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Foreign Exchange Crisis

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By Dr.C.S. Weeraratna

csweera@sltnet.lk

One of the main strategies to resolve the current Foreign Exchange crisis would be to increase export earnings and reduce expenditure on imports. Most of the activities involved are short-term while the others are medium/long term.

Increase export earnings

Increasing exports is of paramount importance to improve the present FE crisis. A major source of FE is the plantation sector. Around 800,000 ha are cultivated with crops such as tea, rubber, coconut, etc., and this sector has in the last few years earned nearly Rs. 360 billion annually. However, as indicated in table 1, production of these major export crops have not shown any substantial increase during the last five years and the contribution from this sector has remained at nearly 20% of the export income. Hence, strategies need to be implemented to increase production and hence FE earnings from this sector. There are many state sector organisations to implement such strategies.

As shown in Table 1 tea production has been fluctuating around 300 million kg per year during the last five years in spite of several institutions assigned to the tea sector. The average tea yields are considerably lower than the potential yields. In the smallholder tea sector the average yield is around 1800 kg/ha and in the estate sector it is about 1200 kg/ha. In 2020, tea earned Rs. 230 billion in FE. Better management practices in the short term would increase the quantity and quality of the tea produced making it possible to increase FE earnings substantially from the current Rs. 230 billion.

Rubber is another important export crop. In 2017, it earned nearly Rs. 6 billion in foreign exchange but has decreased during the following three years. Based on Central Bank annual reports, the total Rubber production in 2010 was 152.9 million Kg and by 2019, it has plummeted to 74.8 million kg. The corresponding average yields are 1561 kg/ha and 665 kg/ ha respectively. These figures indicate that the Sri Lankan rubber sector is ailing in spite of several institutions assigned to promote rubber production in the country. With the current higher rubber prices it would be possible to earn more FE by increasing rubber production by better management practices which would produce results in the short term. During the last few years the rubber sector has been affected by many factors one of which is ineffective management.

Coconut production too has declined during the last five years as shown in Table 1. The total extent under coconut in Sri Lanka is around 400,000 ha and about 325,000 ha are small holdings. Annual production of coconut has been fluctuating around 3,000 million nuts, (app. 6000 nuts/ha) As the state of the existing coconut plantations need to be looked into. If the production of the existing coconut lands is increased by 1000 nuts/ha/year by better management, and applying organic and inorganic fertilisers the total production can be increased by a substantial number within a year which will increase the export income from coconut.

This appalling situation in the plantation sector can be attributed to many factors. If the productivity of this sector is raised by implementing better management practices it would be possible to increase foreign exchange earnings from this sector. Most of these practices would produce results in the short term .

A large number of crops other than tea, rubber and coconut cultivated in Sri Lanka have a high potential as export crops. There are 24 agro ecological zones, each characterised by specific climate and soils. This makes it possible to cultivate different types of crops such as spice crops, tuberous crops, horticultural (fruit crops) and floricultural crops, medicinal herbs, etc.

Sri Lanka is famous for spices. The most sought-after spice crops are cinnamon, pepper, cloves, cardamoms, nutmeg, mace and vanilla which grow in abundance mainly in the wet and intermediate zone. In 2020, county earned nearly Rs. 60 billion by exporting spice crops.

Cinnamon is the most important spice commodity among the spice sector. In 2019, it earned around Rs. 32 billion in FE. The production of cinnamon has been fluctuating around 20,000 t per year during the last few years. Sri Lanka received its first ever Geographical Indication (GI) certification when the European Union (EU) Commission on 02 February,2022 granted GI status to Ceylon Cinnamon and this would make a higher demand for Sri Lanka cinnamon.

Pepper is the second important commodity among spices. It is grown in the wet and intermediate zones mostly as a mixed crop. The Sri Lankan pepper has higher piperine content which gives it a superior quality and pungency. Annual production of pepper too has remained stagnant at around 20,000 kg.

Other spices such as cloves, cardamom, nutmeg and mace have the potential to earn a substantial amount of FE. With the increase of international demand for natural products, and the island’s focus on enhancing and evolving its value added range, spices and the essential oils extracted from these crops will continue to earn more FE.

Dehydrated food is another agricultural product which has a potential to earn much -needed FE. During some months there is a glut of fruits and exporting dehydrated/canned fruits would bring in an appreciable amount of FE.

In any programme/plan to increase foreign exchange earnings from the agricultural sector, agro-industries has to be given much emphasis . A large number of crops cultivated in Sri Lanka have considerable potential in various agro-industries. However, only rubber, coconut and a few fruit crops are used in industries. Crops such as cassava, horticultural and floricultural crops, medicinal herbs, cane, bamboo, sunflower, castor, ayurvedic herbs, etc. have a considerable industrial/export potential but are not cultivated to any appreciable extent. The development of agro-industries will also increase export income and will have a tremendous impact on the economy of the country and also provide employment opportunities among rural people. Private sector can be involved in such projects for which appropriate technical assistance need to be given by the relevant public organizations.

Decrease expenditure on imports

While implementing strategies to increase our FE income by promoting exports, action needs to be taken to decrease our expenditure on imports. During the period 2017-2020 annual expenditure on importing food has been around Rs. 320 billion. The current expenditure on food imports is likely to be even more due to the depreciation of SL rupee, and shortage of rice and other food crops the result of banning import of agrochemicals. .

One of the problem the country is facing is the fuel crisis, which is likely to have extremely undesirable repercussions. A large sum of money is spent on importing petroleum to Sri Lanka, In 2020, we imported fuel worth Rs. 540 billion . If we are going to consume petroleum products at the current rate, at least an additional Rs. 50 billion will have to be spent in 2022. Hence, it is essential that the consumption of petrol and diesel be reduced. In many other countries such as China, Thailand, Singapore, action has already been taken to reduce fuel/ power consumption and cut down wastes. If we reduce our power consumption by 10%, it will result in a saving of Rs 60 billion in foreign exchange.

Studies conducted in many countries have found that ethanol is an alternative to petrol. Many countries are either producing or using ethanol in large quantities or are providing incentives to expand ethanol production and use. Prompted by the increase in oil prices in the 1970s, Brazil introduced a programme to produce ethanol for use in automobiles to reduce oil imports. Brazilian ethanol is made mainly from sugar cane. Among the countries using ethanol as a bio fuel are Australia, France, India, Sweden, USA, South Africa, etc. Use of ethanol tends to reduce environment pollution caused by compounds such as tetraethyl lead found in petrol. Ethanol can be made from high starch containing crops such as manioc and maize, or high sugar containing crops such as sugarcane. These crops are cultivated in Sri Lanka. Around 10 million litres of alcohol are produced annually at Pelwatta and Sevanagala sugar factories. These can be used to blend petrol and used at least in three wheelers so that those who use them need not pay higher fares. A few years ago Prof. Thissa Vitharana, who was the then minister of Science and Technology, appointed a committee to look into the possibility of using substitutes for fuel. The committee recommended the use of ethyl alcohol and Jatropha oil as bio-fuels. No follow-up action was taken by the subsequent governments to promote these substitutes as bio-fuels. Oil from Jatropha (Weta Erandu) a crop that can be grown widely in the Dry Zone of Sri lanka can be used as a bio fuel.

Dendro-power can be generated using fast growing nitrogen fixing tress such as glyricidia and leuceana. These crops not only can be used to generate electricity but also are a good source of animal feed and fertilisers. It may be more beneficial to grow these crops in eroded tea lands where the yields are relatively low. Soil erosion in such tea lands also can be reduced by growing these crops. The Bio Energy Association of Sri Lanka has been instrumental in promoting cultivation of glyricidia.

Sri Lanka, a country begging for dollar loans to import medicine, fuel, etc., which are critically important, needs to have a flexible policy on exports and imports. As indicated above, there are 24 agro ecological zones, each characterised by specific climate and soils. This makes it possible to cultivate different types of crops. Most of the food imported can be locally produced thereby reducing expenditure on food imports. A closer look at the imports reveals that around Rs. 50 billion (nearly 16% of food imports) in FE is spent on importing sugar, most of which can be locally produced. The total annual requirement of sugar in the country is around 620,000 t but, only about 50,000 t are produced locally.

Sugarcane has a considerable potential to reduce the expenditure on food imports. Sugar production in the country has not increased by any appreciable amounts during the present decade. The Kanthale sugar factory remains closed while a plan to cultivate sugarcane in Bibile remains shelved. Jaggery made from kitul, and sugarcane are good substitutes of sugar manufactured from sugarcane.

A substantial amount of foreign exchange is spent on importing milk. In 2020, Rs. 60 billion in FE was spent to import milk and dairy products. We have around 1 million cattle consisting of mostly indigenous cattle. Their productivity is low (1-3 litres/day) mainly due to the poor nature of the breeds and inadequate low quality feed supply. The dairy industry has a potential to contribute considerably to solving the Sri Lanka’s FE crisis. Milk production can be increased by increasing availability of cattle food, and thereby an appreciable amount of foreign exchange spent on milk imports can be reduced. Milk production also plays an important role in alleviating nutritional poverty and it is a source of extensive employment opportunities. If milk production can be increased, an appreciable amount of foreign exchange spent on milk imports can be reduced and improve the nutrition status of the people.

Expenditure on subsidiary food crops such as chilies, green gram, ground nut, potato, etc., is few billions of rupees. The extent under these crops and their average per hectare yields have not increased by any appreciable amount during the last decade. A few years ago, a former Minister of Agricultural Development Chamal Rajapaksa appointed an Advisory Panel to make proposals to develop the agricultural sector so that there was a quantitative and qualitative increase in crop production at a lower cost with no damage to the environment. The recommendations of the panel were mainly on development and use of better varieties of seeds and planting material, effective control of weeds, insect pests and diseases, better water management, and water conservation, proper use of inorganic and organic fertilizers, controlling soil degradation and appropriate land use, promoting agro –industries, and carrying out relevant agricultural research and use of their findings. During the last few years numerous programmes such as “AMA’, ” Waga Sangramaya” and “Govi Sevana ” were implemented. All these activities/programmes, appear to have not made any appreciable positive impact on the agricultural sector of the country indicated by increasing expenditure on food.

In addition to sugar, milk, and rice, we spend a colossal sum on importing food items which can be locally produced. Among these are lentils (Rs. 20 billion) onion( Rs 16 billion), maize (Rs. 10 billion) fruits and vegetables and spices mainly chillies. Even herbs such as katuwelbatu and thippili which can be produced locally and used for ayurvedic drugs are imported at a cost of nearly USD 6 million every year. Most of these crops can be cultivated in the dry zone where only about 2 million acres are in productive use out of the 4.5 million ha. Non-availability of adequate rainfall during the yala season is one of the limiting factors of crop production in the dry zone. However, better water management practices and rainwater harvesting would reduce this limitation.

Although hundreds of research projects related to plantation and food crops are carried out by the faculties of agriculture, the Department of Agriculture, etc., there appears to be very little liaison/interaction among the relevant institutions, to utilise the research findings so that we can increase productivity in the agriculture sector and save an appreciable amount of FE.



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BRICS emerging as strong rival to G7

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It was in the fitness of things for Indian Prime Minister Narendra Modi to hold a special telephonic conversation with Russian President Vladimir Putin recently for the purpose of enlightening the latter on the need for a peaceful, diplomatic end to the Russian-initiated blood-letting in Ukraine. Hopefully, wise counsel and humanity would prevail and the world would soon witness the initial steps at least to a complete withdrawal of invading Russian troops from Ukraine.

The urgency for an early end to the Russian invasion of Ukraine which revoltingly testifies afresh to the barbaric cruelty man could inflict on his fellows, is underscored, among other things, by the declaration which came at the end of the 14th BRICS Summit, which was held virtually in Beijing recently. Among other things, the declaration said: ‘BRICS reaffirms commitment to ensuring the promotion and protection of democracy, human rights and fundamental freedoms for all with the aim to build a brighter shared future for the international community based on mutually beneficial cooperation.’

It is anybody’s guess as to what meanings President Putin read into pledges of the above kind, but it does not require exceptional brilliance to perceive that the barbaric actions being carried out by his regime against Ukrainian civilians make a shocking mockery of these enlightened pronouncements. It is plain to see that the Russian President is being brazenly cynical by affixing his signature to the declaration. The credibility of BRICS is at risk on account of such perplexing contradictory conduct on the part of its members. BRICS is obliged to rectify these glaring irregularities sooner rather than later.

At this juncture the important clarification must be made that it is the conduct of the Putin regime, and the Putin regime only, that is being subjected to censure here. Such strictures are in no way intended to project in a negative light, the Russian people, who are heirs to a rich, humanistic civilization that produced the likes of Dostoevsky and Tolstoy, among a host of other eminent spirits, who have done humanity proud and over the decades guided humans in the direction of purposeful living. May their priceless heritage live long, is this columnist’s wish.

However, the invaluable civilization which the Russian people have inherited makes it obligatory on their part to bring constant pressure on the Putin regime to end its barbarism against the Ukrainian civilians who are not at all party to the big power politics of Eastern Europe. They need to point out to their rulers that in this day and age there are civilized, diplomatic and cost-effective means of resolving a state’s perceived differences with its neighbours. The spilling of civilian blood, on the scale witnessed in Ukraine, is a phenomenon of the hoary past.

The BRICS grouping, which encompasses some of the world’s predominant economic and political powers, if not for the irregular conduct of the Putin regime, could be said to have struck on a policy framework that is farsighted and proactive on the issue of global equity.

There is the following extract from a report on its recent summit declaration that needs to be focused on. It reads: BRICS notes the need to ensure “Meaningful participation of developing and least developed countries, especially in Africa, in global decision-making processes and structures and make it better attuned to contemporary realities.”

The above are worthy goals that need to be pursued vigorously by global actors that have taken upon themselves the challenge of easing the lot of the world’s powerless countries. The urgency of resuming the North-South Dialogue, among other questions of importance to the South, has time and again been mentioned in this column. This is on account of the fact that the most underdeveloped regions of the South have been today orphaned in the world system.

Given that the Non-aligned Movement and like organizations, that have espoused the resolution of Southern problems over the decades, are today seemingly ineffective and lacking in political and economic clout, indications that the BRICS grouping is in an effort to fill this breach is heartening news for the powerless of the world. Indeed, the crying need is for the poor and powerless to be brought into international decision-making processes that affect their wellbeing and it is hoped that BRICS’s efforts in this regard would bear fruit.

What could help in increasing the confidence of the underdeveloped countries in BRICS, is the latter’s rising economic and political power. While in terms of economic strength, the US remains foremost in the world with a GDP of $ 20.89 trillion, China is not very far behind with a GDP of $ 14.72 trillion. The relevant readings for some other key BRICS countries are as follows: India – $ 2.66 trillion, Russia – $ 1.48 trillion and Brazil $ 1.44 trillion. Of note is also the fact that except for South Africa, the rest of the BRICS are among the first 15 predominant economies, assessed in GDP terms. In a global situation where economics drives politics, these figures speak volumes for the growing power of the BRICS countries.

In other words, the BRICS are very much abreast of the G7 countries in terms of a number of power indices. The fact that many of the BRICS possess a nuclear capability indicates that in military terms too they are almost on par with the G7.

However, what is crucial is that the BRICS, besides helping in modifying the world economic order to serve the best interests of the powerless as well, contribute towards changing the power balances within the vital organs of the UN system, such as the UN Security Council, to render them more widely representative of changing global power realities.

Thus, India and Brazil, for example, need to be in the UNSC because they are major economic powers in their own right. Since they are of a democratic orientation, besides pushing for a further democratization of the UN’s vital organs, they would be in a position to consistently work towards the wellbeing of the underprivileged in their respective regions, which have tremendous development potential.

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Queen of Hearts

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She has certainly won the hearts of many with the charity work she is engaged in, on a regular basis, helping the poor, and the needy.

Pushpika de Silva was crowned Mrs. Sri Lanka for Mrs. World 2021 and she immediately went into action, with her very own charity project – ‘Lend a Helping Hand.’

When launching this project, she said: “Lend a Helping Hand is dear to me. With the very meaning of the title, I am extending my helping hand to my fellow brothers and sisters in need; in a time where our very existence has become a huge question and people battling for daily survival.”

Since ‘Lend a Helping Hand’ became a reality, last year, Pushpika has embarked on many major charity projects, including building a home for a family, and renovating homes of the poor, as well.

The month of June (2022) saw Pushpika very much in action with ‘Lend a Helping Hand.’

She made International Father’s Day a very special occasion by distributing food items to 100 poor families.

“Many are going without a proper meal, so I was very keen, in my own way, to see that these people had something to keep the hunger pangs away.”

A few days later, the Queen of Hearts made sure that 50 more people enjoyed a delicious and nutritious meal.

“In these trying times, we need to help those who are in dire straits and, I believe, if each one of us could satisfy the hunger, and thirst, of at least one person, per day, that would be a blessing from above.”

Pushpika is also concerned about the mothers, with kids, she sees on the roads, begging.

“How helpless is a mother, carrying a small child, to come to the street and ask for something.

“I see this often and I made a special effort to help some of them out, with food and other necessities.”

What makes Pushpika extra special is her love for animals, as well, and she never forgets the street dogs that are having a tough time, these days, scavenging for food.

“These animals, too, need food, and are voiceless, so we need to think of them, as well. Let’s have mercy on them, too. Let’s love them, as well.”

The former beauty queen served a delicious meal for the poor animals, just recently, and will continue with all her charity projects, on a regular basis, she said.

Through her charity project, ‘Lend a Helping Hand,” she believes she can make a change, though small.

And, she says, she plans to be even more active, with her charity work, during these troubled times.

We wish Pushpika de Silva all the very best, and look forward to seeing more of her great deeds, through her ‘Lend a Helping Hand’ campaign.

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Hope and political change:No more Appachis to the rescue

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KUPPI on the current economic and political crisis: intervention 1

by Harshana Rambukwella

In Buddhist literature, there is the Parable of the Burning House where the children of a wealthy man, trapped inside a burning house, refuse to leave it, fearful of leaving its comfort – because the flames are yet to reach them. Ultimately, they do leave because the father promises them wonderful gifts and are saved from the fire. Sri Lankans have long awaited such father figures – in fact, our political culture is built on the belief that such ‘fathers’ will rescue us. But this time around no fathers are coming. As Sri Lankans stare into an uncertain future, and a multitude of daily sufferings, and indignities continue to pile upon us, there is possibly one political and emotional currency that we all need – hope. Hope is a slippery term. One can hope ‘in-vain’ or place one’s faith in some unachievable goal and be lulled into a sense of complacency. But, at the same time, hope can be critically empowering – when insurmountable obstacles threaten to engulf you, it is the one thing that can carry you forward. We have innumerable examples of such ‘hope’ from history – both religious and secular. When Moses led the Israelites to the promised land, ‘hope’ of a new beginning sustained them, as did faith in God. When Queen Viharamahadevi set off on a perilous voyage, she carried hope, within her, along with the hope of an entire people. When Martin Luther King Jr made his iconic ‘I have a dream’ speech, hope of an America where Black people could live in dignity, struck a resonant chord and this historical sense of hope also provided inspiration for the anti-Apartheid struggle in South Africa.

This particular moment, in Sri Lanka, feels a moment of ‘hopelessness’. In March and April, this year, before the cowardly attack on the Gota Go Gama site, in Galle Face, there was a palpable sense of hope in the aragalaya movement as it spread across the country. While people were struggling with many privations, the aragalaya channeled this collective frustration into a form of political and social action, we have rarely seen in this country. There were moments when the aragalaya managed to transcend many divisions – ethnic, religious and class – that had long defined Sri Lanka. It was also largely a youth led movement which probably added to the ‘hope’ that characterized the aragalaya. However, following the May 09th attack something of this ‘hope’ was lost. People began to resign themselves to the fact that the literally and metaphorically ‘old’ politics, and the corrupt culture it represents had returned. A Prime Minister with no electoral base, and a President in hiding, cobbled together a shaky and illegitimate alliance to stay in power. The fuel lines became longer, the gas queues grew, food prices soared and Sri Lanka began to run out of medicines. But, despite sporadic protests and the untiring commitment of a few committed activists, it appeared that the aragalaya was fizzling out and hope was stagnant and dying, like vehicles virtually abandoned on kilometers-long fuel queues.

However, we now have a moment where ‘hope’ is being rekindled. A national movement is gathering pace. As the prospect of the next shipment of fuel appears to recede into the ever-distant future, people’s anger and frustration are once again being channeled towards political change. This is a do-or-die moment for all Sri Lankans. Regardless of our political beliefs, our ideological orientation, our religion or class, the need for political change has never been clearer. Whether you believe that an IMF bailout will save us, or whether you believe that we need a fundamental change in our economic system, and a socially and economically more just society, neither of these scenarios will come to pass without an immediate political change. The political class that now clings to power, in this country, is like a cancer – poisoning and corrupting the entire body politic, even as it destroys itself. The Prime Minister who was supposed to be the messiah channeling international goodwill and finances to the country has failed miserably and we have a President who seems to be in love with the idea of ‘playing president’. The Sri Lankan people have a single existential choice to make in this moment – to rise as one to expel this rotten political order. In Sri Lanka, we are now in that burning house that the Buddha spoke of and we all seem to be waiting for that father to appear and save us. But now we need to change the plot of this parable. No father will come for us. Our fathers (or appachis) have led us to this sorry state. They have lied, deceived and abandoned us. It is now up to us to rediscover the ‘hope’ that will deliver us from the misery of this economic and political crisis. If we do not act now the house will burn down and we will be consumed in its flames.

Initiated by the Kuppi Collective, a group of academics and activists attached to the university system and other educational institutes and actions.

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