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Deficit in trade account widens in the face of import surge

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External Sector Performance – December 2021

The deficit in the trade account widened in December 2021 compared to a year earlier, mainly due to excessive surge in imports recording the highest ever monthly import expenditure, despite persistently high earnings from exports that exceeded US dollars 1.0 billion for the seventh consecutive month. During the year 2021, the trade deficit widened notably, driven by considerable increase in imports that outpaced the growth in exports. Tourist arrivals continued the growth momentum in December with a notable increase over the previous month. Meanwhile, workers’ remittances recorded a month-on-month growth in December 2021, mainly reflecting the response to incentive scheme introduced for remittances and the seasonal increase. The weighted average spot exchange rate in the interbank market continued to hover around Rs. 201 per US dollar during the month.

Trade Balance:

The deficit in the trade account widened to highest ever monthly value of US dollars 1,085 million in December 2021, compared to the deficit of US dollars 562 million recorded in December 2020. The cumulative deficit in the trade account in 2021 also widened to US dollars 8,136 million from US dollars 6,008 million recorded in 2020.

Terms of Trade:

Terms of trade, i.e., the ratio of the price of exports to the price of imports, improved by 4.6 per cent in December 2021, compared to December 2020, as the increase in export prices surpassed the increase in import prices. Meanwhile, the terms of trade for 2021 deteriorated by 7.8 per cent compared to the previous year.

Overall exports:

Earnings from merchandise exports in December 2021 grew by 19.9 per cent over December 2020 to reach US dollars 1,156 million. Increases in earnings were observed across all main categories, while industrial exports mainly contributed to the expansion. Meanwhile, cumulative export earnings in 2021 increased by 24.4 per cent to US dollars 12,502 million compared to US dollars 10,047 million recorded during 2020. This is the highest ever export earnings for a year recorded in history compared to previous highest export earnings of US dollars 11,940 million that was recorded in 2019.

Industrial exports:

Earnings from the export of industrial goods increased by 21.3 per cent in December 2021, compared to December 2020. This increase was due to a broad-based increase in earnings from most of the industrial products led by garments, petroleum products, food, beverages, and tobacco and rubber products. However, a decline in earnings was reported in the category of printing industry products (mainly currency notes). Export of garments to all major markets improved.

– CBSL



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Manudam Mehewara Initiative by Dialog, MAS, Hemas & CBL reach 10,000 families, invites all corporates to Join its countrywide emergency relief mission

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Emergency relief is currently being distributed across all 25 districts

In a mission to provide emergency relief to the most vulnerable communities across the country amidst the ongoing economic crisis, the ‘Manudam Mehewara’ initiative reached its first milestone of aiding over 10,000 families in-need.

 Joining hands with like-minded partners including its execution partner Sarvodaya Shramadana Movement and independent auditor PwC Sri Lanka, Manudam Mehewara was initiated by Dialog Axiata PLC, MAS Holdings, Hemas Holdings PLC, and CBL Group with the end goal of providing emergency support to over 200,000 vulnerable families and communities across the country that do not have access to essential supplies and basic necessities. ITN, Siyatha, Swarnawahini, TV Derana and Vasantham are also supporting the initiative as media partners.

Emergency relief is currently being distributed across all 25 districts, and the Manudam Mehewara programme will conduct its relief efforts until a sustainable benefit transfer system is established through an effective recovery plan. Manudam Mehewara invites all corporates to join our shared mission to support over 200,000 vulnerable families across Sri Lanka.

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Ninewells Hospital raises awareness on thyroid disease in newborns to commemorate World Thyroid Day 2022

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Ninewells Hospital, Sri Lanka’s leading woman and childcare hospital in the private sector, commemorates World Thyroid Day on 25th May by emphasising the significance of early detection and treatment of Congenital Hypothyroidism among newborns in Sri Lanka.

Congenital hypothyroidism (CHT) is a condition affecting infants from birth, and refers to an absent thyroid gland or a thyroid gland that is present but is unable to produce adequate thyroid hormones. On average, 1 in 4,000 babies are born with a severe form of CHT in Sri Lanka, while milder forms can be seen more commonly. If left untreated, the condition can affect brain development as well as normal growth in children and adolescents. Conversely, if detected and treated early, the damaging effects of CHT can be reversed and prevented completely.

“As Sri Lanka’s leading private sector childcare health service provider, we want to draw attention to the serious implications of Congenital Hypothyroidism on World Thyroid Day this year. Congenital Hypothyroidism is a condition which has a detrimental impact on postnatal development. For this reason, early detection and treatment is vital and should ideally begin within the first two weeks after birth,” said Dr. Vibash Wijeratne, Chief Operations Officer and Director, Ninewells Hospital.

In 2021 Ninewells Hospital unveiled a Thyroid-Stimulating Hormone (TSH) testing facility to support Sri Lanka’s national program for screening newborns for CHT and the country’s vision for a healthier population. Since then, the hospital has carried out over 8,000 tests in 2021 and over 2,000 tests between January and May of 2022.

With the unveiling, Ninewells Hospital became the first in the private sector to introduce a TSH screening machine and became one of the only two hospitals in the country to offer this screening service.

“The screening for CHT is a simple process that is performed using a heel prick test. At Ninewells, the test report following the screening is issued within a short span of three days which is unprecedented in the country. This allows healthcare providers to begin immediate treatment to avoid development impediments in newborns and infants,” Dr. Wijeratne also said.

Ninewells Hospital is Sri Lanka’s premier women’s and children’s hospital in the private sector, providing a variety of specialty services such as Obstetrics, Gynaecology, Paediatrics, and Fertility. The hospital, which is backed by the Access Group of Companies’ visionary leadership, continues to push boundaries and raise the bar for women’s and children’s healthcare in Sri Lanka.

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SL plunges into worst economic contraction in the wake of dramatic currency collapse – CBSL Governor

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By Hiran H.Senewiratne

Sri Lanka will witness the worst economic contraction in its history, as it reels from a currency collapse of the rupee from 200 to 370 to the US dollar and interest rates contracted above 20 per cent, Central Bank Governor Dr. Nandalal Weerasinghe said.

“Sri Lanka is going through severe fuel shortages and power cuts after the credibility of a soft-peg was broken by mis-targeted interest rates in the course of targeting an output gap (printing money to boost growth) under the Keynesian ideology, Weerasinghe said while addressing the Press Club of the Sri Lanka Press Institute. The event was held at the Colombo Hilton on Monday.

Weerasinghe added: “At this juncture we cannot make normal imports for the next three to six months. Industries are saying there is no raw material. Only essential imports can be made on a priority basis in order to maintain day- to- day activities.

‘Sri Lanka’s economy contracted 3.6 per cent in 2020 amid the Coronavirus crisis and it also contracted 1.5 per cent in 2001, after a soft-peg crisis amid a civil war.

‘The latest failure of the unstable peg with the US dollar came after the Central Bank printed over two trillion rupees over two years to mis-target interest rates, leading to a steep collapse of the currency and a correction of the interest rates back to around 20 to 25 per cent.

‘The economic crisis has also spilled over into a political crisis and social unrest.

‘The rupee’s 2022 fall to 380 to the US dollar from 200 to the dollar is the worst currency crisis created by the soft-pegged Central Bank in its 72- year- old history.

‘The money printing Central Bank created its first economic crisis and output shock in 1953, bringing down growth to 0.7 per cent after triggering a now famous “hartal”.

‘An Exchange Control Act was also enacted in 1952 as the printed money from the newly set up Central Bank scrambled to go out, in a phenomenon that was repeated multiple times over the next 70 years and dragged the country into 16 IMF programs.

‘The unstable Central Bank was set up by a US money doctor in 1950 in the style of Argentina’s BCRA, abolishing a Currency Board that had kept the country stable through two World Wars and the Great Depression, where money printing above the external anchor was outlawed.

‘The worst recorded crises in the country include the 1948 uprising against the then colonial administration which took place after the British railway bubble burst, commodity prices fell and the then colonial government upped taxes. However, there is no information on the economic contraction that year.

‘Sri Lanka’s citizens burnt the houses and property of the elected ruling class on May 9, after the unstable peg collapsed in a botched float where interest rates were not allowed to go up before the float and a surrender rule pushed the rupee down.

‘Interest rates were allowed to go up after my appointment as CBSL Governor and the economy is now slowing and the headlong crash of the rupee peg has slowed.’

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