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The Central Bank of Sri Lanka has imposed import limitations on non-essential goods.

The Monetary Board of the Central Bank of Sri Lanka has decided to impose a 100 per cent cash margin deposit requirement against the importation of selected goods of non-essential/non-urgent nature made under Letters of Credit and Documents against Acceptance terms with Licensed Commercial Banks and National Savings Bank, with immediate effect.

The decision to impose the cash margin deposit requirement is expected to support the ongoing efforts to preserve the stability of the exchange rate and foreign currency market liquidity, particularly by discouraging excessive imports of speculative nature.

The goods on which import limitations have been enforced include telecommunication devices (such as mobile telephones and fixed telephones), home appliances (such as fans, TVs, refrigerators, washing machines, digital cameras, hair clips, heaters, lamps, ovens), clothing and accessories (such as babies’ garments, hosiery, jerseys, nightdresses and pyjamas, overcoats, shirts and blouses, suits, track suits and swimwear, T-shirts, underwear, footwear, watches, sunglasses, other accessories), household and furniture items (such as furniture, lamp and lighting fittings, ornamental products, tableware and kitchenware, bed linen), air conditioners and cosmetics and toiletries.

Archbishop of Colombo His Eminence Cardinal Malcolm Ranjith stated that the Catholic Church had never supported the incumbent Sri Lanka Podujana Peramuna (SLPP)-led Government or President Gotabaya Rajapaksa to come to power but had only criticised the then United National Front (UNF)-led Government.

“We only criticised the Government at the time of the Easter Sunday terror attacks because they knew about the attacks but did not prevent it and did not arrest the perpetrators. In that context, if anyone thought that we supported the current Government, it would be a misinterpretation,” the Cardinal clarified.

The Archbishop stated this addressing a media briefing at the Archbishop’s House in Colombo on Wednesday (8).
Speaking further, he said that they were not even prepared to meet any presidential candidate during that time.

“At the time of the Presidential Election, we were not prepared to welcome any presidential candidate from any political party through the gates of the Archbishop’s House. We defended our neutrality,” he emphasised. “There was even a newspaper cartoon in which it was shown that the gate of the Archbishop’s House was locked, and the then presidential candidates Gotabaya Rajapaksa (incumbent President), Sajith Premadasa (incumbent Opposition Leader) and Anura Kumara Dissanayake (incumbent National People’s Power Leader) were standing outside the gate.”

The Archbishop further said that he had never called on the people to vote for any party, but had instead said that the previous UNF-led Government had not fulfilled its obligations.

“So the candidates said that they would change the situation and ensure national security in the country. That is just what they have said, and not something I have said,” he noted.

Earlier in the same press conference, the Archbishop revealed that the Catholic Church has told the international community that justice has not been meted out to the victims of the Easter Sunday attacks of 2019, and that there are attempts by the Government to undermine the investigation.

The Archbishop made these remarks with regard to reports that the Government has sought an audience with Pope Francis at the Vatican, the centre of the Roman Catholic Church, to brief him on the progress made in the investigation into the attacks.

Sri Lanka’s Parliament on Monday (September 6) approved a national emergency declared by President Gotabaya Rajapaksa on August 30.

The government said the emergency was required to check soaring prices of food and hoarding of essentials by a “food mafia”. But the Opposition said it was “in bad faith, with the ulterior motive of further restricting fundamental rights of the citizenry and moving further in the direction of authoritarianism”.

The emergency has added to the uncertainty of Sri Lanka’s food crisis, which has all the makings of a perfect storm.

Debt, forex crisis, inflation

Sri Lanka is bent by a huge foreign debt burden. It is unable to repay these loans because of critically low foreign exchange reserves.

With the tourism industry destroyed since the 2019 Easter attacks, Sri Lanka had lost one of its top foreign exchange pullers even before the pandemic struck.

The tea and garment industries have also been hit by the pandemic, affecting exports.

Remittances increased in 2020, but are not sufficient to pull Sri Lanka out of its crisis. At the end of July, the country’s foreign exchange reserves were $ 2.7 billion, while it needs to repay foreign debts of about $ 4 billion.

An expected $ 400 million currency swap with India has not yet materialised. In March, Sri Lanka obtained a $ 1.5 billion currency swap deal from China. Last month, Bangladesh gave a first tranche of $ 50 million of a $ 250 million loan swap agreement.

A currency swap is a loan agreement for repayment with interest in the local currency.

The low forex reserves also mean Sri Lanka has been unable to import as much as it used to in the past.

Earlier this year, it stopped imports of vehicles and several other items, including edible oils, turmeric, and even toothbrushes, in a bid to save precious foreign exchange. Sri Lanka imports many of its essential food items, including pulses, sugar, wheat flour, vegetables, and cooking oil.

This is the supply side problem of the crisis.

On the demand side, the printing of Rs 800 billion by the Central Bank of Sri Lanka over the last 18 months to ease the economic crisis has increased liquidity in the economy. But this infusion of money, and the consequent increase in demand without a corresponding increase in supply, has led to a sharp spike in inflation.

This in turn has devalued the currency, made imports costlier, added to the debt and put the forex reserves under more pressure.

The government’s decision, under the emergency, to fix prices of all essential items has further hit imports, as traders are reluctant to buy at high prices internationally without a promise of returns from sales in the markets at home.

In addition, there is a restrictive import licensing regime.

Another emergency, old fears

The emergency has been declared under the legal framework of the Public Security Ordinance (PSO).

Section 2 of the PSO empowers the President to declare a State of Emergency in two situations: when the President is of the opinion that it is expedient to do so a) in the interest of public security and the preservation of public order, or b) for the maintenance of supplies and services essential to the life of the community.

“With the declaration of a State of Emergency on 30th August 2021, the President is now able to promulgate Emergency Regulations dealing with any subject at any given time. Considering Sri Lanka’s history with emergency, other security related laws and legacy of repression, this raises serious concerns,” the Colombo-based think tank Centre for Policy Alternatives noted in a statement.

While the emergency has to be taken to Parliament for renewal every three months, the President is empowered to bring in regulations that do not need parliamentary oversight or approval.

“The importance of ensuring that the extraordinary powers arrogated to the executive through these emergency regulations have to be used purely for the specific purposes recognised by the regulations…must be recognised as a temporary conferral of extraordinary power for the government during times of acute crisis. It should not be considered as a substitute for the ‘normal legal regime’. As such the State of Emergency should be in force only for a limited period of time,” the Centre for Policy Alternatives note said.

It asked citizens to democratically challenge “any measure to stifle dissent, curtail civil liberties and threaten Sri Lanka’s constitutional democracy”.

Sri Lanka was under an emergency for over three decades during the war against the Liberation Tigers of Tamil Eelam (LTTE) until it was allowed to lapse in 2011; and then for brief periods during the anti-Muslim riots in 2018, and after the Easter bombings in 2019.

In Parliament, Opposition members argued that there was no need for an emergency, as other legislation were available to check hoarding and cap food prices.

The appointment of a serving major general as the Commissioner General of Essential Services has raised concerns that the civilian administration is being bypassed.

Memories of another food crisis

The last time the country experienced a food crisis was in the 1970s, during the Sirimavo Bandaranaike government’s experiment with socialism.

The long queues seen outside the government-owned Sathosa grocery shops have triggered memories of the “ship-to-mouth economy” of those days, Colombo’s The Sunday Times said in an editorial, recalling “the precious ration card which provided every family with limited subsidised quantities of rice, sugar, kerosene, flour, and dhal; the endless queues for bread and cloth; and the draconian foreign-exchange controls and exit permits. Senior citizens may well recall how they had to wait anxiously for the next ship to arrive with their food”.

The ban on chemical fertilisers in March, when President Rajapkasa announced that the country would grow only organic food henceforth, becoming the first country to do so, may aggravate the shortage, agricultural experts have said.

The move was aimed at saving foreign exchange in imports of these fertilisers, but it is feared that the sudden mid-crop change, without preparing the soil adequately, could adversely affect yields of vegetables and rice.

Source: The Indian Express

Sri Lanka is facing a severe foreign exchange crisis after the pandemic hit the island nation’s earnings from tourism and remittances, Finance Minister Basil Rajapaksa said.

The government’s revenues were also far short of target as pandemic curbs hurt economic activity, Rajapaksa said during a debate in parliament Tuesday. The country is under an extended lockdown amid a record rise in Covid-19 deaths and hospitalizations caused by the delta variant.

The deteriorating reserves position prompted S&P Global Ratings to last month cut Sri Lanka’s rating outlook to negative. That helped stoke concerns the nation won’t be able to service $1.5 billion of debt due next year, as well speculation Colombo may turn to the International Monetary Fund for support.

Revenue from tourism has fallen to about $2 million a month this year, from more than $450 million two years ago, according to data from Trading Economics. Until recently, travel and tourism accounted for 5% of the $81 billion economy, whose foreign exchange reserves have now depleted to the lowest level since 2009 after repayment of $1 billion of debt in July.

Rajapaksa said Sri Lanka was receiving concessionary funds from the World Bank and Asian Development Bank to help face the pandemic.

“Our policy is to borrow loans with simple and concessionary terms without any conditions that will harm the country’s independence and sovereignty,” he said, without elaborating.

The government earlier this year imposed capital controls as it sought to use its own resources to meet external payment obligations instead of turning to the IMF, whose aid comes with strict conditions.

Prime Minister Mahinda Rajapaksa has not sought a meeting with Pope Francis and neither will he or his delegation be visiting the Vatican during the Prime Minister’s visit to Italy which begins tomorrow, the Daily Mirror learns.

Prime Minister Rajapaksa will leave for Italy tomorrow morning along with Foreign Minister G.L. Peiris and Foreign Secretary Admiral Jayanath Colombage to attend the G-20 Interfaith Forum.

Sources from the Prime Minister’s Office said neither Rajapaksa nor Peiris had sought an audience with Pope Francis and neither will they be visiting the Vatican or hold discussions over the Easter Sunday attacks or brief anyone over the ongoing investigations.

The purpose of the visit is the G-20 Interfaith Forum at which the Prime Minister will deliver the keynote address and even in his speech there is no mention of the probe of the Easter Sunday blasts, the Daily Mirror learns.

The visit will be restricted to the city of Bologna where the Forum is being held.