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Wednesday June 7th, 2023

Sri Lanka govt dithers as palm oil plants rot in nurseries

ECONOMYNEXT – Sri Lanka’s palm oil plantations stand to lose 500 million rupees worth of fully grown plants in nurseries as the government dithers on approving new plantings the industry badly needs to expand production, an official said.

“The regional plantation companies, many of whom are present here have 550,000 plants to the value of over 500 hundred million rupees rotting in their nurseries,” Rohan Fernando, president of the Palm Oil Industry President told its annual meeting.

“ . . . before long, they’ll be useless to be planted.”
Fernando blamed the government’s Central Environmental Authority for publishing an incomplete study of apparent dangers of oil palm that was seized upon by opponents to block new plantings.

“An unfortunate report from the Central Environmental Authority, which was absolutely one sided, which was absolutely baseless, which had caused all the damage today and has created untold setbacks to the palm oil industry,” said Fernando.

He said the report was one-sided because not all the member of the committee that prepared it had signed the report.

“I’m calling this an unfair report because there was a committee who dealt with this subject, but not all of the members of the committee signed the report.”

A draft study by the CEA, on which much of the opposition is based, was not signed by four of seven members of the panel which prepared it and contained several wrong conclusions, according to Asoka Nugawela, a professor in the Faculty of Agriculture and Plantation Management at the University of Wayamba.

Fernando said a solution was needed without further delay to prevent the private sector from losing their investments which also could generate employment.

The government had approved planting palm oil in 20,000 hectares of land but it was abruptly stopped.

Only 11,000 hectares had been planted due to agitation by environmentalists and opposition from local government bodies.

President Maithripala Sirisena, under whom comes the CEA, is yet to give an appointment to plantation industry officials trying to put forth scientific evidence oil palm cultivation is not as harmful as widely believed.

“We’ve got the person I believe can give us a remedy for this. Unfortunately, our efforts have been not successful, but we are still hopeful that the President will grant us an appointment to share our views together with whoever the officials are,” said Fernando.

“They should give us a proper hearing and a tangible solution as soon as possible, so that we can proceed, and then, if at all, review this situation about palm oil with scientists that are knowledgeable on this subject.”

Oil palm has been grown in the island for 50 years and was only recently being expanded.

The international back lash against the palm oil industry was mainly due to the countries cutting down virgin forests.

(COLOMBO, 27 August 2019)



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Sri Lanka’s shares slip on profit taking and selling pressure

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

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Sri Lanka Treasuries yields plunge, 12-month down 318bp

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

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Sri Lanka forex reserves rise US$722mn in May 2023

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed amid weak credit and better inflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.


No pre-determined level to stop Sri Lanka rupee appreciation: CB Governor

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.


Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)

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