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Sunday May 26th, 2024

Sri Lanka shortage creating agency may allow milk powder supplies to resume

ECONOMYNEXT – Sri Lanka’s Consumer Affairs Authority has been blocking the entry of milk powder to the market through its price control power is expected to relax the restriction next week, which may allow imported supplies to reach the market, reports said.

Sri Lanka’s State Minister for Consumer Affairs Lasantha Alagiyawanna had met milk powder importers on Saturday to discuss a new price control and had agreed to a 200 rupee increase per kilogram compared to 350 requested, privately owned Derana TV reported.

It will be submitted to government committee on cost-of-living for approval.

Sri Lanka’s Consumer Affairs Authority had created severe hardships for people creating shortages of milk powder and liquefied petroleum gas with its price control, forcing importers to halt operations to prevent going bankrupt.

Price controls automatically lead of rationing and black markets.

Lakshman Weerasuriya, a member of an association representing milk powder importers, told the television station said the exiting price of 945 rupees was set at a time when the rupee was at 186 to the US dollar and milk powder was 2.80 dollars kilogram.

Sri Lanka’s rupee had collapsed due to money printing – mainly to pay state worker salaries – which had triggered forex shortages and excess imports.

“Though the US dollar is listed as 203 rupee at banks we buy at 238 rupees,” he said. “A tonne of milk powder is 4,100 to 4,200 US dollars.

“We asked for a 350 rupee increase in. We were offered 200 rupees. We hope to sign an agreement next week.”

“But we said this is if dollars are available at 203 rupees.”

Sri Lanka is operating a deadly monetary arrangement without a consistent anchor called ‘flexible exchange rate’ where convertibility is suddenly and arbitrarily suspended from time to time, leading to currency collapses.

At the moment convertibility at 203 to the US dollar had been suspended for most trade transactions by the central bank, leading to the exchange rate floating in an over-the-counter market towards 230 to the US dollar.

If the price increase is allowed, and importers can bring in the produce a 400 gram pack of powder will go up by 78 rupees to 458 rupees, the report said.

The central bank has been printing money mainly to pay state worker salaries after tax cuts in December 2019 created a big hole in the budget, which was worsened by an import ban in cars and other highly taxed items.

The money was printed to fill gaps in the budget and also through price control at bond auctions, where real bids dried up like milk powder.

Newly appointed Central Bank Governor Nivard Cabraal lifted the price control within a day of assuming office and there is expected to be some volatility in rates as the market gets used operating without controls and money starts flowing back after rates spike.

Executive Director of the CAA Thushan Gunewardene, who had be in charge as the agency created most of the shortages is expected to resign next week, the report said.

Whole milk powder prices soared to around 4,250 dollar a tonne in March 2021, and later fell to 3,500 levels. However since August prices are again climbing up.

WMP contract for October delivery (without freight and related charges) have already climbed back up to 3720 dollar according to Global Dairy Trade, an industry portal.

The US Fed was also firing a Powell Bubble pushing up prices of commodities, energy, precious and base metals.

Classical economists had said Fed Chief Jerome Powell, who was printing around 120 billion dollars a month was ‘delusional’ for calling the commodity price boom ‘transitory’ and dismissing any link with rapidly expanding money supply.

Powell had unremunerated excess reserves, a key safeguard that had earlier protected the US credit system from the worst effects of Keynesian liquidity injections. (Colombo/Sept19/2021)

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Sri Lanka power outages from falling trees worsened by unfilled vacancies: CEB union

HEAVY WINDS: Heavy rains and gusting winds have brought down trees on many location in Sri Lanka.

ECONOMYNEXT – Sri Lanka’s power grid has been hit by 300,000 outages as heavy winds brought down trees, restoring supply has been delayed by unfilled vacancies of breakdown staff, a union statement said.

Despite electricity being declared an essential service, vacancies have not been filled, the CEB Engineers Union said.

“In this already challenging situation, the Acting General Manager of CEB issued a circular on May 21, 2024, abolishing several essential service positions, including the Maintenance Electrical Engineer in the Area Engineer Offices, Construction Units, and Distribution Maintenance Units,” the Union said.

“This decision, made without any scientific basis, significantly reduces our capacity to provide adequate services to the public during this emergency.

“On behalf of all the staff of CEB, we express our deep regret for the inconvenience caused to our valued customers.”

High winds had rains have brought down trees across power lines and transformers, the statement said.

In the past few day over 300,000 power outages have been reported nationwide, with some areas experiencing over 30,000 outages within an hour.

“Our limited technical staff at the Ceylon Electricity Board (CEB) are making extraordinary efforts to restore power as quickly as possible,” the union said.

“We deeply regret that due to the high volume of calls, there are times when we are unable to respond to all customer inquiries.

“We kindly ask consumers to support our restoration teams and to report any fallen live electrical wires or devices to the Electricity Board immediately without attempting to handle them.

The union said there were not enough workers to restore power quickly when such a large volume of breakdowns happens.

“We want to clarify that the additional groups mentioned by the minister have not yet been received by the CEB,” the union said.

“Despite the government’s designation of electricity as an essential service, neither the government, the minister in charge, nor the CEB board of directors have taken adequate steps to fill the relevant vacancies or retain current employees.

“We believe they should be held directly responsible for the delays in addressing the power outages due to the shortage of staff.”

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Melco’s Nuwa hotel to open in Sri Lanka in mid-2025

ECONOMYNEXT – A Nuwa branded hotel run by Melco Resorts and Entertainment linked to their gaming operation in Colombo will open in mid 2025, its Sri Lanka partner John Keells Holdings said.

The group’s integrated resort is being re-branded as a ‘City of Dreams’, a brand of Melco.

The resort will have a 687-room Cinnamon Life hotel and the Nuwa hotel described as “ultra-high end”.

“The 113-key exclusive hotel, situated on the top five floors of the integrated resort, will be managed by Melco under its ultra high-end luxury-standard hotel brand ‘Nuwa’, which has presence in Macau and the Philippines,” JKH told shareholders in the annual report.

“Melco’s ultra high-end luxury-standard hotel and casino, together with its global brand and footprint, will strongly complement the MICE, entertainment, shopping, dining and leisure offerings in the ‘City of Dreams Sri Lanka’ integrated resort, establishing it as a one-of-a-kind destination in South Asia and the region.”

Melco is investing 125 million dollars in fitting out its casino.

“The collaboration with Melco, including access to the technical, marketing, branding and loyalty programmes, expertise and governance structures, will be a boost for not only the integrated resort of the Group but a strong show of confidence in the tourism potential of the country,” JKH said.

The Cinnamon Life hotel has already started marketing.

Related Sri Lanka’s Cinnamon Life begins marketing, accepts bookings

(Colombo/May25/2024)

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Sri Lanka to find investors by ‘competitive system’ after revoking plantations privatizations

ECONOMYNEXT – Sri Lanka will revoke the privatization of plantation companies that do not pay government dictated wages, by cancelling land leases and find new investors under a ‘competitive system’, State Minister for Finance Ranjith Siyambalapitiya has said.

Sri Lanka privatized the ownership of 22 plantations companies in the 1990s through long term leases after initially giving only management to private firms.

Management companies that made profits (mostly those with more rubber) were given the firms under a valuation and those that made losses (mostly ones with more tea) were sold on the stock market.

The privatized firms then made annual lease payments and paid taxes when profits were made.

In 2024 the government decreed a wage hike announced a mandated wage after President Ranil Wickremesinghe made the announcement in the presence of several politicians representing plantations workers.

The land leases of privatized plantations, which do not pay the mandated wages would be cancelled, Minister Siyambalapitiya was quoted as saying at a ceremony in Deraniyagala.

The re-expropriated plantations would be given to new investors through “special transparency”

The new ‘privatization’ will be done in a ‘competitive process’ taking into account export orientation, worker welfare, infrastructure, new technology, Minister Siyambalapitiya said.

It is not clear whether paying government-dictated wages was a clause in the privatization agreement.

Then President J R Jayewardene put constitutional guarantee against expropriation as the original nationalization of foreign and domestic owned companies were blamed for Sri Lanka becoming a backward nation after getting independence with indicators ‘only behind Japan’ according to many commentators.

However, in 2011 a series of companies were expropriation without recourse to judicial review, again delivering a blow to the country’s investment framework.

Ironically plantations that were privatized in the 1990s were in the original wave of nationalizations.

Minister Bandula Gunawardana said the cabinet approval had been given to set up a committee to examine wage and cancel the leases of plantations that were unable to pay the dictated wages.

Related

Sri Lanka state interference in plantation wages escalates into land grab threat

From the time the firms were privatized unions and the companies had bargained through collective agreements, striking in some cases as macro-economists printed money and triggered high inflation.

Under President Gotabaya, mandating wages through gazettes began in January 2020, and the wage bargaining process was put aside.

Sri Lanka’s macro-economists advising President Rajapaksa the printed money and triggered a collapse of the rupee from 184 to 370 to the US dollar from 2020 to 2020 in the course of targeting ‘potential output’ which was taught by the International Monetary Fund.

In 2024, the current central bank governor had allowed the exchange rate to appreciate to 300 to the US dollar, amid deflationary policy, recouping some of the lost wages of plantations workers.

The plantations have not given an official increase to account for what macro-economists did to the unit of account of their wages. With salaries under ‘wages boards’ from the 2020 through gazettes, neither employees not workers have engaged in the traditional wage negotiations.

The threat to re-exproriate plantations is coming as the government is trying to privatize several state enterprises, including SriLankan Airlines.

It is not clear now the impending reversal of plantations privatization will affect the prices of bids by investors for upcoming privatizations.

The firms were privatized to stop monthly transfers from the Treasury to pay salaries under state ownership. (Colombo/May25/2024)

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