Chinese envoy meets Sri Lanka leader, discusses Belt and Road projects
ECONOMYNEXT – Chinese Ambassador to Sri Lanka Qi Zhenhong met Sri Lankan President Gotabaya Rajapaksa on Monday (28) and discussed bilateral and diplomatic relations including Belt and Road projects, the Chinese embassy in Colombo said.
The meeting comes weeks after India pledged to assist Sri Lanka with much needed financial assistance including a 400 million US dollar swap arrangement, a 500 million US dollar credit line to purchase fuel with, and a 1 billion US dollar credit line to buy essential foods and medicines.
Both Sri Lanka and China are celebrating the 65th anniversary of diplomatic relations as well as the 70th anniversary of the historic rubber-rice pact signed between the two countries.
“Zhenhong emphasised that the biggest inspiration from the 65th anniversary of the establishment of diplomatic relations between China and Sri Lanka is that no matter how the domestic and international situation changes in Sri Lanka in the past, present or future, China will always be Sri Lanka’s most trustworthy good friend, true friend and old friend (sp),” the Chinese embassy said in a statement.
“The current world situation is changing rapidly, and the spirit of the rubber-rice pact of ‘independence, self-reliance, unity and mutual support’ is even more significant today, 70 years later. At the new historical starting point, China is willing to join hands with Sri Lanka to make unremitting efforts to improve the quality and upgrade of bilateral relations.”
According to the statement, the two sides also conducted friendly and in-depth exchanges on topics such as economic, trade and financial cooperation between the two countries, major “Belt and Road” projects, and regional cooperation.
Sri Lanka has been in the middle of a geopolitical tussle between China, the US and India, analysts say.
China has invested in and loaned billions of dollars for Sri Lanka’s post-war infrastructure and also owns the country’s largest port in the southern district of Hambantota and reclaimed land worth 1.5 billion US dollars next to the island nation’s main port in Colombo.
The Chinese embassy statement further said President Rajapaksa discussed Sri Lanka’s current economic and financial situation and thanked China for its long-term and firm support for Sri Lanka’s national development. The president said he looked forward to further strengthening cooperation with China to bring more benefits to the two nations.
The president’s office confirmed the meeting with the Chinese Ambassador but did not reveal any details.
Sri Lanka is facing a financial and dollar crisis with the country running out dollars to buy fuel, essential foods, and gas.
Lack of fuel imports due to the dollar shortage has already resulted in extended power cuts and long queues for fuel. (Colombo/Mar02/2022)
Sri Lanka power regulator seeks US$150mn for fuel for 60-days
ECONOMYNEXT – Sri Lanka’s power regulator said it has sought 150 million US dollars from the central bank to import fuel for the next two months, but no response has been received forcing power cuts of over seven hours from March 02.
The Public Utilities Commission of Sri Lanka said President Gotabaya Rajapaksa had also instructed the central bank to provide the necessary foreign exchange but it had not happened.
“We have given a number of proposals to the government and cabinet to solve the power crises but the advice not been taken in to consideration,” PUCSL Chairman Janaka Ratnayake said in a statement.
“The power crisis that has come from the fuel crisis is due to the wrong financial management. That is to say, unwise use of foreign exchange. Priority should be given for fuel.
PUCSL had also advised that the Ceylon Electricity Board and Independent Power Producers be allowed to import fuel directly.
“The power plants need 150 million US dollars in the next two months to buy diesel, naptha and furnace oil,” Ratnayake said.
“We ask relevant parties that our proposals be followed.”
“Due to the 7 to 8 hour power cut, small and large industries will become inactive. It will make the entire economy fall.”
Sri Lanka is facing severe foreign exchange shortages due to liquidity injections made to enforce low interest rates. (Colombo/Mar02/2022)
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)
Diesel shortage affecting transport, agriculture & fishing industries
Fuel crisis brings Sri Lanka to its knees
Fuel crisis brings Sri Lanka to its knees
Sri Lanka central bank seeks stool pigeons on grey market as...
ECONOMYNEXT – Sri Lanka’s central bank has asked the public to tip the monetary authority on grey market forex dealing as a currency crises triggered by money printed to enforce low interest rates worsened.
“Permission to buy, sell and exchange foreign currency in Sri Lanka is granted ONLY to authorized dealers (i.e. licensed banks) and money changers appointed by the Central Bank of Sri Lanka (CBSL),” the monetary authority said.
“Therefore, foreign currency, shall be purchased, sold or exchanged only through an authorized dealer or an authorized money changer.”
Members of the public, armed with printed rupees, usually paid as salaries to state workers, have turned to unofficial markets for dollars, pushing up parallel exchange rates as there are not enough dollars to match the printed money.
The central bank gave telephone numbers and email addresses for tip-offs.
The full statement is reproduced below:
The Central Bank requests the public to provide information on unauthorized foreign currency dealings
Permission to buy, sell and exchange foreign currency in Sri Lanka is granted ONLY to authorized dealers (i.e. licensed banks) and money changers appointed by the Central Bank of Sri Lanka (CBSL).
Therefore, foreign currency, shall be purchased, sold or exchanged only through an authorized dealer or an authorized money changer.
In terms of the provisions of the Foreign Exchange Act, No.12 of 2017, engaging in foreign currency transactions without permission of CBSL by any person, institution or any other entity is an unlawful activity.
Therefore, if it is noted that any person, institution or any other entity is engaged in unauthorized foreign exchange dealings, the public is hereby requested to inform the Foreign Exchange Department of CBSL via the following telephone numbers or the email address.
Telephone : 0112398827
0112477375
0112398568
Email : [email protected]
Sri Lanka import 45-pct of wheat, other grains, sunflower oil from...
ECONOMYNEXT – Sri Lanka imports 45 percent of wheat, more than half of soybeans, sunflower oil, peas and asbestos are from Russia and Ukraine, which are now in the middle of a war, and mitigation plans may be needed, a Colombo-based think tank said.
Russia and Ukraine are key buyers of Sri Lanka tea and are important sources of tourists.
“Overall, Russia and Ukraine account for 2 percent of Sri Lanka’s imports and 2.2 percent of exports in 2020,” Asanka Wijesinghe, a researcher at Colombo-based Insitute of Policy Studies said in an analysis.
“However, both countries are vital import sources for wheat and export destinations for Sri Lanka’s black tea.”
Russia and Ukraine purchase about 18 percent of fermented black tea exported by Sri Lanka.
About 45 percent of Sri Lanka’s wheat imports came from Russia and Ukraine.
“In addition, more than half of Sri Lanka’s imported soybeans, sunflower oil and seeds, and peas are from Ukraine,” the note said.
“Moreover, Russia and Ukraine are significant import sources for asbestos, semi-finished products of iron and steel, copper(cathodes), and potassium chloride for fertiliser.”
EU, the UK, US and Canada have proposed to cut off several Russian banks from the Swift payment system, which will make it difficult for Russia, in particular, to trade internationally.
Usually, food is exempted from sanctions.
Wijesinghe said rising wheat prices may further push up rice prices.
However, Sri Lanka is now facing forex shortages as the central bank is printing money to keep interest rates down.
As wheat and rice are substitutes, high wheat prices may increase the demand for rice. Thus, it is necessary to remove input shortages like fertiliser to ensure domestic production is adequate.
“Due to the current foreign exchange crisis, Sri Lanka’s ability to effectively face such shocks is constrained,” Wijesinghe said.
“Thus, the urgent priority is to resolve the current foreign exchange crisis to regain the ability to trade swiftly.”
Imports soared to a record 2.2 billion US dollars in December 2021 as the central bank started sterilizing reserves given for imports with new money, a subsidy was given to overseas remittances with printed money and tourism recovered.
Sri Lanka has a dysfunctional pegged exchange rate at 200 to the US dollar with a wide parallel exchange rate and analysts have urged monetary tightening and float to end sterilized intervention and unify the parallel exchange rates.
Sri Lanka is now using reserves for imports, essentially living beyond its means. Sri Lanka last used reserves to extensively intervene at these levels in late 2018. (Colombo/Feb28/2022)
Sri Lanka jacks up tourism earnings estimate for 2021, Jan 2022
ECONOMYNEXT – Sri Lanka has revised up by 142 percent, tourism earnings estimates for January 2022 and also for the full year 2021, based on the average stay and spending from a survey by the tourism promotion office.
Tourism earnings for the full year 2021 were revised up to 633.8 million dollars from a earlier 261.4 million US dollars.
The earnings were revised “based on Sri Lanka Tourism Development Authority survey results on average stay period and average spending per day estimates for 2021,” the central bank said.
Tourism earnings for January 2022 which were originally listed at 110 million US dollars have been revised up to 268.3 million dollars.
The data may be further revised “revised based on Sri Lanka Tourism Development Authority survey results on average stay period and average spending per day estimates for 2022,” the central bank said.
Sri Lanka has blamed the country’s currency crisis on the fall of tourism receipts but analysts have warned that the tourism recovery cannot solve a monetary problem, relating to liquidity injections which has to be solved with higher interest rates.
From October Sri Lanka started using ‘reserves for imports’ (defend the peg for trade transactions), which force the central bank print more money to keep rates down (sterilize the intervention).
Related
Sri Lanka has to hike rates, tourism recovery will not help end forex crisis: Bellwether
To break the cycle of sterilized interventions the rupee should be floated, analysts have said.
Higher tourism earnings will simply generate more imports as the recipients of the money, such as hotel worker, guides and taxi drivers, spend the profits.
There are also operating costs, such as fuel and electricity as well as some foods that are imported to service tourists.
Sri Lanka’s central bank depreciated the currency from 4.70 at the creation of the central bank to 182 to the US dollar in 2019, without Covid or loss of tourism revenues. (Colombo/Feb27/2022)
Transport providers in Sri Lanka struggle to find fuel amid shortage
ECONOMYNEXT – Sri Lanka’s fuel crisis is affecting daily office transport, as service providers are finding it increasingly difficult to keep their buses and vans running, even as private bus owners warn of an imminent collapse of public transport in the country.
A spokesperson for Deepna Transport, a Colombo-based office transport service, told EconomyNext that finding fuel has been a challenge.
‘’I have been in search of fuel all over. I went to around 30 stations to find diesel. I haven’t cancelled anything, nor taken up any work,’’ he said.
Minister of Power Udaya Gamanpila in a parliament session on Wednesday (23) said: “The problem we are facing is not a power or fuel problem. It is the non-availability of dollars.”
He also stated that Sri Lanka would receive 37,500 metric tonnes of diesel worth $35.3 million.
‘’Petrol sheds are rationing what can be given. We need diesel of at least 10,000 rupees to run the daily so when its rationed like this we are wasting time, and the diesel we already have,’’ several transport providers told EconomyNext.
Some fuel stations denied reports that they’re hiding their stocks. “We simply don’t have diesel to provide,’’ one spokesperson said.
However, a fuel station in Talawakele, Kandy, said that due to the shortage, rationing was necessary to make sure that there was enough fuel to go around.
“There are a lot of private buses in this area,” a source told EconomyNext.
“We give each bus around 2,000 to 3,000 rupees worth of petrol, so that they can run the vehicles without stopping. We have to do this because the fuel has to be distributed among everyone as equally as possible since there are very few petrol sheds in the area. ”
“The crisis has scared a few customers and they would pump petrol even if the tanks were full,” he said.
Among the scared consumers are Sri Lanka’s private bus owners.
President of the Lanka Private Bus Owners’ Association Gemunu Wijeratne told reporters on Saturday (26) that the 2,000-rupee cap on the diesel sold to private buses.
“This is not practical, because a bus needs about 6,000 to 7,000 rupees worth of diesel a day to operate short distances. For long distance it’s about 10,000 rupees. This is severely impacting us,” he said.
Warning that by Monday (28) buses may not be able to find diesel at all, Wijeratne said his association plans to inform the Transport Ministry that private bus owners will be compelled to limit their operations whether it’s short distance or long.
“If this continues, public transport will collapse and the economy will come to a standstill,” he said.
Related:
Address fuel shortage to prevent collapse of public transport: Sri Lanka private bus owners
Transporters were expecting shortcomings in fuel and many have taken up tactics to cope with business. Drivers stated that they would go to many different petrol sheds to get a full tank.
‘’I’ve lost diesel by attempting to find diesel! I went to five cities in search of diesel, only to come home to nothing. I have a couple of buses in the network and a few were not able to run today,’’ mentioned Lakshitha, a private transport provider.
He went on to state that several of his passengers had to resort to working from home, and that many had to use public transport to report to work.
‘’There are were more vehicles in petrol sheds rather than on the road,’’ he added.
On Saturday morning, Sri Lanka’s Indian Oil Corporation unit S raised the price of petrol by 20 rupees a litre to 204 rupees and that of diesel by 15 rupees to139 rupees, amid a rise in global prices.
Sri Lanka taxes petrol at higher rate and diesel at a lower rate, despite diesel being more expensive to import. LIOC previously raised petrol to 184rupees to a litre when state-run Ceylon Petroleum Corporation (CPC) held prices at 177 rupees.
The state-run CPC cannot buy enough dollars in the market at the current 200 to the US dollar rate due to foreign exchange shortages. The shortages come from rupees injected into the banking system to maintain low interest rates which it has pushed up credit and demand for all imports.
Energy Minister Udaya Gammanpila has sought a price increase but the cabinet of ministers last week decided not to raise prices.
The CPC says it is losing 551 million rupees a day due to rising fuel prices in February. Unless prices are increased it cannot find the rupees to buy dollars. In the past, losses were covered by tax cuts and loans from state banks. (Colombo/Feb25/2022)