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Tuesday April 23rd, 2024

Sri Lanka’s Ceylon tea output down 16.3-pct in May 2022

Sri Lankan tea plucker

ECONOMYNEXT – Sri Lanka’s Ceylon Tea production was down 16.3 percent in May 2022 from a year earlier to 26.04 million kilograms while the total output for the first five months dipped 17 percent from the previous year, data shows.

In May high growth teas were down 15.97 percent to 6.3 million kilograms, medium grown was fell 19.83 percent to 4.7 million kilograms and low grown were down 15 percent to 14.8 million kilograms, industry data published by Forbes and Walkers Tea Brokers show.

“On a cumulative basis too, all elevations have shown a decline over the corresponding period of 2021,” industry data said.

Low grown teas, mostly grown by small holders and exported to the Middle East and Central Asia are the most sought-after and expensive Ceylon Teas now.

The national average tea price in the month of May was 3.69 dollars or 1,324.95 in rupees.

Sri Lankan tea has been earning higher prices for tea exports in rupees after the currency was depreciated in March against the USA dollar in 2022.

However, the industry had previously predicted the tea output to dip following a fertiliser ban that was imposed in April to November 2021.

The ban was imposed on fertilizer and agrochemicals after money printing created forex shortages and over health concerns.

Sri Lanka’s Government Medical Officers Association, a key policy advisory group, had said according to the Roman author and natural philosopher Pliny the Elder, ancient Sri Lankans lived over 140 years and after agrochemicals, non-communicable diseases had worsened.

In the first five months of 2021, tea output was up 31.5 percent to 135.6 million kilograms. (Colombo/June26/2021)

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Sri Lanka state oligopoly allowed to import some black gram

ECONOMYNEXT – Sri Lanka has allowed the import of some black gram, by three state agencies, according to a gazette notice issued under the hand of President Ranil Wickremesinghe.

Import licenses will be given for 2,000 metric tonnes of the seed classified under HS Code 7312.31.22 and 29.

Sri Lanka State Trading Corporation, National Food Promotion Board and Sri Lanka Hadabima Authority is to be given import licenses.

Traders have resorted to smuggling some types of black gram (ulundu) mis classified as chick peas, to get over high taxes and import restrictions.

Tamil legislators have also protested the import controls, which they go into several key ethnic foods they consume. (Colombo/Apr23/2024)

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Sri Lanka single borrower limits cut to 25-pct of bank capital, SOEs also included

ECONOMYNEXT – Sri Lanka’s central bank has issued directions limiting loans to a singe borrower or a group of connected customers to 25 percent of Tier I capital, with state enterprises which turned out to be the biggest borrowers, also included.

In a 2007 direction, banks were allowed to give loans up to 30 percent of capital for a single customer and 33 percent for a group but the rules were widely violated in the case of state enterprises, which were used as off-budget vehicles to give energy and other subsidies.

Banks will have to limit exposures to 25 percent starting from January 2026.

According to transitional provisions published in the direction seems to indicate that some banks may have single borrower exposures of 85 percent or more.

They will be required to bring exposures down to 60 percent by 2027 and 25 percent by 2028.

Download the direction from here Sri-Lanka-single-borrow-limit-direction-2024

Energy utilities were made to borrow from state banks to run off-budget subsidies under plan avoid a price formula during the Rajapaksa regimes.

Sri Lanka’s state banks ended up with large debts to Ceylon Petroleum Corporation partly due to flexible inflation targeting (printing money to cut rates as soon as inflation fall triggering forex shortages) even when fuel was market priced in 2018, analysts have shown.

When rates were cut with inflationary open market operations, triggering forex shortages, CPC was barred from buying dollars and forced to get suppliers’ credit denominated in dollars.

The suppliers’ credits were later converted to dollar loans from state bank loans, usually after the currency collapsed from the inflationary rate cuts or inflationary open market operations to sterilize interventions or both, analysts have shown.

The CPC loans have since been taken over by the government.

Banks have also funded roads and other state projects.

“Licensed banks shall gradually reduce the exposures to Public Corporations to meet the maximum limit,” by December 2030 according to the direction.

“Public corporation shall mean any corporation, board or other body which was or is established by or under any written law other than the Companies Act, with funds or capital wholly or partly provided by the Government.”

Many of the newer state enterprises however have been suddenly set up under the Companies Act, unlike earlier where a specific act was passed by the parliament to set up corporation or a statutory authority.

Borrowings of CPC and CEB eventually hit the financial stability of state banks while actual bad loans were under-reported. Now the bad loans are being covered with a state capital injection.

Under an International Monetary Fund and World Bank backed program, the so-called ‘sovereign bank nexus’ is being severed to protect the banking system.

Government securities, central bank sterilization securities, loans guaranteed by multilateral lenders or high rated foreign banks are excluded. (Colombo/Apr23/2024)

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Sri Lanka exceeds tax revenue target by 6% in first quarter

ECONOMYNEXT – Sri Lanka’s revenue collecting bodies have outperformed and exceeded tax revenue target by 6 percent for the first quarter ended on March 31, State Revenue Minister Ranjith Siyambalapitiya said.

“After many years of difficult challenges, it has been possible to exceed the expected state revenue in the first quarter of 2024,” he said in a statement.

The government expects a revenue collection of 4,106 billion rupees in 2024.

“The reason for the economic crisis in the past period was the reduction in the level of government revenue. Considering the achievement of higher than the target in the first quarter of this year and the revenue pattern, the 2024 will become a year in which the revenue targets can be achieved,” he said.

The three tax revenue collecting bodies – Sri Lankan Customs, Excise Department, and Inland Revenue Department have collected 834 billion Sri Lanka rupees in the first quarter.

“It is a 6% higher than the expected revenue target of 787 billion rupees,” Siyambalapitiya said.

He said the Inland Revenue Department exceeded its target by 13 percent to 430 billion rupees compared to the target of 381 billion rupees in the first quarter of 2024.

He also said Customs Department has managed to reach the target of 353 billion rupees and the Excise Department has also achieved 96% of the revenue requests and earned 51 billion rupees in the first quarter.

The island nation has raised Value Added Tax (VAT), imposed new taxes, and increased personal income taxes to boost the revenue under an International Monetary Fund-backed reforms in return of a $3 billion External Fund Facility.

People have started to grumble over the government’s higher taxes without reducing some of the state expenditures. The government has been in the process to privatize some key state-owned enterprises. However, that process faced delays amid gradually rising protests against the move. (Colombo/April 22/2024)

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