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Tuesday November 29th, 2022

Sri Lanka price controlled drugs still cheaper despite rupee collapses: Rajitha

ECONOMYNEXT – Sri Lanka’s price controlled drugs are still lower than pre-control price, Health Minister Rajitha Senaratne said, despite two price hikes given due the collapse of the currency by the central bank.

Sri Lanka’s central bank has busted the rupee from 4.70 to the US dollar when it was set up in 1950 to around 180 rupees to the US dollar by 2019. The rupee was fixed from 1885, under a currency board which had no money printing powers.

From 2015 to 2019 under the administration that Senaratne was health minister the central bank busted the rupee from 131 to 180 to the US dollar, taking part of the shine off his price controls.

The National Medicinal Drugs Authority, which was set up by Senaratne gave a 5 percent increase at first and a 14 percent increase after the central bank’s latest collapse of the rupee.

“They (pharma companies) asked for a 23 percent increase but we gave only14 percent,” Senaratne told parliament.

The rupee which appreciated amid weak credit in 2019 from 182 to about 176 to the US dollar is now again sliding.

In August the bank printed tens of billions of rupees through its lender of last resort facilities at the policy deposit rate after disruptive repayment of central bank credit by the Treasury, seeming financed or part financed by newly minted LOLR money.

As the only agency allowed to issue rupee notes, the central bank is solely responsible for over-issue and collapses of the rupee.

Meanwhile Senaratne said the antibiotics such as Amoxicillin injections, were raised to 757 rupees from 631 rupees, after the latest rupee collapse. It was sold at 1668 rupees before price controls.

The drug Azithromycin was raised 63.37 rupees but it was 111 rupees before price controls.

He said price controls kept prices down and also saved money for the government.

“Due to the price control we implemented in 2016 for the medicines for the cancer patients we able to save 17.6 billion for the government,” Senaratne said.

He said according to one audit, there have been big savings for the government, but a supplementary estimate for cash was presented because more people were doing operations due to free medical devices given.

Earlier the many devices for surgery had to be bought by the patient.

Medical device prices were also brought down in 2016, but had been increased by 14 percent after the central bank busted the rupee.

Many companies gave a large cut to doctors who prescribed the device, according to some sources, which pushed up the price.

A medical device known as a Metal Stent that is used for the heart patients was raised to 27,500 rupees from 24,000 rupees after the rupee collapse. It was 50,000 rupees before the price control in 2016.

A drug eluting Stent was raised to 120,000 from 105,000 but it was 275,000 before the price controls.

A glucometer for diabetic patients was raised to 3150 rupees. It was 5250 rupees before the price control.

And testing stripes used with the Glucometer raised to 57 rupees from 50 rupees after the rupee collapse and it was 100 rupees before the price control, Senaratne said.

Lenses that are imported have also been increased.

American lenses was increased to 18 500 rupees and it was 28 000 before the price control. Hoya lenses was raised to 13,950 rupees in this year and it was 25,900 before the price control.

Another type of lense was raised to 6,920 rupees but before price controls it was 25,000 rupees, he said.

“There are about 10 types of lenses under this category that we changed prices in this year,” Senaratne said. (Colombo/Aug23/2019)

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Sri Lanka rubber farmers to get boost from France, Michellin

ECONOMYNEXT – Sri Lanka will start a project supported by France and Michellin group to support 6,000 rubber farmers, cabinet spokesman Minister Bandula Gunawardena said.

Rubber farmers in Badalgama and Medagama in the Moneragala district will be supported improve their capacity and supply chains at a cost of 726,700 Euros.

Financial support will be provided by France’s Michellin group which has a subsidiary in Sri Lanka and the government of France.

The project will be implemented by France’s Ksapa group under the guidance of Ministry of Industries.

The cabinet of ministers had cleared a proposal by the Plantations Industries Minister to enter into an agreement to implement the project. (Colombo/Nov29/2022)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a twitter.com message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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