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Sunday February 25th, 2024

Sri Lanka tea cost of production up 30-35-pct, industry says

ECONOMYNEXT – Cost of production of Sri Lanka tea has gone up 30 to 35 percent amid a currency crisis and plantations are still cut off from fertilizer despite a ban on agrochemicals being lifted, an industry official has said ahead of wage negotiations.

Cost of fertilizer has shot up partly due to a global commodity bubble fired by Federal Reserve money printing, which is now being reversed with rate hikes, and Sri Lanka has also been hit by foreign exchange shortages.

Sri Lanka’s ex-President banned fertilizer and agro chemical on the advice of the Government Medical Officers Association, and other activists including a monk.

“While the Sri Lankan Government has finally reversed its extremely ill-advised decision, the current conditions mean that fertilizer supplies will continue to be scarce, and therefore extremely expensive,” Bathiya Bulumulla, the outgoing chairman of Sri Lanka’s Planter’s Association said at is recent annual meeting.

“Many estates have been cut off from fertilizer supplies for up-to 18 months. The detrimental impacts will likely be felt for years to come.

“However, to this day, none of the so called experts and activists associated with these policy misadventures have acknowledged or accepted responsibility for the severe consequences of their actions.

“Meanwhile, the cost of all other material inputs, from packaging to fuelwood, and electricity have all sharply increased, while labour wages remain completely untethered from productivity.

“As a result, our Cost of Production has on average increased between 30-35 percent.

Tea prices have also shot up in rupee terms after the rupee fell from 182 to 360 to the US dollar after two years of money printing and cuts for ‘stimulus’.

However production is down amid fertilizer shortages.

Plantations now have to pay higher wages to workers with inflation running at 70 percent.

Sri Lanka’s rubber production had collapsed 40 to 45 percent, Bulumulla said with the chemical ban hitting the sector in two ways.

“As we had warned a year prior, low availability of fertilizer resulted in reduced yield, which was further exacerbated by one of severe outbreaks of ‘Pesta Leaf Fall Disease’, which further decimated production,” he said.

“As a result, we saw total rubber production collapse over 40 to 45% the past year.”

“And we do believe that the problems we face today can be solved. But we must first set ensure that politics is led by economics and science, and not the other way around.

“Only then can we truly start to work together for the betterment of the industry, and all who depend on it for their livelihood.”

Rubber revenues were up 40 percent to 42 million US dollars with higher global prices, he said. (Colombo/Sep31/2022)

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Sri Lanka could get US$500mn from ADB in 2024

ECONOMYNEXT – Sri Lanka could receive 500 million US dollars in support from the Asian Development Bank in 2024 based on the progress of policy reforms, Country Director of the Manila-based lender, Takafumi Kadono said.

The ADB expect to go to its Board around March or April with a 100 million US dollar power sector loan subject to the cabinet of ministers of approving a revised electricity reform bill.

A 100 million dollar loan to support SMEs could also be approved in the early part of the year. Sri Lanka is setting up a credit guarantee agency to support credit for small firms.

A 200 million dollar credit for financial sector was also slated for the year. The ADB gave the first tranche of the financial sector policy loan late last year.

A $100mn for the water sector could also be approved later in the year.

Sri Lanka could get around 200 to 300 million US dollars a year at the lowest rate, or concessional ordinary capital resources (COL) rate of 2 percent.

The balance of would come at the ordinary capital resource rate linked to SOFR.

The ADB has also started work on a ‘Country Partnership Strategy’ for Sri Lanka covering the 2024-2028 period, Kadodo said. (Colombo/Feb25/2024)

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Sri Lanka’s multi-aligned foreign policy based on friendship: Min

ECONOMYNEXT – Sri Lanka’s multi-aligned foreign policy is based on friendship to all and enmity to none, its Minister of Foreign Affairs has said.

“Non-alignment means not becoming a bystander. Non-alignment means you are not forced or coerced into a camp to take sovereign decisions… you make your own choices. Whether it is commercial, security, regional or otherwise,” M U M Ali Sabry said on X (twitter).

“I have repeatedly stressed that sovereignty is the right to have your own opinion on what’s right and wrong, and to stand by your principles. Our multi-aligned foreign policy is based on friendship to all and enmity to none,” Sabry was quoting from his speech at the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) Foreign Policy Forum, on the theme ‘Reassessing Non-Alignment in a Polarised World’.

Sri Lanka is one of the founding members of the Non-Aligned Movement.

The strategically located island has been increasingly walking a fine line between opposing global factions as it seeks to come out of a financial crisis. (Colombo/Feb24/2024)

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Sri Lanka’s Commercial Bank Dec net down on tax provisions

ECONOMYNEXT – Sri Lanka’s Commercial Bank of Ceylon reported profits of 6.9 billion rupees from the December 2023 quarter down 21 percent, despite an improvement in net interest income and lower provisions, amid a change in tax provisions.

Pre-tax profits were 8.89 billion rupees up from 2.4 billion rupees. There was a 6.4 billion tax reversal last year compared to a 1.7 billion rupee tax charge this year.

Commercial Bank reported earnings of 5.26 rupees for the quarter. For the year to December 2023 earnings were 16.07 rupees per share on total profits of 21.1 billion rupees, down 11.3 percent.

Net fee and commission income was down 1.2 percent to 6.1 billion rupees.

Net interest income went up 16.8 percent to 25.5 billion rupees, with interest income rising marginally by 1.3 percent to 73.0 billion rupees and interest expense falling 5.45 percent to 47.5 billion rupees.

Loans and advances to customers grew 4.06 percent to 1.17 billion rupees in the year to December. Debt and other financial instruments fell 10.5 percent to 649 billion rupees.

Financial assets measured and fair value through other comprehensive income was at 287 billion rupees, up from 117 billion rupees.

Impairment charges were 13.1 billion rupees, down from 19.6 billion rupees last year.

Gross assets were up 6.45 percent to 2.36 billion rupees. Net assets were up 5.51 percent to 214 billion rupees. (Colombo/Feb24/2024)

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