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Tuesday May 30th, 2023

Sri Lanka import 45-pct of wheat, other grains, sunflower oil from Russia, Ukraine: IPS

ECONOMYNEXT – Sri Lanka imports 45 percent of wheat, more than half of soybeans, sunflower oil, peas and asbestos are from Russia and Ukraine, which are now in the middle of a war, and mitigation plans may be needed, a Colombo-based think tank said.

Russia and Ukraine are key buyers of Sri Lanka tea and are important sources of tourists.

“Overall, Russia and Ukraine account for 2 percent of Sri Lanka’s imports and 2.2 percent of exports in 2020,” Asanka Wijesinghe, a researcher at Colombo-based Insitute of Policy Studies said in an analysis.

“However, both countries are vital import sources for wheat and export destinations for Sri Lanka’s black tea.”

Russia and Ukraine purchase about 18 percent of fermented black tea exported by Sri Lanka.

About 45 percent of Sri Lanka’s wheat imports came from Russia and Ukraine.

“In addition, more than half of Sri Lanka’s imported soybeans, sunflower oil and seeds, and peas are from Ukraine,” the note said.

“Moreover, Russia and Ukraine are significant import sources for asbestos, semi-finished products of iron and steel, copper(cathodes), and potassium chloride for fertiliser.”

EU, the UK, US and Canada have proposed to cut off several Russian banks from the Swift payment system, which will make it difficult for Russia, in particular, to trade internationally.

Usually, food is exempted from sanctions.

Wijesinghe said rising wheat prices may further push up rice prices.

However, Sri Lanka is now facing forex shortages as the central bank is printing money to keep interest rates down.

As wheat and rice are substitutes, high wheat prices may increase the demand for rice. Thus, it is necessary to remove input shortages like fertiliser to ensure domestic production is adequate.

“Due to the current foreign exchange crisis, Sri Lanka’s ability to effectively face such shocks is constrained,” Wijesinghe said.

“Thus, the urgent priority is to resolve the current foreign exchange crisis to regain the ability to trade swiftly.”

Imports soared to a record 2.2 billion US dollars in December 2021 as the central bank started sterilizing reserves given for imports with new money, a subsidy was given to overseas remittances with printed money and tourism recovered.

Sri Lanka has a dysfunctional pegged exchange rate at 200 to the US dollar with a wide parallel exchange rate and analysts have urged monetary tightening and float to end sterilized intervention and unify the parallel exchange rates.

Sri Lanka is now using reserves for imports, essentially living beyond its means. Sri Lanka last used reserves to extensively intervene at these levels in late 2018. (Colombo/Feb28/2022)

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India extends under utilized $1 bln credit facility to Sri Lanka by one year 

ECONOMYNEXT – India has extended a $1 billion credit facility to Sri Lanka by another year after the loan that was given to help the crisis-hit island nation to continue import of essentials was not fully utilized in the 12 month period originally agreed, officials said.

Sri Lanka faced with a looming sovereign default signed the credit facility in March 2022 for one year through March 2024. However, the full $1 billion had not been utilized yet.

The Facility has been used for urgent procurement of fuel, medicines, food items and industrial raw materials, as per the requirements and priorities of Sri Lanka.

“The initial agreement was signed in 2022 March and out of the 1000 million US dollars allocated materials were imported for $576.75 mil,” Shehan Semasinghe, State Finance Minister said in his official twitter platform.

“The agreement is extended for the remaining $423.25 mil. We will prioritize the import of essential medicines till March 2024.”

Indian High Commission in Colombo said the State Bank of India (SBI) has extended the tenure of the $1 billion Credit Facility provided to Sri Lanka in response to a request from the Government of Sri Lanka.  (Colombo/May 30/2023)

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Sri Lanka President cleared to discuss cancelled LRT after soured Japan relations

ECONOMYNEXT – Sri Lanka’s Cabinet of Ministers approved a proposal by President Ranil Wickremesinghe discuss resuming a Japan funded. Light Rail Transit (LRT) project cabinet spokesman said, as the island nation is in the process of mending ties with Tokyo.

However, any such deals are likely to take place after the debt restructuring and Sri Lanka starts to repay its foreign loans to come out of default, analysts say.

Former President Gotabaya Rajapaksa unilaterally cancelled the 1.5 billion US dollar LRT and East Container Terminal (ECT) projects in 2021. Japan agreed to fund the LRT project while it was one of the tripartite members of the ECT project along with India and Sri Lanka.

The abrupt cancellation hit the diplomatic ties between the two countries and Sri Lankan government officials have said Japan had given the project to Sri Lanka at a very lower financing cost.

President Wickremesinghe returned from Japan late last week after having met top officials of the Japanese government including its prime minister.

“In recent history, due to the stopping of several agreements and proposals suddenly, President Wickremesinghe went to Japan after creating the background to clear some of the worries we have,” Cabinet Spokesman Bandula Gunawardena told the weekly media briefing.

“Before he went, he got the approval from the cabinet to resume the discussion on the light railway project. He got the approval from the cabinet to get parliament approval for bilateral agreements signed or any other investments project. Any change or cancellation of a project could be done only with the approval of the parliament.”

Japan has backed Sri Lanka under Wickremesinghe’s presidency after the island nation declared sovereign debt default. (Colombo/May 30/2023)

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Sri Lanka to tighten grip on television with broadcast law

ECONOMYNEXT – Sri Lanka has formulated a broadcast authority law to regulate electronic media which will be made public soon, Cabinet spokesman Minister Bandula Gunawardana said.

“The draft prepared by a cabinet subcommittee under Justice Minister Wijedasa Rajapaksa has discussed with various parties will be given to all media institutions and broadcast media,” Gunawardana said.

“We do not have to hide or force anyone. A legal framework that can be acceptable to all for all sectors.”

“In a week or two Minister Wijedasa will discuss with state and private stakeholders.”

At the moment Sri Lanka has issued frequencies without conforming to an “international procedures”, he said.

In Sri Lanka television frequencies are issued under a state television act.

Successive administrations in Sri Lanka has since around 1980 mis-used state television duopoly which including for conducting elections according to critics.

Private television as well a raio emerged around the 1990s and has since over shadowed state media.

There have been calls by ruling party politicians from time to time to control private media. There is now calls to control social media.

At a Committee on Public Accounts meeting of the Department of Government Information, ruling coalition legislators called for regulation of television content. (Colombo/May30/2023)

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