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.
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 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.
[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 .
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.
Janaka Ratnayake, Chairman of the Public Utilities Commission (PUC) says that the period of power cuts during the week will be reduced after next Monday (07).
He was speaking at the Bandaranaike International Conference Hall this morning (03) to launch a public consultation program.
Chief Government Whip, Minister Johnston Fernando says that the people should not be alarmed as President Gotabhaya Rajapaksa has issued orders and provided the necessary funds to continue the supply of fuel for the next month.
“The President has given the necessary orders to supply fuel continuously and the required funds have been found. A ship has arrived today, and when it was unloaded it made all the necessary decisions to continue to supply the fuel needed for the next full month. ”
Question: Do you have dollars to pay for these?
“It has to be paid because we do have dollars. The President took direct decisions on those matters with the Prime Minister and the Minister of Finance. ”
Q: Does that mean there will be no need for people to wait in queues in the future?
“No, there is no need. We also tell the people not to panic and fill up the tanks ”
Minister Johnston Fernando said this while expressing his views to the media while leaving after a special discussion held at the Presidential Secretariat yesterday (02).
President Gotabhaya Rajapaksa has issued an extraordinary gazette notification appointing new secretaries to two-state ministries.
Accordingly, K.G. Wijesiri has been appointed as the Secretary to the State Ministry of Rural Paddy and Allied Tanks, Reservoirs and Irrigation Development.
S.D. Padikorala has been appointed as the Secretary to the State Ministry of Sugarcane, Maize, Cashew, Pepper, Cinnamon, Clove, Betel and other Small Plantation Crops Development, Allied Industries and Export Promotion.
The appointments will take effect on February 18, 2022.
The President of the Ceylon Private Bus Owners’ Association Gemunu Wijeratne says that if a system of issuing diesel for private buses is not implemented, the private bus service will be completely inactive by tomorrow (04).
The majority of buses were not able to run due to the lack of diesel. Because there is a serious problem in getting diesel from the queue. About two-quarters of the bus capacity ran yesterday. Today it goes even lower. In particular, if there is no fuel for tomorrow, the bus service will be completely inactive as usual. Therefore, today we hope that at least the SLTB will provide us with fuel, as promised by the Minister of Transport. Otherwise it is a serious problem ”
Gemunu Wijeratne stated this in response to a media query made this morning (03).
The launch of the National Manifesto ‘මුළු රටම හරි මගට’ took place yesterday (02). It was organized by 11 parties representing the government including the SLFP, the JNP and the Pivithuru Hela Urumaya.
Speaking at the event Minister Wimal Weerawansa stated that the country is facing a serious crisis. He alleges that the government leaders do not have a definite plan to overcome the crisis.
The Minister further stated that challenges cannot be overcome by acting with an arrogant mindset and a plan should be prepared for that.
Weerawansa points out that carpet roads built with huge loans from foreign countries are all over the country and while people are suffering from various problems, carpet roads are still being constructed and some of the roads that were carpeted are being carpeted again.
Minister Weerawansa says that despite the carpeted roads, the people do not have the fuel to travel on those and the government has failed to supply fuel to vehicles.
