The Central Bank of Sri Lanka assures that the current economic downturn will ease and the market will stabilize soon.
The Governor of the Central Bank of Sri Lanka, Ajith Nivard Cabraal stated that while the rupee may depreciate in efforts made to give it more flexibility, it could also result in advantages to the country, such as increase in the foreign flow, and in turn, development expected in other sectors.
Taking these issues into consideration, the Central Bank is ready to take decisions according to the challenges that may arise in the future, he emphasized.
The move to devalue the Sri Lankan rupee was aimed at improving macroeconomic stability as the country struggles with its worst financial crisis in years, he added.
The central bank earlier in the week introduced a flexible exchange rate framework, which saw the rupee depreciate by around 30% to 260 rupees against the dollar on Thursday.
“The decision to impose a flexible exchange rate has caused challenges but we are confident these can be managed,” Cabraal said in a short video uploaded on Facebook.
“However, it was a step taken to maintain macroeconomic stability and ensure financial system consistency,” he added.
Sri Lanka’s staple food prices shot up by at least 10-30 rupees each on Friday (11) evening, following a rupee devaluation in the country to control a forex crisis as global commodity prices rose due to Russian-Ukraine war.
The Central Bank of Sri Lanka (CBSL) allowed a flexible exchange rate on Tuesday (07) which has resulted in a 17-percent depreciation in the currency so far.
Dealers said the rupee was quoted around 260/75 against the USD on Friday
The price increase is expected to raise inflation which is already at a record high of 15.1 percent by February 2022, a 14-year high.
Following the devaluation, the country saw commodity prices soar including the price of medicine and air tickets. Three-wheel fares also went up.
“Everything has increased. Tell me what has not increased? Today itself flour, bakery items and diesel and petrol increased,” S.M.D Suriyakumara, Lanka Confectionery Manufacturers Association (LCMA) Chairman,said.
Bread, a staple food of Sri Lanka, will be increased by 30 rupees from March 12 and other bakery products too will be increased by 10 rupees each along with rice packets.
“We don’t have any alternatives in Sri Lanka at present to wheat flour,” N K Jayawardene, the president of the All Ceylon Bakery Owners Association said. “
One of the largest wheat millers, Serendib Flour Mills, has increased the price by 35 rupees according to reports.
Some staff canteens on tender services have decided to reduce the size of the food to stay competitive to manage price shocks.
Rice packets will be increased by 20 rupees and Kottu by 10 rupees while other short eats will be increased by 5 rupees.
Rice packets can be bought at different prices from 150 to 400 rupees in wayside shops, so everything will now go up by 20 rupees.
Egg prices which already rose during the December festival season are trading between 27-28 rupees in the local groceries. Poultry and egg producers have not announced a price increase yet but said they are in discussion to do so.
Sugar wholesalers in the Colombo Pettah market said on Friday that they sold a kilo of white sugar at 190 rupees whereas on the previous day it was at 170 rupees per kilo.
“Everything is going to rise. Rice will increase by 15 rupees; flour has increased by 40 rupees; dhal will increase by 30 rupees, and sugar will rise by 20 rupees traders
Litro Gas Lanka Ltd. says that it has begun the distribution of LP gas cylinders to their dealers countrywide with the aim of easing the current shortage.
Sri Lanka is facing a cooking gas shortage again after the key suppliers have said local commercial banks are not opening letter of credit (LCs) to facilitate imports amid severe dollar shortage.
The island nation’s cooking gas dealers say they have not received the adequate supply now.
The move comes as Sri Lanka’s forex shortage has worsened with lack of US dollars even to import essential commodities like gas and fuel amid expensive global commodity prices after the Russian invasion.
However Litro Gas Lanka Ltd. says a total of 120,000 cylinders of liquefied petroleum gas (LPG) were filled and distributed so far today at its storage terminal in Kerawalapitiya.
The process will continue for the next few days to ease the shortage in the local market, the company said further.
Earlier today, the Litro Gas chairman stated that issues pertaining to the opening of letters of credit and payment for liquefied petroleum (LP) gas were sorted out.
Accordingly, unloading, filling and distribution from the company’s storage terminal in Kerawalapitiya had commenced.
The two LP gas companies in Sri Lanka, Litro Gas and LAUGFS have been encountering issues in supplying the products as the banks were not allowing them to open letters of credit due to the ongoing US dollar shortage.
They also warned of a looming shortage in liquefied petroleum gas in the country as the stocks were expected to run out.
In many areas including Colombo, a number of restaurants and bakeries were compelled to remain closed for several days due to the shortage of LP gas in the market. Meanwhile, some restaurants had resorted to cooking using firewood.
However, on March 08, Litro Gas said a consignment of 2,500 metric tonnes of domestic liquefied petroleum gas was being unloaded from a ship to the storage terminal in Kerawalapitiya. Litro Gas also stated that two other ships carrying LP gas have entered the Sri Lankan maritime border.
Laugfs Gas, Sri Lanka’s only private LP gas supplier in the duopoly market, said there is only a little stock left at present .
“We will see a serious shortage. We have very little stock, only sufficient for one or two days in the port,” W K H Wegapitya, Laugfs’ Chairman, told Economynext.
Laugfs Gas controls around 20 percent of the LP gas market in Sri Lanka while the state owned Litro supplies 80 percent.
Laugfs needs on average 15-30 million US dollars per month to import gas, Wegapitya said.
“We have been supplying around 15,000 tons to the market per month but with this forex issue we are finding it difficult to continue the supply specially with commercial banks not opening letter of credits for us to import gas,” he said.
Laugfs had been able to continue it’s supply in the past month with the support of commercial banks that opened LCs for the company.
“With today’s situation, there will be another shortage of gas by next week,” he added.
Laugfs had also been re-exporting gas to Bangladesh, Africa and Maldives, but that also has been halted.
The island nation already suffered a LP gas shortage late last year after Litro changed the composition in gas which led to several explosions at household level, a commission report has said.
Sri Lanka signed a joint venture shareholders agreement with India to launch the Solar Energy project in Sampur, Trincomalee.
The Ceylon Electricity Board (CEB) and the National Thermal Power Corporation in India (NTPC) were the signatories for the agreement, as enior official of the CEB confirmed.
Indian energy conglomerate NTPC Ltd in a Private-Public Partnership (PPP) has already agreed to establish the new solar park in Sampur Sri Lanka’s Eastern Province, he disclosed.
It will be built on land that was already leased to the company a few years prior for a coal power plant, which was rejected by the previous Government.
NTPC Ltd. is India’s largest power generation utility, with an overall power generation of 60,000 MW in India.
The new solar power park being planned is to be implemented under the guidance of the International Solar Alliance.
India is to set up a solar power park in Sri Lanka as part of a concerted strategy to project its presence in the Indian Ocean region, even as China aims to co-opt countries into its ‘Belt and Road’ initiative.
By leveraging the country’ solar expertise, India’s largest power generation utility NTPC Ltd plans to set up this project in the island nation under the aegis of International Solar Alliance (ISA).
This comes in the backdrop of an increasing presence of China in the Indian Ocean region, which India considers its sphere of influence.
“We are looking at setting up a solar park in Sri Lanka,” said a senior Indian government official requesting anonymity.
State-run Ceylon Electricity Board has an installed power generation capacity of around 35.8 gigawatts (GW). India has been working on improving the energy infrastructure in Sri Lanka.
Petronet LNG Ltd had earlier announced its plans of setting up a liquefied natural gas terminal in Sri Lanka.
India is also exploring the option of an overhead electricity link with Sri Lanka as part of efforts to create a new-energy ecosystem for the neighbourhood.
China is already one of the biggest investors in various infrastructure projects in Sri Lanka.
The proposed solar park follows after state-run NTPC Ltd’s plan to set up a coal-fuelled power project in Trincomalee didn’t make much headway and was eventually scrapped after Colombo asked India to change—for the second time—the location of the stalled $500 million project.
It is nearly two weeks since the war started in Ukraine, a country ten times the area of Sri Lanka, with twice its population. In many ways, its experience seems to have parallels with the Sri Lankan experience – with the notable exception that Ukraine has 15 nuclear power plants that appear to be potential targets in this war, raising the spectre of a nuclear holocaust!
Let me be clear: I am with the Ukrainian and Russian people who are heroically opposing this war, and I stand with all those protesting the unbearable and often intentional burden this war is inflicting on civilians. If there is one lesson we have learned from the past ten decades, there are no winners in wars, and we all lose something besides our humanity.
Condemning aggression is an essential step. Putin’s ultranationalist ideology of bringing back Russia to its Tsar Era ‘glory’ is abundantly recorded in the Western media. Much less visible in this reporting is the hawkish nationalism of the Ukrainian presidents and their rejection of diplomatic solutions in favour of military solutions since 2014. There is radio silence in the mainstream media on the sustained and belligerent search by the US and its allies for enemies/ causes to sustain NATO after the collapse of the Soviet Union, the very reason for NATO’s existence. This war is a product of these three forces at play.
I want to reiterate that nothing justifies invasion. But to avoid potentially catastrophic and eminently preventable conflicts like these in the future, we need to understand how we got to this point.
Media Coverage
Yes, it is indeed not the media that launched this war. Yet, the western media appears to have abdicated its responsibility. Instead of presenting the whole truth to nudge their governments to take diplomatic options seriously, they presented half-truths. They cherry-picked facts to justify the war that the ruling ideology of the West is not too keen to avoid.
There are two opposing schools of thought regarding the backdrop of this war: Those who think that the present situation explains why Europe needs a NATO. Then some believe that NATO should not have continued to exist after the demise of the Soviet Union. Remnants of cold war ideology generated the much-needed enemy to justify NATO and led to this war – in other words, the existence of NATO will generate the reasons for its existence.
I support the latter hypothesis based on the available evidence. None of the US mainstream media provided any coverage of the historic Russian concerns – the exceptions like Democracy Now! and the Nation are too few and have a limited audience. Instead, the media continues to play a partisan role in demonizing Putin and exclusively focusing on his aggression while avoiding presenting the context that seems to fuel his aggression. In short, they continue to act as the voice of warmongers.
Russian-Sponsored Civil War and Ukrainian Intransigence
The Revolution of Dignity in Ukraine [mainly in Kyiv] was triggered by the 2013 decision of the pro-Russian President Yanukovych not to sign the EU-Ukraine Agreement (that would have paved the way for Ukraine to join the EU). Instead, he chose to embrace the Eurasian Economic Union favoured by Russia. In the end, Yanukovych was forced out of office (he fled to Russia). Subsequently, Russia annexed Crimea in 2014 and instigated and continued supporting an uprising in the southern and eastern parts of Ukraine (LPR and DPR).
Facing this aggression, the Government of Ukraine pursued a military option with active support from the US and its allies. For instance, since 2014, Ukraine has received $2.7 billion in military assistance from the US. In 2014, President Petro Poroshenko incorporated the neo-Nazi militia Azov into the National Guard and praised their valour. Ukraine banned the use of the Russian language, including in the primarily Russian-speaking Southern and Eastern regions. Pursuing diplomatic options was not in the cards. The civil war that ensued has taken over 15,000 lives since 2014.
This continued even as the Russian invasion unfolded. The current President banned men of ages between18-60 from fleeing the country; he requested accelerated entry into NATO; and continued to pressure NATO to enforce a no-fly zone above Ukraine. The last one would have escalated this conflict into a European war. A total abdication of statesmanship accompanies the reckless disregard for civilian lives – the statesmanship needed to manage an aggressive neighbour. Sadly, this lack is celebrated as heroism by the champions of this war in the EU parliament and the Western media.
International Anti-war Activism: All Lives Matter
The outpouring of support around the globe to the Ukrainian people is heartening. A colleague of mine shared a message on Saturday asking me to switch off the lights at 8:00 pm for a while- a symbolic No to Putin’s energy supply. I marvelled at the creativity and symbolism. As I turned off the lights at the agreed time, I pondered the ongoing wars and refugee crises. Gradually Yemeni war drifted into my consciousness. It is not too far from Ukraine and has a similar population (30 million to Ukraine’s 43). This war also started around the same time – 2014-15 and has claimed over 18,500 lives. Civilians are targeted in this war as well – for example, the UK-based charity Oxfam noted that in January 2022 alone, there were 48 bombing attacks by the Saudi-led coalition on civilian targets. According to Save the Children, the month of January also saw record deaths and casualties – 599. How many of us would know the extent of deliberate targeting of civilians in Yemen? If we knew that, would we consider a day of a boycott of Saudi oil (not drive cars)? More importantly, how difficult would it be for Yemeni refugees to get asylum in Europe?
I deeply admire the courage and activism of the 13,500 Russians who have been incarcerated so far for protesting against the war despite the harsh measures imposed by Putin. I raise this point not to argue that the international community should pay less attention to this war and the plight of Ukrainian civilians. But to call for a recognition of our own biases, scrutinize our choices, examine the extent of our alignment with the International Order, and remind ourselves that atrocities perpetrated on those who do not resemble us are no less heinous and share our attention equitably.
The Outcomes of this War
It is doubtful that absolute victors and losers emerge at the end of this war. Russia would like to force Ukraine to revert to its satellite status of the Soviet era, which would require occupation. It would want to make an example out of Ukraine for the other countries in its ‘sphere of influence’. In its version of the International Order, they all need to reverse their course of joining the EU and avoid hostile military alliances (no NATO, no presence of hostile missiles, no military advisors, etc.). On the other hand, the US and its allies would like to enforce their vision of the Unipolar World Order and assert their monopoly of violence through punitive sanctions so comprehensive that will deter Russia from pursuing this war and other acts of aggression without their sanction.
When the dust settles, we will likely see neither side fully achieving its goals. For instance, Russia should recognize by now that reverting to the Soviet Era situation is not feasible. Given the resistance it is facing in Ukraine, installing a puppet regime is not a viable long-term option. It may have to settle for the neutrality of Ukraine (no joining NATO or hosting hostile long-range missiles). And the West will recognize the limitations of the efficacy of sanctions against a determined economic and military power.
The West and Ukraine have to come to terms with the fact that even severe sanctions are not likely to bring about quick results. Sanctions will hurt Russians considerably in the long run, but the current call for all countries by Biden to ban all oil imports from Russia is wrong-headed. It neglects the lessons from the OPEC oil embargo of oil in the ‘70s that resulted in a global recession and prolonged stagflation. Already, economies are reeling under the COVID shock. Oil price shock is the last thing the globe needs now.
While it’s hard to predict exactly how things will change, some areas of potential shifts are worth considering. The media punditry is too busy war-mongering to worry about such trivialities; hence we have to do it ourselves.
A Unipolar International Order
The first casualty could well be the existing Unipolar International Order – using the collective military and economic
might to maintain a monopoly of global governance of trade and finance – of setting the rules of the ‘game’. While there may be no radical changes immediately, the tendency to fray at the edges will accelerate. Militarily, Russia already challenged this Order in Syria rather successfully (much to the detriment of the Syrian people). But the Order believes in the longer-term power of sanctions over short-term military losses.
Europe may begin to bolster its defence under the leadership of Germany and eventually provide an alternative to the NATO/US dominance. Already Trump (or one of his clones) is knocking at the doors of the US presidency in 2024. Trump has never hidden his admiration for Putin. Europe can no longer count on the US for its security. Recent statements of Germany points to its willingness to assert itself.
To what extent lessons from this war will embolden China and allow it to be better prepared when it challenges the Order as it carries out its own agenda of expansion in the South China Sea and Taiwan? In other words, to what extent will this war empower China to test its own might as a world power as it accelerates towards becoming the largest economy in the world?
To what extent other ex-Soviet bloc countries will be able to pursue an independent path to join the EU and NATO in the future? This is linked to a number of factors:
To what extent will Europe be willing to put boots on the ground to defend these countries when Putin sends his tanks? NATO actions have made it quite clear to Ukraine and any potential newcomers that it will not fight for them. And that while sanctions take time to take effect, the consequences of war are immediate and harsh.
The level of resistance Russia encountered during this invasion could make him realize that his original plan of occupying Ukraine and installing a puppet regime was not viable. Sooner or later, he may have to settle for a ‘neutrality’ position of Ukraine and withdraw from the country. This would mean that Ukraine agrees not to join the NATO or host hostile missiles against Russia.
If he succeeds in Ukraine, to what extent will Ukraine be a deterrent for the ex-Soviet bloc? If it doesn’t function well enough as a deterrent, will Russia exercise further military aggression?
A relevant question is: Will Putin be able to repeat such aggression in the future, given the internal resistance he faces against these aggressive expansionary tactics? Unlike the Crimean war, which had broad support within Russia, a war with Ukraine appears to have had little popular support before the invasion. With rising casualties, this opposition will continue to mount – Russia has admitted to losing 500 soldiers so far, but the actual figure could be much higher; as mentioned, despite the strict censorship (media is not allowed to use the word ‘war’ to describe the invasion) and draconian measures to suppress dissent, public protests are erupting in Russia – last Sunday alone 5,000 protesters got arrested, bringing the total to over 13,500; even the allies of Putin such as the Russian Orthodox Church have come out in opposition to the war. Finally, the war also might have disabused Putin of his illusion that the peoples of these countries are interested in joining his grand Russian empire.
Towards a Bipolar Global Financial System – Dollar and Renminbi
A second impact will be further gains to Renminbi as a reserve currency, though the dollar still remains the dominant global currency. Russia and similarly sanction-prone countries may seek to de-couple from the dollar and seek alternatives to protect their assets. Since the 2014 sanctions after illegally annexing Crimea, Russia has diversified its $630 billion liquid reserves – it reallocated over 55% of its reserves, and Renminbi has benefitted from this shift. As the largest trading nation and the second-largest economy, China’s push to make the Renminbi an alternative reserve currency will be boosted by this spurt of sanctions we have been seeing in the past two decades.
Collateral Damage
Rising fossil fuel prices will have the relative effect of strengthening Russia at the expense of the rest of Europe. Despite Rouble plummeting 35% (and Russian stock markets getting pummelled), crude prices have climbed well over $100 / barrel and, if 2014 is any indication, go North of $150/ barrel. Unless Iran sanctions are lifted shortly, and Saudi Arabia can be persuaded to ramp up its oil production, supply is not likely to increase. Therefore, prices will remain high throughout the war.
The recent move by the US and UK to impose a ban on Russian oil will have minimal effect on the oil and gas revenues of Russia since the imports from the US and UK are miniscule compared to its supply to Europe. However, record level gas prices that the US is seeing may cost Biden the mid-term elections (which would have happened anyway). Many are betting on a longer term inflation in the US as a result of higher gas prices. If this were to happen, it may cost Biden his next Presidential elections.
Higher fossil fuel prices will tend to push prices of many essential items higher, including food prices. Moreover, Russia and Ukraine together account for a quarter of the global wheat trade. Even the more affluent nations will see their central banks struggling to cope with the already high inflationary pressures with little wiggle room to combat this shock. But the biggest casualty of this war, besides the millions of Ukrainian civilians, will be the poor across the world, particularly those in the poorer nations whose economies are already buckling under the COVID shock – an additional 122 million people were pushed below the poverty line during the last two years, reversing the trend in the previous decade. In the coming months, the current hike in fuel and food prices are likely to push millions more into abject poverty and starvation.
In Summary: The existing International Order is a loose bundle of rules established by the powerful countries. This Order is blind to how it affects the lives of those in the less powerful nations. Putin is correct about calling out the hypocrisy of the current Unipolar Order (America and its allies calling all the shots) as evidenced by the invasion of Iraq (remember weapons of mass destruction?), Afghanistan, the War on Terror, and the list go on. These instances show the fundamental nature of the Order – it is always about their immediate interests—Right and Wrong matter only when they are not too inconvenient for those interests of the powerful players. Putin’s Russia wants to be recognized as part of this club as before. The plight of Ukrainians is collateral damage in this ‘jostling for position.’ This will not be the first nor the last such instance.
With the signing of the Line of Credit for US $500 million, Exim Bank, to date, has extended 10 lines of credit to the Sri Lankan government on behalf of the Indian government, taking the total value of LOCs extended to $2.18 billion, a release said.
Projects covered under the LOCs extended to Sri Lanka include the supply of petroleum products, railway projects, defence and infrastructure projects.
The Reserve Bank of India has issued a notification to all banks in India on the $500m line of credit offered to Sri Lanka.
The bank said that the Export-Import Bank of India (Exim Bank) has entered into an agreement dated February 02, 2022 with the Government of Sri Lanka, for making available to the latter, a Government of India supported Line of Credit (LoC) of USD 500 million (USD Five Hundred Million only) for the purpose of financing purchase of petroleum products from India.
Under the arrangement, financing of export of eligible goods and services from India, as defined under the agreement, would be allowed subject to their being eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this agreement.
Out of the total credit by Exim Bank under the agreement, goods, works and services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India, and the remaining 25 per cent of goods and services may be procured by the seller for the purpose of the eligible contract from outside India.
The Agreement under the LoC is effective from February 18, 2022. Under the LoC, the terminal utilization period is 6 months from the date of signing of LoC agreement or such other extended date which Exim Bank may agree at the request of Borrower, provided however that such extended date shall in no case be beyond 12 (twelve) months from the date of LoC agreement.
Shipments under the LoC shall be declared in Export Declaration Form as per instructions issued by the Reserve Bank from time to time.
No agency commission is payable for export under the above LoC. However, if required, the exporter may use his own resources or utilize balances in his Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange.
Authorised Dealer (AD) Category- I banks may allow such remittance after realization of full eligible value of export subject to compliance with the extant instructions for payment of agency commission.
India and Sri Lanka are to further expand cooperation in the petroleum sector to help overcome the present crisis in Sri Lanka.
The High Commissioner of Sri Lanka to India Milinda Moragoda met with the Minister of Petroleum & Natural Gas and Housing and Urban Affairs of India Shri Hardeep Singh Puri, today (10th March ) at the Ministry of Urban Affairs in New Delhi.
India has provided to Sri Lanka as envisaged under the four-pillars of cooperation, agreed during the visit of Sri Lankan Finance Minister Basil Rajapaksa to India in December last year.
in particular the USD 500 million line of credit has been approved to purchase petroleum products. Additional assistance too has been provided by India to enhance Sri Lanka’s petroleum stocks.
High Commissioner Milinda Moragoda also briefed Minister Puri on the challenges that Sri Lanka is currently facing as regards to the supply and distribution of petroleum products and their impact on the country’s energy sector.
The High Commissioner and the Minister discussed modalities through which India and Sri Lanka could further expand cooperation in the petroleum sector to help overcome the present crisis.
The discussion also focused on a range of issues pertaining to the energy sector, including ways and means through which Sri Lanka could establish long-term strategic ties in the petroleum, oil, gas and related logistics sectors.
Minister Hardeep Singh Puri was a distinguished career diplomat prior to joining politics. He had served at the High Commission of India in Colombo during the period 1984-1988.
India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC. In 2020, India was Sri Lanka’s 2nd largest trading partner with the bilateral merchandise trade amounting to about USD $ 3.6 billion.
Sri Lankan exports to India have increased substantially since 2000 when ISLFTA came into force and more than 60% of Sri Lanka’s total exports to India over the past few years have used the ISFTA benefits.
Interestingly, only about 5% of India’s total exports to Sri Lanka in the past few years have used the ISFTA provisions, thereby indicating their overall competitiveness in the Sri Lankan market.
In addition to being Sri Lanka’s largest trade partner, India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka.
A number of leading companies from India have invested and established their presence in Sri Lanka. According to BoI, FDI from India amounted to about US$ 1.7 billion during the period 2005 to 2019.
The main investments from India are in the areas of petroleum retail, tourism & hotel, manufacturing, real estate, telecommunication, banking and financial services.
Similarly, investments by Sri Lankan companies in India are also surging and taking advantage of India’s dynamic economy and wider market.
Significant examples include Brandix (about USD 1 billion to set up a garment city in Visakhapatnam), MAS holdings, Damro, LTL Holdings, and other investments in the freight servicing and logistics sectors.
Despite an increase in users shifting to cashless transactions, Sri Lanka banks are facing a shortage of new ATM cards as its suppliers cannot import plastic resin cards owing to the present dollar crisis at present, several General Managers of banks disclosed.
Some of the local banks have suspended the issuance of new credit and debit cards or renewal of the ATM cards on expiry, pushing account holders into difficulty since a couple of months ago.
Under this circumstance, these account holders had to vist banks for their financial transactions, spending their valuable time in bank counters.
State owned banks are facing more shortages compared to commercial banks. There is also a shortage of SIM cards powered by chips. The chips are mainly imported from China.
It is learned that several branches of banks have started to run out of stock .There are also several complaints lodged against those suppliers, who have increased the price for cards supplied to banks by taking advantage of the current situation.
Driven by significant chip shortages, hundreds of payment cards are at risk of not being issued over several months,a senior banker said.
It has been well documented that the entire semiconductor industry is currently going through a high level of uncertainty as demand for chips continues to far exceed all expectations across all industry segments.
Supply cannot currently keep up with increasing demand and the payment cards industry is by no means immune from this situation.
Local banks have raised concerns on the usage of debit and credit cards for foreign currency transactions due to the current volatility in the market, and have started taking on their own a set of measures to minimise the hit on the sector.
Sri Lanka Bank’s Association (SLBA) said that individual banks have taken necessary measures to limit foreign currency transactions via debit and credit cards.
“No common decision has been made but there were concerns raised with regard to debit and credit card transactions overseas.
This was due to the recovery process and billing issues among other areas of concern,” said a SLBA high official. He pointed out that banks are concerned with the usage of debit and credit cards for overseas transactions largely due to two reasons.
The first is the issue with electronic fund transfer facilitator Visa. As it pays the rates as per rates published by the Central Bank of Sri Lanka (CBSL), the difference in rates that prevailed in the market some time ago created an issue for banks.
Now it is back to normal but earlier when Visa settles to the bank with the CBSL published rate, we had to settle at a different rate from the customers which was creating a problem for us,” he explained.
The second is that due to import restrictions, banks are watchful and want to ensure that the cards are not used for unacceptable foreign currency transactions.
Furthermore, he stated that a collective decision on settling limits would depend on the value and volume of foreign currency transactions happening through the cards.
“Cyber threats and other factors are also being considered at the moment but it depends on the extent of the transaction,” he added.
He asserted that although banks are exercising caution, no limitations would be imposed on transactions made by education, hospital, airline, insurance, and hotel merchants.
He also pointed out that as several media reports highlighted that banks were charging an additional fee for foreign currency transactions, banks have held active discussions in that regard and are exploring avenues to best manage the situation.
The Asian Development Bank (ADB) President Masatsugu Asakawa arrived yesterday in Sri Lanka and reaffirmed the multilateral organisation’s support for a quicker socio-economic recovery amidst challenges.
Asakawa called on President Gotabaya Rajapaksa yesterday and during the meeting reaffirmed ADB’s support for Sri Lanka’s recovery path from the coronavirus disease (COVID-19) pandemic.
Asakawa commended the Government’s rapid vaccination drive, which has been critical to managing the spread of COVID-19 and kick-starting economic activities amid social, fiscal, and debt challenges.
“Sri Lanka is managing a number of complex challenges raised during the COVID-19 pandemic, including through necessary efforts to restore fiscal and external balances while containing inflation,” Asakawa said.
“ADB is committed to supporting the Government in addressing the present challenges and striding toward green, resilient, and inclusive growth as well as sustainable energy transition.”
Asakawa is on a two-day visit to Sri Lanka, his first visit to South Asia since assuming office in January 2020.
In meetings with Prime Minister Mahinda Rajapaksa and Finance Minister and Chair of the ADB Board of Governors Basil Rajapaksa, Asakawa highlighted the need to underpin sound macroeconomic management with structural reforms. ADB is preparing a new country partnership strategy for Sri Lanka to support its National Policy Framework and medium-term development targets.
Together with ADB Director General for South Asia Kenichi Yokoyama and ADB Secretary Muhammad Ehsan Khan, Asakawa reviewed preparations for the 55th Annual Meeting of the ADB Board of Governors to be hosted by Sri Lanka in September with the theme of “Positioning Climate Resilient Green Economy for the Post COVID-19 World”.
During his visit, Asakawa will inaugurate Sri Lanka’s first microgrid system and the associated research and development lab at the University of Moratuwa.
The system can operate in both grid-tied and off-grid modes. The pilot, financed under the ADB-assisted Supporting Electricity Supply Reliability Improvement Project, has the potential to be replicated and contribute to a green and climate resilient future.
He is scheduled to visit the Colombo Port and the Port Access Elevated Highway Project, which provides a direct link to the port from the expressway network. Colombo Port received support from ADB to improve container handling capacity and is now one of South Asia’s few deep-water ports strategically linking the key Asia–Europe shipping route.
Asakawa will also visit the ADB-supported molecular polymerase chain reaction (PCR) laboratory at the Colombo East Base Hospital. The laboratory – the largest in the country – was established in 2020 to support Sri Lanka in its response against the COVID-19 pandemic.
ADB is a long-standing partner of Sri Lanka, which is a founding member of the institution. Since its first loan to Sri Lanka in 1968 to help modernise tea factories, ADB has funded projects in a variety of sectors such as agriculture, rural development, water, transport, and energy.
ADB has provided cumulative assistance of $11.3 billion, including both sovereign and non-sovereign projects and programs. ADB’s Trade and Supply Chain Finance Program (TSCFP) has supported transactions valued at $ 6.9 billion, of which $ 1.26 billion was for essential goods imports in 2021 including vaccines and other medical and pharmaceutical products.
During the pandemic, ADB provided $ 150 million to support the country’s vaccination drive, and additional loan and grant funds to procure medical supplies and materials to increase the screening and testing capacity across the country, expand intensive care services, and upgrade emergency treatment units and inpatient hospital wards. TSCFP also supported import of vaccines totalling $ 160 million.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members – 49 from the region.
Minister Pavithra Wanniarachchi says that immediate steps will be taken to obtain at least 1000 megawatts of capacity from renewable energy to the national grid within this year to provide an uninterrupted power supply without any crisis.
The Minister said this while inaugurating the construction work of the Cardiology Unit of the Ratnapura Teaching Hospital which is being constructed with a financial allocation of Rs. 1075 million this morning (11).
She said that when she was the Minister of Power and Energy in 2014, the Ceylon Electricity Board was transformed into a Rs. 15 billion profit making institution.
The Minister said that the Government of India had worked with the Government of India to develop the 900 MW Sampur Power Plant and had prepared a tender document but it was not operational and no electricity would be generated to meet the needs of the country except during the rainy season.
