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Tuesday February 7th, 2023

Sri Lanka targets US$1.5bn from tea exports in 2023

ECONOMYNEXT –  Sri Lanka is targeting revenues of 1.5 billion US dollars from exports in 2023 and is expecting to finish 2022 with 1.2 billion US dollars, Niraj de Mel, Chairman of Sri Lanka Tea Board, the industry regulator and promotion body.

In 2023, the Tea Board expects a total production of 290 million kilos, and exports of 275 million kilos.
In the first 10 months of 2022, Sri Lanka has shipped 211 million kilos of tea and has earned an export revenue of 1.05 billion US dollars.

“When it comes to production there is a reduction of around 18.3 percent or 40 million kilos in the first 10 months from a year ago,” De Mel told reporters.

When it comes to exports, there is a 9.5 percent drop. But last year our exports increased and there was a higher carry over to this year. We have already shipped 211 million kilos so far in 2022.”

In 2020 De Mel said around 250 million Kilos were exported earning a total of 1.03 billion, while in 2021 236 million kilos were exported earning a total forex revenue of 1.1 billion US dollars.

Though the production has dropped, the prices of tea in auctions has gone up due to higher demand and the rupee depreciation.

Due to the low production, resulting mainly due to banning of chemical fertilizer by the ousted President Gotabaya Rajapaksa, De Mel said, the average amount weekly sold in the auction also went down by around 1-1.5 million kilos.

“But because of the production decrease the amount available for the international buyers to buy has decreased but they are trying their best to buy whatever there is, because Ceylon tea is a selling point of their own brands,” De Mel said.

“That is why the prices for our product have gone up. One is the name we have and the next is the high demand,”

“With the rupee depreciation since Mid-march the prices have gone up drastically. In October for the first time ever we got a FOB of 5.72 USD. In rupees that is more than 2,000. This is the first time in history. Those in the value chain benefit from this.”

De Mel said, the higher prices can be argued as a disadvantageous point by the marketers in the international market, but can be managed due to the higher demand.

“The rupee has depreciated around 70-76 pct. But the prices of tea have gone up by around 140 pct. That is why the small holders are getting more than 290-300 rupees per kilo,” De Mel said.

“And also some say we will have a hard time competing in the international market. That is correct. But as I said, the demand is high.”

In 2022 prices of most food commodities surged after the US Fed printed money. With the Fed tightening policy the dollar has started to strengthen weakening the prices of energy, metals and food.
Global coffee prices have fallen steeply over the past quarter. (Colombo/ Nov 27/2022)

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Sri Lanka Railways to seek PPPs to boost revenue streams

CURFEW RUSH: Commuters scrambling to get home after curfew was declared in Sri Lanka on March 20, 2020.

ECONOMYNEXT – Sri Lanka Railway department hopes to expand Public Private Partnerships and earn more non-passenger revenues to offset recurring operational costs, an official said.

“For the past 10 years, except the last few years, the Railway operational income only covers around 50 percent of the operational expense of the Department,” the General Manager of the Railway, D.S. Gunasinghe told EconomyNext.

“Our plan is to increase the non-passenger revenue of the Railway department.

“And we cannot expect and do not hope for money from the government.”

Sri Lanka Railways already has agreements with Prima, a food firm, and Insee Cement, which is bringing in additional income, Gunasinghe said.

“We had agreements for material transportation such as sand in the past, however it was canceled but we hope to start it again” he said.

The department will rent out its storage facilities and circuit bungalows for the tourism sector to create additional revenue streams.

Sri Lanka Railways recorded an operating loss of 10.3 billion rupees during 2021, compared to a loss of 10.1 billion rupees in 2020, the Central Bank 2021 annual report showed.

The total revenue of the SLR stood at 2.7 billion rupees, a 41.3 percent drop from a year ago.

(Colombo/ Feb 06/2023)

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Sri Lanka’s doctors distribute anti-tax hike leaflets to train commuters

ECONOMYNEXT – Doctors representing Sri Lanka’s Government Medical Officers Association (GMOA) distributed leaflets outside the Colombo Fort railway station against a progressive tax hike, threatening to address the government in a “language it speaks”.

GMOA Secretary Haritha Aluthge told reporters outside the busy Fort railway station Monday February 06 afternoon that all professional associations have collectively agreed to oppose the personal income tax hike.

“The government is taking a lethargic approach. They cannot keep doing this. They have a responsibility towards the citizens, the country and society,” said Aluthge.

The medical officer claimed that the government was acting arbitrarily (අත්තනෝමතික).

“If it cannot understand the language they’ve been speaking, if the government’s plan is to put all professionals out on the street, if it doesn’t present a solution, all professional unions have decided unanimously to address the government in a language it speaks, ,” he said.

Aluthge and other GMOA members were seen distributing leaflets to commuters leaving the railway station. Doctors in Sri Lanka in general are likely to earn higher salaries than the average train commuter, and a vast majority of Sri Lanka’s population, most of whom take public transport, don’t fall into the government’s new tax bracket. Many doctors, though certainly not all, collect substantial sums of money at the end of every month as doctor’s fees in private consultations.

About two miles away from the doctors, the Ceylon Blank Employees’ Union, too, engaged in a similar distribution leaflet campaign on Monday at the Maradana railway station. A spokesman promised “tough trade union” action if there was no solution offered by next week.

Sri Lanka’s cash-strapped government has imposed a Pay As You Earn (PAYE) tax on all Sri Lankans who earn an income above 100,000 rupees monthly, with the tax rate progressively increasing for higher earners, from 6 percent to 36 percent.

A person who paid a tax of 9,000 rupees on a 400,000 rupee monthly income will now have to pay 70,500 rupees as income tax, the latest data showed. This has triggered a growing wave of anti-government protests mostly organised by public sector trade unions and professional associations.

Even employees of Sri Lanka’s Central Bank recently joined a week-long “black protest” campaign organised by state sector unions against the sharp hike in personal income tax, even as Central Bank Governor Nandalal Weerasinghe said painful measures were needed for the country to recover from its worst currency crisis in decades.

The government, however, defends the tax hike arguing that it is starved for cash as Sri Lanka, still far from a complete recovery, is struggling to make even the most basic payments, to say nothing of the billions needed for public sector salaries.

Economists say Sri Lanka’s bloated public service is a burden for taxpayers in the best of times, and under the present circumstances, it is getting harder and harder to pay salaries and benefits.

Sri Lanka’s new tax regime has both its defenders and detractors. Critics who are opposed to progressive taxation say it serves as a disincentive to industry and capital which can otherwise be invested in growth and employment-generating business ventures. Instead, they call for a flat rate of taxation where everyone is taxed at the same rate, irrespective of income.

Others, however, contend that the new taxes only affect some 10-12 percent of the population and, given the country’s economic situation, is necessary, if not vital, at least for a year or two.

Critics of the protesting workers argue that most of the workers earn high salaries that most ordinary people can only dream of, and, they argue, though there may be some cases where breadwinners could be taxed more equitably, overall, Sri Lanka’s tax rates remain low and are not unfair.  (Colombo/Feb06/2023)

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Sri Lanka bond Yields end steady

ECONOMYNEXT – Sri Lanka’s bond yields closed steady on Monday, dealers said while a guidance peg for interbank transactions remained unchanged.

A bond maturing on 01.07.2025 closed at 32.15/30 percent, steady from Friday’s 32.05/10 percent.

A bond maturing on 01.05.2027 closed at 28.90/29.10, steady from Friday’s 28.90/20.05 percent.

The Central Bank’s guidance peg for interbank US dollar transactions appreciated by one cent to 361.96 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 370.35 rupees on Monday, data showed. (Colombo/Feb 06/2023)

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