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Sri Lanka’s Bairaha Farms hit by import embargo on top of Coronavirus

ECONOMYNEXT – Sri Lanka’s Bairaha Farms Plc, a feed-milling and poultry processing group which had already been hit by a Coronavirus crisis has warned of further supply chain disruptions from a self-imposed trade embargo triggered by money printing.

Bairaha Farms, a publicly traded company said disruptions to their activities were ‘quite severe’ during a lockdown imposed to contain a Coronavirus pandemic.

“It has led the company to reluctantly destroy destroy day-old chicks well below the cost,” the firm said in a stock exchange filing.

The firm said the performance would be hit in the March quarter and it will stretch into the first quarter of 2018. However the firm is expecting business to pick up as they are engaged in essential products business.

Meanwhile Sri Lanka has slammed a series of import controls in the style of a self-imposed trade embargo, which is hitting the supply chains of many companies, as money printing led to forex shortages.

One of the items controlled by the government is maize.

“With regard to obtaining government approval for the import of maize production by the industry, so far no approval has been granted even though repeated requests have been made to various government authorities,” the firm said.

The Coroanviris pandemic initially resulted in hitting supply chains of some companies involved in importing input from China, but the new trade controls will hit a wider spectrum of firms, including those catering to the domestic economy.

Sri Lanka’s central bank has avoided a credible external anchor by resorting to a discretionary ‘flexible’ exchange rate with a high degree of discretion and also avoided operating a credible domestic anchor with ‘flexible’ inflation targeting.

The framework is driven by call-money-rate-targeting-with-excess-liquidity which analysts say brings balance of payments troubles as soon as domestic credit improves and also threatens the ability to repay foreign loans.

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The current import controls with the aid of a law widely used in the 1970s to implement the worst self-imposed trade embargo in post-independent history.

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The import control law, along with a mid-night gazette, are tools used to create ad hoc changes to the business environment (regime uncertainty) and disrupt economic activities in the country for decades. (Colombo/June01/2020)