Crisis-hit Sri Lanka’s priority is making drugs available than affordable –...

ECONOMYNEXT – Sri Lanka’s health sector priority is to make drugs available than making them at affordable price, Health Minister Keheliya Rambukwella said as the island nation’s economic crisis has hit the availability of drugs including some key essential and life-saving medicines.

The US dollar shortage has resulted in lower drug imports and President Gotabaya Rajapaksa’s government has requested from bilateral donors and multilateral finding agencies to help the island nation from a possible looming drug shortage.

Rambukwella says many organizations have pledged around 500 million US dollars for medicines, though the island nation’s only has received part of the total pledges.

According to Rambukwella, the pledges include 73 million US dollars from the World Bank, 66 million from from the Asian Development Bank, 100 million US dollars from Asia Infrastructure Investment Bank (AIIB) and 200 million US dollars from the ongoing Indian credit line.

However, many people have complained of expensive drugs after the rupee currency was allowed to depreciate by around 75 percent.

“We all are experiencing the impacts of forex issue. So it is not limited to a particular group of people or sector,” Rambukwella told a media briefing on Tuesday.

“As of now we have to move with that. I guess is a 10-15 percent of the population could turn into state health sector from the private sector due to forex issues.”

“Right now it is a question of availability. Having said that we will have look into some price controls subsequently. Right now the priority is given for availability than the affordability.”

Many individual hospitals and Government Medical Officers’ Association, a health sector trade union have complained of unavailability of some essential and life saving drugs.

Rambukwella said there could be some instances of drug shortages, but overall most of the drugs are available.

Many hospitals, however, have maintained and told patients that some drugs are not available as they were earlier. (Colombo/June 21/2022)

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Sri Lanka private credit tumbles in May, state credit also falls

ECONOMYNEXT – Sri Lanka’s private credit from commercial banks grew only 2.5 billion rupees in May 2022, amid a soft-peg collapse the lowest since a 2020 strict lockdown when credit turned negative for three months, while credit to government also fell, official data showed.

Sri Lanka’s private credit grew to only 7,754.5 billion rupees in May 2022 from 7,752.5 billion rupees in April with rupee denominated loans barely growing from 6,659.8 billion rupees to 6,659.8 billion rupees.

Loans dollar banking units to private sector fell to 794.6 billion rupees from 797.5 billion rupees in May which in dollar terms reflects a fall of about 130 million US dollars based on official end month exchange rates.

Meanwhile credit to state enterprises grew to 1,750.1 billion rupees in May from 1,725 billion rupees in April with rupee denominated debt rising by 71.6 billion rupees in May.

While the Ceylon Petroleum Corporation has raised prices, the Public Utilities Commission has failed to hike electricity prices for 7 years, leading to higher borrowings from banks, leading to pressure on interest rates and also money printing when rate rises are resisted.

State enterprise loans from foreign currency banking units fell to 222.1 billion rupees in May from 268.5 billion rupees a month earlier indicating a fall of around 160 million US dollars.

Credit to government fell marginally from 6548.1 billion rupees to 6,499.1 billion rupees, with both domestic and foreign banking units contributing.

Net central bank credit to government also marginal, though the central bank bought some bonds outright injecting permanent money into the banking system and reducing overnight injections.

In May Sri Lanka imported oil on a credit line from India, and state-run Ceylon Petroleum Corporation gave the balance rupees from customer sales to the Treasury after covering its losses.

However in June the credit line ran out.

There is another credit line for essential services which will bring some money to the Treasury as long is it used by private sector who will pay rupees to the government.

Sri Lanka’s rupee collapsed from 200 to 370 to the US dollar in a botched float after March though interest rates were raised in April to slow private credit and help save the soft-peg to the US dollar.

Sri Lanka’s private credit and the broader economy has to be smashed to pay state worker salaries without printing money try and save a soft-pegged exchange rate regime in 70 years of monetary instability since a soft-peg was set up in 1950.

The economic smashing has to be greater than in the past due to existence of a surrender requirement that pushes down the rupee, as well as delays in raising rates.

Soft-peggers call monetary instability ‘macro-economic instability’ and also manage to transfer the blame to imports and tax payers though private citizens are net savers and who have no ability to print money and de-stabilize the balance of payments and impose exchange and trade controls.

In May the rupee was transacting around 380 to the US dollar when a 360 to the US dollar and Undiyal premiums were falling, when a guidance peg was slammed at 360 to the US dollar with a surrender requirement still in place.

Sri Lanka is in a severe monetary crisis, with rising prices increasing malnutrition due to the collapse of a soft-peg after two years of money printing and failed float with a surrender requirement.

Inflation topped 50 percent in June.

Soft-pegs or flexible exchange rates cooked up in Latin America and the US after the Great Depression are peddled to third world countries where ‘economists’ have ‘fear of floating’ and ‘fear of currency boards’ and adopt unstable regime with anchor conflicts instead. (Colombo/July04/2022)

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Sri Lanka to lose power for seven-and-a-half hours on March 02...

ECONOMYNEXT – Sri Lanka will see an unprecedented seven-hour scheduled power outage on Wednesday (02), with some areas expected to lose electricity for seven hours and 30 minutes.

The Public Utilities Commission of Sri Lanka (PUCSL) confirmed the decision to reporters Tuesday (01) afternoon.

Click here for the demand shedding schedule for Wednesday (02).

The island nation is in the midst of a power crisis on top of a severe forex shortage as the Ceylon Electricity Board (CEB) struggles to find fuel for thermal power generation, even as the reservoirs used for hydro power generation continue to run dry. On February 15, the CEB sought PUCSL permission for daily scheduled power cuts until further notice to provide electricity to meet peak demand during the day and at night.

On Tuesday, the CEB announced a three-hour power cut during day time and a possible 30-minute cut at night.

Even though the Central Bank of Sri Lanka (CBSL) has issued dollars for the Ceylon Petroleum Corporation (CPC) to pay for diesel off a ship that arrived last weekend, authorities have said it will not be sufficient to run the country’s thermal plants continuously.

The CEB said that, due to the unavailability of fuel, several thermal plants have been forced to shut down, while the MahaWeli Authority has instructed the utility provider to limit the drawdown of Castlereigh, Mausakelle and Samanalawewa reservoirs which are used for hydro power generation.

According to Wednesday’s power cut schedule, E and F areas will have outages of five hours each between 8am and 6pm and two hours power cuts between 6pm and 11pm.

In P, Q, R, S, T, U, V and W areas, power cuts of five hours will be imposed between 8am and 6pm and two hours and 30 minutes between 6pm and 11pm.

“If we can’t get credit from banks, if the government is not giving us any relief and if we also cannot increase prices, tell me where to find money to bring in diesel,” Energy Minister Udaya Gammanpila told the privately owned Derana Tv on Tuesday (01).

“We have 20,000 metric tonnes of diesel in stock, enough for four days. There is another ship coming tomorrow.”

Gammapila said the government should understand priorities when importing products into the country.

“Our imports bill for the last year was one of the biggest [on record], which was 21 billion US dollars. Only 2.8 billion dollars was spent on fuel,” he said.

“According to CBSL, we have spent 6 billion US dollars for non-essential items such as drinking water, dhal, apple, and other fruits. Their reason for importing these items such as fruits is that tourists are demanding these items. But if tourists come and they have to stay in the dark with no electricity, or can’t travel because of fuel shortages, they will not visit Sri Lanka again. So we have to identify the priorities. This is a more crucial situation than the war we faced in the past,” the minister said. (Colombo/Mar01/2022)