An Echelon Media Company
Tuesday December 5th, 2023

Sri Lanka inks US$251mn tea for oil debt deal with Iran

ECONOMYNEXT – Sri Lanka had inked a deal to set off export of tea to Iran against a legacy oil credit owed by state-run Ceylon Petroleum Corporation to the National Iranian Oil Company, without busting US sanctions, the island’s Ministry of Plantations Industries said.

Sri Lanka was unable to settle the credit after US sanctions barred dealings with Iranian banks.

Each month Sri Lanka’s Treasury will release 5 million dollar equivalent in rupees to the Sri Lanka Tea Board, a state-run industry regulator and promotion office.

The Tea Board will then pay individual exporters in rupee at the central bank exchange rate.

“This scheme will not violate any UN or US sanctions since tea has been categorized as a food item under humanitarian grounds while none of the black listed Iranian Banks will be involved in the equation,” Sri Lanka’s Plantation Ministry said in a statement.

“Since the Iranian authorities have been repeatedly highlighting the importance of the early settlement of the debt, this scheme will enable the Ministry of Finance to make the settlement in local currency through trenches of USD 5 million equivalents.”

The deal will neither bring foreign exchange to the country and non will go out, the ministry said.

Sri Lanka is in the midst of a severe balance of payments crisis after record money printing to keep interest rates down.

Sri Lanka usually gets oil credits from friendly countries whenever the central bank prints money, and forces the state-run CPC to run an unhedged forex position. The oil loans then generate massive losses as the currency collapses.

The credit lines also worsens the ‘current account deficit’ which is then conveniently blamed for currency crises in a Mercantilist knee jerk reactions, analysts have said.

The MoU was signed by Ramesh Pathirana, Minister Plantation of Sri Lanka and Alireza
Paymanpak, Deputy Minister of Industry, Mine and Trade of Islamic Republic of Iran in Colombo on Tuesday, the Plantation Ministry said in a statement.

Sri Lanka had exported 14.5 million US dollars of tea to Iran up to November 2021, up 0.39 percent from a year earlier.

Sri Lanka’s Plantation MInistry said Ceylon Tea export to Iran had dropped from a peak of 38.42 million kilograms in 2013.

“Due to US sanctions imposed on Iran in November 2012 and with the absence of an accepted payment
mechanism through the banking system, Sri Lanka tea exporters found it difficult to receive the export
proceeds from Iranian buyers,” the ministry said.

“As at present the payments are usually channeled through intermediary countries and on many occasions export proceeds are received in installments incurring inordinate delays.”

“The additional US sanctions on Iran are creating further impediments for Sri Lanka to export tea to
that destination.”

Iran has been in discussion with Sri Lankan governments for a barter system – exchanging only goods and services without involving US dollars – to get over the problem of making payment to Iran banks.

The monthly payments from the Treasury will continue until the entire 251 million dollar debt is settled.

“The Sri Lanka Tea Board will establish a dedicated account to receive funds from the Ministry of Finance and disburse the same to tea exporters.” (Colombo/Dec21/2021)

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Sri Lanka finding ways to clear 1.1mn pending cases: Justice Minister

ECONOMYNEXT – Sri Lanka is taking a series of steps to speed up 1.1 million pending court cases and encourage alternative dispute solving mechanisms, Justice Minister Wijedasa Rajapakshe said.

“The delay in court cases is a serious problem,” Minister Rajapakshe told a briefing at the President’s Media Centre.

“We have already taken several steps to expedite cases.”

There were 5,680 cases in Supreme Court, 4,054 in the Court of Appeal, 6,168 in the High Court of Civil Appeal, 8,363 in the Commercial High Court, 28,000 in the High Court, 254,000 in District Courts and 791,000 in Magistrates Courts.

In 2015, only 49 percent of complaints to mediation boards were resolved. Following reforms, the ratio has been increased to 70 percent.

The value of disputes going to mediation board has been raised to one million rupees from 500,000 rupees.

To solve land problems in the post-war period, special mediation boards on property was set up in the North and the East.

Mediation boards on property will be set up in another 16 districts.

Commercial High Courts were increased to four from three.

Another Commercial High Court will be set up in the future. The consideration of cases that can go to a High Court was raised from 4 million rupees to 10 million rupees.

A commercial dispute resolution law will be introduced next January.

A small claims court has been established.

Case involving disputes below 2 million rupees can be directed to small claims court.

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Sri Lanka stocks close up as some investor interest returns

ECONOMYNEXT – The Colombo Stock Exchange closed up on Monday, CSE data showed.

The All Share Price Index was up 0.22 percent, or 23.33 points, at 10,743.59.

The S&P SL20 index was up 0.68 percent, or 20.60 points, at 3,067.73.

Turnover was at 708 million. The banks sector contributed 189 million, while the food, beverage and tobacco sector contributed 176 million of this.

Sri Lanka’s stock market has seen some investor interest return after last week’s news that the country had managed an agreement on a debt restructuring deal with an official creditor committee, and foreign funds for some development projects resumed.

Top positive contributors to the ASPI in the day were Sampath Bank Plc (up at 71.50), LOLC Holdings Plc (up at 379.00), and Commercial Bank of Ceylon Plc, (up at 90.90).

There was a net foreign outflow of 52 million.

Citrus Leisure Plc, which announced that its banquet hall and revolving restaurant at the Lotus Tower would launch on or around Dec 9, saw its share price rise to 6.20 rupees. (Colombo/Dec4/2023).

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Sri Lanka rupee closes broadly steady at 328.10/30 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 328.10/30 to the US dollar on Monday, from 328.00/10 on Friday, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.70/14.00 percent from 13.70/95 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.10 percent from 13.90/14.05 percent.

A bond maturing on 15.01.2027 closed at 14.00/14.10 percent from 14.05/10 percent.

A bond maturing on 01.07.2028 closed at 14.20/35 percent from 14.15/25 percent.

A bond maturing on 15.05.2030 closed at 14.25/45 percent, from 14.20/45 percent.

A bond maturing on 01.07.2032 closed at 14.05/40 percent, from 14.00/45 percent. (Colombo/Dec4/2023)

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