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Tuesday May 30th, 2023

Sri Lanka President asks China to reduce trade deficit, invest in tech university

ECONOMYNEXT – Sri Lanka’s President Gotabaya Rajapaksa has asked China to purchase more goods to reduce a large trade deficit and also invest in a technology university during a visit of a delegation led by ex-Foreign Minister Jang Jiechi.

“Sri Lanka has a strong private sector,” President Gotabaya had said.

“They manufacture various products. Open the Chinese market for these items. Encourage Chinese investors to invest in Sri Lanka. Promote Chinese people to visit Sri Lanka.”

Most Sri Lankans buy Chinese goods because they are more cost-effective than buying from a third country. Chinese investments and loans however contribute to the overall trade deficit of the country, when the money is spent by recipients on imports or cement and steel is imported.

Income earned from Chinese tourists, will also contribute to a trade deficit with China or other countries when tourism workers and hotel owners spend the money.

President Rajapaksa had asked China to participate in Sri Lanka’s tea auction. Sri Lanka however taxes bulk tea exports to discourage them.

He had also invited China to set up a University of Technology to provide more higher educational opportunities for young Sri Lankans.

“Extending President Xi’s congratulations to President Rajapaksa over landslide victories at recent elections, Mr. Yang recalled that he visited Sri Lanka 35 years ago as an interpreter assisting a visiting Chinese delegation,” a statement from the President’s office said.

“He noted that Sri Lanka is the first country in his four-nation tour of Asia adding that the President of China gives high priority to the enhancement of bilateral relations with Sri Lanka.”

Yang Jiechi is an ex-Foreign Minister and had served as the ambassador to the United States.

Chairman of the China International Development Cooperation Agency, Wang Xiaotao; Assistant Foreign Minister of China, Deng Lee and Chen Song, Deputy Director General of Department of Asian Affairs were also in the delegation.

China has identified several areas conducive for the development of bilateral relations with Sri Lanka.

In addition to completing large-scale projects already underway, these include agriculture, education, tourism, water supply, healthcare, medical supplies, modern technology, digital economy, Blue Economy and labour training.

Sri Lanka intends to re-start talks on a China – Sri Lanka Free Trade Agreement and also complete an industrial zone in Hambantota.

Hambantota Port is now operated by a Chinese company with an equity stake bought by China.

“Constructing a port in Hambantota is an idea of Sri Lanka and not China’s,” President Rajapaksa had said.

“We were convinced that it woulld be a project with a vast potential for generating income and employment opportunities. China offered to fund it.

“Many geo-political analysis interprets this project as ‘debt trap’ set up by China to gain control over Sri Lankan affairs.

“I want to prove that it is not the case and that this large-scale project will help improve the living standards of the people. Assist us in this endeavour.”

President Rajapaksa had said he had toured China 13 times and see how the country developed.

“I have seen massive development especially in rural areas,” he had said.

“My target is to bring about similar development especially in rural areas in Sri Lanka and to raise the living conditions of the people in this country, especially that of the poor.

“I look forward to seeing a visible progress in the Port City project over the next four years.”

The Port City is awaiting the passing of a Special Economic Zone Law by Sri Lanka to attract investors. (Colombo/Oct09/2020)

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Sri Lanka rupee at 293.50/294.50 to dollar at open, bond yields steady

ECONOMYNEXT – Sri Lanka’s rupee closed at stronger at 293.50 /294.50 against the US dollar in the spot market on Tuesday, while bond yields were unchanged, dealers said.

The rupee closed at 296.75 /297.25 to the US dollar on Monday after opening around 296.50 /297.50 rupees.

A bond maturing on 01.09.2027 closed at 26.50/65 percent unchanged from Monday’s close.

Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money. (Colombo/ May 30/2023)

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Sri Lanka food producers on countdown; 6-months to reduce trans fat content

ECONOMYNEXT – Sri Lankan food manufacturers only have another six months to reduce the amount of trans fat in food items as the government plans to ban high trans-fat food from January 2024 onwards, an official said.

“A six-month grace period has been given to existing manufacturers, sellers and distributors whose products contain trans-fat,” an official of the Ministry of Health told EconomyNext requesting anonymity.

According to a Ministry of Health gazette issued on… a person shall not sell, offer for sale, expose or keep for sale or advertise for sale, any packaged food product containing trans-fat unless the total amount of trans-fat of such food product per 100 grams or 100 milliliters of the food product is declared on the label of such packaged food product.

However, these regulations will not be applicable for export oriented food products.

Trans-fat is a type of fat that has certain chemical properties and is usually found in processed foods such as baked goods, snack foods, fried foods, shortening, margarine, and certain vegetable oils.

Eating trans-fat increases blood cholesterol levels and the risk of heart disease.

Meanwhile, the World Health Organization (WHO) has praised Sri Lanka for enacting a legislation on trans-fat to protect health and prevent premature deaths from coronary heart disease, a statement from the WHO said.

“Eliminating trans-fats from food supplies is a cost-effective measure with enormous health benefits,” the statement quoting Poonam Khetrapal Singh, Regional Director, WHO South-East Asia said.

“By enacting legislation on trans-fat, Sri Lanka has once again demonstrated its resolve to protect and promote the health of its people”.

The regulations are coming into effect as Sri Lanka is struggling with food insecurity as the country recovers from its worst economic crisis.

However, an improvement in food security across all provinces has been recorded, according to an assessment by a Crop and Food Security Assessment Mission (CFSAM) of two UN agencies. (Colombo/ May 30/2023)

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India extends under utilized $1 bln credit facility to Sri Lanka by one year 

ECONOMYNEXT – India has extended a $1 billion credit facility to Sri Lanka by another year after the loan that was given to help the crisis-hit island nation to continue import of essentials was not fully utilized in the 12 month period originally agreed, officials said.

Sri Lanka faced with a looming sovereign default signed the credit facility in March 2022 for one year through March 2024. However, the full $1 billion had not been utilized yet.

The Facility has been used for urgent procurement of fuel, medicines, food items and industrial raw materials, as per the requirements and priorities of Sri Lanka.

“The initial agreement was signed in 2022 March and out of the 1000 million US dollars allocated materials were imported for $576.75 mil,” Shehan Semasinghe, State Finance Minister said in his official twitter platform.

“The agreement is extended for the remaining $423.25 mil. We will prioritize the import of essential medicines till March 2024.”

Indian High Commission in Colombo said the State Bank of India (SBI) has extended the tenure of the $1 billion Credit Facility provided to Sri Lanka in response to a request from the Government of Sri Lanka.  (Colombo/May 30/2023)

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