By: Staff Writer

December 23, Colombo (LNW): Sri Lanka’s rice industry is at a critical juncture, as high prices, shortages of nadu rice, and substantial rice imports dominate national discourse.

While rice importation offers benefits like stabilizing prices and preventing shortages, it also poses risks to small and medium-scale millers who may struggle to compete in a market flooded with imported rice.

The government’s strategy of importing and distributing rice through state-run retailers like Sathosa seeks to regulate prices but introduces challenges, including corruption risks, market distortions, and logistical inefficiencies.

Import Challenges and Economic Burden

Government-led importation efforts require significant financial resources and robust quality assurance mechanisms. Large-scale imports increase the risk of mismanagement and unethical practices.

Moreover, limiting sales to state outlets could lead to private retailers reselling imported rice at higher prices, negating the intended affordability for consumers. This, coupled with purchase limits at Sathosa, may cause long queues and inconvenience.

The economic implications of Sri Lanka’s rice policies are striking. The country taxes rice imports at 65 LKR per kilogram, keeping local prices roughly 50% higher than global averages.

While this generates tax revenue—4.3 billion LKR from 67,000 metric tonnes of imports in one instance—it places a heavy burden on consumers. Notably, the taxes collected often benefit domestic producers rather than the Treasury, perpetuating inefficiency in the rice sector.

Despite significant rice consumption—twice the global average—Sri Lanka’s market remains underdeveloped, and farmers remain impoverished. Local rice production reached 2.89 million metric tonnes in the last Maha and Yala seasons.

Yet, the additional 187.8 billion LKR paid by consumers due to inflated prices highlights systemic inefficiencies. This “arbitrage” benefits paddy producers and millers without incentivizing productivity or market improvements.

Structural Challenges in the Rice Market

Sri Lanka’s rice sector suffers from low productivity and misaligned market incentives. Farmers hesitate to boost yields because increased supply often leads to price drops, negating potential income gains. Conversely, low yields may drive prices up but result in reduced total income, perpetuating poverty and discouraging efficiency.

Another significant issue is the mismatch between the types of rice grown and market demand. While Sri Lanka predominantly produces short-grain varieties, global markets favor long-grain rice like basmati and jasmine. Transitioning to globally competitive varieties faces challenges such as unsuitable soil conditions and high production costs. Additionally, the true cost of rice production is underestimated. Producing one kilogram of rice requires 2,400 liters of water, yet farmers are not charged for water usage, masking the actual economic and environmental costs.

The rice market is further constrained by an oligopoly of large-scale millers. These entities dominate the market due to their financial capacity and storage infrastructure, while small and medium-scale millers, despite offering better prices, lack the resources to compete effectively. Limited competition exacerbates high consumer prices and stagnation within the industry.

Pathways to Sustainable Solutions

Addressing Sri Lanka’s rice crisis requires long-term, multifaceted strategies. Key solutions include improving productivity through better farmer incentives, diversifying the buyer base, and allowing private sector imports without restrictive licensing. Encouraging the establishment of farmer associations with adequate storage facilities could also reduce reliance on large millers and enhance market competition.

Government price controls and heavy intervention are unlikely to resolve underlying issues. Instead, policies should focus on transparency, fair competition, and balancing productivity improvements with equitable outcomes. By addressing these systemic challenges, Sri Lanka can create a more resilient and efficient rice market that benefits both consumers and farmers.

By: Staff Writer

December 23, Colombo (LNW): The International Monetary Fund (IMF) will review the new tax measures announced by Sri Lanka recently, Julie Kozack, Director of the Communications Department of the IMF said.

 She noted that the IMF staff and the Sri Lankan authorities reached a Staff-Level Agreement on the Third Review under the EFF arrangement last month.

The International Monetary Fund (IMF) has proposed a series of tax reforms for Sri Lanka, effective from January 1, 2025, aimed at achieving fiscal sustainability and a tax-to-GDP ratio of at least 14% by 2026. These reforms include the introduction of new taxes, adjustments to existing ones, and the removal of certain exemptions

Kozack said that once the review is completed or approved by the IMF Executive Board, Sri Lanka will have access to $333 million. 

“With respect to what comes next, the Executive Board meeting is expected to take place in the coming months following the implementation by the authorities of the prior actions,” she said.

Kozack revealed that  the IMF staff will include a full assessment of the new tax measures in the staff report that will be published following approval by the Executive Board of the program.

President Anura Kumara Dissanayake recently announced proposed reforms to Sri Lanka’s Personal Income Tax (PIT) system.

These changes include raising the tax-free monthly income threshold from LKR 100,000 to LKR 150,000, as well as adjusting the tax brackets to offer substantial savings for taxpayers.

At the same time, these proposals reinforce Sri Lanka’s position as one of the region’s least taxed countries for lower-income earners.

Although the President did not outline the precise tax rates for each bracket, PublicFinance.lk has estimated the new rates and brackets based on the proposed reductions upto Rs 300,000 per month.

Sri Lanka already provides the highest tax-free threshold and a comparatively lower tax burden for low-income earners than most other South Asian countries, with the exception of the Maldives.

In a previous blog, PublicFinance.lk noted that Sri Lanka’s current tax-free income threshold of Rs 100,000 per month is higher than those in Bangladesh (Rs 75,682), Pakistan (Rs 54,710), and India and Bhutan (approximately Rs 91,000).

However, while income earners below Rs 250,000 per month enjoy relatively low tax obligations, the burden beyond this amount rises sharply to the highest in the region.

By: Staff Writer

December 23, Colombo (LNW): The Consulate General of Sri Lanka in Milan hosted a Ceylon tea promotional event recently in Venice, Italy during series of events organsised in connection with the 700th death anniversary of the legendary Italian explorer Marco Polo.

The event was organised in collaboration with the National Committee and the AR-Tea Academy in Venice.

Italy Imports from Sri Lanka of Coffee, tea, mate and spices was US$9.08 Million during 2023, according to the United Nations COMTRADE database on international trade. Italy Imports from Sri Lanka of Coffee, tea, mate and spices

Held as the last of a series of events organised honouring Marco Polo’s legacy, the event centred on promoting Ceylon Tea. It attracted a vibrant audience of tea experts, enthusiasts and cultural connoisseurs of the city of Venice.

The gathering featured insightful presentations from Italian agents of Mlesna and PMD Tea, who highlighted the rich heritage, distinct flavours and global appeal of Ceylon Tea.

Tea sommelier from the AR-TEA Academy, Gabriella Scarpa delivered an engaging presentation showcasing the versatility and premium quality of Ceylon tea, which has captured the hearts of tea lovers worldwide.

 Her session also included an interactive tea-tasting experience, allowing attendees to savour the unique characteristics of Ceylon Tea that originates from different regions of the country. Counsellor of the Consulate General of Sri Lanka in Milan Tharaka Botheju briefed the audience on the history of Ceylon tea and its prestigious status in the “tea world”.

The participants were treated to an array of Ceylon tea-based finger foods, both savoury and sweet, along with a selection of tea-inspired beverages including cocktails, mocktails and tea-flavoured ice cream served with a strong, hot brew of tea (a creative variation of the traditional Italian affogato served with cafe).

These culinary delights were highly appreciated, showcasing the versatility of Ceylon tea in gastronomy. The event was further enriched with Sri Lankan cultural performances that provided attendees with a glimpse into the country’s vibrant traditions.

The event was a significant platform to elevate the profile of Ceylon tea in Italy, inspiring professionals and enthusiasts to explore its exceptional qualities.

December 23, Colombo (LNW): Sri Lanka’s total export performance for November 2024, encompassing both merchandise and services, reached a value of US$ 1,269.33 million, marking a slight increase of 0.04 per cent compared to the same month in 2023.

The data, provided by the Export Development Board (EDB), reveals that while merchandise exports showed a decline, the services sector demonstrated strong growth, helping to offset some of the downturn.

According to provisional figures from Sri Lanka Customs, merchandise exports in November 2024 totalled US$ 943.1 million, reflecting a decline of 5.6 per cent in comparison to November 2023.

The drop in merchandise exports can primarily be attributed to decreased earnings from key sectors such as rubber-based products, electrical and electronic components, food and beverages, as well as seafood.

Despite the challenges in the merchandise sector, services exports delivered a more promising outcome. The estimated value of services exports for November 2024 reached US$ 326.23 million, representing a substantial year-on-year increase of 20.89 per cent.

This surge in services exports highlights the country’s growing strength in sectors such as tourism, IT services, and business process outsourcing, which have continued to perform well amidst global economic uncertainties.

The overall export performance in November reflects the mixed nature of Sri Lanka’s external trade, with both challenges and opportunities present in various sectors.

The notable rise in services exports is seen as a positive sign for the country’s diversification efforts, demonstrating the potential for further growth in non-merchandise sectors.