The Sri Lankan poultry industry expects a 20% drop in production this year as high feed costs hit farms. Ussec Sri Lankan Consultant Athula Mahagamage said the layer industry is feeling the most impact, with many farms shutting.

The chicken meat production has collapsed 30 percent and egg output 40 percent as a currency collapse pushed up costs feed imports were blocked by foreign exchange shortages, an industry official said.

Prices of chicken and eggs have risen in Sri Lanka due to a surplus demand in the market and further price hikes are expected due to a shortage in animal feed, the All Island Poultry Industry Association said.

Ajith Gunasekera, the associationpresident said that the price of an egg has increased to around 62-70 rupees and the price of a one kilogram of frozen chicken has increased to around 1,700 rupees

Gunasekara attributed the price hike to a dearth of animal feed that has made it difficult for the poultry industry to maintain animal stocks in farms, mainly in the SME sector.

“Small and medium farmers are leaving the business due to feed shortages and because big poultry companies are stopping buy back schemes,” he said .

Broiler meat output has fallen 30 percent to 12,000 metric tonnes a month from 18,000 metric and prices have shot up, he said.

As Sri Lanka needs 40 million US dollars a month to import animal products, the country should focus on local production of substitutes to minimise the cost and secure a continuous supply, the All Island Poultry Association said.

Association President Ajith Gunasekera said that with egg and chicken suppliers leaving the market due to lack of animal feed, Sri Lanka is facing issues in supplying eggs and chicken to the local market and the tourism sector which is expected to boom from the third quarter of 2022.

Before the contraction, the poultry industry was able to produce 216,000 MT of chicken and 26.5 billion MT of eggs a year.

However, with the fertilizer ban in 2021 resulting in a drop in crops, the production of maize, an essential raw material for animal feed, dropped.

With the forex issue emerging in March 2022 followed by the Central Bank of Sri Lanka (CBSL) floating the rupee, Sri Lanka put heavy restrictions on imports, resulting in the industry being unable to import animal feed, supplements and medicine.

As a result, local production dropped significantly, resulting in a rapid increase in prices due to high demand.

Gunesekara said the industry is concerned about meeting a possible rise in demand in the coming weeks with more restaurants and hotels mainly in urban areas restarting their business with the anticipated increase in tourist arrivals.

Japanese engineering group Taisei will enter negotiations on a possible stoppage of an airport expansion in Sri Lanka after funding for the project was cut off, another sign of the country’s deepening economic crisis.

Taisei in 2020 won a 62 billion yen ($ 464 million at current rates) contract to build a new multilevel terminal and viaduct at Bandaranaike International Airport near Colombo, Sri Lanka’s largest city. It had expected to complete construction around 2023.

But the Japan International Cooperation Agency recently suspended over 70 billion yen of lending to Airport and Aviation Services (Sri Lanka), the State airport operator, which would have paid for the project.

Taisei will start talks with Airport and Aviation Services to suspend the project, and could request a release from its contract as early as the fall if the funding situation and other factors do not improve.

Sri Lanka’s tourism industry was ravaged by the coronavirus pandemic, which in turn squeezed its foreign-exchange reserves. Combined with years of current-account deficits, the Sri Lankan Finance Ministry in April announced that it would stop foreign debt repayments until it can chart a path out of the crisis.

A Sri Lankan Cabinet Member had recently announced a halt in multiple JICA-funded projects, local media reported.

Former President Gotabaya Rajapaksa, whose family has been a dominant political dynasty in Sri Lanka for decades, fled the country in July amid protests over inflation and other economic difficulties. New President Ranil Wickremesinghe aims to restart bailout talks with the International Monetary Fund and seek aid from other international partners.

The Sri Lankan airport project is believed to account for tens of billions of yen of Taisei’s 221.5 billion yen nonconsolidated overseas balance carried forward, a measure of the scale of outstanding projects, as of the end of March.

“We decline to comment on the progress of individual projects,” a Taisei spokesperson told Nikkei.

A JICA spokesperson said the agency “cannot provide information regarding our borrowers”.

There were 180 Japanese companies operating in Sri Lanka as of July, according to research company Teikoku Databank. Although the impact from Sri Lanka’s crisis has been limited so far “protracted uncertainties in the business environment caused by political instability could affect companies’ strategies,” Teikoku said in a report.