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Tuesday May 30th, 2023

Sri Lanka trade of US$461mn threatened by Russia invasion of Ukraine

Dr. Anil Perera, Director Economic Research, Central Bank, Sri Lanka

ECONOMYNEXT – Sri Lanka’s external trade of 461 million dollars with Russia and Ukraine is under threat, an official said after Vladimir Putin’s invasion of the neighbouring nation, triggered a humanitarian crisis and sanctions.

“Russia and Ukraine war could have impacts on the Sri Lankan exports because some of our exports, mainly tea goes to the region,” Anil Perera, Director of Economic Research at Sri Lanka’s central bank told reporters in Colombo.

According to central Sri Lanka exports 10.2 percent of tea to the Eastern European region.

Russia is one of the top Sri Lankan tea buyers.

Total exports to Russia and Ukraine amounts to 179 million US dollars a year or 1.4 percent of the total exports.

Total imports from Russia and Ukraine is 282 million US dollars (1.4% of total imports).

Perera said wheat imports could be affected.

Commodity prices and oil, already hit by Jerome Powell’s money printing, has soared after Putins’ war.

Thursday Brent crude rose to 117 dollars per barrel, the highest in eight years, against 96 dollars on February 22.

Russia and Ukraine are among the top five wheat exporters in the world.

Sri Lanka imports base metal, wheat and coal from Ukraine and Russia.

Russian and Ukrainian tourists have also been flocking to Sri Lanka.

In the first two months of the year, Russia brought 28,818 visitors and Ukraine 13,062 visitors.

“These geopolitical tensions could have some impacts on tourism, but we think Sri Lanka’s tourist source markets are diversified and the on-going tension will not be that high,” Perera said.

The Ruble has collapsed from around 77 before Putin’s war to around 110 to the US dollar which may make tea and holidays more expensive to Russians. (Colombo/Mar04/2022)

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Sri Lanka cabinet approves President’s proposal to resume Japanese LRT after soared ties 

ECONOMYNEXT – Sri Lanka’s Cabinet of Ministers approved a proposal by President Ranil Wickremesinghe to resume the unilaterally cancelled Japan funded Light Rail Transit (LRT), cabinet spokesman said, as the island nation is in the process of mending ties with Tokyo.

However, any such deals are likely to take place after the debt restructuring and Sri Lanka starts to repay its foreign loans to come out of default, analysts say.

Former President Gotabaya Rajapaksa unilaterally cancelled the 1.5 billion US dollar LRT and East Container Terminal (ECT) projects in 2021. Japan agreed to fund the LRT project while it was one of the tripartite members of the ECT project along with India and Sri Lanka.

The abrupt cancellation hit the diplomatic ties between the two countries and Sri Lankan government officials have said Japan had given the project to Sri Lanka at a very lower financing cost.

President Wickremesinghe returned from Japan late last week after having met top officials of the Japanese government including its prime minister.

“In recent history, due to the stopping of several agreements and proposals suddenly, President Wickremesinghe went to Japan after creating the background to clear some of the worries we have,” Cabinet Spokesman Bandula Gunawardena told the weekly media briefing.

“Before he went, he got the approval from the cabinet to resume the discussion on the light railway project. He got the approval from the cabinet to get parliament approval for bilateral agreements signed or any other investments project. Any change or cancellation of a project could be done only with the approval of the parliament.”

Japan has backed Sri Lanka under Wickremesinghe’s presidency after the island nation declared sovereign debt default. (Colombo/May 30/2023)

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Sri Lanka to tighten grip on television with broadcast law

ECONOMYNEXT – Sri Lanka has formulated a broadcast authority law to regulate electronic media which will be made public soon, Cabinet spokesman Minister Bandula Gunawardana said.

“The draft prepared by a cabinet subcommittee under Justice Minister Wijedasa Rajapaksa has discussed with various parties will be given to all media institutions and broadcast media,” Gunawardana said.

“We do not have to hide or force anyone. A legal framework that can be acceptable to all for all sectors.”

“In a week or two Minister Wijedasa will discuss with state and private stakeholders.”

At the moment Sri Lanka has issued frequencies without conforming to an “international procedures”, he said.

In Sri Lanka television frequencies are issued under a state television act.

Successive administrations in Sri Lanka has since around 1980 mis-used state television duopoly which including for conducting elections according to critics.

Private television as well a raio emerged around the 1990s and has since over shadowed state media.

There have been calls by ruling party politicians from time to time to control private media. There is now calls to control social media.

At a Committee on Public Accounts meeting of the Department of Government Information, ruling coalition legislators called for regulation of television content. (Colombo/May30/2023)

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Sri Lanka rupee at 296.75/297.25 to dollar at open, bond yields steady

ECONOMYNEXT – Sri Lanka’s rupee opened at 297 /297.50 against the US dollar in the spot market on Monday, while bond yields were steady, dealers said.

The rupee closed at 296.75 /297.25 to the US dollar on Monday after opening around 296.50 /297.50 rupees.

A bond maturing on 01.09.2027 was quoted at 26.50/75 percent steady from Friday’s close at 26.50/65 percent.

Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money. (Colombo/ May 29/2023)

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