Author: TELO Admin

Sri Lanka’s inflation rate, which dropped to single digits for the first time in months in July, may still face headwinds from rising water, food and energy prices, analysts say, in a challenge for a crisis-hit country seeking to foster growth.

Inflation has dropped sharply in recent months from the 69% hit last September, partly due to the statistical base effect, but also due to a stronger currency and better harvests.

A severe foreign exchange crunch triggered Sri Lanka’s worst financial crisis in seven decades last year, triggering the inflation surge. But figures released Monday showed its key inflation rate nearly halved to 6.3% from 12% in June.

Economic stability has improved since March after a $2.9 billion rescue package from the International Monetary Fund (IMF).

However, the country needs to focus on reducing losses at state enterprises and to pass on energy prices as per IMF conditions which may boost inflation, analysts warned.

“The high base effect issue will finish off in the next two months and beyond that we might actually see a slight upward push in inflation with the currency depreciation and possibly a bit of food inflation coming into play,” said Dimantha Mathew, head of research at First Capital.

“There could be some volatility in the last quarter and inflation could end the year at the 6%-8% range.”

Sri Lanka’s currency has appreciated about 10% this year but analysts are concerned it could come under pressure from stronger import demand in the last quarter.

A government decision to raise water tariffs by as much as 50%, higher global commodity prices and severe dry weather in some rice growing regions will also pressure prices, several analysts said.

Higher global cooking gas costs could also have an impact, Muditha Peiris, head of the state-run LPG company said on Friday, but ruled out immediate price hikes.

The country’s central bank remains confident in the downward trend. It expects the rate to fall within the 4%-6% target band and even dip below it in the next two months.

“But in the medium term we expect inflation will stabilise within the target range of 4%-6%,” P.K.G. Harischandra, head of research at the central bank told reporters on Thursday.

Following the rapid decline in inflation, Sri Lanka’s central bank cut policy rates by 450 basis points in June and July this year, after raising them a record 1050 basis points from April 2022 to March.

The central bank is expected to continue easing interest rates in the second half, Harischandra said.

India has handed over an advance aid of INR 450 million to Sri Lanka to fund its digital identity project, a significant step in its digitalisation programme being implemented through the Indian grant assistance.

Sri Lankan president Ranil Wickremesinghe’s office said that the fund from the Indian government was given on Friday (August 4).

During a meeting at the Presidential Secretariat, key stakeholders, including Presidential Senior Adviser on National Security and Chief of Presidential Staff, Sagala Ratnayaka, State Minister of Technology, Kanaka Herath, Indian High Commissioner, Gopal Bagley, and First Secretary of the Indian High Commission, Eldos Mathew and others engaged in extensive discussions on the project’s execution.

“Signifying the Indian government’s commitment to the initiative, the Indian High Commissioner handed over a significant contribution of Indian Rs 450 million to Minister Kanaka Herath (State Minister of Technology), constituting 15 per cent of the total funds required for the successful implementation of the project as an advance payment,” a statement from the President’s Office said.

Ratnayaka stressed that there should be a well-defined timeline to ensure the project’s seamless execution.

Ratnayaka acknowledged the significance of the project in the economic recovery of the island nation and expressed gratitude to the Indian government for its unwavering support.

“High Commissioner handed over a cheque of INR 450 million to State Minister Hon @kanakadh, in the gracious presence of Hon @SagalaRatnayaka today for SLUDI (Sri Lanka Unique Digital Identity Project) project, which is being implemented through grant assistance by Govt of #India,” the Indian High Commission in Colombo posted on platform X, formerly known as Twitter.

The aim of the project is to collect biographic and biometric information, including facial, iris, and fingerprint data, which will be stored in a centralised system to issue identification cards as per the standards set by the International Civil Aviation Organisation (ICAO).

According to officials, the implementation of the project would lead to more effective and efficient delivery of government services, financial inclusion, poverty reduction.

The project commenced with the signing of a MoU between Sri Lanka and India in March 2022 and an Indo-Sri Lanka Joint Project Monitoring Committee (JPMC) for the Sri Lanka Unique Digital Identity Project (SL-UDI) was introduced.
(Indiatv/PTI)

As per a report of the National Audit Office (NAO), the total losses incurred by the Mattala Rajapaksa International Airport (MRIA) between 2017 – 2022 amounted to Rs. 42.81 billion.

Accordingly, the report indicated that the airport’s operating costs for the year 2022 amounted to Rs. 2.03 billion, which is, in fact, 26 times higher than its income. The airport had meanwhile incurred a loss to the tune of Rs. 22.21 billion last year.

Furthermore, while a rough estimate of one million passengers were expected at the MRIA annually, the NAO report revealed that only a total of 11,577 passengers had travelled through the Mattala Airport last year, while only 103,324 passengers have travelled via MRIA between 2017 and 2022.

The project to initially develop the MRIA costed Rs. 36.56 billion, while Rs. 19 billion had been obtained in foreign loans for the project.

It was further stressed that the MRIA was, in fact a project initiated by the government, and not one which was decided by the Airport and Aviation Services Sri Lanka (Pvt) Ltd.

Meanwhile NAO reports also revealed that the Batticaloa International Airport (BIA), which was opened in March 2018, has totaled an operating cost of Rs. 86 million over the past five years, however has failed to generate any income.

The Ports, Shipping and Aviation Ministry has planned to re-construct the Talaimannar Pier to facilitate passenger vessels from Rameswaram, India after 37 years.

The pier was destroyed and had been abandoned to deteriorate during the conflict era in the north. Accordingly, under the instructions of Minister Nimal Siripala de Silva, the Sri Lanka Ports Authority (SLPA) has been vested with the re-construction of the pier.

The estimated cost of the investment is Rs. 1,800 million. Parallel to the re-construction of the pier, about 10 acres of government-owned land bordering the port will be acquired for port infrastructure development activities.

Under these new developments, a modern passenger terminal and warehouse facilities will be constructed. It has also been decided to call for RFPs for these investments to be carried out under PPP. In the past, a passenger ferry service existed between Talaimannar and Danushukodi.

However, the Dhanuskodi port was completely destroyed due to cyclones. At present, India has completed developments at the Rameswaram Port, and the Indian government has declared clearance to commence a passenger ferry service between Mannar and Rameswaram.

The Minister emphasized that the commencement of the ferry service between Talaimannar and Rameswaram will also facilitate Sri Lankan pilgrims to India by providing low-cost travel facilities.

He also said that these measures will facilitate the exchange of goods between the two countries and will be a commendable opportunity to popularize the products of the people of northern Sri Lanka in India.

India’s newest airline Akasa Air has added a 20th aircraft to its fleet, making it eligible to fly internationally. The carrier, which will complete one year of operations on August 7, has also become the first airline in Asia to have the Boeing 737-8-200.

Indian regulations require airlines to have at least 20 aircraft in their fleet to become eligible for international operations.

“Going from zero to 20 aircraft within 12 months is not just an Akasa record but a record that encapsulates the potential of the country,” said Vinay Dube, founder and CEO of Akasa Air. The airline has recorded the highest on-time performance for several consecutive months in 2023, he added.

The international routes that Akasa would be looking to explore include the Middle East, tips of Eastern Africa, Southeast Asia, Nepal, Sri Lanka and Bangladesh, Dube said in an earlier interview with Skift.

The airline plans to fly international later this year with a fleet of 72 Boeing 737 Max aircraft, with intentions to expand to 100 aircraft by 2025. Last month, the carrier ordered four more planes from Boeing, which are to be delivered in the next four years. It is also looking to hire some 500 employees to its workforce ahead of the international expansion.

Currently, Akasa operates more than 900 weekly flights across 16 Indian cities.