incident Investigation Bureau is established. (Colombo/ Mar23/2023)

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Sri Lanka bond yields steady, Rupee 319/325 at close

ECONOMYNEXT – Sri Lanka’s treasury bond yields closed steady on Thursday while rupee closed weaker, dealers said.

A 01.07.2025 bond closed at 30.60/31.00 percent on Tuesday, down from 30.25/75 percent on Wednesday.

A 15.09.2027 bond closed at 27.80/28.10 percent, steady from 27.90/28.00 percent from Wednesday.

Sri Lanka rupee closed at 319/325 against the US dollar depreciating from 318/320 from a day earlier. (Colombo/ March23/2023)

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Sri Lanka shares dive to two-week low on local debt restructuring fears

ECONOMYNEXT – The Sri Lanka market fell for a fourth session to a two-week low on Thursday, led by financials, as worries over domestic debt restructuring continued after the IMF loan was approved earlier this week resulting in investors adopting a wait-and-see approach until further clarity was provided, analysts said.

The main All Share Price Index (ASPI) closed down 1.38 percent or 131.07 points to 9,395.98, lowest since March 02.

Analysts said, majority of the banks have been on slower investment trends on fears of domestic debt restructuring after the IMF approval and waiting for more clarity on the local debt restructuring.

“The market is on muted sentiments despite the IMF loan being approved and is going through a period of consolidation,” Ranjan Ranatunga of First Capital Holdings said.

The market saw a net foreign outflow of 298 million rupees and the total offshore inflows recorded so far in 2023 to 3.3 billion rupees.

The most liquid index, S&P SL20, closed 1.64 percent, or 45.33 points, down at 2,722.94.

The market saw a turnover of 3.4 billion rupees on Thursday, above this year’s daily average of 1.8 billion rupees.

This is the highest turnover generated since March 08, which is when the market was driven off of positive sentiments from International Monetary Fund deal hope after Chinese assurances.

Top contributors to revenue was Agalawatte Plantations, on off board transactions of a stake change, contributing revenue of 1.6 billion rupees, Ranatunga said.

Top contributors to revenue industry wise was Food and Beverage and Telecommunications.

Sri Lanka Telecom has been seeing positive uptrends as the Secretary to the Treasury has informed the Board of Directors of Sri Lanka Telecom PLC (SLT) and Lanka Hospitals PLC that the Cabinet of Ministers has granted approval in principle for the divestment of the stakes held by the Treasury Secretary in the two companies.

Top losers were Sampath Bank, Hatton National Bank and Commercial Bank.

Sri Lanka is looking at options to re-structure domestic debt, or local law local currency debt (LLLC), without harming the banking sector and announce them the International Monetary Fund said in a report.

Banks have been witnessing profit taking and selling pressures after continuous uptrends prior to the IMF loan had been approved.

Analysts said, selling pressures is expected to ease as the IMF hopes to reduce inflationary pressures which will in turn lead to reductions in interest rates. (Colombo/Mar23/2023)

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