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Friday June 2nd, 2023

Sri Lanka’s data prices are low, but it is still expensive for low income earners due to tax

The author is a researcher working on telecom and big data projects at LIRNEasia, a regional ICT policy thinktank. She was appointed Chair of the ITU’s sub-group tasked with proposing revisions to the ITU’s ICT Price Baskets in 2017. The revised methodology was adopted in 2018 by all member states.

At the World Telecommunication/ICT Symposium (WTIS) held in Geneva, December 2018, there was a panel dedicated to affordability of ICT services. The conversations were centered on price as a key driver for adoption and use of Information and Communication Technologies (ICTs).

Price isn’t everything. But it is the most notable and distinguishable factor when purchasing a good or service and therefore is paramount. It is also the perception and value of a specific service that affords the rationale for spending. According to LIRNEasia’s recent “AfterAccess” multi-country surveys, lack of affordability is among the top three reasons that affects consumer’s choices of getting online and staying online.

With the ubiquitous nature of the Internet and the increasing dependence of services offered via mobile networks, it is important to analyze the pricing of mobile broadband plans.

Are prices in Sri Lanka high?

The International Telecommunication Union (ITU), the UN apex body on ICTs, annually benchmarks prices for voice, SMS, and fixed and mobile broadband for its member states. Sri Lanka has among the lowest prices in the world, ranked at no.21 for mobile broadband (plans with minimum 1 GB data allowance/month) out of 181 countries, based on price in USD (including taxes) as a percentage of GNI per capita.

It has the lowest prices among SAARC countries in terms of absolute prices as well as price as a percentage of GNI per capita, despite the third highest tax rate (Table 1).

Price vs. Affordability

“Price” and “affordability” are terms often confused and used interchangeably. Affordability is impacted by variations in price and income, among other things. In theory, the underlying costs of providing a service tend to decrease with time (as capabilities of newer technologies afford higher levels of efficiency). However, this may not always be reflected in the final price the consumer pays.

But how low should prices go to be affordable?

According to the new targets set in 2018 by the UN Broadband Commission for Sustainable Development, “entry-level broadband services should be made affordable in developing countries at less than two percent of monthly Gross National Income (GNI) per capita, by 2025.”

While Sri Lanka is well within the target (Table 1), a country-level average of GNI per capita does not really represent the ground reality. Further analysis on price as a percentage of household income per capita (and considering the average size of a household as 3.8 persons, based on data published by the Department of Census and Statistics), by decile (Table 2) paints a clearer picture of affordability.

Table 2: Mobile broadband basket (1 GB, 2017) price as a percentage of household income per capita, by decile.

As Table 2 shows, for the poorest in the country, 1 GB of data will cost approximately eight percent of their monthly income.

Although the Broadband Commission target is not met across all income deciles, prices in Sri Lanka are still a lot more affordable than, for example, in India.

Based on the published household income quintiles, prices in India range from five percent to 33 percent of monthly income per capita, per quintile (from the highest to lowest, respectively).

There is no doubt that low prices allow for greater adoption and use. Prices that are too low, however, can threaten long-term sustainability and are detrimental to the market.

Given the capabilities of newer technologies such as 5G that promise greater speeds at lower levels of latency (or round-trip time) while dealing with issues like congestion that current networks face, operators should to be incentivised to invest. Without regulatory certainty, it is unlike that the significant investments required will be made.

If the government wants to make Internet access more affordable, it should consider cutting taxes, which are third highest in the region, below only Pakistan and Bangladesh.

If the government wants to address the needs of those in the poorer deciles or specific market segments, it should use the revenues collected from international calls and design targeted subsidies without harming the already problematic investment environment.


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Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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