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Gamini Lokuge new Energy Minister. Pavithra Wanniarachchi new Power Minister

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Gamini Lokuge has been sworn in as the new Minister of Energy, in the new Cabinet reshuffle.

Pavithra Wanniarachchi has been sworn in as the new Minister of Power.

Udaya Gammanpila previously served as the Energy Minister.

S.B. Dissanayake to be given a Cabinet Ministry!

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The long-conversed cabinet reshuffle is set to take place in a while today (03), following the dismissal of Cabinet Ministers Udaya Gammanpila and Wimal Weerawansa from their ministerial portfolios.

Accordingly, Ruling Party MP S.B. Dissanayake is believed to be given a Cabinet Ministry, most likely the Cabinet Ministry of Education or the Cabinet Ministry of Higher Education.

Gammanpila and Weerawansa ousted from ministerial portfolios

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Ministers Wimal Weerawansa and Udaya Gammanpila have been removed from their ministerial portfolios with immediate effect, following months of criticism levelled against the government by the two government minor party leaders.

The ongoing criticism levelled against the regime by the two figures have also affected the performances of their ministries as well, hence the dismissal, according reports.

Weerawansa served as the Industrial Minister and Gammanpila the Energy Minister.

MIAP

UNP Leader Wickremesinghe comments on Russia-Ukraine armed struggle and its impact on Asia

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Leader of the United National Party (UNP) and former Prime Minister MP Ranil Wickremesinghe held a discussion with the Sri Lankan youth regarding the armed struggle in Ukraine and its impact on the Asian region.

The discussion was moderated Ishini Kaveesha based on various queries raised by the youth community through Social Media.

Before the war between Ukraine and Russia began, there was much negotiation. In your opinion could it have been avoided?

This war could have been avoided; it was avoidable. If we go back Ukraine is basically a part of the old Soviet Union. Russians think of Ukraine like we think of Kandy. The breakaway took place and at that time a fair number of the Soviet nuclear missiles were in Ukraine. The U.S. asked Ukraine to give it up, and in return they (Ukraine) got a guarantee of their sovereignty. Russia also joined that, that was done in Berlin, I think it was the Berlin Agreement. Thereafter, there were problems between Russia and Ukraine because NATO wanted to bring in missiles, and that is part of the old Soviet Union territory, which they should not have done. This went on for some time, and then there is the famous case of Russians taking over Crimea, which originally belonged to them and then they got into Donbas and other areas. Lets leave that aside. So when it came here, it was a question of are you going to join NATO and put missiles here. Russians said no. Now President Obama and President Trump got through it, they did not concede the Russians claims. On the other hand, they did not make Ukraine an issue. So there was room for negotiations to settle it later. Especially President Trump reached out and had a good rapport with President Putin. Now after President Biden came in, his foreign policy seems to be to take on both Russia and China. He wants to be the defender of the Western Order.

Recently Russia and China signed an agreement which is called the “no-limit friendship”, which is a friendship without limits and boundaries or prohibitions. Thereafter Russia was emboldened further to ask that nuclear missiles not be put in Ukraine and Ukraine should not become a member of NATO. The U.S. and U.K. not the other NATO members, tried to play their own game and corner Russia and make Russia back down by getting Ukraine to say they want to be part of NATO and not give in to your demands. They expected Putin to climb down. Putin thought was ready, or thought he was ready, and he invaded Ukraine. So the real issue is about the security of Russia and what are they going to do. They took the West and the Americans by surprise.

Russians have intervened as the Soviet Union in East Germany, in Poland and in Hungary when Hungary tried to join NATO, and Czechoslovakia in 1968. What is happening there? I think the Russians have got in there and what will happen to Kyiv? The last time in 1941 during the battle of Kyiv the Germans surrounded Kyiv, they never took it over. So Russians maybe trying to do this and they are surrounding cities but how much they come into the cities I don’t know. But this seems to the policy they are following. This is what the war is and it could have been avoided but it was not. Because America tried to test its strength, and now Putin is responding to it with his strength. Fact is America is more powerful, but Putin has the second largest nuclear arsenal in the world and the dangers lies there.

Now that sanctions have been put in place from the West, do you think the war from Russia’s side will stop?

I do not think so. The sanctions were the only remedy that the West could use, because when they were caught with the Russian invasion what could they do? They were not prepared to fight, Europe was not going to fight and America was not going to fight. Their mood is not for a fight. So the only action President Biden had was sanctions. They were talking of sanctions, but they have gone beyond the normal sanctions, bringing in SWIFT and others. They are not trying to use the sanctions on Russia in the hope that the Russian President will be brought down by the Russian people, that it will turn bad for them (Russia) and that Putin will lose his position. But there is another side of politics to it, because Boris Johnson was about to lose his position as Prime Minister of the United Kingdom, now he is upping it so he will go up in the polls. He has already climbed about 6 or 7% and he is taking a tough line. For President Biden also he is in a problematic area. (Former) President Trump says there was no war in my time and I knew how to deal with Putin and handle Ukraine. So he had to show he can bring results, and he needs to bring results quickly because he is going to lose in the midterm elections. So he is pushing hard on the sanctions thinking Russia will come down and he can save himself. Basically many of the issues will be domestic issues, and the Republicans won’t be unhappy if the Russians stay on in Ukraine a bit longer because they can get the advantage of it. The third man with elections if President Macron of France. But he is playing a different role, he is showing that he can talk to Russia, he can talk to the West and he can talk to China. So he is telling the Frenchmen that if you remove me you will not have a leader who is recognised globally. So he is playing a different game to the other two. The Australian Prime Minister Scott Morrison is also having elections and he is also upping his stakes to show he can be tough on China. But all this means is that we do not know where this will end. They are playing for their politics, and this will bring the total global economy. The question of whether SWIFT should be utilised for political purposes is coming up.

Anyway this will be a hit on the Western economy also, and whether economies can recover and whether their COVID recovery will get knocked back is another issue. So sanctions itself is becoming more complicated and the issue is why are countries not involved with this also prevented from doing transactions with Russia. That is a big issue for countries not involved, so all that is coming up. It may also lead to the questions of how the West is using its economic power and how do you respond to it. Already other countries are raising this issue.

Why has China and India refused to support sanctions against Russia?

China has the “no-limit friendship” with Russia and they say that there are reasons why Russia acted, but they are not defending it and that they should stop the fighting. So is India. Also, remember India is very close to Russia and so is China. They are members of the Shanghai Co-operation Organisation together with Pakistan, Iran and the Central Asian republics. So Russia is getting help from there, they are not turning against them. So what has happened is the Shanghai Co-operation Organisation is holding. The issue is for the Quad, India is a member but they have not taken the same line as the US. It is not in India’s interest to go along here.

There is a bigger issue than India and China, the fact is Asia is silent. They haven’t condemned Russia the way America expected them to. They have raised the invasion. In the Security Council India, China and UAE are all silent. They were non-committal. Indonesia, the leader of the G20 is non-committal. Pakistan is also going around Russia. So it looks like most of Asia is going along with Russia. Now that is what is important, because Asia counts today. Everyone is neglecting this, nobody wants to report it.

There is another issue that has come up, and we in Asia need to think about. This is the third conflict in Europe. Where will it end? The first was World War 1. They could not sort out how to carry out the investigation into the assassination of the heir to the Astro-Hungarian throne. As a result the first world war broke out. Serbia and Russia on one side, Austria and Germany on the other and then France and the U.K. joined. They could not control it.

The Second World War also started in Europe and by 1940 the Germans controlled all of Europe, and Britain was actually isolated. Britain could not have survived until 1942 when Russia and America came into the war without the help of the Asians. South-Asia alone gave about 2 ½ million soldiers, and many of the resources came from Asia along with Africa, Australia and Canada. But without this Britain could not have survived without its empire. When the war was on remember about 5 million Chinese, between the Nationalists and the Communists tied down the Japanese. So the land war was basically 5 million Chinese tying down the Japanese in the continent and the British 14th Army with the Indians tying it down in Burma.  This allowed the Americans to go up, the U.S was able to destroy the Japanese army. But without it the war would not have been won. The French lost their territory and started a Government in exile, the Free French. They only have a building in London. Then they asked all the French colonies to support the Free French. All the Frenchmen who were Governors said no, there was on African governor, Felix Oboue of Chad, he declared for Free France and that’s how the French came up. Europe was under the Germans, it was here who gave the manpower to help get Europe liberated and the Europeans and Russians made the next world order. That ended in ’89, but nevertheless the West and Russia has been running this. Now we are finding that they are bungling and they are going for a third conflict. If it is not a world war, at the moment nuclear weapons are not being used, certainly there will economic havoc. This means that within a century Europe is unable to control their conflicts and they are trying to come out. In this case Asia is coming up. Many of us feel Asia must step up and say this is no longer your issue, this is our issue and we do not want to go to war. We are not allowing the West to run it the way they want, we must all get involved.

Asia staying silent is an issue cause the African Union has also not taken part, Brazil and Argentina have supported US but the Mexicans have stayed out. I do not think it is about the Russians, because everyone has accepted the fact that Russia has invaded Ukraine. We know they have had a problem, but the problem is not that, if you ask everyone they will accept Russia has invaded Ukraine. The problem is that they do not approve of what the West is doing, so everyone is staying silent. The Asians are saying look we are the most powerful countries now, our economies are growing we cannot get affected by this we cannot have a world war. We have our disputes but they have not gone to this extent. China and India have had problems in the Himalayas but somehow they have managed to sort it out. But on this main issue they want to start a world war to win their elections. Therefore, the Asian view is that we cannot only allow the West to decide the rules of the world. Asia must come in, and that is a view I have and many others have. The Government of Sri Lanka has been non-committal like all the others, such as Bangladesh. Some of them who have commented have not said who has invaded whom, the invasions are bad and the war must stop. This is what the media is not highlighting, cause the West cannot accept that Asia today is also calling the shots.

Sri Lanka is highly reliant on Russia and Ukraine in regards tea and tourism, how will this war affect our economy?

We will get affected, though it is not as big as our exports elsewhere. Especially the tea, the low country and mid-grown tea goes to countries such as Russia, and we cant send it there. This means that a lot of the low-grown and mid-grown smallholders’ families will be having problems. So will the factory holders, that is the big one.

Secondly they will have an impact on the global economy. We still do not know how it will work cause the Western economies will also get affected, inflation will be high there. It is not only a Sri Lankan issue, there are specific Sri Lankan issues but there are others as well.

How can our economy not be affected by this war?

Everyone will be affected by this, it is how we go out. But there are a lot of potentials for Asia to think on its own. Firstly, no one wants SWIFT and others to be used as a political weapon. If US and UK want to place sanctions against Russia, that is there business. But we should not be stopped from trading with Russia and others. It is a globalised economy where we agreed they would run the system, but if it is going to be used for these purposes where we lose then I think Asia has to look at another system. China is starting a China-centric one, some of the others may not want a China-centric one, but will want one that is acceptable to all. I think Africa may also join it. That is where the power is. The West is losing that power it had. The globalisation that they put together they are now taking apart. The West is controlling the instruments of globalisation and finance, if you look at Dubai, they can develop because they have not got involved. People are already saying Dubai’s international financial centre is safer, that Dubai does not play any politics at all. Now if you look at London as a financial centre, many of the businesses used to send their money there, and from London they would deal with Russia and others. Now when London stops all those transactions, London will lose out as a financial centre. They already lost out on BREXIT, and they will lose out some more and Dubai will really develop.

I really feel we must look at alternate systems, in ten years I feel Asia will be capable of putting it into order. This is a big risk that the Americans had not looked at. Their dominance of the instruments of Globalisation, if you look at their I.T. it is no longer relevant. If you look at Western media it is not being accepted in Asia, it is Al-Jazeera and here we watch the Indian TV. The Western Power is being reduced, in my view I think that it will be an ideal time when this confrontation comes to an end that Indonesia, who is the chair of the G20 and is also where the first Asian conference was held, should get together with China, India and UAE to summon a conference of all Asian nations and re-invent Asia. They were the ones who hosted Bandung Conference, and so they should take the lead and call for such a conference.

Thank You Mr. Wickremesinghe for your point of view.

Thank you for asking the questions.

President appoints 13 High Court Judges

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President Gotabaya Rajapaksa has appointed 13 High Court judges this morning. The appointment letters have been issued to these judges.

Accordingly, 08 district judges, a chief magistrate, two magistrates and two senior state counsels have been promoted as High Court judges.

New High Court Judges:

A.G. Aluthge – District Judge
R.R.J.U.T.K. Rajakaruna – District Judge
R.A.D.U.N. Ranatunga – Magistrate
T.M.C.S. Gunasekara – District Judge
M. Prabath Ranasinghe – District Judge
R.M.S.B. Chandrasiri – Chief Magistrate
R. Weliwatta – District Judge
G.L. Priyantha – Magistrate
A. Nishantha Peiris – District Judge
S.M.A.S. Manchanayake – District Judge
L. Chamath Madanayake – District Judge
V.M. Weerasuriya – Senior State Counsel
H.A.D.N. Hewawasam – Senior State Counsel

The President noted that he hopes to protect the independence of the judiciary, establish the rule of law in the country and prevent delays in court proceedings.

USAID praises SL for granting free visa extensions to Ukrainians stranded amid ongoing violence in homeland

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Samantha Power, the Administrator of the United States Agency for International Development (USAID) has held a discussion with Mahinda Samarasinghe, Sri Lankan Ambassador to the United States, regarding the Russian invasion against Ukraine and stressed that the international community should stand together against Russia’s ‘unprovoked and premeditated’ violence against Ukraine.

USAID Spokesperson Rebecca Chalif in a statement yesterday (02) stated that Ambassador Power praised Sri Lanka’s efforts to grant free visa extensions, as well as free meals and accommodation to the Ukrainian tourists stranded in the island amidst the ongoing violence in their homeland.

Below is the statement:

Today, Administrator Samantha Power spoke with Sri Lankan Ambassador to the United States, Mahinda Samarasinghe. The Administrator stressed the urgency of the international community standing together against Russia’s unprovoked and premeditated violence against Ukraine. Ambassador Power praised Sri Lanka’s decision to grant free visa extensions, as well as free meals and accomodation, to some 4,000 Ukrainian tourists and other Ukrainian visitors stranded in Sri Lanka because of the Russian invasion. They agreed that the show of global solidarity with the Ukrainian people had been overwhelming.

MIAP

President says Right to Life of Wildlife must be ensured

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Animals and plants species must be given the right to live in the same environment as humans and the humans must ensure the right life of wildlife, said President Gotabaya Rajapaksa, marking the World Wildlife Day today (03).

In a Social Media remark, the President noted that following the environmental policy of expanding the country’s forest cover from 29 per cent to 32 per cent in the next five years, plantation of one million tree every year and wildlife conservation reforestation programmes will be implemented.

“Today is World Wildlife Day. More than 8,400 species of wildlife around the world are on the verge of extinction, even on a day like today while we celebrate the safety of all animals and plants.

Human is not the only inheritor of the environment. Animals and plants species must be given the right to live in the same environment as humans. This is why attention has been paid to this matter through our policy statement, “Vistas of Prosperity”.

Following the environmental policy of expanding Sri Lanka’s forest cover from 29% to 32% in the next five years; plantation of one million tree every year, wildlife conservation, reforestation programmes will be implemented throughout the country. The prime focus of all these endeavours is to ensure the right to life of wildlife. And it must be remembered diligently.”

MIAP

Health professionals’ strike action called off for 10 days

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The strike action launched by health professionals will be temporarily ceased for a period of ten days, starting from 08 am tomorrow (04), a statement by the trade unions said.

The hiatus is in consideration of the points raised during the discussion held with the Health Secretary last night and the energy crisis befallen the country, the statement said.

Nevertheless, the trade unions pointed out that it has become the practice of the government to take various decisions by calling in only their political affiliates among those who make the same demand, adding that this policy should be seriously condemned in the event that it is threatening the independence of the trade unions.

Accordingly, the health professionals’ trade unions also urged the government to rectify this matter instead of further complicating the possibility by which the problems can be solved.

MIAP

IMF Executive Board Concludes 2021 Article IV Consultation with Sri Lanka

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March 2, 2022 Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Sri Lanka on February 25, 2022.

Sri Lanka has been hit hard by COVID-19. On the eve of the pandemic, the country was highly vulnerable to external shocks owing to inadequate external buffers and high risks to public debt sustainability, exacerbated by the Easter Sunday terrorist attacks in 2019 and major policy changes including large tax cuts at late 2019. Real GDP contracted by 3.6 percent in 2020, due to a loss of tourism receipts and necessary lockdown measures. Sri Lanka lost access to international sovereign bond market at the onset of the pandemic.

The authorities deployed a prompt and broad-based set of relief measures to cope with the impact of the pandemic, including macroeconomic policy stimulus, an increase in social safety net spending, and loan repayment moratoria for affected businesses. These measures were complemented by a strong vaccination drive. GDP growth is projected to have recovered to 3.6 percent in 2021, with mobility indicators largely back to their pre-pandemic levels and tourist arrivals starting to recover in late 2021.

Nonetheless, annual fiscal deficits exceeded 10 percent of GDP in 2020 and 2021, due to the pre-pandemic tax cuts, weak revenue performance in the wake of the pandemic, and expenditure measures to combat the pandemic. Limited availability of external financing for the government has resulted in a large amount of central bank direct financing of the budget. Public debt [2] is projected to have risen from 94 percent of GDP in 2019 to 119 percent of GDP in 2021. Large foreign exchange (FX) debt service payments by the government and a wider current account deficit have led to a significant FX shortage in the economy. The official exchange rate has been effectively pegged to the U.S. dollar since April 2021.

The economic outlook is constrained by Sri Lanka’s debt overhang as well as persistently large fiscal and balance-of-payments financing needs. GDP growth is projected to be negatively affected by the impact of the FX shortage and macroeconomic imbalances on economic activities and business confidence. Inflation recently accelerated to 14 percent (y/y) in January 2022 [3] and is projected to remain double-digit in the coming quarters, exceeding the target band of 4–6 percent, as strong inflationary pressures have built up from both supply and demand sides since mid‑2021. Under current policies and the authorities’ commitment to preserve the tax cuts, fiscal deficit is projected to remain large over 2022–26, raising public debt further over the medium term. Due to persistent external debt service burden, international reserves would remain inadequate, despite the authorities’ ongoing efforts to secure FX financing from external sources.

The outlook is subject to large uncertainties with risks tilted to the downside. Unless the fiscal and balance-of-payments financing needs are met, the country could experience significant contractions in imports and private credit growth, or monetary instability in case of further central bank financing of fiscal deficits. Additional downside risks include a COVID-19 resurgence, rising commodity prices, worse-than-expected agricultural production, a potential deterioration in banks’ asset quality, and extreme weather events. Upside risks include a faster-than-expected tourism recovery and stronger-than-projected FDI inflows.

Executive Board Assessment [4]

Executive Directors commended the Sri Lankan authorities for the prompt policy response and successful vaccination drive, which have cushioned the impact of the pandemic. Despite the ongoing economic recovery, Directors noted that the country faces mounting challenges, including public debt that has risen to unsustainable levels, low international reserves, and persistently large financing needs in the coming years. Against this backdrop, they stressed the urgency of implementing a credible and coherent strategy to restore macroeconomic stability and debt sustainability, while protecting vulnerable groups and reducing poverty through strengthened, well-targeted social safety nets.

Directors emphasized the need for an ambitious fiscal consolidation that is based on high-quality revenue measures. Noting Sri Lanka’s low tax-to-GDP ratio, they saw scope for raising income tax and VAT rates and minimizing exemptions, complemented with revenue administration reform. Directors encouraged continued improvements to expenditure rationalization, budget formulation and execution, and the fiscal rule. They also encouraged the authorities to reform state-owned enterprises and adopt cost-recovery energy pricing.

Directors agreed that a tighter monetary policy stance is needed to contain rising inflationary pressures, while phasing out the central bank’s direct financing of budget deficits. They also recommended a gradual return to a market-determined and flexible exchange rate to facilitate external adjustment and rebuild international reserves. Directors called on the authorities to gradually unwind capital flow management measures as conditions permit.

Directors welcomed the policy actions that helped mitigate the impact of the pandemic on the financial sector. Noting financial stability risks from the public debt overhang and sovereign-bank nexus, they recommended close monitoring of underlying asset quality and identifying vulnerabilities through stress testing. Directors welcomed ongoing legislative reforms to strengthen the regulatory, supervisory, and resolution frameworks.

Directors called for renewed efforts on growth-enhancing structural reforms. They stressed the importance of increasing female labor force participation and reducing youth unemployment. Further efforts are needed to diversify the economy, phase out import restrictions, and improve the business and investment climate in general. Directors also called for a prudent management of the Colombo Port City project, and continued efforts to strengthen governance and fight corruption. They noted the country’s vulnerability to climate change and welcomed efforts to increase resilience.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Comprises central government debt, guaranteed debt, and the CBSL’s foreign liabilities.

[3] Measured by the Colombo Consumer Price Index.

[4] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .

International Monetary Fund (IMF)

Pharma industry  to work with the Govt to tackle drug shortage  

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Pharma industry representatives expressed willingness to work with the government’ tackle the present shortage of pharmaceuticals in the country.

They have put forward their proposals to set the record straight and ensure the supply of medicinal drugs with the prompt intervention of the relevant authorities.    

Representatives of the Sri Lanka Chamber of the Pharmaceutical Industry said that they are prepared to work with the government and engage with relevant stakeholders to secure Sri Lanka’s immediate requirements for medicines and prevent medicine shortages.

SLCPI stated that solutions to dollar shortages and more importantly acceptable pricing mechanisms as well as immediately ironing out NMRA red tape for registrations are prerequisites.

At a press conference, the Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI) addressed concerns over the shortage of essential medicines amidst the country’s ongoing economic crisis.

SLCPI officials confirmed current shortages in essential medicines and raised their deep concerns over supplies moving forward, including lifesaving drugs.

While the pharmaceutical industry has been affected by global issues such as logistics challenges, cost escalation of raw materials and inflation and Sri Lanka is not an exception to these challenges. 

Industry officials identified three key factors affecting the current shortage of essential medicines in Sri Lanka.

The pharmaceutical industry noted that they are currently unable to sustain supplies of essential medicines due to unrealistic price regulations set by the National Medicines Regulatory Authority (NMRA). All essential drugs are under price control since October 2016, without a pricing mechanism.

“A sustainable pricing mechanism will help adjust for key input costs changes such as the exchange rate, fuel costs, interest and inflation. The NMRA has been requested by the court to establish a price mechanism that is sustainable both to the industry and the patient. This has not happened yet”, SLCPI noted.

The industry further noted that there is undue delay at the NMRA in 1) granting the re-registration of products which have been available in the market for a considerable period, and 2) new product registrations. With regulatory fees increasing by an average of 11-fold, the service of the regulator is below expectation.

“There is a severe delay in processing the documents for granting product registration approvals and import licenses”, SLCPI stated. 

 “85% of pharmaceutical products are imported, and these imports are paid for by US dollars. The current US dollar shortage in the country has increased the difficulty of importing essential medicines. 

In addition to this, companies have been unable to pay their dues. As a result, suppliers are no longer interested in supplying to Sri Lanka”, stressed SLCPI.

The situation is further worsened as banks find it difficult to honour the Letters of Credit (L/Cs) that are opened to import drugs.

 Bank delays in opening the L/Cs until there are sufficient dollars has resulted in shipments being scheduled according to the availability of dollars and not according to the needs of the patients, the industry warned.