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Sunday September 24th, 2023

Sri Lanka recycled plastic exporter say orders falling, outlook ‘grim’

ECONOMYNEXT – Sri Lanka’s BPPL Holdings Plc an exporter of recycled plastics products and yarn, said profits fell 90 percent to 30 million rupees in the March 2023 quarter maid falling export orders and an appreciating rupee.

Mainstream economists in US Fed and European Central Bank have tightened policy after printing money to drive up unsustainable demand and trigger supply chain bottlenecks.

There was a slowdown in revenue from all key markets and across product lines due to fears of a possible recession in the coming months, BPPL told shareholders in the interim accounts.

“Most customers lowered order volumes whilst running down inventories as rising interest rates and thereby funding costs in their own markets contributed to the slowdown,” the firm said.

“The business outlook for the next few months remains grim as we are uncertain when orders will pick-up in our key markets.”

Sri Lanka also printed money for two years triggering the worst currency crisis in the history of the island’s flexible exchange rate central bank, driving up fuel and electricity costs as well as domestic interest rates.

BPPL said the firms fuel, transport and electricity costs went up and corporate taxes doubled from 14 to 30 percent.

Sri Lanka’s central bank has hiked rates and stabilized the economy. The rupee has also reversed direction as a result. However, BPPL now has raw material acquired at higher prices.

The rupee had appreciated to 327 to the US dollar by March 2023 from 366 in December 2022.

BPPL said it had lost million in pre tax profits as a result.

“The corresponding benefits from Rupee appreciation due to lower importation costs takes around three to four months to realise as raw materials “on hand” have to be used up and replacement materials imported at lesser cost,” BPPL said.

On polyester yarn the firm is expecting a pick up later in the year. Rupee appreciation is also bringing input costs down.

“Indications are that the situation will only improve in the second half of the new financial year 2023/24 once global interest rate increases peak,” the firm said.

“We also anticipate lower production costs now that fuel costs have begun to reduce in Sri Lanka and
inflation in general has started to come down.

“We also expect a faster pick-up in orders for recycled polyester yarn following the introduction of several new products to our portfolio.

“Yarn was the first of our business lines to be impacted by the global economic slowdown and we expect it to be the first to recover as well.”

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Sri Lanka India industrial zone around Trinco, maritime links mooted

ECONOMYNEXT – Sri Lanka’s Ports Minister Nimal Siripala de Silva had highlighted the desire of both the Governments to work closely to develop the industrial zone at Trincomalee, after accepting an invitation to participate in a maritime summit.

The Global Maritime India Summit (GMIS) will be held in India from October 17-19, 2023 at Mumbai where Sri Lanka has been invited at a partner country.

At a curtain raiser event on September 22, India’s High Commissioner in Colombo, Gopal Baglay had said both countries were working on enhancing sea connectivity according to a vision document launched during a recent visit of the President of Sri Lanka to India.

Minister de Silva will lead a delegation from Sri Lanka to the summit.

Secretary to the Ministry of Ports, Shipping and Waterways, Government of India, T K Ramachandran said the Global Maritime India Summit aims strengthen the Indian maritime economy by promoting global and regional partnerships and facilitating investments.

The event will give an opportunity to the Government of Sri Lanka to attracting greater investment from India in development of its maritime infrastructure, Ramachandran said.

It will also facilitate greater business to business interactions. (Colombo/Sept24/2023)

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Sri Lanka brings back import para tariff on milk

ECONOMYNEXT – Sri Lanka has brought back an import para tariff called the Ports and Airports Levy, to several grades of milk powder.

Milk powder has been removed from a list of PAL exemptions, making them liable for a 10 percent tax.

The PAL para tariffs are also a contentious issue in terms of export competitiveness, and the government has previously given undertakings that they will be eliminated.

Trade freedoms of the poor figure in an IMF/World bank reform program with the governments.

Milk is a protein rich food, in a country where children of poor families are facing stunting and malnutrition.

Economic nationalism is seen at high levels in food, with several businessmen are pushing for trade protection, amid an overall autarkist (self-sufficiency) ideology, going directly against policies followed in East Asia, which the same as hold up as examples.

Sri Lanka keeps dairy product prices up ostensibly to bring profits to a domestic dairy company and farmers.

Sri Lanka also keeps maize prices up, ostensibly to give profits to farmers and collectors. (Colombo/Sept22/2023)

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Sri Lanka govt warns liquor manufacturers: pay defaulted tax or lose licence

ECONOMYNEXT – Sri Lanka government which is struggling to raise the state revenue despite   higher taxes, has warned liquor manufacturers to pay defaulted taxes or lose their licence.

The government is now getting tough with past tax defaulters amid concerns over falling short of this year’s revenue target agreed with the International Monetary Fun (IMF).

“Liquor manufacturing firms owe us 660 crore rupees (6.6 billion rupees),” Siyambalapitiya told  reporters on Thursday (21).

“Most of this or around a third is the only excise tax amount to be paid. The rest is penalty. If a liquor manufacturer does not pay on time, we impose a penalty of 3 percent per month This means 36 percent (penalty) per annum,” he said.

“We have given them deadline to repay the basic excise taxes. If they don’t pay, we will cancel their licence.”

President Ranil Wickremesinghe’s government committed an ambitious revenue target among many other reforms to the International Monetary Fund (IMF) in return to a $3 billion loan package.

However, the revenue could face a short fall of 100 billion rupees, State Finance Minister Ranjith Siyambalapitiya has said.

A new Central Bank Act also has legally prevented the government of printing money at its discretion as  in the past.  (Colombo/September 24/2023)

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