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ECONOMYNEXT – Sri Lanka’s State Pharmaceuticals Corporation (SPC) has called tenders from Indian medical suppliers for medicine purchase through an Indian credit line in order to fill a gap of medical supplies in the state health sector, an SPC official said.

SPC General Manager Dinusha Dassanayake told EconomyNext on Thursday (31) that tenders were called on Thursday and SPC will take the necessary steps after considering the bids offered by the suppliers.

“The Medical Supply Division sent us a list of medicines they need to get in order to close the supply gap we have in the country at the moment due to the current situation,” said Dassanayake.

“Since this is through the Indian credit line, one condition they had was that the medicine that we import be of Indian origin. So we placed a condition when calling bids that only Indian suppliers may  apply.

“Once we have received all the tenders, we will evaluate them and finalise our orders,” he said.

From the one billion US dollar credit line from India, 200 million USD is to purchase medical supplies.

Sri Lanka is currently in the midst of a severe forex shortage which has hampered imports including essentials such as medicines.

State Minister of Pharmaceutical Production, Supply and Regulation, Channa Jayasumana in a Facebook post said on Thursday that, under the Indian credit line, Sri Lanka has been given a limited time to purchase the medicine.

“Medicines can be bought only by Indian suppliers. They will have the opportunity to open letters of credit (LC) for tender-approved items after the procurement process. That way, only 40 drugs were included,” said Jayasumana.

Jayasumana added that Sri Lanka’s state health sector needs about 1,500 medicines and 3,000 surgical/medical equipment.

“Almost 80 percent of imported medicines are from India anyway. The Medical Supply Unit (MSD, set up a list of essential medicines and surgical equipment for the next year as soon as it became aware that medicines can be available under Indian loan,” he said.

“The relevant payment will be directly done by the State Bank of India (SBI) after sending the list to Indian officials upon selection of suitable suppliers among them. This is going to be done in Indian rupees. The sooner this process is over the sooner we get the medicines. We have been given a limited time range for that,” said the state minister.

Several state-owned hospitals in Sri Lanka were forced to temporarily stop routine surgeries due to a shortage of medicines. Hospital management had informed staff to use the available medicines only in emergency cases till the supply was recovered.

“Private sector suppliers are not in a position to import the medicine ordered last year as it was difficult to open loan letters due to the dollar shortage. If we don’t take advantage of this opportunity to get our medicines for the country when we get US dollars and other foreign currency, we will be in a severe drug crisis in the next few months,” Jayasumana warned.

Private sector condition is worsening

Meanwhile, an industry representative from the private medicine supply sector told EconomyNext that conditions are worsening for private sector importers. He said even the National Medicine Regulatory Authority had authorised a price increase of medicine by 29 percent earlier this month, and private sector supply is down by about 30 at present at the moment.

“The situation is much worse now than when we explained it earlier this month. The banks do not entertain any LC  applications and ask for credit for up to 180 days for both LCs and documents against acceptance documents. In the absence of any forward booking mechanism, who knows what the rupee will be against the USD in 180 days? How do you cost your shipments?” the source told EconomyNext.

He added that many products are out of stock in both the state and private health sectors.

“The last price increase by a whopping 29 percent was when the US dollar reached 260 rupees. The official rate is over 300 now and the unofficial crossed the 400 mark today,” the source said.

He said the situation will get much worse for supplies, and  the industry anticipates most essential price controlled items will be in short supply as the importers are incurring losses on their sale.

Commenting on the tender calls for Indian suppliers under the Indian credit line, he said it is a ray of hope to control the situation.

“The first tenders are being called on Thursday (31). With a 25 percent performance bond, many established companies are reluctant to participate and supply under this scheme.  As the NMRA registration requirement is likely to be waived for this supply, it is mostly the lower end opportunists that are likely to supply,” he said.

The source said the government’s opinion of the local manufacturer is somehow the solution to this problem without realising that local value addition in pharmaceuticals is low as active pharmaceutical ingredients, buffering agents, excipients, machine tools, packaging even most often technical staff all have to come from abroad.

“So the impact of the shortage of foreign currency will affect availability anyway,” he said.

The NMRA was delaying registration and reregistration of drugs, further contributing to supply disruptions in addition to price controls

“The pricing committee consisting of pharmacists completely untrained in pricing matters is seeking prices lower than the gazette price and are holding up registrations,” the source said.

“They have limited the number of registrations to a given molecule to 15, severely limiting competition as a couple of major importer companies account for about 10 of the suppliers,” he added.

He said the registration of new molecules where the number of suppliers are limited is slow, owing to manipulations within the NMRA. Therefore, the prices remain high for these items.

“If there ever was a pharmaceutical mafia, it’s alive and kicking inside the NMRA itself and sadly the outlook for the patients is dire,” he went on to say.

“The Indian line of credit is about a month’s supply. It will be mostly utilized by the state sector. Not much of a help where annual requirement is concerned, but a welcome relief given the situation,” he added. (Colombo/Mar31/2022)

ECONOMYNEXT – Peo TV, Sri Lanka Telecom’s internet protocol television (IPTV) service, has taken three international sports channels off its network citing difficulties in making payments for the service providers in US dollars, officials said.

Three channels owned by the Indian multinational Star Sports network have not been on air on Peo TV from Monday (28) due to payment difficulties, a Sri Lanka Telecom (SLT) official told Economy Next on Thursday (31).

SLT is Sri Lanka’s national telecommunications provider, with the government owning 50.5 percent of the company.

“A few channels aren’t being aired because we are unable to make some of the payments. However, we are working with the bank to get this problem solved. It will most likely be resolved by today or tomorrow,” the official said.

There are issues with remitting payments and restrictions revolving around payments and that is the only barrier in providing the service to consumers, the official said.

The privately owned Dialog Axiata Plc, however, has so far not experienced such issues, a spokesperson said.

Sri Lanka is facing a severe dollar shortage amid a debt crisis, as indiscriminate money printing and dwindling forex reserves take a toll on the island. (Colombo/Mar31/2022)

ECONOMYNEXT – Sri Lanka’s stock index plunged over 7 percent despite the trading was halted twice on Wednesday (30) as on-going economic crisis and extended power cuts prompted heavy selling amid margin calls, brokers said.

The main All Share Price Index (ASPI), however, recovered to close 3.66 percent or 352.66 points lower at 9,294.89, its lowest since September 27. It lost over 700 points during the day.

“All the possible negative factors in the market played a role in today’s plunge,” a market analyst said.

S&P SL20 of the most liquid stocks ended 4.25 percent or 141.84 points lower to 3,196.19 points. It nosed dived over 9 percent triggering two market halts.

On Wednesday, the country saw a 10-hour power cut despite officials assuring no lengthy power cut. The duration of power cuts has been further increased to 13 hours for Thursday (31). Analysts say power cuts and lack of fuel hurt the listed companies across the board though manufacturing firms are hut hard.

Analysts had cautioned that if the market falls below 10,000 mark there would be a spiral effect, creating a downward trend.

Analysts said many investors are still concerned over how the government is going to face the mounting debt as they are not still confident if it would really go to the IMF or drag the decision of seeking IMF help.

The day’s turnover was 3.29 billion rupees, around two-third of this year’s average daily turnover of 5.0 billion rupees.

Analysts said investors are trying to shift their savings to hedge against the rupee fall and inflation, which is at a record high and more than 5 percent higher than one-year Treasury bill yield. Brokers said investors opt for stocks to hedge against inflation.

Sri Lanka’s rupee has fallen over 60 percent since it was allowed flexibility on March 07.

All commodity prices in Sri Lanka have been on the rise due to the currency fall.

Rising oil prices, policy rate hikes, a slowing economy, and shortage of dollars, fuel, and cooking gas along with extended power cuts continues to dampen the sentiment.

The market has lost 19.7 percent so far in March after falling 11 percent in the previous month. Overall the market has lost 23.9 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year.

Foreign investors bucked the trend and bought a net 367.9 million rupees worth of shares. However, the market has witnessed a total foreign outflow of 2 billion rupees so far this year.

Expolanka, LOLC Holdings and Hayleys dragged the index down on Wednesday.

Shares in LOLC Holdings fell 7.6 percent to close at 645.25 rupees a share, Hayleys fell 9.5 percent to close at 80.20 rupees a share while Expolanka plunged 9.1 percent to close at 223 rupees a share. (Colombo/March30/2022)

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board (CEB) has imposed up to 13-hour power cut for Thursday (31) as acute diesel shortage has compelled the utility provider to increase the duration of power cuts from the previous day’s 10 hours.

The CEB has decided to cut power from 12am to 8am for the first time in the ongoing power crisis.

Areas ABCDEF and PQRS will see 3 hours of power cut from 3am to 6am, 4 hours from 12pm to 4pm and 6 hours from 6pm to 12am.

Areas GHIJKL and TUVW will experience 3-hour power cut from 12am to 3am, 4 hours from 8am to 12pm and 6 hours from 4 pm to 10pm.

Areas MNOXYZ, however, will witness only 5.5-hour power cut – 3.5-hour interruption from 5.30am to 9am and 2 hours from 4pm to 6pm.

Download the power cut schedule for March 30 from

Though the government has said the duration of the power cuts will be reduced gradually, the power cut has been extended mainly due to lack of fuel amid severe shortage of US dollars.

The lack of fuel also has resulted in large queues for diesel and petrol despite record price hikes. (Colombo/ March 30/2022)

ECONOMYNEXT – The number of power shedding hours could be increased to as high as 15 hours a day and private transports could be pulled out from the services if the Sri Lankan government fails to supply fuel, officials said.

The daily power cut duration has increased to 13 hours for Thursday with the main grid losing 800 MW for two days after thermal power stations were forced shut down.

Drought has reduced Sri Lanka’s hydro power generation capacity, while severe dollar shortage has hit the island nation’s capacity of ensuring timely import of fuel stocks for power generation.

The state-run fuel retailer Ceylon Petroleum Corporation (CPC) has announced that there will be no diesel for both power generation as well as consumption for personal vehicles until Thursday.

“It is clear that due to these circumstances, we currently have a 10 hour power cut and if this continues, the power shedding may extended for 12 or maybe 15 hours per day,” Anil Ranjith Induwara, President of the CEB Engineers Association told reporters on Wednesday (30).

Induwara warned that the country could be in dark during the upcoming new year in mid-April if the fuel shortage continues and the country receives no rains.

Sri Lanka’s foreign reserves have depleted and and the country is mainly depending on a 500 million US dollar Indian credit line for fuel.

Unexplainable Rise  

Fuel consumption has jumped nearly five folds in one year, CPC, Chairman Sumith Wijesinghe told reporters on Wednesday (30).

He said the total fuel consumption in January 2021 was 39,000 metric tons including diesel for power generation while it has increased to 180,000 metric tons in January 2022.

“We need to investigate the matter because there was no vehicle importation in the last two years. Therefore how can there be such increase in fuel consumption?”

On Tuesday (29) the CPC said no diesel will be delivered for power generation and public consumption on Wednesday (30) and Thursday (31) as it was unable to unload a 37,500 metric ton diesel a consignment at the main Colombo port.

Wijesinghe expects the CPC will be able to deliver diesel to the market only from April 01, 2022.

Grim Reality 

The Public Utilities Commission of Sri Lanka (PUCSL) has said the water level have decreased to 27 percent in reservoirs and it needs to utilized for drinking and agriculture as well as power generation.

The power crisis may further extended if Sri Lanka is unable to secure coal consignments in the next five months, officials say.

“We have not secured enough coal and for the last 4 consignments of coal, we have not paid due to the forex issue,” Janaka Rthanayaka , the Chairman of the PUCSL told reporters on Tuesday.

“It will be difficult to unload coal in the off season. If that happens, we will be in a much bigger issue than we are now in 5-6 months.”

Rathnayaka said, if the power shedding further extends, the ongoing economic crisis could worsen with all sectors being forced to seize operations during power cuts.

“Even if we get the fuel, until we get to the rainy season, we will face this power shedding and if the authorities do not invest in more power plants in the next two years, it will be much worse than now.”

Private Transport at Stake 
Private transport providers warned the government that the island wide transportation service providers will withdraw from the services next week on wards if the fuel shortage issues is not
addressed.

The President of the Private Bus Owners’ Association, Gamunu Wijerathna said the transportation is already being limited due to the diesel shortage.

“We ask the government not to test our patience and if these issues are not being answered by next week, we have already discussed with other association and we will withdraw from all transportation services island wide,” Wijerathna said.

Sri Lanka’s inter district school transport services association also warned to withdraw from school transportation from Friday on wards due to the fuel shortage.

“These days we are struggling to provide services. We are doing this mainly because of these children who will miss their education and due to exams days are coming,” N.M.K Harishchandra Padmasiri, President of the association, told reporters on Wednesday.

“We tried to talk with authorities but have not received any positive feedback. From this Friday on wards, if we do not get a proper answer we will withdraw from services.” (Colombo/ March 30/2022)

ECONOMYNEXT – A Saudi Arabian delegation will visit Sri Lanka to look into investment opportunities in renewable energy and other projects, outgoing Saudi envoy has told President Gotabaya Rajapaksa on Tuesday (29).

“A high-level Saudi delegation will soon visit Sri Lanka to explore the investment opportunities in the renewable energy sector and other sectors,” the President’s Media Division (PMD) said quoting the outgoing Ambassador Abdulnasser Hussain Al-Harthi.

“The President pointed out the vast opportunities available in Sri Lanka for direct investment in the pharmaceutical, technology and
apparel industries.”

Rajapaksa’s attempts to shift into renewable energy is yet to be prove success. Already U.S.-based New Fortress Energy is given green light for a Liquefied Natural Gas (LNG) project through an unsolicited project and India’s privately owned Adani group is given approval to build a solar plant in the northwestern coast of Mannar.

Another 100 MW solar power plant has been signed with India to build in Sri Lanka’s eastern port district of Trincomalee after a planned 500 million US dollar 500 MW coal-fired plant was cancelled due to environmental concerns.

Sri Lanka is facing energy crisis due to severe shortage of dollars deprived the island nation of importing fuel for power generation. The country is facing around 7.5 hour power cut on a daily basis.

President Rajapaksa also invited the Saudi government to explore investment opportunities associated with the Chinese-owned Colombo Port City and the proposed ship repairing and manufacturing facility to be built at the Chinese-managed Hambantota Port.

Rajapaksa thanked the Saudi Arabia for its development assistance provided through the Saudi Development Fund.

Outgoing Saudi envoy Al-Harthi stated that Saudi Arabia intends
to continually provide the assistance of the Saudi Development Fund to Sri Lanka. (Colombo/March29/2022)

ECONOMYNEXT – US Ambassador for Sri Lanka Julie Chung has hinted a credit line from  the United States Agency for International Development (USAID) for renewable energy projects in the island nation, President Gotabaya Rajapaksa’s office said on Monday (28).

The Ambassador said this when she called on President Rajapaksa at the Presidential Secretariat on Monday, the Presidential Media Division (PMD) said without giving any further details on the credit line.

The US Ambassador was not immediately available for comments on her pledge. However, Chung in her official twitter feed said she met President Rajapaksa to to discuss Sri Lanka’s economic challemges and human rights.

“The recent US-Sri Lanka Partnership Dialogue underlined our commitment to a democratic, prosperous, and sovereign Sri Lanka,” Chung said in her twitter message.

“I met with President Gotabaya Rajapaksa to discuss Sri Lanka’s economic challenges and how we can work together to promote inclusive governance and protect human rights.”

Sri Lanka is facing an economic crisis along with severe shortage of dollars which has resulted in extended power cuts due to lack of fuel imports and drought.

India has provided 500 million US dollar credit line to purchase fuel. However, government officials say the amount is only adequate for nearly 6 weeks.

A Liquefied Natural Gas (LNG) deal with New Fortress Energy, a US private company, has been delayed after it was challenged by many activists and legislators including former Energy Minister Udaya Gammanpila and Industrial Minister Wimal Weearawansa.

The Supreme Court dismissed the case soon after both ministers were sacked from their government by President Rajapaksa.

The deal was signed through a back-door process and could be worth up to 6 billion US dollars but is coming in as the sale of share of a power plant, engineers of the state power utility have warned.

They have also said energy security would also be undermined as the national grid would be dependent on a single company for the supply of LNG to the entire country and will also block state-run Ceylon Electricity Board from using cheapest energy source based on market prices.

ECONOMYNEXT – Sri Lanka’s central bank has banned money changers from selling US dollars above the commercial bank rates as the country grapples from a forex crisis triggered by money printed to keep rates down and a surrender requirement.

Sri Lanka has an exchange rate regime with anchor conflicts (flexible exchange rate) which is neither a true float with a domestic inflation anchor nor a credible peg (external anchor).

An attempt to shift to a clean float has so far not succeeded. The central bank has been urged by classical economist to hike rates and drop a surrender requirement to make the float work so that shortages in imported energy, medicines and food.

Sri Lanka has had external crises ever since a credible peg was abolished in 1950.

Stable single anchor monetary regimes (hard peg or clean float) have been relentlessly opposed by those who want to depreciate the currency and transfer wealth from the working class to business owners (competitive exchange rates).

Sri Lanka’s banks are offering to sell dollars at 285 to the US dollar. In the kerb market, the rupee hit 360 to the US dollar this week.

When money is printed to keep rates down and exchange controls are imposed, the kerb market and Undiyal rates go up with money trying to rush out of the country and pay for imports.

The outward flow of money at high prices in turn are financed by higher rates paid to inward worker remittances.

There now calls to set up a currency board to end 72 years of monetary instability and social upheavals from the dual anchor conflicting ‘flexible exchange rate’.

Related

Sri Lanka currency board will preserve rupee, impose discipline: Wijewardena

The full statement is reproduced below:

Department of Foreign Exchange
28.03.2022

NOTICE TO THE PUBLIC – MONEY CHANGERS

The public is hereby notified that in terms of the provisions of the Foreign Exchange Act, No. 12 of 2017, Money Changers have been prohibited from offering higher exchange rates to customers beyond the exchange rates offered to such Money Changers by Licensed Banks.

The Money Changers have been informed that their licenses would be suspended/ revoked if they transact any foreign currency transactions at rates beyond the rates stipulated by Licensed Banks.
The public is requested to inform the Department of Foreign Exchange via the following telephone numbers or the email address of any instances that a Money Changer offers higher exchange rates for any transaction.

Telephone :
0112398523
0112398827
0112477375
0112398568

Email : [email protected]

ECONOMYNEXT – India’s Foreign Minister S Jaishankar who is on an official visit in Sri Lanka met the island nation’s Finance Minister Basil Rajapaksa Monday (28) morning and discussed India’s assistance to its southern neighbour in battling a worsening economic crisis.

Began the visit by meeting Finance Minister @RealBRajapaksa.

Discussed the economic situation and India’s supportive response. We will continue to be guided by Neighbourhood First pic.twitter.com/D6K7Wq1JZd

— Dr. S. Jaishankar (@DrSJaishankar) March 28, 2022

Jaishankar also visited a Lanka IOC (Indian Oil Corporation) filling station in Colombo some hours later, where he was briefed by Lanka IOC Managing Director Manoj Gupta on the fuel supply situation.

Visited Lanka IOC in downtown Colombo. MD Manoj Gupta briefed me on fuel supply situation.

Indian LoC of US$ 500 million is helping Sri Lankan people in their everyday life. pic.twitter.com/1EmTpXmzSp

— Dr. S. Jaishankar (@DrSJaishankar) March 28, 2022

India has given a 500 million US dollar credit line for fuel, a 400 million dollar central bank swap, a billion US dollar loan for food and medicines as the island kept interest rates low to inject money and dollar inflows were siphoned out of the banking system through a surrender requirement for new money.

India wrapped up long delayed undertakings by Sri Lanka on a fuel tank farm and a joint venture power plant in Trincomallee in Eastern Sri Lanka. India is also to invest in renewable energy and have maritime co-ordination.

The rupee has fallen steeply under a so-called flexible exchange rate amid an attempt to establish a clean float which has not happened, as the rupee was allowed to fall gradually under a ‘flexible exchange rate’.

The Indian foreign minister is in Colombo to participate in a meeting of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), an organisation set up in 1997 for regional co-operation with Sri Lanka, India, Thailand and was later joined by Myanmar, Nepal and Bhutan. (Colombo/Mar28/2022)

ECONOMYNEXT – Power cuts of 5 hours for some areas in Sri Lanka and over three hours for other areas were approved in two blocks for March 26 Saturday, Public Utilities Commission Chairman Janaka Ratnayake said as a forex crisis creates power shortages in the dry season.

Areas PQRSTUVW will have 2 hours and 15 minutes of power cuts from 8.30am to 5.30pm and 1 hour and 50 minutes from 5.30pm to 11.00pm.

Areas ABCDEFGHIJKL will have 3 hours and 20 minutes of power cuts from 8.00am to 6.00pm and 1 hour and 40 minutes from 600pm to 1100pm.

Download the power cut schedule for March 28 from 28-03-2022-Power-Interruption-Schedule

Over the weekend the PUCSL increased the power cuts after demand went up. The regulator has not yet given a price increase for power and people are shifting to electricity as gas prices went up and shortages emerged.

Sri Lanka is facing forex shortages due to money printed to keep interest rates low and the country has run out of reserves and the currency has been floated.

However, the float has not yet taken place and the rupee has fallen from 203 to 275 to the dollar and prices are getting validated at that level. (Colombo/March28/2022)