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Friday June 2nd, 2023

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 to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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