Croplife Sri Lanka an organization with local members of importers and manufacturers of agricultural inputs affiliated to Croplife International recently disclosed that agriculture production cost rose 67% during the last quarter of 2021 whilst production slumped by 54% due to the Government’s decision to ban imports of chemical fertilizer.
“As a result, prices of agricultural produce increased by much as 45% adding to the cost-of-living crisis impacting the country,” the company said at a forum it hosted focusing on the “Role of Agric-Inputs in Food Security” featuring several leading private and public sector experts from the industry.
“The Government was forced to go back on its decision, but its adverse impacts are still felt today and will be for longer,” Croplife Sri Lanka Chairman Chamenda Wijerathne told the forum.
“On the back of this crisis, inferior quality fertilizer, weedicides and insecticides have made their way into the market. Some of them have come in through illegal channels. Due to their low cost some farmers have opted to use these harmful products on fields,” he added.
Noting that farmers lacked proper understanding on how to use these products, Croplife initiated a program to protect farmers, the industry and produce from such schemes. This initiative also encompasses the agriculture ministry and is vital for the sustainability of the industry according to Wijerathne.
Croplife Sri Lanka is the local arm of Croplife International and Croplife Asia. It consists of importers and manufacturers of agricultural inputs registered with the Department of Agriculture and aims to ensure agriculture and farmer sustainability through innovation.
An estimated 6.3 million people in Sri Lanka are facing moderate to severe acute food insecurity and their situation is expected to worsen if adequate life-saving assistance and livelihood support is not provided, the Food and Agriculture Organization of the United Nations (FAO) and the United Nations World Food Programme (WFP) warned in a new report .
Two consecutive seasons of poor harvests led to a nearly 50 percent drop in production coupled with reduced imports of food grains due to foreign exchange constraints, according to the joint FAO/WFP Crop and Food Security Assessment Mission (CFSAM) report.
The report notes that immediate food assistance and livelihood programmes – including through existing social assistance mechanisms – are critical to enable households to access nutritious food – particularly moderately and severely acute food insecure ones.
Without assistance, the food security situation is expected to deteriorate further, particularly during the October 2022 to February 2023 lean season, driven by poor harvests of staple foods, in particular paddy rice, and the ongoing economic crisis.
Sri Lanka‘s agri product price rises by 45 percent due to Fertilizer ban
CB calls upon to publicize action against violators of forex repatriation rules
Sri Lanka Central Bank has been called upon to make public the actions taken by them against exporters, companies and individuals who do not comply with all regulations on foreign exchange transactions, United Federation of Labour (UFL) disclosed.
The country’s monetary authority has so far failed to reveal up-to-date details of measures and the current progress of its initiatives it has taken for non-compliance of its regulations on foreign exchange transactions including repatriation of export proceeds.
The Central Bank has intensified its monitoring on compliance with the relevant requirements with respect to exporters and Authorised Dealers , but its out come was not in the public domain, UFL claimed
The UFL demanded CBSL to take action against non-compliance by directly enabling the Foreign Exchange Department of CBSL to access offshore accounts of the exporters and repatriate export incomes held outside the domestic banking system.
They further urge the CBSL to take action against offending Companies and hold them accountable under the law for flouting CBSL regulations which has threatened the economic sovereignty of Sri Lanka.
According to the information reported by banks, during the first six months of year 2022, a total of US$ 1,533 mn has been received as service exports receipts, of which $ 406 mn has been converted to Sri Lankan Rupees.
The highest monthly service export proceeds of $ 324 mn were received in March 2022. During discussions with representatives of service exporters, they have highlighted the potential to further enhance export receipts
The UFL said the Section 9 (2) of the Monetary Law Act of 1949 (as amended) gives the Monetary Board of the CBSL expansive powers which includes directly accessing offshore accounts and enforcing repatriation of residual incomes of exporters who violated repatriation requirements.
Foreign exchange liquidity shortage in the domestic financial system has led to a crippling scarcity of imported essentials like fuel, medicine, food and fertiliser, stoking inflation of nearly 70% and food inflation of 95% by September this year.
The unavailability of foreign exchange is shrinking production; Sri Lanka’s Industrial Production Index collapsed 14.3% by August 2022.
It is leading to rising unemployment hand in hand with hyperinflation, a situation which economists call stagflation.
Despite the fact that foreign exchange needed to secure essential supply of imports and reduce living costs is critically low, Sri Lanka recorded its highest ever merchandise export income of $ 8.9 billion in Jan-Aug 2022.
Furthermore, foreign debt servicing costs declined sharply following the sovereign default in April this year. Against this backdrop, a trade surplus of $ 21 million in June 2022 was also recorded.
Including the services exports income of approximately $ 2 billion and $ 2.2 billion inflow of workers’ remittances the total non-debt foreign exchange availability of Sri Lanka amounts to nearly $ 13.1 billion against the lower total import bill of $ 12.8 billion in Jan-Aug 2022. Sri Lanka also received a $ 4.2 billion emergency credit line from India during the period.
Nevertheless, CBSL’s foreign exchange reserves diminished to $380 million by September 2022 excluding the $ 1.4 billion Chinese swap facility that is subject to conditionalities on usability.
The domestic financial system is therefore facing the worst foreign exchange shortage since independence while export incomes are the highest in history alongside minimal foreign debt servicing costs.
21A enacted from today!
The 21st Amendment to the Constitution of Sri Lanka will be enacted from today (31), as Speaker Mahinda Yapa Abeywardena signed for it this morning.
MIAP
Is the present CBSL aware of the Financial Literacy? Let us examine
The objective of this article is to highlight the pathetic condition of the survey and research skill at the present Central Bank of Sri Lanka (CBSL) based on publication of financial literacy survey 2021 released on 25th October
The CBSL possess huge institutional memory and skills in the conduct of island wide household surveys and release of publications immensely useful for the policymakers, researchers and the general public. The series of Consumer Finances Surveys since 1953 has been the landmark source of data in assessing the socio-economic progress of the post-independent Sri Lanka. The Statistics Department in the CBSL has emerged to carry out a specialized function of surveys and compilation of socio-economic statistics within the CBSL whereas the Economic Research Department has been focusing on policy-focused research.
Having been engaged in several surveys including Consumer Finances Survey, compilation of statistics and research as well as financial sector supervision duties for nearly 17 years continuously, by reading the above publication, I am at a loss to understand how the CBSL has fallen to this pathetic condition in producing statistical information as part of its public mandate.
Before I provide my comments on the definitions and findings published in the above-stated Financial Literacy Publication, their highlights are given below.
Highlights of the CBSL Financial Literacy
1. Financial literacy has been defined as the combination of knowledge, attitudes and behavior necessary to make informed financial decisions and achieve financial wellbeing. The sample size is 4,800 households, but the total number of adults surveyed to assess the literacy level is not indicated in the report.
2. A single indicator of financial literacy level is calculated focusing on the four fundamental concepts for financial decision making, i.e., numeracy, compound interest rate, inflation and risk diversification. A person was defined as financially literate if that person correctly answered at least three out of these four financial concepts.
3. Accordingly, Sri Lankan financial literacy rate of adults aged 18 and above is 57.9%. It is 55.2% for female and 61.1% for male.
4. The overall financial literacy score ranges from 1 to 21. It is the sum of the financial knowledge score (0 to 7), financial attitude score (1 to 5) and financial behavior score (0 to 9).
- Financial knowledge score is based on basic understanding of financial concepts like inflation (definition and impact of inflation), simple and cumulative interest rates, risks associated with investments (Risk diversification and risk-reward) and borrowing.
- Financial attitude score is based on attitudes towards money, money management and planning for the future.
- Financial behavior score is based on savings, short and long-term investment planning, making rational purchases and keeping track of cash flow.
5. The overall financial literacy score for Sri Lanka is 12.12 which shows an ample space for improving the level of financial literacy.
6. Vulnerable groups based on overall financial literacy score – For this purpose, the scores have been estimated for gender, age group, education level, urban/rural and digital use.
A Few Comments
1. I tried to calculate my financial literacy under three categories/scores given in the publication. However, I could not do it as the questionnaire used for the survey has not been given in the publication. The standard practice used in survey reports is to disclose the questionnaire. However, the CBSL is not aware of this general practice. Therefore, the reader has no way to understand the rationale behind the financial literacy rates and literacy scores given in this publication. Accordingly, the reader without the questionnaire does not have the ability to assess the quality of the survey findings or to interpret the findings for applications.
2. There is no meaning of the overall financial literacy score and the finding that 57.9% of adults are financially literate. In the survey, the sum of three scores as shown in para 4 above is the overall financial literacy score which is 12.12 for Sri Lanka. However, the determination of the financial literacy based on this score has no rationale.
- First, this kind of arithmetic summation of three different scores of different scales has no statistical meaning.
- Second, whether the literacy rises or falls on the score from 1 to 21 is not defined. Therefore, the level of the score used to identify adults as financial literate is not stated. This shows that the financial literacy rate of 57.9% is meaningless.
- Third, the report states that 59.49% of respondents are above the overall financial literacy score 12.12. However, the minimum target score is stated as 14. Therefore, how 57.9% of adults is determined as financially literate is not clear, i.e., whether it is based on the overall financial literacy score or four concepts-based indicator state in para 2 above.
- Fourth, how vulnerable groups are identified from these financial literacy rates are not presented in the report although it is mentioned.
3. The report states that the survey was commissioned to assess the level of financial literacy levels of the population with a view to formulating appropriate policy measures. This is a meaningless statement as literacy scores and findings given in the report are baseless. Further, appropriate measures stated therein are not known or commented. As the CBSL is the apex financial sector regulator, it should propose and implement appropriate policy measures based on these findings so that both financial inclusion and monetary policy transmission are improved.
4. The elements considered in the scores of financial knowledge, financial attitude and financial behaviors are seen to be copied from textbook concepts on financial management in developed countries. For example, risk diversification, risk and return, investment planning, inflation and real value of money are found in complex financial management. Even complex investors have different descriptions, attitudes and behaviors on these strategies. Therefore, asking questions on these matters from persons to identify the financial literacy level in a country like Sri Lanka is highly inappropriate.
For example, everybody knows how prices affect their purchasing power in a market environment. But, they do not know different definitions of inflation and the trend of statistical inflation rates as measured from price indices for the purpose of cost of living monitoring. People who invest in crypto-currencies or Ponzi schemes or unlawful investment schemes (latest Thilini Priyamali and crypto currency scam) do so, not because they are financially illiterate, but because they are risk-taking in finance.
5. Therefore, financial literacy should be surveyed on basic skills available with persons and households similar to the concept of the language literacy (reading and writing of a simple sentence in own language). In that context, financial literacy should be defined to cover the familiarity or the usage of the formal financial system for payments, savings, investments and borrowing. Therefore, the definitions should be based on identified transactions and their frequency.
Accordingly, the financial literacy in the countries with dominance in bank intermediation like in Sri Lanka is primarily to gage the familiarity or skills on financial transactions with banks. Availability of a bank account, habit of deposit and withdrawal, the use of ATM/debit card, bank fund transfers, the use of a credit card, the use of internet/APP based banking, etc., can be listed to assess the levels of literacy from the primitive to the advanced. If necessary, investments in stocks, government securities and other instruments can be added to gage the advanced levels of literacy as defined. Therefore, it is simply the survey of savings and investment covered in the Consumer Finances Surveys plus the skills in new payment instruments.
6. However, the CBSL has blindly followed financial definitions of the US Consultants in assessing Sri Lankan financial literacy and, therefore, survey findings are meaningless for any use other than colorful reports. This shows how the present CBSL has fallen to hands of foreign experts. Further, why this survey was conducted by the Regional Development Department while the Statistics Department specially trained for surveys was kept out is questionable on the ground of misallocation of resources.
Concluding Remarks
As commented above, it is clear that the CBSL also does not understand the measurement of financial literacy used as the benchmark to modernize the financial system of Sri Lanka. The reason why the foreign currency reserve was collapsed to almost zero leading to the economic crisis and default of foreign debt is the lack of foreign currency literacy at the CBSL. Further, skyrocketing of interest rates through the monetary policy is also a result of the lack of monetary literacy at the CBSL.
The CBSL goes for government debt restructuring while restructuring of private sector debt in the domestic banking sector is not facilitated yet. Meanwhile, the CBSL also lost a few billion of investments made with a primary dealer in 2016 which is also a financial literacy problem.
The existence of a huge risk of a banking crisis in the currency context is also a result of the lack of financial system literacy of the CBSL as an apex body of the financial regulator and supervisor in the country. The crisis prevention and resolution literacy is another level of financial literacy in countries.
The CBSL has been engaged in a large number of country-wide awareness programmes to improve the financial literacy of the people during the last two decades. Paper notices and “A Guide to Financial Services in Sri Lanka” (first published in 2002 in all three languages) prepared by me under advice of A S Jayawardena, then Governor, were main actions. The Guide was last updated in May 2017 just before my retirement (but the CBSL web carries the Guide published in 2004) whereas new programmes are not heard.
Therefore, it is proposed that the CBSL conduct periodical financial literacy surveys covering a wider sample to gather data on domestic definitions to initiate policies for financial deepening and improvement of monetary policy transmission in the country.
P Samarasiri
Former Deputy Governor, Central Bank of Sri Lanka
(Former Director of Bank Supervision, Assistant Governor, Secretary to the Monetary Board and Compliance Officer of the Central Bank, Former Chairman of the Sri Lanka Accounting and Auditing Standards Board and Credit Information Bureau, Former Chairman and Vice Chairman of the Institute of Bankers of Sri Lanka, Former Member of the Securities and Exchange Commission and Insurance Regulatory Commission and the Author of 10 Economics and Banking Books and a large number of articles published)
Eshana to be appointed BOI Chairman?
Politics sources say former Pan Asia Bank Chairman and chairman of
National Development Bank and head of Esna Group of Companies Eshana
De Silva is speculated to be appointed as the next BOI Chairman according
to political sources to kick start the investment drive.
Mr. de Silva currently serves in the capacity of Chairman of many Companies including the Esna Group of companies, Hanjin Shipping Lanka, Shermans Logistic (Pvt) ltd, Star Leisure (Pvt) Ltd, Esna Holidays (Pvt) Ltd and as a director of several other Companies such as in the Interocrean Group, in the Sherman Sons Group and of Fortress Resorts PLC. Mr. de Silva was Director of the Board of
Investment (BOI) for 6 years, where he also served as Chairman of the BOI
Audit Committee.
He has also served as a Board Member of the Sri Lanka Ports Authority from 2008-2013. He is the Honorary Consul for the Republic of Kazakhstan in Sri Lanka.
Hatton Office of Tamil Progressive Front opened under Opposition Leader’s Patronage
The Hatton, Nuwara Eliya Office of the Tamil Progressive Front was opened under the patronage of Leader of the Opposition Sajith Premadasa yesterday (30).
The event was organised by Vice Chairman of the Tamil Progressive Alliance and Nuwara Eliya District Samagi Jana Balawegaya (SJB) MP Palani Digambaram and attended by Alliance Chairman Mano Ganeshan and many other political activists.
It was noteworthy that Secretary General of the Ceylon Labour Congress Jeewan Thondaman also attended the event.
MIAP
Decision on bread price today..
A decision on slashing the price of bread will be made during the Executive Committee meeting of the All Ceylon Bakery Owners’ Association today (31), said the Union.
Based on the decision, the price of a loaf of bread may be slashed by about Rs. 10 – 20, they added.
The move will be made based on the availability of enough imported wheat flour in the market, and a final decision in this regard will be announced today, the Union noted.
MIAP
LITRO Chief says no gas shortage, stocks released to market as usual
Chairman of the state-run LITRO Gas Company Muditha Peiris said certain reports on a LP gas shortage being on the rise are false and that the Company is releasing gas stocks to the market as usual.
“We as the LITRO Gas Company are issuing stocks to the market as usual. There are enough stocks available at LITRO. Therefore, we haven’t even resorted to the assumption of the occurrence of a gas shortage. We say with responsibility that that there are enough gas stocks, quantitatively. There is no gas shortage, according to our knowledge,” Peiris said.
The LITRO Chief went on: “We are not sure if someone has deliberately created a shortage somewhere. That being said, we are not sure if the idea of a gas shortage is being planted at certain outlets if they posses no stocks. We uninterruptedly issue gas. Therefore, we are not sure if this was a staged shortage. Otherwise, we cannot accept that there is a gas shortage.”
MIAP
Landslide early warnings issued!
The National Building Research Organisation has issued early landslide warnings to several areas of the country. These areas are of Ratnapura, Kegalle and Nuwara Eliya Districts.
Accordingly people of following areas are advised to be vigilant amidst the risk of landslide occurrence;
Kuruwita, Nivithigala, Kalawana and Elapatha – Ratnapura District;
Deraniyagala, Dehiowita, Ruwanwella and Yatiyanthota – Kegalle District; and
Ambagamuwa and Nuwara Eliya – Nuwara Eliya District
These warnings are in effect till 7 pm tonight (31).
MIAP
Showery conditions expected to enhance due to low-level atmospheric disturbance: Met Dept
Due to a low-level atmospheric disturbance in the vicinity of Sri Lanka, showery condition is expected to enhance over the island, said the Department of Meteorology in a statement today (31).
Showers or thundershowers will occur at times in Northern, Eastern and North-central provinces. Showers or thundershowers will occur elsewhere during the afternoon or night.
Heavy showers about 100mm are likely at some places in Northern, Central and Sabaragamuwa provinces and in Galle and Matara districts.
General public is kindly requested to take adequate precautions to minimise damages caused by temporary localised strong winds and lightning during thundershowers.
Marine Weather:
| Condition of Rain: |
| Showers or thundershowers will occur at times in the sea areas off the coast extending from Puttalam to Batticaloa via Mannar, Kankasanturai and Trincomalee. Showers or thundershowers will occur at several places in the other sea areas during the evening or night. |
| Winds: |
| Winds will be north-easterly or variable in direction. Wind speed will be (20-30) kmph. Wind speed may increase up to 50 kmph at times in the sea areas off the coast extending from Puttalam to Trincomalee via Kankasanturai and Mullaitivu. |
| State of Sea: |
| The sea areas off the coast extending from Puttalam to Trincomalee via Kankasanturai and Mullaitivu will be fairly rough at times. The other sea areas around the island will be slight. There is a higher chance of the occurrence of thundershowers in the sea areas off the coast extending from Batticaloa to Colombo via Trincomalee, Kankasanturai, and Puttalam due to the development of low-level atmospheric disturbance in the vicinity of Sri Lanka. Therefore, naval and fishing communities are requested to be vigilant during the activities in the aforementioned sea areas since there can be temporarily strong gusty winds and very rough seas during thundershowers. |