An Echelon Media Company
Sunday June 16th, 2024

Sri Lanka tea output, export earnings could fall 25-pct over fertilizer ban: industry group

ECONOMYNEXT – Sri Lanka’s tea production and export revenues are likely to fall in the coming months due to a fertilizer ban though up to July 2021 volumes and earnings are up compared to 2020, but down from 2019, a industry group has wanred.

Tea production is likely to fall 25 percent within six months, and 40 to 50 percent after that along with quality.

“With tea being a perennial (long-term) crop, the negative effects of insufficient nutrition will be felt throughout the economic lifespan of the plant, which tends to be more than 25 years,” the Planter Association, representing managers of the larger commercial tea farms said.

Up to July 2021 Sri Lanka had earned 766 million dollars from tea exports, with good rains, up 9 percent from 2020 when the country was hit by a drought. But it was down 4 percent from 2019.

“It is unfortunate that that the export earnings generated by the tea industry, which has sustained Sri Lanka for more than a century, is unable to contribute to its fullest potential at a time the country is in dire need of it,” Roshan Rajadurai, spokesman for Sri Lanka’s Planter’s Association representing managers of the top commercial farms said.

“This is an unnecessary opportunity cost for both the industry and the country. Sadly, based on the analysis of credible experts, the worst is yet to come. Long-term reduction of yield from tea plantations is inevitable, unless a solution is provided immediately.”

Sri Lanka had banned agro-chemical as money was printed to maintain a rigid interest rate structure creating a currency crisis under a soft-peg or ‘flexible exchange rate’ while and also to reduce health fallouts.

Sri Lanka’s Government Medical Officer’s Association has said according to the work of Pliny the Elder, a Roman author, ancient inhabitants of the island had lived for 140 years when there were no agro-chemicals.

An earlier ban on glyphosate had hit Ceylon Tea market in Japan where worse alternatives are not allowed.

“Changes in fertilizer and agro-chemicals also alter the properties of the final product that tea consumers associate with Ceylon Tea – including a strong aroma and taste,” the PA warned.

Sri Lanka’s regional plantations companies complied with global standards the group said.

“This is evidenced by the industry’s capability to meet the highly stringent standards of buyer countries, including European countries, in terms of maximum residue limit (MRL), which refers to the highest level of a chemical residue legally allowed in food and beverages,” the PA explained.

“In addition, plantations only make use of inputs approved by the Tea Research Institute (TRI) of Sri Lanka, which follows a highly rigorous testing and approval process in allowing use of agro-chemicals for tea cultivation.

“Similarly, RPCs strictly adhere to the parameters recommended by the TRI for the application of fertiliser.”

The group said organic fertilizer in a large scale was not feasible.

“This is because a significantly greater amount of organic fertilizer needs to be applied when compared with chemical fertilizer and the application process also requires vastly greater use of labour – which is both highly costly and not available sufficiently in Sri Lanka,” the PA said.

“Organic tea is a small and emerging niche within the industry and would not provide sufficient scale to sustain the sector.”

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

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)

Continue Reading

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)

Continue Reading

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)

Continue Reading