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Thursday September 21st, 2023

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 government to develop Arugam Bay tourism sector

ECONOMYNEXT – The Arugam Bay Tourism Development Plan, which focuses on challenges to infrastructure development in the area and obstacles hindering the growth of the tourism sector, was discussed by government officials and key stakeholders yesterday (20).

Participants from heads of relevant organizations, the Police and district officers met at the Presidential Secretariat to discuss how each institution could contribute to finding solutions to these challenges, the president’s media division said in a statement.

The main tourism plan for Arugam Bay, prepared by the Urban Development Authority (UDA) was presented by chief of presidential staff, Sagala Rathnayaka.

904,318 tourists visited Sri Lanka from January to August 2023, an increase from the 719,978 tourists that arrived in the country during the whole of 2022, statistics provided by the Sri Lanka Tourism Development Authority show.
“A tourist will spend an average of 185 -195 dollars a day,” Sri Lanka Tourism Development Chairman, Priyantha Fernando, told EconomyNext.

Sri Lanka’s government aims to attract five million tourists a year, and has mooted the establishment of an Investment Infrastructure Corporation, a decision-making council and regional committees under provincial tourism boards. (Colombo/Sep21/2023)

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Sri Lanka gets 19.23 mn US dollar grant from USA

ECONOMYNEXT – The United States yesterday (20) announced the commitment of more than 19 million US dollars in additional funds to further the development of Sri Lanka.

The 19.23 million US dollar (6.2 billion rupees) is obligated through the Development Objective Grant Agreement between the United States Agency for International Development (USAID) and the Sri Lanka government.

“This development assistance will support economic growth and democratic governance activities and demonstrates the ongoing US commitment to its partnership with Sri Lanka and in building lasting people-to-people ties,” a statement by the Embassy of the United States of America read.

“This investment demonstrates the United States’ ongoing commitment to our partnership with Sri Lanka and our steadfast support to the people of this stunning, opportunity-filled country, as USAID Administrator Samantha Power and President Wickremesinghe discussed in New York,” said Gabriel Grau, USAID Sri Lanka and Maldives Mission Director.

“With these funds we’ll continue to work with the government of Sri Lanka to improve economic growth and democratic governance and advocate for vulnerable populations.”

USAID is an independent agency of the United States government responsible for administering civilian foreign aid and development assistance.

The United States has provided more than 2 billion US dollars (nearly 720 billion rupees) in assistance to Sri Lanka since 1956. (Colombo/Sep21/2023)

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Sri Lanka’s 2022 EPF returns falls to lowest, single digit in near two decades – CB data

ECONOMYNEXT – The 2022 annual average return on Sri Lanka’s largest contributory pension scheme, the Employees’ Provident Fund (EPF), has fallen to its lowest in nearly two decades, Central Bank data showed.

The annual average return in the last year fell to 9.52 percent from the previous year’s 11.40 percent, a central bank response to a Right to Information (RTI) request showed.

Returns on EPF has raised concerns among contributors after the government decided to include EPF investments in the government treasury bonds under the domestic debt optimization (DDO) process.

Last year’s lower return has been recorded despite market interest rates being more than 30 percent towards the end of the year. In contrast, the fund has given a double digit return in 2020 when the market interest rates hovered in single digits.

Analysts have predicted the returns to be further low with the central bank opting for the government’s DDO option.

A central bank analysis on DDO showed the return on EPF could fall to as low as 6.79 percent if the DDO option was not chosen within the next 12 years as against 8.02 percent if opted for DDO.

Trade unions and some politically motivated fractions opposed the government move to include the EPF investments under the DDO. However, parliament approved the move early this month.

According to the data made available from 2005, the central bank, which is the custodian of the EPF, has given the highest return of 16.03 percent in 2009.

The island nation’s largest pension fund has almost 21-million member accounts including 18.3 million non-contributing accounts due to some members having multiple number of accounts.

The 3.38 trillion-rupee ($10.6 billion) worth fund as of end 2022 is managed by the central bank, including its investment decisions.

As of end 2022, the central bank has invested 3.23 trillion rupees or 95.7 percent of the total EPF in government securities, while 84.1 billion rupees has been invested in listed companies in the Colombo Stock Exchange, the central bank said quoting the EPF audited financial statement. (Colombo/September 21/2023)

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