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Sunday June 16th, 2024

Sri Lanka removes on-arrival PCR requirement for all arrivals in bid to boost tourism

ECONOMYNEXT – Sri Lanka will be open up for fully vaccinated tourists from September 29 as it removes the last COVID-19 travel restriction, the on-arrival PCR test, subject to a negative result within 72 hours of departure, in a bid to boost the dollar-earning tourism sector amid a forex crisis.

Health Minister Keheliya Rambukwella took to twitter to announce the decision, which will go in to effect from 0000hours September 29.

The Indian ocean island has removed a number of COVID-19 restrictions on travellers, despite an ongoing lockdown that is expected to be relaxed on October 01.

Fully vaccinated tourists are free to move across the country the way they did before the pandemic, but were required to undergo an on-arrival PCR test until September 28 that in turn necessitated a one-day quarantine until PCR tests reports were cleared.

Public parks and tourist site are also open on a pre-booking basis for tourists,  while bars and restaurants are open and ready to serve the holiday makers.

However the country continues to report close to 1,000 new COVID-19 infection cases per day, out of which over 90 percent are confirmed to be caused by the Delta variant.

Meanwhile, 50.4 percent of Sri Lankans had been fully vaccinated by September 18, according to Health Ministry data. At least 60.8 percent or 14.18 million of the population have been jabbed with the first dose.

Sri Lanka Tourism Development Authority (SLTDA) Director General Dhammika Wijayasinghe previously told EconomyNext that health officials and industry representatives were in discussion to ease COVID-19 restrictions as the country has fully vaccinated at least 50-percent of the population.

Shehan Sumanasekara, Director-Chief Operations (all airport) at Airport & Aviation Services (Srilanka) told EconomyNext last week that the Bandaranaike International Airport (BIA) sees close to 1,000 -1,500 arrivals and 1,700 to 2,000 departures per day.

Of these arrivals, some 300 are from India, while some are from Germany and Spain, according to Sumanasekara.

“Arrivals numbers change day to day but with the gradual ease of restrictions we expect it to increase in the near future,” he said.

Sri Lanka’s pre-pandemic tourism sector was one of three key-dollar earning sectors after apparel and foreign remittance.

In 2018, the sector generated 4.4 billion rupees in revenue and in 2019, after the Easter-Sunday attacks, earned 3.5billion US dollars.

Sri Lanka’s reserves dropped to 2 billion US dollars in July when it repaid a billion dollar bond and some other accounts.

Gross forex reserves were 2.6 months of imports measured as the average of past 12 months in June 2020.

The reserves are the lowest since July 2009, when the country had just finished a war and was rebuilding reserves, but in September it recovered slightly to 3.5 billion US dollars through International Monetary Fund (IMF) special drawing rights (SDR). (Colombo/Sep28/2021)

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Sri Lanka state airport agency swimming in cash after sovereign default

ECONOMYNEXT – State-run Airport and Aviation Services (Sri Lanka) Ltd is swimming in cash after a sovereign default halted debt repayments allowing it to post a profit of 29.7 billion rupees with 10.4 billion rupees in interest income, official data showed.

In April 2022 Sri Lanka declared a sovereign default after printing large volumes of money over more than two years to enforce rate cuts and blowing the biggest hole in the balance of payments in the history of the island’s money printing central bank.

Interest earnings of Airport and Aviation Services also shot up to 10.4 billion rupees in 2023 from 6.1 billion in 2022 and 3.3 billion rupees in 2021 before the sovereign default.

Under the terms of the default or ‘debt suspension’, state agencies like the Airport and Aviation Services, and Sri Lanka Port Authority were also not required to service loans, even if they had the cash to repay loans.

AASL’s finance income shot up in 2023 “mainly because the company has invested surplus cash saved by not servicing the foreign loans obtained by the company due to the temporary debt moratorium policy of the country,” the Finance Ministry said in a report.

Sri Lanka’s rupee and foreign currency interest rates also shot up in 2022 and 2023 as rate cuts enforced by money printing were lifted to clear anchor conflicts.

After inflationary rate cuts kill confidence in a currency triggering capital flight and parallel exchange rates, excessively high rates are needed to kill domestic credit and stabilize the currency.

Countries with such flawed operating frameworks in central banks tend to have chronic high nominal interest rates in any case.

AASL’s rupee revenues went up to 48.8 billion rupees in 2023 from 32.2 billion rupees in 2022 as passenger movements increased to 7.5 million from 5.5 million with a recovery in tourism and local traffic.

Sri Lanka’s currency crisis hit in 2022 just as the island was recovering from Coronavirus pandemic triggering fuel shortages and power cuts as money printing triggered forex shortages.

From 2022 March the rupee collapsed from 200 to 370 levels an attempt to float the rupee was failed by a surrender rule (a type of buy-side pegging which pushes the exchange rate down).

In 2023, after hiking rates to kill credit, the surrender rule was removed, leading to a currency appreciation.

The airport agency also made an exchange gain of 6.1 billion rupees in 2023 against an exchange loss of 10.5 billion rupees in 2022 the rupee appreciated. (Colombo/June16/2024)

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Sri Lanka car import relaxing roadmap given to IMF: State Minister

ECONOMYNEXT – Sri Lanka has submitted a roadmap on relaxing vehicle imports to the International Monetary Fund, State Minister of Finance Ranjith Siymabalapitiya said as the country recovers from the worst currency crises in the history of its central bank.

The import relaxation will allow vehicles for public transport, goods transport, then motor cycles and cars use by private individuals and after that, luxury cars, Minister Siyambalapitiya said.

Luxury cars however attract the highest taxes for each dollar spent on imports.

Economic analysts have characterized vehicle import controls as a ‘cascading policy error’ that follows inflationary rate cuts, which then deprive taxes to the state and triggers more money printing and more forex shortages, requiring even higher corrective interest rates and a contraction of economic activities to save the rupee.

According to the latest IMF report car import controls may have led to revenue losses of 0.7 to 0.9 percent of GDP.

Sri Lanka started controlling imports few years after a central bank was set up in 1950 and also tightened exchange controls progressively, so that macroeconomists using post-1920 spurious monetary doctrines taught at Anglophone universities could print money through various mechanisms to suppress rates.

Sri Lanka is working with the IMF as a guide on many issues and the roadmap was submitted to the agency on June 14, Minister Siyambalapitiya said.

The IMF in an economic report released last week the plan was expected to be submitted by June 15.

Whatever the IMF’s faults, which some wags have called ‘progressive Saltwaterism’, the agency does not advocate import controls as solution to balance of payments problems, despite a Mercantilist fixation with the current account deficit in countries with reserve collecting central banks, analysts say.

Import controls have the same effect as import substation on the balance of payments, which is none, classical economists have pointed out and is now mainly a problem associated with macro economists and economic bureaucrats of so-called basket case countries.

Any pressure on the currency or missed reserves targets in the IMF program has come in the past only if the central bank printed money to suppress rates as credit growth picked up from car imports.

Sri Lanka had 3,000 items under import controls when rates were suppressed with printed money from 2020 to 2022 but eventually ended up with the worst currency crisis triggered by macro economists in the history of the country and eventual external default.

A committee made up of the Department of Trade and Fiscal Policy of the Finance Ministry, the Department of Registration of Motor Vehicles, the Central Bank and two associations representing vehicle imports were appointed to come up with the roadmap, he said. (Colombo/June15/2024)

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Chitrasiri Committee presents draft constitution for Sri Lanka Cricket

ECONOMYNEXT – A draft constitution for Sri Lanka Cricket, the governing body for cricket in the island, prepared by a committee headed by retired Supreme Court judge K T Chitrasiri, was presented to President Ranil Wickremesinghe today (15).

The Sri Lanka team were ignominiously knocked out of the Men’s T20 World Cup tournament this week, sparking renewed criticism of the team and the governing body.

Last November, a cabinet sub-committee was appointed to address challenges faced by Sri Lanka Cricket and provide recommendations after consecutive losses became a hot topic in parliament.

After parliament decided to remove the administrators of the sport, the International Cricket Council (ICC) Board suspended Sri Lanka Cricket’s membership.

Based on the sub-committee’s recommendations in its report, the Cabinet then appointed an expert committee to draft a new constitution for Sri Lanka Cricket.

The committee headed by judge K T Chitrasiri includes President’s Counsel Harsha Amarasekara, Attorney-at-Law Dr Aritha Wickramanayake and Chairman of the Sri Lanka Chamber of Commerce Duminda Hulangamuwa.

Deputy Solicitor General Manohara Jayasinghe, and Shamila Krishanthi, Assistant Draftsman representing the Legal Draftsman’s Department, and Loshini Peiris, Additional Secretary to the President were also on the committee. (Colombo/Jun14/2024)

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