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Sri Lanka unemployment hits 10-year high in 2020 March quarter

ECONOMYNEXT – Sri Lanka’s unemployment hit 5.7 percent in the March 2020 quarter, levels not seen since 2009 at the end of a 30-year war, in 2009 when the unemployment rate spiked over 6 percent, data from the state statistic office showed.

Sri Lanka’s tourism sector took a hit with Coronavirus from the first quarter of 2020, but the airport was closed in March 19 and curfews started shortly after.

Sri Lanka’s economic output is expected to contract absolutely in the second quarter, for which data is not yet out.

Sri Lanka’s unemployment hit 6 percent levels at the end of a 30-year war and came down rapidly.

The data is based on statistical surveys which have error margins. Pre-war data may also not be directly comparable as the statistics office was not active in the North and the East earlier.

After the war, there was a construction boom, partly financed by China, which injected demand into the economy.

However, greater monetary instability hit the country from around 2012, with balance payments crises coming in quick succession amid worsening proc-cyclical money printing from the central bank, which ended the relative monetary stability seen in the country from 2000 to 2011.

Sri Lanka’s unemployment rate has been edging up from around mid 4 percent levels over the past three years amid greater monetary instability, price controls, rapid policy and tax fluctuations which made for an uncertain business environment (regime uncertainty).

Sri Lanka’s Import and Export Control Department, which was a key driver of the 1970s economy, a midnight gazette and the Consumer Affairs Authority are key sources of regime uncertainty.

The last administration also set up a new price control authority, the National Medicinal Drugs Authority, instead of reforming the central bank. The NMRA now gives periodic controlled price hikes when the central bank prints money or depreciates the currency for de facto or explicit REER targeting, analysts have said.

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In 2011, Sri Lanka expropriated private firms including Board of Investment approved companies through an ad hominem law and in 2015 a ‘super gains’ and several expropriation taxes were slammed further worsening property rights, policy stability and just rule of law.

The policy has also deteriorated with trade restrictions which worsen whenever the central bank prints money and triggers currency trouble.

Large numbers of Sri Lankans went to work abroad, including under difficult conditions in the Middle East from the 1980s as the rupee collapsed, helping reduce domestic unemployment numbers which hit close to 20 percent during the period of trade restriction in the 1970s.

2020 also started with more regime uncertainty with tax reversals and a debt moratorium just as the economy was starting to recover from a 2018 balance of payments crisis.

Meanwhile, the statistics office said the total employed population fell to 8.02 million in the first quarter of 2020, down from 8.12 million a year earlier.

Agriculture workers had grown from 2.01 million to 2.12 million, while those in the industry fell from 2.31 million to 2.17 million.

Service sector workers fell from 3.85 million to 3.71 million.
Among the unemployed, female unemployment was sharply higher at 9.6 percent, compared to males at 3.7 percent.

Unemployment below GCE A/L qualified persons was 2.7 percent for males and 5.4 percent for females.

Among those with GCE A/L and above unemployment was 10.1 percent, with 5.5 percent among males and 14.7 percent among females.

“Survey results further show that the problem of unemployment is more acute in the case of educated females than educated males, which was observed consistently over the results of previous survey rounds as well,” the statistics office said. (Colombo/July20/2020 – Update II-sb)

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Sri Lanka suffers over $138mn foreign outflow from govt bonds in 2024 after rate cuts

ECONOMYNEXT – Foreign investors have dumped 41.6 billion-rupee ($138.6 million) worth of Sri Lanka government securities in the first 20 weeks of 2024, the central bank data showed, after reduction in the key policy interest rates.

The foreign holding in Sri Lanka’s treasury bills and treasury bonds fell to 75.9 billion rupees on the week ended on Friday (17), May 2024, from 117.4 billion rupees on the week ended on December 29.

The central bank rate has reduced the key policy rates by 50 basis points so far in 2024, extending the rates cut by 700 basis points since June last year.

The rupee appreciated 9.1 percent in the first four months, but the gain failed to attract foreign investors amid a dragged debt restructuring negotiation with external private creditors.

Currency dealers said lackluster demand for dollars due to dampened imports with heavy controls, boom in both tourism revenue and remittances have helped to increase the dollar liquidity in the market, leading to the appreciation of the local currency.

The dealers said foreign investors can earn capital gain if they had bought government securities before the appreciation and now the offshore investors might be selling their bonds.

“They are also discouraged by policy rate cut because that will reduce their returns from the rupee bond investments,” a currency dealer said.

The yield in 12-month T-bills has fallen 336 basis points in the first four months of this year, the central bank data showed.

The central bank also reduced the Statutory Reserve Ratio (SRR) of commercial banks by 200 basis points in August last year to boost liquidity in the market with an aim to reduce market interest rates.

Under tough International Monetary Fund (IMF) conditions for its $3 billion loan program, the central bank raised key monetary policy rates in 2022 and last year to bring down inflation which hit over 70 percent in 2022. The inflation has fallen to the lower single digit now.

The rupee has appreciated to around 300 against the US dollar this week from around 330 level early in November. The local currency was at 365 rupees against the US dollar in early 2022. Depreciation causes capital loss for foreign investors. (Colombo/May 18/2024)

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Sri Lanka’s ‘Sancharaka Udawa’ tourist fair seeks to involve universities

ECONOMYNEXT – Sri Lanka’s ‘Sancharaka Udawa’ tourism fair kicked off this week to promote interaction between industry stakeholders and relevant Government bodies, including the Tourist Police, and also universities.

“Several universities, including Colombo, Uva Wellasa, Kelaniya, Sabaragamuwa and Rajarata were given free stalls to facilitate student interaction with industry professionals,” Chairman of the Sancharaka Udawa Organising Committee, Charith De De Alwis said in a statement.

The event takes place today (18) at the BMICH and houses stalls for hoteliers, tour and transport services, with a goal of attracting 10,000 visitors.

Organized by the Sri Lanka Association of Inbound Tour Operators (SLAITO) and the Sri Lanka Tourism Promotion Bureau (SLTPB), the 11th edition of Sancharaka Udawa offers a platform for both B2B and B2C sectors.

“Sancharaka Udawa houses over 170 exhibitors and a footfall of more than 10,000 visitors,” De Alwis said.

This year’s edition will include participants from outbound tourism sectors to facilitate capacity building. The event provides networking opportunities for industry newcomers and veterans.

“The networking platform offers opportunity for small and medium-sized service providers integrating them into the broader tourism landscape. The anticipated outcome is a substantial increase in bookings particularly for regional small-scale tourism service providers.” (Colombo/May18/2024)

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Sri Lanka’s CEB sells LTL shares to West Coast IPP for Rs26bn

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board has sold shares of an affiliate to West Coast Power Company Limited, an independent power producer giving profits of 25.9 billion rupees in the March 2024 quarter, interim accounts showed.

The sale has been carried out as a transfer.

“Twenty-eight percent (28-pct) of share ownership of CEB within LTL Holding’s equity capital has been transferred to West Coast Power Company Ltd for a total consideration of Rs 26 billion as part of a partial settlement of outstanding dues…” the March interim accounts said.

“This transaction resulted in a net gain of Rs25.9 billion rupees which has been recognized and reflected in the ‘Gain from Share Disposal’ in the individual financial statement in CEB.”

LTL Holdings is a former transformer making unit of the CEB set up with ABB where the foreign holding was sold to its management.

The firm has since set up several IPPs.

West Coast Power operates a 300MW combined cycle IPP in Kerawalapitiya promoted by LTL group liked firms in which both the Treasury and Employees Provident Fund also have shares.

Its operational and maintenance contract is with Lakdhanavi, another private IPP. The firm has been paying dividends.

The capital gain from the transfer of shares helped the CEB post profits to 84 billion rupees for the March 2024 quarter.

CEB reported gross profits of 62.7 billion rupees from energy sales and 30.6 billion rupees in other income and gains in the March 2024 quarter. Other income was only 3.1 billion rupees in last year. (Colombo/May18/2024)

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