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Sunday March 26th, 2023

Sri Lanka looking to counter boothaya, tsunami water on paddy

ECONOMYNEXT – Sri Lanka is looking to counter the problem where farmers cannot get a guaranteed price due to higher moisture content in paddy (rough rice) coming from mechanical harvesters, State Minister for Public Distribution and Economic Affairs Harsha de Silva said.

Amid labuor shortages Sri Lankan farmers are increasingly relying on mechanical cutters and combine harvesters generally known as <i>boothaya (devil)</i> or <i>tsunami</i> in the farming community.

Unlike in the old days when rice was dried before threshing and after, mechanical harvesters threshed the paddy on the run and combine harvesters also winnwoed paddy allowing for grain to be bagged immediately, leaving a high moisture content.

"It is true that paddy from boothaya and tsunami has a moisture content as much as 22 percent," de Silva admitted.

"When there is a high moisture content millers will not pay the guaranteed price. The guaranteed price is based on a moistrure content of 14 percent. We are addressing the problem by introducing dryers."

 He said 10 dryers would be introduced in the initial pilot project.

Since most economic problems in the world that are not solved by the community quickly are due to regulations set by the coercive power of the state that prevents solutions, de Silva was asked by a reporter why different guaranteed prices based on the moisture content are not declared.

"That is something we are looking at," de Silva said. "We want to introduce a range of prices."

Sri Lanka has set a farmgate price of 41 rupees a kilo for Samba and 39 rupees for Nadu, but some millers were paying prices as low as 36 rupees a kilo.

The rice yield of paddy depends on the water content and also the size of the seed. In sunny areas in the East the rice yields are higher and blunt one size fits all prices have no meaning, analysts say.

It may take about 1.6 kilograms of paddy to make a kilo of rice.

De Silva said a committee was also looking to see whether the guaranteed price should be raised. (Colombo/July30/2019)


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Sri Lanka seeks to settle India ACU debt, credit lines over 5-years

ECONOMYNEXT – Sri Lanka has requested India to settle payments due to the country under the Asian Clearing Union mechanism and credit lines given in 2022 over 5 years, Indrajit Coomaraswamy, an advisor the island’s government said.

Sri Lanka is negotiating with India to settle the money over a 5-year period, Coomaraswamy, a former central bank governor told an online forum hosted by the Central Bank.

“Our request from the Indians is to settle it over five years,” he said. “That I think is still in the early stages of negotiation. The same with the one billion line of credit.”

Sri Lanka’s central bank owed the ACU 2.0 billion US dollars to the Asian Clearing Union according to a year end debt statement, issued by the Finance Ministry.

Sri Lanka owned India, 1,621 million dollars according to ACU data by year end, excluding interest.

India has given a 1 billion US dollar credit line to Sri Lanka as well a credit line for petroleum.

Sri Lanka in March 2024 has paid 121 million US dollar out of a 331 million US dollar IMF tranche to settle an Indian credit line.

Indian credits were given after the country defaulted in April 2022 as budget support/import when most other bilateral lenders halted giving money. (Colombo/Mar26/2023)

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Sri Lanka coconut auction prices up 1.16-pct

ECONOMYNEXT- Sri Lanka’s coconut auction prices went up by 1.16 percent from a week ago at an auction on Thursday, data showed.

The average price for 1,000 nuts grew to 83,219.45 from 82,260.58 a week earlier at the weekly auction conducted by Sri Lanka’s Coconut Development Authority on March 23.

The highest price was 92,500 rupees for 1,000 nuts up from the previous week’s 90,600 rupees, while the lowest was 76,500 also up from 70,000 rupees.

The auction offered 900,010 coconuts and 583,291 nuts were sold. (Colombo/Mar 26/2023)

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Sri Lanka in talks for billion dollar equivalent Indian rupee swap

ECONOMYNEXT – Sri Lanka is in talks with India for a billion US dollar equivalent Indian rupee central bank swap, to facilitate trade, Indrajit Coomaraswamy, ad advisor to the government said.

“The amount is still uncertain it could be up to the equivalent of a billion US dollars,” Coomaraswamy told an online forum hosted by Sri Lanka’s central bank.

The money will be used to facilate India Sri Lanka trade, he said.

India has been trying to popularize the use of Indian rupees for external trade and also encouraged Sri Lanka banks to set up Indian rupee VOSTRO accounts.

However the first step in popularizing a currency for external trade is to get domestic agents, especially exporters, to accept their own currency for trade, like in the case of the US or EU, analysts say.

India’s billion US dollar credit to Sri Lanka given during the 2022 crisis is settled in Indian rupees (transaction need).

However the Indian government itself has chosen to denominate it in US currency for debt purposes (future value).

In most South Asian nations, receivers of remittances are willing to accept domestic currencies, leading to active VOSTRO account transactions.

Sri Lanka is expected to repay a 400 million US dollar swap with the Reserve Bank of India next year under an International Monetary Fund backed program for external stability and debt re-structuring.

Central bank swap proceeds sold to banks, which are then sterilized with inflationary open market operations, can trigger forex shortages and currency crises, analysts warn.

Sri Lanka went to the International Monetary Fund after two years of inflationary monetary operations by the central bank’s issue department (money printed to suppress interest rates) triggered the biggest currency crisis in its history and external sovereign default.

Sri Lanka had gone to the IMF 16 times with similar external troubles except for the April 2003 extended fund facility under Central Bank Governor A S Jayewardene which was a purely reform-oriented program with the World Bank (PRGF/PRSP) program at a time when he was collecting reserves with deflationary monetary policy and perhaps the lowest inflation since the Bretton Woods collapsed. (Colombo/Mar26/2023)

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