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Monday June 24th, 2024

Sri Lanka needs to ramp up daily PCR testing to 40-50,000 a day: Dr Rannan-Eliya

ECONOMYNEXT – With up to 500 new COVID-19 cases reported every day, Sri Lanka ought to conduct 40,000 to 50,000 PCR tests a day, well above the current rate of less than 12,000, if it is to successfully contain the ongoing outbreak, a leading epidemiology expert said.

Executive Director and fellow of the Institute for Health Policy (IHP) Dr Ravindra Rannan-Eliya has called for increased testing in order to contain the outbreak without resorting to lockdowns.

“During the past six months, the World Health Organisation (WHO) has suggested various testing levels as being adequate, ranging from 1 test per 1,000 people each week to 30 tests for every positive case detection. These translate into rates of 3–15,000 tests/day in Sri Lanka currently. Our assessment is that these guidelines do not have a strong evidence base, and that these levels of testing are too low to achieve and maintain elimination, which needs to be our goal if we are to avoid lockdowns as desired by our President,” Dr Rannan-Eliya, a public health expert as well as an economist, wrote in a post written for the IHP blog yesterday.

EconomyNext spoke to Dr Rannan-Eliya via email yesterday on his expert views on Sri Lanka’s response to the new wave of COVID-19 that has now surpassed 10,000 cases in a period of just one month.
Excerpts follow, with some light editing for clarity.

EN: Do you think Sri Lanka can afford the economic losses that will occur from not increasing testing?

RR: The money [for increased testing] is available. The initial cost/forex requirement of expanding machine capacity (USD 7-10 million) can be easily financed by the current World Bank COVID project (USD 128 million). In the longer-term, this is not a cost. By keeping transmission at low levels, the additional profits that local business will generate by not having to endure lockdowns and reduced consumer confidence (and labour shortages as EconomyNext reported is occurring in the tea sector), and the additional income taxes and VAT that Treasury will collect will pay for the operating costs more than several fold.

There will, however, be a political cost for the Samagi Jana Balavegaya (SJB) and others. I note that President Trump almost certainly lost re-election because of mismanagement of COVID-19. It will be very bad news for the opposition if the government increases testing as we propose, and can get the economy back to growth as a result.

EN: What is your opinion on the antigen test? Will it help meet our testing requirements and be compatible with Sri Lankan requirements?

RR: The performance of antigen tests varies a lot between manufacturers and also depending on how they are used. Without proper testing, I cannot say how good the particular kit is that the Ministry of Health (MOH) has imported. Overall, they are not as good as PCR testing in detecting new cases, and performance also depends on how they are used. To slow transmission, we need to maximise our ability to detect cases.

Antigen tests will not be as good at doing this. So 1,000 antigen tests will be not as effective as 1,000 PCR tests. So, long term, we need to rely on PCR testing. However, we now have a serious problem because our PCR capacity is limited, so we have no option but to use other inferior methods such as antigen tests to compensate until the MOH installs the increased PCR capacity.

EN: Regarding the current situation in the country, do you think we are still not at the community spreading level? MOH Epidemiology Head Dr Sudath Samaraweera said even though the number of patients increased, the patient count in the Gamapaha district is dropping. What is your take on that?

RR: The Epidemiology Unit is using the term “community spread” as defined by WHO where it refers to whether the origin of cases can be identified. As I have explained before, I do not think that we should rely on the WHO classification, and as a scientist i do not find it helpful for COVID-19.

I would rather not get into this discussion because I think we and the media are pushing the MOH into a corner. They are probably afraid of the political implications of changing WHO categories. Frankly, if the MOH wants to use the term “community spread”, I think they would be smarter to defuse the situation by using the term to classify individual cases as, say, Australia does, and not try to pigeonhole us into a WHO category which may have political implications.

That is, they should in future simply report how many cases are (i) imported, (ii) local cases of known origin, and (iii) community spread cases where the origin is unknown. Then we can get on with focusing on the number of overall local cases and the level of transmission, which is what really matters.

Regarding the Gampaha question, the real issue is that we see no evidence of nationwide transmission slowing. We have been detecting a steady 400-500 new cases/day for some time, and we can also see that PCR testing has been stuck at about 10,000 tests/day. There is a possibility that the real number of new cases is increasing, but we are no longer able to detect this because we cannot increase PCR testing.

EN: How effective is the current strategy of the government? In your opinion, do we need to go for a different strategy?

RR: Some components are very good, but the overall strategy has clearly failed.

The border closure in March, which I should point out was only put in place at the urging of medical experts like myself and the Government Medical Officers Association (GMOA), was a good decision. The very effective quarantine facilities and contact tracing and isolation led by the military and intelligence services have been world class, and we should be grateful. But there has been one consistent and enormous failure in the overall strategy, which will undermine all the other good efforts. That is the failure to build up PCR testing capacity after April as other countries did, and the failure to start routine testing of all patients with respiratory symptoms, coughs, colds or fever. There has been enormous resistance in many parts of the MOH and in my profession, to the idea that high levels of testing were needed for COVID-19 control, and this resistance has cost us dearly.

EN: What is your position on not conducting PCR tests on people who have passed the 14-day quarantine period?

RR: The risk that international arrivals who have not displayed symptoms for 14 days in quarantine are not infectious is low, but the scientific evidence does not exist that allows us to say with 100 percent confidence that the risk is zero. Some countries that have had 14-day quarantine with PCR testing have had outbreaks which they suspect were caused by undetected cases getting through quarantine. So in a situation where the goal is elimination and we have PCR testing capacity, then it is safer to err on the side of caution and test. I note that New Zealand continues to do this. However, we have now run out of PCR testing capacity. Given this we may need to prioritise, accept increased risks for now, and use our limited testing capacity instead for detecting community cases.

EN: Does the new coronavirus lose its ability to infect other people after 10-14 days of infection?

RR: In cases where the person is very sick, infectiousness can last a lot longer than 14 days, and this has been well documented since at least March. But I think you are referring to cases where the person has no symptoms or only mild symptoms, where the risk of infection after 14 days is very low.

However, as I explained, we do not have scientific evidence to say that it is zero. I think some doctors are pointing to a recent US CDC assessment that it is zero. However, if you read the CDC document carefully, their conclusion is based on one Taiwanese study which did not have a large sample, and so was not able to conclusively determine that the risk was zero. The CDC also noted one other Chinese study which suggested that people could remain infectious for much longer.

The way I would interpret this is that the CDC is primarily trying to provide guidance in a country – the USA – where the virus is rampant, infecting hundreds of thousands every day, and where the President’s own Chief of Staff is on record as saying they have given up trying to control the virus. In this context, they only worry about minimising risk and not about getting risk to zero, so they can afford to accept a low level of risk. As a country which until recently had near zero cases, we need to take a harder look at the same evidence. (Colombo/Nov10/2020)

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Sri Lanka central bank appoints two Deputy Governors

ECONOMYNEXT – Sri Lanka’s central bank said Assistant Governors A A M Thassim and J P R Karunaratne were promoted to the post of Deputy Governor.

The full statement is reproduced below:


In terms of the provisions in the Central Bank of Sri Lanka Act, No. 16 of 2023, Hon. Minister of Finance, as recommended by the Governing Board, has appointed Mr. A A M Thassim, Assistant Governor and Secretary to the Governing Board, and Mr. J P R Karunaratne, Assistant Governor, as Deputy Governors of the Central Bank of Sri Lanka with effect from 20.06.2024 and 24.06.2024, respectively.

Mr. A A M Thassim

Mr. A.A.M. Thassim has over 31 years of service at Central Bank of Sri Lanka (CBSL) in different capacities in the areas of Supervision and Regulation of Banking Institutions, International Operations, Communication, Payments and Settlements, Employees Provident Fund, Finance, Risk Management, Deposit Insurance, Security Services and Information Technology.

He has served as the Director of Bank Supervision (DBS), Director of International Operation (DIO) and Director of Communications (DCM) and has contributed towards strengthening the legal framework, governance, implementation the Basel 3 international guidelines for capital and liquidity and adoption of International Financial Reporting Standards (IFRS) 9 to the banking sector, thereby strengthening the resilience of the Financial Sector.

Further, as the DIO, Mr. Thassim was responsible for the investments and management of foreign reserves of the country and exchange rate management. Mr. Thassim has also gained experience and knowledge in the field of payment systems and was involved in the implementation of the Cheque Imaging and Truncation System. In addition, he has also served on several high-level internal committees including in the areas of monetary policy, financial system stability and international reserves.

Prior to the appointment as the Deputy Governor, Mr. Thassim held the position of Assistant Governor and was in charge of several key departments including the Bank Supervision Department. He also served as the Secretary to the Governing Board, Monetary Policy Board, Audit Committee, Board Risk Oversight Committee, Ethics Committee and Financial Sector Crisis Management Committee.

At present, Mr. Thassim is a board member of the Sri Lanka Export Credit Insurance Corporation and the Vice Chairman of the Institute of Bankers of Sri Lanka (IBSL). Further, he has also served as a board member of the Credit Information Bureau of Sri Lanka and LankaClear (Pvt) Ltd.,

Mr. Thassim is an Associate member of the Chartered Institute of Management Accountants (ACMA) United Kingdom and possesses a Masters in Business Administration (MBA) from the Postgraduate Institute of Management (PIM), University of Sri Jayewardenepura (USJ). He has also completed a programme on Gold Reserves Management from Hass School of Business, University of California, Berkeley, USA.

He is also an Alumni of Harvard University, USA having successfully completed the executive programme on Leaders in Development conducted by the John F. Kennedy School of Government.

Mr. J P R Karunaratne

Mr. J P R Karunaratne has over 33 years of service at the Central Bank of Sri Lanka in different capacities in the areas of supervision and regulation of Banks and Non-Bank financial institutions, Currency management, public debt, Secretariat, Finance, policy review and monitoring. He has served as the Director of Supervision of Non-Bank Financial Institutions (DSNBFI) and the Superintendent of Currency (SC) and has contributed towards strengthening the legal and regulatory framework in the Non-Bank Financial Institutions sector and has played a prominent role in the consolidation of the Non-Bank Financial Institutions sector. Prior to the appointment as a Deputy Governor, Mr. J P R Karunaratne held the position of Assistant Governor and was in-charge of the Department of Supervision of Non-Bank Financial Institutions, Finance Department and the Facilities Management Department.

As an Assistant Governor Mr. Karunaratne has previously overseen several other departments namely, Macroprudential Surveillance, Resolution and Enforcement, Foreign Exchange, Currency, Regional Development, Legal and Compliance, Risk Management, Center for Banking Studies, Security Services and Staff Services Management.

He has also served as the Secretary to the Monetary Board, Secretary to the Board Risk Oversight Committee, Monetary Board Advisory Audit Committee and the Ethics Committee. Further, He was on release to the Ministry of Defence, where he served as a Financial Advisor. He was also appointed as the Chief Operating Officer for the Secretariat of Committee of Chartered Accountants appointed by the Supreme Court in 2009.

He has served as the Chairman of the Sri Lanka Accounting and Auditing Standards Monitoring Board and has been a Council Member of the Certified Management Accountants (CMA) of Sri Lanka. Mr. Karunaratne was awarded the CMA Sri Lanka Business Excellence Award at the CMA Sri Lanka National Management Accounting Conference 2023 in recognition of his service to the profession. He has also received “Long Service Award” of the IBSL in 2019 in recognition of his long career and contribution as a resource person at IBSL.

He was the Project Team Leader of the South East Asian Central Banks (SEACEN) Malaysia, research project on “Implementation of Basel III Challenges and Opportunities in SEACEN Countries” and SEACEN published the research in 2013. He serves as a member of several internal and external committees at present.

Mr. Karunaratne holds a Master of Commerce Degree in Finance from the University of New South Wales, Australia and a Postgraduate Diploma in Applied Statistics and a Bachelor of Science (Physical Science) Degree with a First class from the University of Colombo. He is a Fellow Member of the Chartered Institute of Management Accountants (CIMA), UK and a Chartered Global Management Accountant (CGMA). Further, he is an Associate Member of the CMA Sri Lanka.

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Sri Lanka opposition questions claims that IMF housing tax is only for kulaks

ECONOMYNEXT – Sri Lanka’s opposition has questioned claims made by government spokesmen that a tax on housing proposed in an International Monetary Fund deal is only limited to rich people but if as promised by President one house is exempt, it is welcome, legislator Harsha de Silva said.

Sri Lanka President Ranil Wickremesinghe made a promise in parliament that the first house of a citizen will be excluded from the property tax.

Related Sri Lanka to exempt one house from imputed rent wealth tax: President

But opposition legislator Harsha de Silva pointed out that the IMF program documents clearly says taxes will be levied on owner occupied houses on ‘imputed taxes’, not second houses.

Under current inland revenue laws, actual rent income from a second house is already captured as part of taxable income.

The IMF document mentions a threshold value from which taxes will be exempt but not that a whole owner-occupied primary residence will be exempt.

“The tax is imposed on the income of individuals (rather than real property itself) and thus raises central government revenue in accordance with the constitution,” IMF staff said in their report.

“A similar tax was previously included in the Inland Revenue Act. No. 10 of 2006.

“Under this regime, primary residences were exempt and the assessed values for rating purposes were used to determine the base.

“Given the broad exemption and the use of outdated and downward biased annual values, the tax generated hardly any revenue.”

Meanwhile Sri Lanka has promised to impose the housing tax from April 01, 2025.

“…[W]e will introduce an imputed rental income tax on owner-occupied and vacant residential properties before the beginning of the tax year on April 1st, 2025,” the memorandum of economic policies agreed with the IMF said.

“An exemption threshold and a graduated tax rate schedule would make this tax highly progressive.

“The full revenue yield from this tax is estimated at 0.4 percent and would materialize in 2026 (with a partial yield of 0.15 percent in 2025).

“This yield would still fall short by 1 percent of GDP relative to the expected yield of 1.2 percent of GDP from the property tax envisaged for 2025 onwards.”

Presidential Undertaking

“Whatever the President said the IMF agreement says owner occupied house,” De Silva told in parliament.

“It is not the second house that is mentioned in the agreement.

“But there is one thing. I am happy as Samagi Jana Balawegaya, that we have been able to save the middle class in society from a massive tax that was to be imposed.”

In Sri Lanka there is a belief that the most productive citizens are fair game for excessive or expropriationary taxation, just like kulaks were targeted in the Soviet Union for actual expropriation, critics say.

Wealth taxes have had disastrous effects on some US cities like Baltimore, leading to falling populations and dilapidated houses.

Sri Lanka is currently facing a brain drain due to high income tax after on top of depreciation from severe monetary debasement from a flexible exchange rate, which is neither a hard peg nor a clean float.

Sri Lanka has imposed a wide range of taxes on the people to maintain a bloated state, after inflationists engaged in extreme macro-economic policy (tax and rate cuts) glorified in Saltwater-Cambridge doctrine to boost growth, throwing classical economic principles and monetary stability to the winds and driving the country into external default.

The IMF itself gave technical assistance the central bank to calculate potential output inviting the agency to cut rates to close the perceived econometric ‘output gap’.

In the run up to the default, rate cuts triggered multiple external crises, leading to output shocks as stabilization programs were implemented.

Macro-economic Policy

Macro-economic policy as known now was devised by Cambridge academic J M Keynes in the wake of the Great Depression triggered by the Federal Reserve after it invented open market operations and policy rates in the 1920s and also popularized by Harvard academic Alvin Hansen among others.

Macro-economic policy started to de-stabilize countries in peacetime in the interwar years and after World War II it led to the collapse of the Bretton Woods system.

The Great Depression was also a peacetime collapse of what was later known as the roaring 20s’ monetary bubble.

“They have blithely ignored the warnings of economists,” classical economist Ludwig von Mises wrote of European nations which got into trouble from rate cuts and Keynesian stimulus, which brought currency depreciation and protectionism in its wake from the 1930s.

“They have erected trade barriers, they have fostered credit expansion and an easy money policy, they have taken recourse to price control, to minimum wage rates, and to subsidies.

“They have transformed taxation into confiscation and expropriation; they have proclaimed heedless spending as the best method to increase wealth and welfare.

“But when the inevitable consequences of such policies, long before predicted by the economists, became more and more obvious, public opinion did not place the blame on these cherished policies…”


In Sri Lanka however there is some understanding of the role played by macro-economists in the most recent crisis.

There are rumblings of unhappiness about ‘central bank independence’ given to an agency to create 5 to 7 percent inflation and currency debasement under a flexible exchange rate and its constitutional status relating to parliamentary control of public finances.

Sri Lanka’s central bank’s current flexible inflation targeting (inflation targeting without a floating rate) regime as well as its 1980s money supply targeting without floating rate has busted the national currency for decades and made it impossible to run budgets, made it difficult for people build houses which are now to be taxed, and also for millions to live and work in the country of their birth.

Fiscal metrics deteriorate each time rate cuts drive the country into currency crises and new taxes are brought in stabilization programs, ousting reformist governments and leading to policy reversals.

Sri Lanka’s citizens have suffered for decades from the privilege given to a few macroeconomists to print money to cut rates with inflationary open market operations and trigger forex shortages.

Related How Sri Lanka’s elections are decided by macro-economists and the IMF: Bellwether

Critics have pointed out that since 1954 in particular, central bank rates cuts which drive the country into external crises and the stabilization programs that follow, have been the main determinant of elections in the country and election of fringe political parties. (Colombo/June13/2024)

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India supports Sri Lanka Coast Guard to boost maritime security

ECONOMYNEXT – India has given 1.2 million US dollars’ worth spare parts to Sri Lanka’s Coast Guard to be used in a vessel also gifted to the Indian Ocean Island on an earlier occasion, the Indian High Commission in Colombo said.

“Handing over of the large consignment of spares symbolizes India’s commitment to support capability building towards addressing the shared challenges of Maritime Security in the region,” the Indian High Commission said

The spare parts were brought to Sri Lanka on the Indian Coast Guard Ship Sachet, an offshore patrol vessel that was on a two-day visit to the island.

The spares were formally handed over to the Sri Lanka Coast Guard Ship Suraksha which was gifted to Sri Lanka in October 2017 by India.

India has gifted spare parts for the ship in June 2021 and April 2022 and also provided assistance in refilling of Halon cylinders in January 2024. (Colombo/June23/2024)

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