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European Union overreacting to Sri Lanka import controls: CB Governor

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ECONOMYNEXT

– The European Union, which protested Sri Lanka’s import controls, is over reacting, the island’s Central Bank Governor W D Lakshman said while officials said the data showed affected imports are minimal.

“The statement that was published here from the EU is probably an overreaction presented too early,” Governor Lakshman told reporters.

“We are at a time we are trying to resolve our balance of payments problems. Even under WTO rules, I think a country is allowed to do certain things which are needed to meet the balance of payments problems.”

Analysts have blamed the phenomenon on a strong prevalence of Mercantilism and lack of knowledge of classical economic theory.

Classical economists have blamed the ideology on Keynes naming his book a ‘general’ theory though it could only be practised without the balance of payments troubles when credit was weak or negative (Why Singapore chose a currency board over a central bank) and the teachings of arch-Keynesians like Alvin Hansen (IS-LM) which also has to assume no external trade (Mundell–Fleming model).

In 1971 the US also imposed trade controls called a ‘Nixon-shock’ as the dollar peg with gold collapsed from printing money to target an output gap. Sri Lanka then closed the entire economy.

Trade or current account deficits are driven by foreign-financed savings-investment gaps, while currency falls are triggered by central bank liquidity driven credit, classical economists say. Commodity prices are also expected to spike amid US dollar weakening as demand recovers.

In 2018, Sri Lanka injected liquidity to control rates first by terminating term repo deals, a so-called ‘buffer strategy’ and then through Treasury bill acquisitions in April, critics have said.

The ‘buffer strategy’ refusing to roll over maturing bonds as paper (which happens without an impact on reserve money or the exchange rate) and repaying them with a bank overdraft which was re-finance with window money. As the rupee fell gold imports which were being re-exported through a grey market.

Shortly after gold imports were banned in 2018, the rupee collapsed as more money was injected including through dollar-rupee swap of the types used by foreign speculators to bring down East Asian pegs.

In September more import controls were slammed, making nonsense of the free trade agenda of the then administration and making them a laughing stock.

Governor Lakshman said the emerging problem with the EU could be resolved with discussions.

“I think our external relations authorities are taking up this matter for discussion between Sri Lanka authorities and relevant EU authorities,” he said.

“I think discussions can solve this problem, which I am sure is a short term problem as far as we are concerned until we get out o the present difficulties.”

Officials said the impact on Europe, which had a large trade deficit with Sri Lanka and was a key destination of exports, was minimal.

“We studied the impact of import restrictions on imports from those countries it seems that the impact is quite minimal,” Director of Economic Research Chandranath Amarasekera said.

“As you know the most of the import restrictions are on non-essential imports and agricultural goods that are coming from because the government wants to promote domestic production of agricultural goods.”

“All of us need to understand why the import restrictions have been put in place,” Amarasekera said.

“It is primarily because of the difficult situation that we are in. We have saved about 3 billion dollars because of the reduction of import this year in the first 10 months.”

Analysts, however, have warned that with excess liquidity injected by domestic asset acquisitions, that imports can pick up (or domestic prices to rise) as credit is fungible.

Assistant Governor N Nanayakkara said some of the restrictions have been relaxed; imports for re-exports have also been relaxed. He said the government has said that items such as cars will be kept for a year.

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Covid-19 vaccination programme: MPs not in priority group; President, armed forces chiefs in ‘third category’ 

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By Shamindra Ferdinando

State Minister for Primary Health Care, Epidemics and COVID Disease Control, Dr. Sudarshini Fernandopulle yesterday (25) said that members of Parliament were not among those categorised as priority groups expected to be vaccinated against the Covid-19 pandemic.

Dr. Fernandopulle said so in response to The Island query whether parliamentarians would receive the vaccine scheduled to be delivered by India this week. Asked to explain, Dr. Fernandopulle said that health workers, armed forces and law enforcement personnel engaged in Covid-19 prevention operations would be given priority.

“Lawmakers haven’t been listed under priority groups. However, some members may get the vaccine if they are accommodated in the over 60 years category and those suffering from diabetes, heart disease, cancer et al,” the State minister said.

In addition to State Minister Dayasiri Jayasekera, several lawmakers, representing both the government and the Opposition had been afflicted over the past several weeks. SLPP lawmaker Wasantha Yapa Bandara (Kandy district) is the latest victim. Health minister Pavitradevi Wanniarachchi was among over half a dozen lawmakers tested positive.

Army Commander General Shavendra Silva told Derana yesterday morning Sri Lanka would receive approximately 500,000 to 600,000 doses from India. Responding to a spate of questions from Derana anchor Sanka Amarjith, Gen. Silva explained the measures taken by the government to ensure a smooth vaccination programme. The Army Chief who also functions as the Chief of Defence Staff revealed India had paid for the consignment obtained from the UK.

Later in the day, The Island sought an explanation from the Army Chief regarding the President, Service Commanders, Secretary Defence given the vaccination along with frontline health workers et al, the celebrated battlefield commander said: “Will be in third priority group.”

Asked whether the student population would be accommodated at an early stage of the vaccination programme, Dr. Fernandopulle said that those under 18 years of age, pregnant and lactating mothers wouldn’t be included at all as such groups hadn’t been subjected to trials. Education Secretary Prof. Kapila Perera wasn’t available for comment.

Dr. Fernandopulle emphasized the pivotal importance of following health guidelines strictly in spite of the launch of the vaccination programme. “We shouldn’t lower our guard under any circumstances,” Dr. Fernandopulle said, urging the population to be mindful of those unable to receive the vaccination due to no fault of theirs. As those under 18 years of age had been left out of the vaccination programme, a substantial section of the population would be denied the protection, the State Minister said.

Sri Lanka is also expected to procure vaccines from China and Russia in addition to the doses from India. Health Secretary Maj. Gen. Sanjeewa Munasinghe wasn’t available for comment.

Sri Lanka launches the vaccination programme with the total number of positive cases nearing 60,000 with nearly 50,000 recoveries. The government recently re-opened the Bandaranaike International Airport (BIA) following a pilot programme that brought over 1,200 Ukrainians in dozen flights through the Mattala International Airport.

Dr. Fernandopulle said that the government was ready to launch the vaccination programme as soon as the first consignment arrived from India.

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Tennis balls filled with drugs thrown into Kandakadu Covid-19 treatment centre

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By Norman Palihawadane

Two tennis balls filled with drugs had been thrown into the Covid-19 treatment centre at Kandakadu, Police Spokesperson DIG Ajith Rohana said.

The contraband was found on Saturday by the Army officers attached to the facility.

DIG Rohana said the two tennis balls containing cannabis, heroin and tobacco, had been handed over to the Welikanda Police.

A special investigation has been launched into the incident, the Police Spokesperson said. Such incidents had been previously reported from Welikada, Negombo and other prisons, but it was the first time contraband containing narcotics had been thrown into a Covid-19 treatment centre, he added.

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All cargo clearances at Colombo port now through electronic payments

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The Sri Lanka Ports Authority (SLPA) has introduced a system where payment for imports could be made via the Internet. This allows port users to make payments from their homes or offices to clear goods from the Port of Colombo.

The SLPA has said in a media statement that the new special facility will enable port users to make their port payments easily without hassle.

At present, all terminals of the Port of Colombo are run according to a strategic crisis management plan.

 

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