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ECONOMYNEXT – Hundreds of Sri Lankans this week demanded the cancellation of a 500 million US dollar wind power deal with India’s Adani group due to possible corruption as the project was not opened for competitive bidding.

The protest was held for over three hours starting near a shopping mall –  the Majestic City, in the capital Colombo and then moved to the Power and Energy Ministry and Indian High Commission premises in the neighbourhood.

Adani Group, a multinational diversified conglomerate which has business interests ranging from port management to power generation and renewable energy to natural gas, was awarded the deal in 2021 to generate 500 MW of power using wind mills in the island nation’s northern coast.

The project was resisted by some trade unions at the state-run utility provider Ceylon Electricity Board (CEB) and activists groups claim that the project has bypassed normal tender procedures and was clandestinely signed between President Gotabaya Rajapaksa’s government and the owner of the Adani group who is a close ally of Indian Prime Minister Narendra Modi.

“We are for renewable energy, but we are against shady deals, non-transparency and lack of accountability,” Amanda Wanduragala, a youth protester told EconomyNext.

“This tender should have been given to the lowest bidder, so Adani shouldn’t get it.

“This deal will not be beneficial to us, simply because we can’t give Adani power over our energy sector, and because this is turning into a monopoly. Our country is already suffering and we can’t afford to sell ourselves even more to India,” she said.

Many of the youth came from the group that has been protesting for the last 75 days demanding that President Rajapaksa resign, participants told EconomyNext.

“We are here to tell Adani that although we want renewable energy and although the country needs foreign direct investment (FDI) in order to get through the crisis, we don’t want Adani,” another protester told EconomyNext asking not to be named.

“The way out of this crisis is not more corrupt deals through the backdoor. We want to tell [Rajapasa] and Modi not to push non-transparent deals. The law of this country has been [sidestepped] to push through the wind project.”

Sri Lanka is facing one of its worst economic crises in history, and India has helped with over 3 billion US dollars in credit lines and by delaying the island nation’s import payments.

Some of the protesters said that India should not use Sri Lanka’s vulnerable position to take advantage in business deals.

Melanie Gunathilake, a 26-year old protester, said they were against the allegedly corrupt deal signed by the Rajapaksa government and Adani Power supported by the Modi government.

“Sri Lanka definitely needs renewable energy, and we want to move to a sustainable future but that shouldn’t happen through a corrupt deal,” she said.

The protest comes amid a cold war between India and China in the island nation for strategic infrastructure projects. It was also held nearly a week after the government amended the Sri Lanka Electricity Act to entertain unsolicited projects, replacing the earlier competitive bidding process.

In early 2021, aggressive trade union protests against leasing a Colombo Port terminal to India and Japan forced the government to reverse that deal. However, the Rajapaksa government later compromised with India and gave another 800 million US dollar longer terminal deal to  theAdani group last year.

India has raised security concerns over increasing Chinese influence in Sri Lanka as many infrastructure projects are given to China financed by Beijing.

China was chosen to handle renewable energy projects in Sri Lanka’s northern islands through the standard tender process, but the Sri Lanka government later cancelled them after India protested against China coming close to its southern boarder. (Colombo/Jun16/2022)

ECONOMYNEXT – Activities at several key economic sectors requiring transport are slowly grinding to a halt as forex shortages from continued money printing is making it difficult to finance oil imports, hitting passenger and goods transport.

Sri Lanka’s rupee collapsed from 200 to 360 to the US dollar after two years of money printing and a failed float with a surrender requirement. Liquidity injections and interventions are continuing at the lower level with dollars borrowed from India.

Fuel and gas queues are extending with exasperated customers clashing with police and others who jump the queues.

As passenger and goods transport are disrupted economic sectors that depend on it including farming and tourism are feeling the pinch. While fishermen are provided some fuel on priority for boats are also depended on trucking and domestic.

Thousands of private buses are off the road without fuel. State-run trains which are supplied with fuel are filled to capacity.

It is not clear when the next petrol ship will come with banks unable to open letters of credit, as people using cars and motorcycles languish in queus, but the last diesel ship from an Indian credit line has now arrived in the country.

Related Sri Lanka fuel queues claim two new deaths, taking total to 10

At least two persons died in fuel queues on June 17.

Public Transport

To save fuel the government has closed state offices on Friday and asked them to grow vegetables instead with fertilizer and diesel imports hurting commercial agriculture.

RelatedSri Lanka state offices shut on Fridays for home garden leave

Minister of Transportation Bandula Gunawardena told reporters Thursday, that fuel for private buses will be allocated from two fuel stations in Bastian Road in the capital Colombo but, television footage showed that buses in queues with no fuel.

Gemunu Wijeratne, President of Lanka Private Bus Owners Association says buses and drivers are spending most of their time on diesel queues instead of driving on the road.

Wijeratne said some priority has been promised for public transport and if state-run Ceylon Petroleum Corporation is able to allocate 600,000 liters of diesel per day for the buses, transportation can facilitate 40 million people while running at 50 percent of the capacity.

“With the ministry distributing the incoming fuel according to a priority list the diesel we are getting will be sufficient for the next two weeks,” Wijeratne told reporters on June 16.

“We heard that the CPC does not have any Petrol at the moment making the public transport the main transport for people. If we get 600,000 litres per day, we can facilitate 40 million people who use transport. That is also by operating only 50 percent of the capacity.”

There are emerging complaints of absenteeism and some firms are encouraging work from home.

Goods Transport

Farming produce that is coming to main cities and economic centre are disrupted from diesel shortages.

Also hit are goods that move to the provinces from central wholesale markets in the capital including imports.

“We are coming from Matara,” a crew member from a dry food truck operating from Colombo to the Southern Province, told EconomyNext.

“We stayed for several days to get the diesel to come on this trip from Matara, after we go today, we are cannot confirmation whether we will return tomorrow or not, because of diesel shortage”.

Sri Lanka’s food prices have risen 57 percent over a year according to official data and rice prices have doubled amid import restrictions.

Interventionist soft-peg

The prices of some fish prices have trebled in some cases after the rupee collapsed against the US dollar following monetary and fiscal ‘stimulus’.

The countries economic woes running back to 1950 can be traced to its intermediate regime central bank built by a US money doctor in the style of Argentina’s BCRA. (How Sri Lanka, Latin America was busted by Fed money doctors creating strongmen, anti-Americanism)

Under ‘flexible’ policy its anchor conflicts inherent in intermediate regimes (targeting exchange rates to collect or sell forex reserves while printing money to target interest rates) worsened from 2015.

Sri Lanka is undergoing the worst curency crisis in the history of its central bank after it mis-targeted interest rates under ‘flexible inflation targeting’ with a ‘flexible exchange rate’ an (extreme soft-peg with aggressive floating rate style monetary policy).

Since intensified flexible policy began in 2015 the rupee has fallen from 131 to 360 in three consecutive currency crises where forex shortages were covered by foreign borrowings.

In the latest crisis, after defaulting on foreign debt, authorities are looking for 6 billion dollars in new borrowings.

Fishing

Energy Minister Kanchana Wijesekera says fuel is distributed daily to fishery harbhours though it may not be the full requirement as each multi-day fishing boat requires several thousand litres for a trip.

When boats return, the transport of fish is also threatened.

The Ministry of Fisheries said all efforts were being made to supply kerosene and diesel to fishermen though the volumes were sharply below requirements.

“We are currently supplying fuel according to the stocks we receive, to the fishing fuel station around the country,” Nelson Edirisinghe, secretary to the ministry of fisheries told EconomyNext.

“However, we doubt whether we can meet the entire demand”

Fishing boats need around 900,000 liters of kerosene a day but the Ceylon Fishery Harbhours Corporation gets only around 300,000, Edirisinghe said.

“So the distribution is being done according to the supply we get. Some harbors do not have a fuel station, so they are being supplied by other fuel stations or in alternative ways” Edirisinghe said.

Fish prices are moving up as the currency collapse by the soft-pegged central bank alters the price structure of the economy.

Minister of Fisheries, Douglas Devananda had discussed with the exporters in the industry to obtain the necessary dollars to purchase fuel needed by the fishing boats in an attempt to dollarize the sector.

Partial dollarization is already taking place in the economy.

This week Energy Minister Wijesekera said jet fuel imports and sales which are about 50 million US dollars will be outsourced to a third party reducing the foreign exchange burden on the CPC. (Colombo/June17/2022 – Update II)

COLOMBO (News 1st); The Government will let no one suffer in hunger, says the Minister of Agriculture, Mahinda Amaraweera.  Speaking at a media briefing convened today (16), the Minister of Agriculture answered queries regarding the high price of rice, the shortage of rice and the fertilizer crisis. The Minister assured that his Ministry is directly working Government would let no one suffer in hunger: Minister Amaraweera

ECONOMYNEXT – Sri Lanka is in the process to mend severed ties with Japan after the island nation unilaterally cancelled a 1.5 billion US dollar light rail transit (LRT) and East Container Terminal (ECT) projects as the crisis-hit South Asian nation is seeking international help to come out of its economic downturn amid a political crisis.

Higher government officials and ruling Sri Lanka Podujana Peramuna (SLPP) members have told EconomyNext that most foreign countries were hesitant to help Sri Lanka unlike in the past because some harsh ‘undiplomatic’ experiences in the past.

A former SLPP cabinet minister has said some countries have indirectly told the government that they would not help until President Mahinda Rajapaksa and his family members are in power.

Foreign Minister G L Peiris at a meeting with Miyake Shingo, Parliamentary Vice Minister for Foreign Affairs of Japan, said “the relationship with Japan is vital for Sri Lanka,” after he met the Japanese high official on the sidelines of the 50th session of the Human Rights Council.

Peiris noted that, over the decades, Japan has been a close partner of Sri Lanka, and “expressed appreciation for the assistance provided, particularly in the areas of skills development, computer technology, the construction of the Sri Jayawardenepura Hospital, assistance to the Rupavahini Corporation, the significant assistance provided recently for medical and pharmaceutical items, as well as Japan’s supportive stance on Sri Lanka”, the island nation’s Foreign Ministry said in a statement.

“He also recalled the support extended by Sri Lanka to Japan at the San Francisco Conference at the conclusion of World War II. Sri Lanka wished to expand cooperation with Japan in the areas of digitalization, carbon credit, and ocean related activities including coast conservation, fisheries and global warming. Reference was also made to exploring cooperation in areas coming under the purview of the World Trade Organisation.”

The government under President Gotabaya Rajapaksa, which was close to China earlier, unilaterally suspended a 1.5 billion US dollar LRT project and 500 million US dollar ECT project, which is involved with a tripartite deal with India as well.

Shingo noted that Japan, too, wished to deepen and strengthen cooperation with Sri Lanka in international fora.

Both countries are celebrating 70th year of diplomatic relations this year.

“He…. expressed the hope that long before the 100 year celebration, the relations between the two countries would be elevated to an even higher level. He expressed interest in furthering cooperation with Sri Lanka in the areas mentioned,” Sri Lankan Foreign Ministry said.

Japan has been the top lender for Sri Lanka under its concessionary funding and has poured billions of yens to Sri Lanka’s main Colombo port and many other infrastructure projects.

Sri Lanka is facing its worst economic crisis in the post-independent era. Many countries have pledged help but said only they can do that once Sri Lanka ensures an International Monetary Fund programme after renegotiations with its creditors.

The diplomatic ties with Japan was severed after Rajapaksa’s decision to cancel the key projects which were signed under the previous government.

Japan played a key role when Sri Lanka faced an economic collapse in 2001. It helped to host a donor forum for Sri Lanka and raise 4.5 billion US dollar in 2003 to rebuild war ravaged infrastructure during a ceasefire agreement in the island nation’s civil war. But the country was unable to use the funding fully as there was a government change in 2004.  (Colombo/June 16/2022)

ECONOMYNEXT – Sri Lanka has decided to import 50,000 metric tons of rice using what remains of a one billion US dollar credit line signed in March 2022 for essential commodities, Prime Minister Ranil Wickremesinghe’s office said, amid warnings of an impending food crisis.

The decision was taken at a discussion held at the Prime Minister’s office on Thursday, June 16, to allocate funds for this purpose to the State Trading Corporation under the the Indian loan assistance programme.

“This is expected to avert a possible rice shortage in the future and to curb the abnormal rise in rice prices,” the PM’s office said.

The Indian credit line was signed in March for the purchase of food and medicines.

Earlier on Thursday, Agriculture Minister Mahinda Amaraweera claimed there will be no shortage in rice in the country as the number of hectares being cultivated are higher than anticipated. He said, however, that there will be a shortage by the end of the year which will be managed with the production of  the ‘Maha’ cultivation season that will arrive in February.

Sri Lanka is facing a looming food crisis because farmers could not produce adequate food after President Gotabaya Rajapaksa banned inorganic fertilizer in the last cultivation season. Input shortages this year have also adversely affected the sector.

Inflation coming from the collapse of the currency after two years of money printing has pushed up both domestically made foods and imports up.

Prime Minister Ranil Wickremesinghe has said a food shortage is imminent from August. He has already held discussions over obtaining help from the World Food Programme to prevent a food crisis. (Colombo/Jun16/2022)

 

TEA CENTENARY YEAR SOUVENIR. Pioneers of the Tea Industry in Ceylon (A) JAMES TAYLOR James Taylor the father of the Ceylon Tea Industry opend up the first...

ECONOMYNEXT- The Food and Agriculture Organization of the World (FAO) will distribute 50 kilograms of Urea fertilizer free of charge for 398,000 smallholder farmers while it will grant 60 US dollar cash aid for around 9,000 green gram farmers, an FAO official said on Thursday.

The move comes as a measure to prevent a potential food shortage in August due to the fall in crop yield following chemical fertilizer ban by the government last year.

“Under the joint Humanitarian Needs and Priorities Plan (HNP) launched by the United Nations in Sri Lanka, the Food and Agriculture Organization of the UN (FAO) is seeking international assistance to provide agriculture inputs including seeds and fertilizers (50 kilograms of Urea each) to a target of 398,000 smallholder farmers with landholdings up to 1 acre,” an FAO official, based in Colombo office who asked not to be named, told EconomyNext.

“In addition, FAO is planning a cash transfer programme of USD 700,000 through the Special Fund for Emergency and Rehabilitation (SFERA).”

“Under the programme, 8750 smallholder farmers engaging in green gram cultivation in 7 districts will receive USD 60 (around 21,000 rupees) each enabling them to buy food and /or the productive inputs they need.”

State health officials have warned of a growing malnutrition in Sri Lanka as an impact  of economic crisis that has forced many people to reduce their food intake and go hunger.

The programme by the FAO expects to provide green gram as a raw material for supplementary food for children and pregnant mothers, an agriculture ministry official said.

“This is given to us because we do not have Thirposha (local supplementary food),” Agriculture Minister Mahinda Amaraweera said.

The spokesperson of the Ministry of Agriculture told EconomyNext, “This is a solution to aid farmers to combat the food crisis.”

Amaraweera is in discussion with the World Bank in order to acquire the necessary funds to import the necessary fertilizers with the intention to prevent the food crisis in August 2022.

Amaraweera is confident that a food crisis can be prevented if Sri Lanka embarks on contributing via home-gardening projects.

The government is also in the move to cultivate unutilized lands in the country for a lease period of 5 years to combat the food crisis followed by a persisting foreign exchange crisis. (Colombo/Jun15/2022)

COLOMBO (News 1st); Special attention to the proposed Animal Welfare Bill with the support of the Government as well as NGOs and Animal Welfare Groups under a lengthy consultation process was given at the Ministerial Consultative Committee on Agriculture held recently (10) under the chairmanship of Mahinda Amaraweera, Minister of Agriculture and Minister of Wildlife Army, CDF, & 3,000 Prisoners for Agri Campaign

ECONOMYNEXT – Sri Lanka would introduce new laws to prevent hoarding of food stocks, Prime Minister Ranil Wickremesinghe  said after official scaremongering on looming food shortages and continued monetary instability which has disrupted international tarde.

Wickremesinghe said this when he met with representatives of the commercial banks to discuss the loans requested by rice mill owners.

“The Prime Minister also stated that the government would introduce new legislation that will govern rice mill owners and silo owners to prevent future hoarding of food stocks,” Wickremesinghe’s office said in a statement.

Sri Lanka’s farmers and other started to hoard rice and other foods after official scaremongering that there would be food shortages from August 2022.

Agriculture Minister Mahinda Amaraweera has said there is rice till at least December. Sri Lanka has failed rice harvests in the past but no such scaremongering has been done.

When shortfalls are expected, stocking up drives up prices, in the same way as futures market prices anticipates things in the future and helps smoothen supply across time by reducing current consumption.

The building up of rice silos helps stabilize prices where millers borrow money and buy stocks during harvest time. The silos prevents prices from falling too low during harvest time and also prevents the deterioration of grain over time.

In this instance a spike in paddy prices after official scaremongering, has driven farmers cultivate more rice than at first expected.

Sri Lanka’s rupee fell from 182 to the US dollar to 270 to the US dollar inflating the price of all foods.

Domestic rice prices however are higher that the rest of the world and millers in part are strenghtened in part due to import restrictions and forex shortages from money printed to pay state worker among other expenses. (Colombo/June 15/2022)

ECONOMYNEXT – The United States of America (USA)’s International Development Finance Corporation (DFC) Board approved $120 million in new loans including a $100 million direct loan to the Commercial Bank of Ceylon to expand lending to micro-, small-, and medium-sized enterprises (MSMEs) and address the credit gap for women-owned businesses, the Colombo-based US embassy said on Wednesday.

The U.S loan came as Sri Lanka is facing its worst economic crisis since the independence and most micro, small, and medium sector business are hit by the worsening funding availability.

“Today’s announcement is good news for the private sector, as the DFC’s $120 million in new investments will reach small and medium-sized businesses and help to provide equity, jobs, and futures,” Julie Chung, U.S. Ambassador to Sri Lanka said in a statement.

The MSMEs accounts a quarter of Sri Lanka businesses.

In addition to the 100 million US dollars to Sri Lanka’s largest private lender Commercial Bank, DFC also announced a $15 million loan to BPPL Holdings PLC, a polyester yarn manufacturer incorporating recycled plastic materials and another $5 million loan to MA’s Tropical Food Processing (Private) Limited, a sustainable food company, to finance its expansion and grow its supplier network.

“The loan will support increased production and strengthen Sri Lanka’s recycling infrastructure in support of efforts to reduce plastic waste in Sri Lanka,” the U.S. embassy said in a statement with regard to the 15 million US dollar loan.

“These new loans build on DFC’s existing portfolio in Sri Lanka of nearly $300 million in funding for the MSME sector over the past two years.”

The DFC’s CEO Scott Nathan said the announced on Wednesday will make real impact across a range of sectors and development challenges.

Investments by the DFC, which also provides financing for small businesses and women entrepreneurs in order to create jobs in emerging markets, adhere to high standards and respect the environment, human rights, and worker rights.

The US embassy said the announcements may be subject to congressional notification in Washington and other administrative approvals.

The U.S. on Monday also announced a 27 million US dollar contribution aiming to double the milk production of Sri Lankan dairy farmers participating in the U.S. Department of Agriculture’s “Food for Progress” initiative.

Government officials have said the U.S. has been reluctant to lend Sri Lanka in the past, but the World’s largest economy has come forward to help at the island nation’s worst economic crisis.

On Monday, U.S. Ambassador Chung met Chinese envoy to Colombo and discussed over Sri Lanka’s economic crisis among “broad topics of mutual interest”. (Colombo/June 15/2022)