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Wednesday February 1st, 2023

Sri Lanka top rice millers profiting Rs50bn a season says minister, amid import substitution

ECONOMYNEXT- Sri Lanka’s main rice millers are making 50 billion rupees in profits in a single season Agriculture Minister Mahindananda Aluthgamage said as import controls prevented imports coming into the country allowing billion to be made in many ‘import substitution’ sectors.

In the past two cultivation seasons farmers had produced around 5.3 million kilograms of paddy from which would 3.2 million metric tonnes of rice can be produce, he said.

“There is a mafia of four five main millers,” Alutgamgage thundered in parliament on Monday, which was debating a Presidential declaration of emergency laws as prices of essential goods rose.

“Their profit in a single season is 50 billion rupees.

“They bought nadu paddy at 55 rupees a kilogram from farmers and are selling it at 125 rupees a kilogram.”

“Samba paddy was bought at 60 rupees sold samba at 160 rupees. Keeri samba paddy was bought at 60 to 65 rupees. They sold keeri samba at 225 rupees.”

He said laws will be brought to fine millers 20 million rupees.

Opposition legislator Ranjith Maddumabandara said the millers were close supporters of the government and some were related to a sitting member of parliament.

“Two of the biggest rice millers are inside the parliament,” he said. “The other main person is the brother of a person inside the parliament. They are all with the government. Why can’t you catch them?”

He charged that emergency law was brought to suppress dissent as unrest rose among people.

Maddumabandara said the government lifted port charges for 600 containers of sugar at the port.

Sri Lanka has been facing intensified foreign exchange shortages as the central bank printed large volumes of money as bond auctions failed due to price controls.

Many import containers had got stuck at port awaiting foreign exchange from banks or until they accepted the documents.

Sri Lanka has printed around a trillion rupee of money for monetary ‘stimulus’ under so-called Modern Monetary Theory, after taxes were cut in December 2019 in a fiscal ‘stimulus’.

Foreign exchange shortages from printed money have triggered a series of import controls.

Sri Lanka has restricted rice imports for many years to keep domestic prices higher than world prices in an ‘import substitution’ strategy.

However over the past year global rice and wheat prices have also spiked as the US printed money and Fed Chief Jerome Powell fired a commodity Bubble.

Amid import controls many import substitution companies listed in the stock market have also made record profits.

Import substitution became popular in Latin America partly due forex shortages that came from soft-pegged central banks. (Colombo/Sept06/2021)

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Sri Lanka bond yields down at close

ECONOMYNEXT – Sri Lanka’s bond yields were down at close following a bond auction on Wednesday, dealers said while a guidance peg for interbank transactions remained unchanged.

“The rates were steady at the auction,” a dealer said.

“This can be a signal to the market saying the rates will go down in the future.”

A bond maturing on 01.07.2025 closed at 32.40/60 percent, down from yesterday’s 32.60/85 percent.

A bond maturing on 01.05.2027 closed at 29.10/35 marginally down from yesterday’s 29.20/75 percent.

The Central Bank’s guidance peg for interbank US dollar transactions remained unchanged at 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 371.38 rupees on Friday, data showed. (Colombo/Feb 01/2022)

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Sri Lanka bill auction hits pothole after 2025 bond spike

ECONOMYNEXT – Sri Lanka sold only 45 billion rupees in Treasury bills at Wednesday’s auction after offering 120 billion rupees, data from the state debt office showed, amid market confusion over a spike in a two year bond at an earlier action.

30.1 billion rupees of 3-month bills were sold at 29.91 percent, unchanged from a week earlier after offering 60 billion rupees for auction.

5.1 billion rupees of 6-month bills were sold at 28.72 percent, flat after offering 30 billion.

10.3 billion rupees of 12-month bills were sold at 27.72 percent after offering 30 billion.

Phase II subscriptions have been opened.

The market was foxed after the 2025 bonds were accepted at sharply higher yield than market on January 30, dealer said.

There was further confusion as the there was an outright purchase of 2025 at around 29 percent earlier in January.

Some investors speculated that the authorities were trying to drive more buyers towards short end bonds as bill volumes were getting larger. (Colombo/Feb01/2023)

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Sri Lanka services exports down 5.9-pct in 2022

ECONOMYNEXT – Sri Lanka’s services exports were estimated to have fallen 5.9 percent to 1,876.3 million US dollars, the island’s Export Development Board said.

Services exports estimated is made up of ICT/BPM, construction, financial services, transport and logistics.

There are more than 500 ICT companies, the EDB said.

Sri Lanka’s merchandise exports were up 4.6 percent to US dollars 13.1 billion dollars in 2022 from 2021.

Sri Lanka’s goods exports are slowing amid lower growth in Western markets. (Colombo/ Feb 01/2023)

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