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Sunday March 26th, 2023

Sri Lanka plans to import 800,000MT of rice, no immediate shortage: Minister

ECONOMYNEXT – Sri Lanka may have to import about 800,000 metric tonnes of rice amid a crop shortfall created by a chemical fertilizer ban in the 2022 main season and under cultivation in the current season, Agriculture Minister Mahinda Amaraweera said.

The 800,000 metric tonnes is enough to meet the domestic demand for about four months.

In a good year, Sri Lanka can produce about 3 million tonnes of paddy which turns out to be about 3.0 million tonnes of milled rice.

Already Sri Lanka had imported 339,000 metric tonnes of rice up to the end of the year, he said.

Sri Lanka’s monthly rice demand is estimated at around 190,000 to 200,000 metric tonnes.

“The current rice stocks are enough to meet the demand for up to about the middle of October,” Minister Amaraweera told Sri Lanka’s Derana Television.

“This year’s Yala harvest is estimated to be enough for about two months, due to lower cultivation.”

“That will take the rice availability up to November.”

This year’s Yala season has been hit by fertilizer shortages and diesel for agricultural equipment.

The government is planning to get 65,000 MT of fertilizer from India which can be used in the current season, he said.

However there is late cultivation seen, Minister Amaraweera said with renewed interest in cultivation due to food shortage fears which may take rice availability up to mid-December, he said.

“There is no need to have undue fears that there will be food shortages from August,” Minister Amaraweera said.

“The trade minister is planning to order rice from abroad. It was also discussed at the cabinet today. So we will import the shortfall.

“We will have to import about 800,000 metric tonnes of rice from abroad.”

The Maha main cultivation season starts at the end of the year and harvests begin from around February the following year.

Sri Lanka had seen rice shortfalls of one million tonnes or more in 2016 and 2018 which had been imported.

Global rice prices are now around 375 to 450 dollars a tonne, requiring around 300 to 360 million US dollars to import 800,000 metric tonnes.

Global commodity prices have shot up after US money printing pushed inflation to 40-year highs under the so-called Powell Bubble.

Classical economists have warned for over two years that Fed policy would trigger a commodity bubble and a wide miss in its inflation target. (Conditions ripe for global commodity super-cycle: Steve Hanke)

In the Bernanke-Greenspan bubble which collapsed in 2008/2009 triggering a global economic contraction, several countries banned grain exports.

Minister Amaraweera said Sri Lanka was trying to place import orders early because prices can move up further and there was a danger that rice-producing countries may ban exports.

Though Sri Lanka has easily imported food in the past, now the country is in the middle of a severe foreign exchange shortage, he said.

The government is in the process of raising funds to finance imports from bi-lateral partners, officials have said.

Sri Lanka earns about a billion US dollars through exports, and about 600 million US dollars from remittances where about half comes through official channels. But the balance can be used for food imports anytime open account imports are allowed.

Sri Lanka is currently facing foreign exchange shortages due to monetary instability coming from the lack of a working monetary regime after a soft-peg lost credibility.

Sri Lanka’s central bank has hiked rates to slow domestic credit and reduce outflows. There have been calls to shift away from the unstable intermediate regime which breaks under ‘flexible’ monetary policy to a single anchor regime with tight rules to prevent (Colombo/June07/2022)

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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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