Agriculture

Sri Lanka January Ceylon tea production down 16.1-pct

Sunday February 26, 2023 10:25 am

ECONOMYNEXT – Sri Lanka’s Ceylon Tea production has dropped by 16.13 percent in January 2023 from a year earlier to 19.14 million kilograms, mainly due to policy mismanagement and bad weather, reports said.

The effects of a chemical fertilizer ban under former President Gotabaya Rajapaksa’s government are still lingering in tea farms and bushes are still recovering from the lack of nutrition. The fertilizer ban was lifted in 2022 but supplies were limited amid forex shortages.

Sri Lanka tea production for January 2023 was 19.14 million kilograms down from 22.8 million kilograms a year ago.

In January 2023, high grown tea production fell 34 percent to 3.5 million kilograms.

Medium grown fell 36.9 percent to 2.3 million kilograms and low-grown was down 3.01 percent to 13.1 million kilograms, industry data published by Forbes and Walkers Tea Brokers show.

The national average tea price in January was 4.05 dollars or 1,466.76 in rupees.

Sri Lankan tea has been earning higher prices for tea exports in rupees after the currency was depreciated in March against the USA dollar in 2022.

Tea exports were also down by 9.4 percent from a year ago to 17.56 million kilograms in January 2023.

“We are talking about a tea bush that had little to no fertilizer for one and half years, some of them even for two years,” Tea Board Chairman Niraj de Mel told EconomyNext.

“Some private sector companies got it after the ban but it was also a very small percentage.

“Just because the fertilizer issue’s being sorted out, does not mean everything is sorted now.”

The first three months may not indicate the response to fertilizer De Mel said but a recovery is likely to be seen later, on a lower base.

“So my outlook is in the second quarter, April, May or June should be better than last year” he said.

In 2022, Sri Lanka produced 251 million kilograms of tea and the new target of 2023 is around 272-280 million kilograms, with an expected forex revenue of 1.4 billion US dollars. (Colombo/Feb 26/2023)

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Markets

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

Wednesday June 7, 2023 5:18 pm

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)

Bonds & Forex

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

Wednesday June 7, 2023 4:04 pm

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)

Bonds & Forex

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

Wednesday June 7, 2023 3:48 pm

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 as deflationary policy and weak credit reduced ‘above the line’ outflows.

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.

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.

Related

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)