The general price level as measured in terms of the National Consumer Price Index
(NCPI, 2013=100) increased in January 2020, moved on a declining trend until April and increased thereafter in line with the prices of items in the Food category. Within the Food category, prices of Volatile Food items exhibited mixed movements, while prices of other food items exhibited an overall increasing trend during the period from January to September 2020. With a notable increase at the beginning of the year, prices of items in the Non-food category remained mostly unchanged during the period from April to June 2020, mainly due to the lower demand for non-essential goods and services and non-adjustment of administered prices with the spread of the COVID-19 pandemic in the country. NCPI based year-on-year headline inflation remained above mid-single digit level during the period from January to September 2020. Meanwhile, headline inflation, as measured by the year-on-year change in the Colombo Consumer Price Index (CCPI, 2013=100), remained broadly within the targeted range of 4-6 per cent during the period from January to September 2020.
The year-on-year core inflation, based on both NCPI and CCPI, remained at stable levels, yet notably lower than that of the previous year. Meanwhile, inflation expectations of the corporate sector remained well anchored during the period from January to September 2020. The negative impacts of the COVID-19 pandemic amidst the persistent structural issues led the labour market indicators to deteriorate during the first half of 2020. As such, the Labour Force Participation Rate (LFPR) and employed population declined in the first half of 2020 compared to the corresponding period of 2019. In line with the decline in the employed population, the unemployment rate increased notably to 5.6 per cent during the first half of 2020 compared to the same period of the previous year. Following the same trend, unemployment rates among the females, youth, and educationally qualified persons continued to remain at high levels during the first half of 2020. Meanwhile, departures for foreign employment declined sharply in the first half of 2020 compared to the corresponding period of 2019 due to the spread of the COVID-19 pandemic.
CENTRAL BANK OF SRI LANKA RECENT ECONOMIC DEVELOPMENTS: HIGHLIGHTS OF 2020 AND PROSPECTS FOR 2021 rice,
vegetables, red onion, large fish, meat and green chilli. The increase observed in the prices of Volatile Food items in June 2020 was mainly due to price increases in items such as rice, vegetables, fresh fish and chicken. However, this increasing trend reversed in July 2020, attributed by price decreases in rice, coconut, vegetables and onions. Nevertheless, the prices of items in the Volatile Food category increased afterwards until September 2020, owing to the price increases observed in vegetables, coconut, big onion and fruits. When observing the price movement of selected Volatile Food items, prices of rice varieties underwent several revisions during the period from January to September 2020 to protect consumers from escalating prices during the lockdown period.
Maximum Retail Prices (MRPs) of Rs. 90 each for Samba and Nadu rice and Rs. 85 on Kekulu rice, which were imposed with effect from 10 April 2020, were revised upwards to Rs. 98, Rs. 96 and Rs. 93 on Samba, Nadu and Kekulu rice, respectively, with effect from 28 May 2020.
However, towards the latter part of the period from January to September 2020, a supply shortage in Samba rice was bserved amid the receival of the Yala harvest to the market. In contrast to 2019, prices of coconut recorded increases during the period from January to September 2020 except for May and July, thereupon remaining above the prices prevailed in the corresponding period of 2019. As a result, MRPs of Rs. 60, Rs. 65 and Rs. 70 were imposed on coconut, of which the circumference is below 12 inches, etween 12-13 inches and above 13 inches, respectively, with effect from 25 September 2020. Big onion prices in February, March and April in 2020 remained well above the prices prevailed in the corresponding months since 2014, compelling the government to impose MRPs of Rs. 190 and Rs.150, with effect from 23 February 2020 and 18 March 2020, respectively, to protect consumers from higher prices. Subsequently, big onion prices followed a declining trend during April to July 2020, especially due to lower prices in the international market. Afterwards, big onion prices increased mainly due to decline observed in the domestic production owing to crop damages and export ban
Developments in 2020 Prices
Movements of the General Price Level yy The general price level, which ncreased in January 2020, moved on a declining trend until April and increased thereafter. Both Consumer Price Indices (CPIs), namely, the National Consumer Price Index (NCPI, 2013=100) and the Colombo Consumer Price Index (CCPI, 2013=100),1 which measure the general price level, moved in line with the prices of items in the Food category during the period from January to September 2020. The behaviour of the prices of items in the Food category, which was largely affected by policy decisions taken by the government to curtail the COVID-19 pandemic, has exhibited mixed movements so far during 2020. Even though the prices of items in the Non-food category showed an increasing momentum during January to March, prices of the same exhibited broadly a stable behaviour between April and June 2020, signifying the low demand for non-essential goods and services during the lockdown period. However, prices of items in the Non-food category increased again from July 2020.
= Considering the period from January to September 2020, the prices of items in the Volatile Food2 category increased at the beginning of the year, moved on a declining trend till May 2020, and followed an overall increasing trend thereafter. The increase observed in the prices of Volatile Food items in January 2020 was mainly driven by the price increases of vegetables, coconut and red onion.
However, reversing the continuous increasing trend observed since April 2019, prices of items in the Volatile Food category decreased in February 2020 and continued its declining trend until May 2020 owing to price declines in The Department of Census and Statistics (DCS), compiles official consumer price indices, namely, the National Consumer Price Index (NCPI, 2013=100) and the Colombo Consumer Price Index (CCPI, 2013=100) on a monthly basis. The NCPI demonstrates the price movements of elected consumer items at the nationallevel, while the CCPI reflects the same among urban households in the Colombo district.
2 Volatile Food includes rice, meat, fresh fish and seafood, coconut, fresh fruits, vegetables, potatoes, onions and selected condiments.
PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY
CENTRAL BANK OF SRI LANKA RECENT ECONOMIC DEVELOPMENTS: HIGHLIGHTS OF 2020 AND PROSPECTS FOR 2021 imposed by India with effect from 15 September 2020. Meanwhile, the Special ommodity Levy (SCL) on imported big onion was creased to Rs. 15 and Rs. 50 per 1 kg with effect from 01 May 2020 and 01 August 2020, respectively.
However, the government revised the SCL downwards on imported big onion to 25 cents with effect from 14 October 2020, in view of curtailing difficulties rising with the re-emergence of the risk in the spread of the COVID-19 pandemic in the country. Furthermore, red onion prices, which recorded its highest in the recent past at the beginning of the year, decreased comparatively towards the end of the period from January to September 2020, though the SCL increased to Rs. 50 per 1 kg with effect from 22 May 2020. During the period from January to September 2020, prices of potatoes, which mostly stayed above the price levels observed in the corresponding months of the recent years also experienced an increase in SCL on imported potatoes to Rs. 50 and Rs. 55 per 1 kg with effect from 22 May 2020 and 15 August 2020, respectively.
= Within the Food category, prices of items excluding Volatile Food moved on an overallincreasing trend during the period from January to September 2020, exhibiting a marginal decline only in March 2020. Local milk powder price for a 400g packet was increased from Rs. 345 to Rs. 380 with effect from 28 April 2020 in order to match the imported milk powder price. However, the price of imported milk powder, which underwent several price revisions in 2019 remained unchanged during the period from January to September 2020. MRPs of Rs. 65 per 1 kg of dhal and Rs. 100 per 425g tin of canned fish, which were imposed with effect f0rom 18 March 2020 as provisions of relief to the consumers during the situation prevailed in the country following the COVID-19 outbreak were removed effective from 30 April 2020 with the relaxation of lockdown conditions. Subsequently, the SCLs on dhal and canned fish were increased to Rs. 10 and Rs. 100 per 1 kg, respectively, from 22 May 2020. Another relief measure taken during the lockdown period was to reduce the prices of eggs to Rs. 10 each with effect from 23 March 2020, recording the lowest for the year in April 2020. From May 2020 onwards, egg prices followed a continuous increasing trend, necessitating the decision taken to decrease price per egg by Rs. 2 with effect from 07 September 2020. Having foreseen an attempt to increase chicken prices during the festive season by creating an artificial scarcity of maize, MRPs of Rs. 430 and Rs. 500 on broiler chicken (with skin) and chicken (skinless), respectively were imposed, with effect from 12 March 2020. Even though the chicken prices declined accordingly in April 2020, the prices exhibited an increasing trend afterwards. Moreover, the MRP of maize was also brought to Rs. 55 per 1kg, with effect from 12 March 2020. SCLs on several more imported items were revised upwards from 22 May 2020, among which the SCLs for sugar, yoghurt, garlic, dried chilli and maize were revised upward to Rs. 50, Rs. 800, Rs. 50, Rs. 100 and Rs. 25 per 1 kg, respectively. A MRP of Rs. 750 was imposed on 1 kg of turmeric powder with effect from 21 April 2020 to curtail the rising prices resulting from import restrictions imposed effective from 06 December 2019 with the objective of increasing the local turmeric production. Despite these efforts, turmeric powder prices spiked in the following months owing to the substantial gap between the local supply and demand, resulting in the government removing the MRP with effect from 24 September 2020. Meanwhile, the prices of wheat flour remained stable during the period under review. Considering the difficulties which arose with the re-emergence of the risk in spreading of COVID-19 pandemic in the country, the SCL on several imported items such as dhal, canned fish and sugar was revised downwards to 25 cents per 1kg with effect from 14 October 2020.
Sri Lanka still ‘under test’ before it can receive crucial second tranche from IMF
by Sanath Nanayakkare
International Monetary Fund (IMF) staff concluding their visit to Sri Lanka yesterday reaffirmed their support to Sri Lanka to move out of the ongoing economic crisis, but did not specify an exact timeline for releasing the second tranche of its Extended Fund Faculty (EFF) arrangement to Sri Lanka.
The IMF mission team led by Peter Breuer and Katsiaryna Svirydzenka that visited Colombo from September 14 to 27, is yet to be convinced that it has received a robust programme from the Sri Lankan authorities where they indicate how they would be addressing the persistent revenue shortfall besides outlining progress in foreign debt restructuring which would give Sri Lanka a breather to balance its financing requirements as it starts to repay its foreign debt.
“We had constructive and productive discussions with the Sri Lankan authorities on economic performance and policies underpinning the first review under the IMF Extended Fund Facility (EFF) arrangement. The people of Sri Lanka have shown remarkable resilience and the authorities have made significant progress on important reforms. The discussions will continue towards reaching a staff-level agreement in the near term that will maintain the reform momentum needed to allow Sri Lanka to emerge from its deep economic crisis, Peter Breuer said.
“The objectives of the IMF-supported program will continue to focus on restoring macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential, he said.
However, the press briefing given by the IMF team yesterday signaled that they needed to see more economic and financial policies to support the approval of the First Review of the program under the EFF arrangement.
“Sri Lanka has made commendable progress in implementing difficult but much-needed reforms. These efforts are bearing fruit as the economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 percent in September 2022 to below 2 percent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased. Despite early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with real GDP contracting by 3.1 percent in the second quarter on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months, he said.
Speaking further Peter Breuer said: “Sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth. The authorities have met the program’s primary balance targets and remain committed to this important pillar of the program so as to support their efforts to restore debt sustainability. However, revenue mobilization gains – while improved relative to last year – are expected to fall short of initial projections by nearly 15 percent by year end, in part due to economic factors.
“The onus of fiscal adjustment would fall on public expenditure if there were no efforts to recoup this shortfall. This could weaken the government’s ability to provide essential public services and undermine the path to debt sustainability. To increase revenues and signal better governance, it is important to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.
“Against continued uncertainty, it also remains important to rebuild external buffers through strong reserves accumulation. Building on the Central Bank of Sri Lanka’s success in controlling inflation, refraining from monetary financing will help keep inflation in check. Other challenges include maintaining cost recovery in electricity pricing.
“The government has made steady progress on structural reforms. Key legislations passed in Parliament, including the new Central Bank Act and the Anti-Corruption Act, could improve governance if implemented effectively. The IMF Governance Diagnostic report would inform future reform measures to strengthen governance when published.
“A new welfare benefit payment scheme was enacted with new eligibility criteria that aims to improve targeting, adequacy, and coverage of social safety nets. To ensure financial stability, steps were taken on conducting bank diagnostics, developing a roadmap for addressing banking system capital and liquidity shortfalls and improving the bank resolution framework.
“The authorities have also made headway on regaining debt sustainability through the execution of the domestic debt restructuring and advancing discussions with external creditors. As Sri Lanka is restructuring its public debt which is in arrears.
“Executive Board approval of the first program review requires the completion of financing assurances reviews. These financing assurances reviews will focus on whether adequate progress has been made with debt restructuring to give confidence that it will be concluded in a timely manner and in line with the program’s debt targets.
“Discussions are on-going, and the authorities are continuing to make progress on their plans for revenue mobilization targets, anti-corruption efforts, and other important structural reforms.”
The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, State Minister Shehan Semasinghe, Chief of Staff to the President Sagala Ratnayaka, Secretary to the Treasury K M Mahinda Siriwardana, and other senior government and CBSL officials, during the visit. The IMF team also met with parliamentarians, representatives from the private sector, civil society organizations, and development partners.
‘Imposing minimum room rates on five star hotels could ruin tourism sector’
By Hiran H.Senewiratne
The imposing of a minimum room rate on five star hotels on the basis of a recent gazette notification is actually killing the industry. Room rates, accordingly, could henceforth rise to between 80 percent and 100 percent, top travel and tourism industry expert Chandana Amaradasa said.
“The minimum room rate of a five star hotel currently comes to about US $ 65 but with the new gazette notification it would go up to US $ 170 per day. But our competitors, such as, Thailand, Malaysia and Vietnam are maintaining a minimum room rate of US$ 80 to US$ 85, Amaradasa told The Island Financial Review.
Amaradasa said that the tourism industry is just picking- up and ‘this type of move is detrimental to the entire sector because these room rates are normally determined by demand and supply and not by gazette notifications.
Amaradasa added: ‘At present, Colombo five star hotels are mainly patronized by Indian tourists, corporate clients and MICE tourists. This will not only impact hotel revenue but the outside supply chain as well. Nowhere in the world is the tourism industry regulated in this manner and this would enable our competitors, such as, Vietnam and Thailand to attract tourists.
“As a long term consequence, some of the airlines could also pull out of Sri Lanka and hotels will halt recruiting new staff and training them with the limiting of their revenue sources.’
ADL’s journey continues: Unveiling new offices in Indonesia and Malaysia for tech excellence
Axiata Digital Labs (ADL), the renowned technology hub of Axiata Group Berhad, is proud to announce the grand opening of two new offices in Indonesia and Malaysia. These strategic expansions, respectively, mark significant milestones in the company’s journey since it’s inception in 2019. This signifies ADL’s unwavering commitment to revolutionizing the telecommunications industry and propelling the global rate of digital transformation.
The inauguration of these state-of-the-art offices exemplifies the dedication ADL has towards expanding its footprint and harnessing the power of innovation across Southeast Asia. As the first CMMI 2.0 Level 3 IT organization in Sri Lanka and an ISO-certified company, ADL is well-positioned to lead the charge in transforming traditional telcos into techcos through its groundbreaking Axonect Product Suite.
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