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Friday January 27th, 2023

Sri Lanka ministers defends decision to pay millions to Chinese fertilizer company

ECONOMYNEXT – Senior government ministers in cash-strapped Sri Lanka on Sunday (19) defended a decision to pay 6.7 million US dollars to a Chinese fertilizer company over a deal that had gone awry, as opposition lawmakers decried the move.

Minister of Highways Johnston Fernando told reporters that antagonising a nation as powerful as China will not be in Sri Lanka’s interest in the long run.

“This issue must be resolved amicably. It’s easy for people to say we paid money for a ship of faeces. But antagonising a powerful country could prove more disadvantageous for us in the long term,” he said.

“[Losing] 6 million dollars is not like losing 1.6 billion dollars. China is a country that gave us money when we needed it,” he said.

Sri Lanka’s cabinet of ministers has decided to pay the 6.7 million dollars to the China’s Qingdao Seawin Biotech Group Co Ltd, whose organic fertilizer was rejected by the island nation.

Sri Lanka’s National Plant Quarantine Service (NPQS) had claimed that samples of the fertilizer contained harmful bacteria, prompting the Chinese company to demand 8 million US dollars from the agency in early November.

Related: Chinese fertilizer firm demands US$8mn in damages from Sri Lanka testing agency

The shipment was rejected by Sri Lanka while en route to the island, with the authorities denying entry to what opposition lawmakers and other critics had called a ship of faeces.

Sri Lanka’s scientific findings were roundly rejected by the Chinese company, with the Chinese embassy in Colombo going as far as to blacklist the state-run People’s Bank for not making the payment owed to the company.

The Chinese company subsequently sought arbitration in Singapore, and Sri Lanka later decided to settle the matter by paying 6.7 million dollars to the fertilizer company, on terms purportedly agreeable to both parties.

Asked if Sri Lanka can afford to pay such a colossal sum at a time when the country is facing its worst economic crisis since Independence amid a worsening foreign reserves shortage, Minister Fernando told reporters that the money simply had to be paid.

“The cabinet has decided to pay the amount. It must be paid,” he said.

Education Minister Dinesh Gunawardena, speaking to reporters after an event in Colombo said the matter needs to be resolve amicably.

“China is a friendly nation to us, as is India. These matters can be resolved amicably, and the president has instilled confidence in the country that this can be done. That’s what’s important,” said Gunawardena.

“If there are certain shortcomings meanwhile, steps  must be taken to correct them,” he added.

The opposition is crying foul.

Main opposition Samagi Jana Balavegaya (SJB) MP Ashoka Abeysinghe told reporters: “These funds are being charged for turning the ship away. The fertilizer must be paid for separately. Some ministers are saying countries cannot be antagonised. What is this government?”

SJB MP Nalin Bandara addressing a gathering said: “This isn’t money from Medamulana (the ancestral home of the ruling Rajapaksa family; not the money in the American bank accounts of Gotabaya or Basil Rajapaksa. It’s your money.”

“It’s 1.4 billion rupees collected from your sugar, lentils purchases, from the reloads bought by young people, to pay for this faeces. Who ever thought Sri Lanka would have to pay for faeces?”

Meanwhile, Environment Minister Mahinda Amaraweera, who represents the Sri Lanka Freedom Party (SLFP), was also critical. The SLFP is a constituent party of the government coalition that is increasingly at odds with the ruling Sri Lanka Podujana Peramuna (SLPP).

“No, we have no such hope on China. I don’t see China saving us or helping us contrary to claims. There is a risk of a coming food crisis. We must prepare for it.  We must launch a massive food production campaign, an agricultural operation.  Or we’ll be in big trouble,” he said. (Colombo/Dec20/2021)

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Sri Lanka’s Dialog Axiata hopes to hold prices despite rising costs

ECONOMYNEXT – Sri Lanka’s Dialog Axiata hopes to hold prices despite higher taxes, rising costs like energy, officials said as the country goes through the worst currency crisis in the history of its intermediate regime central bank.

High inflation following a collapse of the currency has reduced real incomes of customers.

“There are many factors to consider, especially with the last price increase we did in last year did not resulted in a significant increase in revenue” Pradeep De Almeida · Group Chief Technology Officer at Dialog Axiata said at the launch of its Future zone at Lotus tower.

In September,2022 following an electricity tarrif hike dialog increased its tariffs on Mobile, Fixed Telephone, Broadband Plans and Value Added Services (Prepaid and Postpaid) by 20 percent while tariffs on all Pay Television Services were raised 25 percent.

Value Added Tax (VAT) was also raised by the government from 12 percent to 15 percent on all Telecommunications and Pay TV services.

“Even though we increase the prices we only saw around 8-9 percent increase in revenue,” Almeida said.

“That is because many users cut off their usage to limit the spending”.

Dialog will increase efficiencies and manage costs in an attempt to avoid prices increases for customers, he said.

Over the 24 months to December 2022, Sri Lanka;s central bank has generated inflation of 76 percent, based on the Colombo Consumer Price Index official data shows. Following the currency collapse, more power tariff hikes are planned.

“We are trying to mainly bear the cost from our side. We are getting a massive support from our parent company Telekom Malaysia International,” Navin Peiris, Group Chief Enterprise Officer at Dialog told EconomyNext.

“Therefore as of now, there is no plan to increase prices”. (Colombo/Jan 26/2023)

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Sri Lanka shares fall at market close on profit taking

ECONOMYNEXT – Sri Lanka shares fell on Thursday as profit taking entered the market mainly on financial and diversified sectors, brokers said.

The main All Share Price Index (ASPI) fell 0.13 percent or 11.50 points to close at 8,926.56.

“The market was trading on dull trade mainly due to profit taking,” an analyst said.

“Also we saw investors taking a sideline as quarterly reports started to come”.

The earnings in the first quarter of 2023 are expected to be negative with revised up taxes and an imminent electricity tariff hike.

Earnings in the second quarter are expected to be more positive with the anticipation of IMF loan and possible reduction in the market interest rates as the tax revenue has started to generate funds.

The central bank’s policy decision was expected and investors have been eying on IMF deal with hopes of rapid economic recovery from the current unprecedented economic crisis, however since the market gained in the last sessions profit taking has come about, analysts said.

The market has been on a rising trend on the hopes of a faster IMF deal. However, the central bank government said the IMF deal is likely in the quarter or in the first month of the second quarter.

The most liquid index S&P SL20 fell  0.33 percent or 9.21 points to 2,798.

LOLC had seen some attention by investors as the firm disposed 90,256,750 shares held with Agstar PLC at 15-17.50 rupees a share.

The market witnessed a turnover of 1.2 billion rupees, lower than the month’s daily average of 1.9 billion rupees.

Expolanka dragging the market down closed 2.36 percent down at 186.7 rupees a share. Sampath bank fell 1.41 percent to close at 42 rupees a share while Royal Ceramic Lanka closed 2.59 percent dwn at 30.1 rupees a share.

(Colombo/Jan26/2023)

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Sri Lanka bonds yields steady at close

ECONOMYNEXT – Sri Lanka bond yields were steady at close on Thursday, dealers said, while a guidance peg for interbank transactions by the Central Bank remained steady.

A bond maturing on 01.05.2024 closed at 31.00/20 percent unchanged from the last close.

A bond maturing on 15.05.2026 closed at 26.60/90 percent, up from 28.50/70 percent on Wednesday.

A bond maturing on 15.09.2027 closed at 28.60/85 percent, up from 28.50/60 percent at the last close.

The three months bill closed at 29.75/30.25 percent unchanged from the last close.

The Central Bank’s guidance peg for interbank US dollar transactions appreciated by another 2 cents to 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 360.49 rupees on Thursday, data showed.  (Colombo/Jan 26/2022)

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