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Wednesday June 7th, 2023

Sri Lanka President plants turmeric in garden in import substitution drive

ECONOMYNEXT – Sri Lanka’s President Gotabaya Rajapaksa has planted a turmeric plant in his garden as part of efforts to grow five plants in 1.5 million households as part of an import substitution drive.

“This programme was launched in an attempt to meet the household Turmeric requirement of the people in their own backyard,” President’s office said in a statement.

“It has been decided to distribute five Turmeric plants per each family for a total of 1.5 million households through the project.

“To symbolize the launch of the programme, the President planted a turmeric sapling in his home garden at Mirihana.”

President Rajapaksa was accompanied by Trade Minister Bandula Gunewardene, Plantations Industries and Export Agriculture Minister Ramesh Pathirana.

Sri Lanka has banned turmeric imports, which was mainly imported from India, driving its price up to unusual levels promoting smuggling as well as domestic cultivation.

The state will make available ‘Grade-A t’urmeric plants would available for the public through the Agriculture Project Officers at Agrarian Service Centers, the statement said.

Sri Lanka has controlled the import of a large number of products and banned others outright in a bid to save foreign exchange as unprecedented money printing triggered forex losses and record balance of payments deficits.

Though promoters initially said prices will fall and shortages will end in six month, the spice remains expensive.

At Spar Supermarket a 100g pack of turmeric powder is offered online at 750 rupees (7,500 rupees a kilogram) and at Kapruka, an online portal at 490 rupees (4,900 rupees a kilogram).

The prices may encourage persons living in apartments in the city to also uproot any flower pots and grow turmeric with piped water.

You tube self-help videos are available on how to make turmeric powder.

To make turmeric powder turmeric tubers have to be boiled or steamed for and then dried in the sun for about four days until they are brittle. Slicing the boiled tubers may speed up the drying process.

The primary tuber (mother tuber) and daughter rhizomes (fingers) have to be boiled seperates for best results. The skin has to be removed (polished) before grinding for the best colour.

Apartment dwellers could dry in the oven at low heat setting, according to self-help videos. After drying the chips have to be ground and sieved.

Unprocessed fresh turmeric which is not dried properly may develop aflatoxin.

In India turmeric is processed in an industrial scale through pressure steaming and processing plants. The division of labour and specialization boosts labour productivity, lowers retail prices, raises living standards of consumers and makes the product export competitive.

Sri Lanka is also planning to ban the import of fertilizer and agro chemicals to save foreign exchange and promote healthy foods. The state is planning to use a fertilizer subsidy to compensate farmers for any crop losses.

Green gram and palm oil imports has already been banned. Meanwhile other analysts have called for controls on the central bank to prevent it from printing money and creating monetary instability. (Colombo/May01/2021)

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Sri Lanka’s shares slip on profit taking and selling pressure

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

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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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