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Wednesday June 7th, 2023

Sri Lanka Maha 2021 rice harvest drop 40-pct due to fertilizer ban

ECONOMYNEXT – Sri Lanka’s Maha 2021 rough rice harvest hit by a chemical fertilizer ban had dropped 40 percent from a year earlier to 1.8 million metric tonnes, Agriculture Minister Mahinda Amaraweera said.

In the 2020/2021 the paddy harvest was 1,862,901 metric tonnes, down from 3,061,394 in 2020, Minister Amaraweera told parliament.

Milled rice is about 68 percent of the paddy harvest.

Sri Lanka banned chemical fertilizer after the Government Medical Officer Association said agro-chemical s caused non-communicable diseases and according to Pliny the Elder, a Roman author who had produced an encyclopedia about 2000 years ago, ancient Sri Lankans had lived for around 140 years and their life expectancy had now almost halved to 74 years.

The government had promised to compensate farmers whose yield fell due to the fertilizer ban but no one had been compensated so far, Minister Amaraweera said.

There were 923,000 farmers listed.

“If there are any drop in the harvest during the 21/22 year, the affected farmer will be given the following compensation to secure their income for a maximum of 5-acre cultivation land,”

“I have informed PM and the cabinet that we need around 15,000 million rupees for that and to give us that,” Minister Amaraweera said.  “If we get that we will give that to the farmers.”

0.5 acres or less              -50 rupees per kilogram

More than 0.5 to 1 acre -50 rupees per kilogram

From 1 to 2.5 acres         -37.50 rupees per kilogram

From 2.5 to 5.0 acres     -25 rupees per kilogram

Minister Amaraweera said production drop in each district during the last Maha season was as follows.

Colombo            -41 percent

Gampaha           -27 percent

Kalutara              -49 percent

Kandy                  -42 percent

Matale                -31 percent

Nuwara Eliya     -55 percent

Galle                    -44 percent

Matara               -50 percent

Hambanthota   -51 percent

Jaffna                  -41 percent

Mannar              -55 percent

Vavuniya            -48 percent

Mullaitivu           -53 percent

Kilinochchi         -61 percent

Batticaloa           -71 percent

Ampara              -41 percent

Trincomalee      -44 percent

Kurunegala        -45 percent

Puttalam            -48 percent

Anuradhapura  -58 percent

Polonnaruwa    -51 percent

Badulla               -45 percent

Monaragala       -39 percent

Rathnapura       -44 percent

Kegall                  -44 percent

(Colombo/ June 14/2022)

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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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SriLankan Airlines expects $50 mln profit in FY 2023/24 

ECONOMYNEXT – Sri Lanka’s loss making national carrier is aiming to earn a profit of 50 million US dollars, its Chief Executive Officer said, after it incurred a loss of nearly 500 million US dollars in the previous financial year.

“I think the outlook for next year is even stronger,” Richard Nuttall, CEO at SriLankan said in an interview with Channel News Asia.

“Assuming that the world stays the same in the year ahead, we expect Sri Lanka’s economy to rebound and tourism to come back, we are forecasting $50 million profit next year,” he said.

‘The Airlines incurred a whopping loss of 168.6 billion Sri Lanka rupees in the financial year 2021/22 ended in March 31, 2022, compared to the loss of 49.7 billion rupees in the previous year, the Sri Lankan has said in the past.

SriLankan Airlines is one of the 52 loss making state enterprises that the International Monetary Fund had recommended for restructuring. President Ranil Wickremesinghe’s government has been considering absorbing the cumulative losses of more than $1 billion and privatizing the national career.

Nuttall said though the currency depreciation did not have any impact on the profitability last year, the country’s short supply of jet fuel hurt the airline.

“So if you look at the year we just had, the year started with the economic challenges in the country in Sri Lanka. We had travel advisories. and the country ran out of jet fuel in July and August. I have never worked for an airline which does not have jet fuel in its home country before,” he said.

“So everything had to stop in India. We lost payload.” (Colombo/June 07/2023)

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