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How Should Sri Lanka Finance the COVID-19 Vaccination Rollout?

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Notably, the government did not budget for a vaccination strategy in its National Budget for 2021. As such, any spending would have to be allocated through an emergency budgetary allocation. The government could potentially reallocate funding from other sectors or even reallocate from within the health sector. These reallocations, for example, could occur through built-in fiscal space for public investments in the budget, postponements or revisions to non-essential government spending initiatives such as non-essential small-scale infrastructure projects

 

By Harini Weerasekera and Kithmina Hewage

 

 An effective vaccination strategy is a necessity for countries to move beyond COVID-19. However, it also requires careful policymaking to balance the financial cost of purchasing and delivering vaccines while stimulating economic growth. This article, based on a recent IPS analysis, provides an overview of the approximate costs associated with the COVID-19 vaccination rollout in Sri Lanka and evaluates policy options to finance the initiative.

 

Assessing Costs

 

While there is no universally agreed level, considering the emergence of new variants, many experts agree that a country should vaccinate around 80% of its population to achieve herd immunity against COVID-19. This translates to 17.5 million Sri Lankans. Thus far, Sri Lanka has received or is expected to receive vaccine donations and other financial assistance from the likes of the World Health Organization’s COVAX Facility to cover approximately 20% of the population.

 Based on publicly available proxy data, as detailed in Table 1 below, assuming that 20% of the population will be financed through the WHO COVAX scheme, the total cost of self-financing   another 60% of the population is USD 139.1 million. These costs include both the cost of purchasing the cheapest vaccine (AstraZeneca-Oxford) and the immunisation delivery costs.

 In a recent study, the World Bank estimates that for the South Asian region, the average per person vaccination cost amounts to USD 12 to receive one dose of the COVID-19 vaccine, under certain assumptions. This costing consists of the full vaccine deployment cost per person, which includes the vaccine dosage cost along with the international airfare and other delivery costs.

 Using this basis of costing, financing two doses of the vaccine for 60% of Sri Lanka’s population would amount to USD 336 million. This is over double the minimum estimate made earlier using local proxy data. As such, a range of USD 140-336 million (LKR 27-66 billion) can be treated as a minimum and maximum estimate range for financing the long-term vaccination strategy in Sri Lanka. This amounts to 0.6-1.4% of total government expenditure for 2020, which is a relatively small proportion of the country’s total government expenditure. For context, the health sector was allocated 4.8% of total government expenditure in 2020. That said, the estimated costs range between 12 and 29.5% of the Ministry of Health’s total expenditure for 2021.

 Furthermore, given difficulties in securing all necessary vaccines from a single producer (e.g. AstraZeneca) due to supply shortages, Sri Lanka has already moved towards purchasing Sputnik V and Pfizer vaccines, which are more expensive than AstraZeneca, and therefore will increase costs. The cost increase will be significant given that other vaccines are two to six times more expensive than a dose of Astra-Zeneca (Table 2).

 Given these realities, Sri Lanka will need to cover these costs through one or a combination of: (a) reallocating existing budgetary commitments; (b) receiving more bilateral and multilateral vaccine donations or financial assistance; or (c) self-financing through targetted tax policies and future borrowings.

 

Reallocating Budgetary Commitments

 

Notably, the government did not budget for a vaccination strategy in its National Budget for 2021. As such, any spending would have to be allocated through an emergency budgetary allocation. The government could potentially reallocate funding from other sectors or even reallocate from within the health sector. These reallocations, for example, could occur through built-in fiscal space for public investments in the budget, postponements or revisions to non-essential government spending initiatives such as non-essential small-scale infrastructure projects.

 However, the extent to which such revisions can be incorporated is greatly limited by the economic conditions under which this vaccination initiative is taking place. Some of these small-scale infrastructure projects, for instance, are geared towards stimulating the economy.

 Sri Lanka’s post-COVID-19 economic recovery is dependent on adequate government spending to stimulate growth, and there has already been a significant amount of spending rationalisation that has taken place. Furthermore, the government will be required to ensure that the broader public health sector is not compromised in any form simply to fund the COVID-19 vaccination initiative as that may have further severe long-term repercussions.

 

Self-Financing

 Given the current economic climate, the government is unlikely to increase direct taxes in the immediate future. Increasing indirect taxes such as import tariffs are also likely to be counter-productive since imports are restricted.  Rather, a tax rationalisation on luxury goods and a sin-tax rationalisation on alcohol and cigarettes could generate a significant amount of revenue that can be directed towards the vaccination drive.

 For instance, a recent study by IPS estimated that government revenue could be increased by LKR 17 billion by 2021, and LKR 37 billion by 2023, if taxes on cigarettes are streamlined and raised in line with inflation. This additional revenue can finance the vaccination strategy such that it reaches the midpoint of the study’s cost estimation range of LKR 20-67 billion.

 A targetted tax intervention achieves the dual aim of raising the required funds to vaccinate the public while simultaneously ensuring that the government’s broader macroeconomic stimulus initiatives can continue unimpeded. If the government is unwilling to finance the entire cost through a targetted tax intervention, even a partial self-financing measure would reduce the necessity for the government to depend on further loans to cover the cost.

 

Best Option

 A basic economic impact analysis by IPS found that the vaccination rollout would generate an additional 30.6 billion in national output, and an extra value addition of LKR 26 billion. Besides, the country’s economy will benefit additionally due to the indirect impacts associated with the public health benefits of a vaccinated populace.

 Considering these factors, the government is best off pursuing a medium-term self-financing option through targetted tax interventions and if required, through external financing. The challenge for Sri Lanka is to secure adequate funding without compromising on its investments in broader public health and social welfare initiatives as weaknesses on those fronts can undermine the success of vaccinating the public from COVID-19.

 From a budgetary perspective, the cost of vaccinating the public fast will also be cheaper than the cost of continuous PCR testing, managing quarantine centres and cluster associated lockdowns over a prolonged period. In addition to securing funding, receiving an adequate supply of vaccine doses for the country to reach its vaccination coverage targets remains uncertain as we progress further into 2021.

 

To learn more, read IPS’ Policy Discussion Brief (PDB) ‘Fiscal Implications of Vaccinating Sri Lanka Against COVID-19’.



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Courtyard by Marriott to debut in Sri Lanka

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Marriott International is set to introduce the Courtyard by Marriott brand to Sri Lanka, this year. The hospitality giant has signed an agreement with Colombo City Centre Partners (Private) Limited, part of the Abans Group, for this 164-key hotel, expected to open in late 2021, – according to Business Traveller India.

Located in the heart of Colombo city adjacent to the Beira Lake, Courtyard by Marriott Colombo will feature 164 modern guest rooms and suites. The rooms will be equipped with functional work area, smart amenities, and high-speed internet access, making it an ideal stay option for business and leisure travellers, the Indian magazine stated.

There will be two dining venues – an all-day dining restaurant serving a combination of western dishes, Asian favourites and a host of local delicacies as well as an adjoining Lobby Lounge decked with a full-service bar and a quick-bites menu.

Other amenities include a 24-hour fitness centre, an outdoor swimming pool and three meeting rooms.

Rajeev Menon, president, Asia Pacific (excluding China), Marriott International said:

“We are delighted to strengthen our Marriott Bonvoy portfolio of hotels in Sri Lanka with today’s signing. The signing underscores our long-term commitment to Sri Lanka as a strategically important market, offering the potential to grow our brands and provide customers with more choices.”

Kiran Andicot, regional vice president – Development, South Asia, Marriott International commented, “We are very pleased to collaborate with Abans Group, who share our vision to offer smart, intuitive service and high-quality accommodation in Sri Lanka.”

Further elaborating on the collaboration, Aban Pestonjee, chairperson of Abans Group said:

“We are happy to have forged this strategic business alliance with Marriott International and are keen to see our relationship grow from strength to strength. We eagerly look forward to the opening of the first Courtyard by Marriott Hotel in Sri Lanka. We are excited to have Marriott International with us at Colombo City Centre.”

 

 

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Virtusa appoints Santosh Thomas as CEO

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Virtusa Corporation, a global provider of digital strategy, digital engineering and IT services and solutions that help clients change and disrupt markets through innovation engineering, yesterday announced the appointment of Santosh Thomas as its new Chief Executive Officer (CEO).

Virtusa’s Board of Directors appointed Santosh as successor to the company’s founder, Kris Canekeratne, who announced his transition from the business in May 2021. Santosh joins Virtusa during a time of significant growth and follows the recent appointment of Sander van‘t Noordende to the position of Chairman of the Board of Directors.

Santosh brings more than 20 years of leadership and industry experience to Virtusa. Most recently Santosh served as President of Global Growth Markets at Cognizant where he managed a business with revenues over $4 billion and built multiple billion-dollar businesses in Europe and Asia Pacific in Banking, CommTech and Products & Resources.  In his new role, Santosh will help Virtusa drive growth in key markets and continue to be recognized as an employer of choice.

“On behalf of the entire company and the Board of Directors, I would like to thank Kris for his more than two decades of leadership,” said Sander van‘t Noordende. “I would also like to welcome Santosh who brings a stellar track record of client service, leadership, and proven success. Santosh has the vision and experience to take Virtusa’s deep heritage in digital engineering to new levels of growth.”

 “I am deeply honored to join Virtusa at this exciting time for our employees, clients and partners,” said Santosh Thomas. “I have admired Kris and Virtusa for fostering a culture of innovation and distinguishing itself as a global leader in helping customers tackle their unique digital transformation challenges. Virtusa has a great brand reputation, an impressive roster of strategic partners, and is well positioned for sustained growth.”

“When I founded Virtusa 25 years ago I had a vision to build a global powerhouse in digital engineering services. And we did just that,” said Kris Canekeratne. “I leave with the confidence that the company and its leadership team have never been stronger and its opportunities have never been greater. I welcome Santosh Thomas to the CEO role and wish him the best in his efforts to lead Virtusa through its next phase of growth.”

Also announced yesterday, Denise Warren has joined Virtusa’s Board of Directors and has been appointed Chairperson of its Audit Committee. Ms. Warren recently retired from her position as Chief Operating Officer (COO) of WakeMed Health & Hospitals, and serves on the boards of Brookdale Senior Living, Computer Programs & Systems Inc., and Rockroom Insurance Group. 

 

 

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No double standards please, on govt’s vehicle import ban: CMTA

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Meanwhile, on June 9, The Island published its front page lead story ‘Covid time bonanza: Luxury SUVs for MPs coming after all- LCs opened before Cabinet rescinded its own decision’.

The Ceylon Motor Traders Association (CMTA) has expressed its concerns on the decision the government has taken to import 400 vehicles – including 227 luxury SUVs – to a value of Rs. 3.7 billion through the Bank of Ceylon. The Government reversed its earlier decision to cancel the order, citing the fact that the Letters of Credit (LCs) had been already opened and “as the opening of Letters of Credit meant guaranteed payment, Sri Lanka faced the prospect of being blacklisted if a unilateral decision was taken” as per Minister Keheliya Rambukwella’s explanation to the press.

The CMTA notified the government of the same issues and repercussions on international trade as a result of unilaterally dishonouring 216 LCs of its members that had been opened prior to the import ban in March 2020. Totalling Rs. 5.2 billion, these include a considerable number of vehicles ordered by permit holders such as doctors and government officials who are at the forefront fighting the pandemic, some of whom had already sold their existing vehicle, anticipating their new vehicle to arrive shortly. Is it fair to keep these permit holders on hold indefinitely while new luxury SUVs are imported for MPs during the import ban?

Due to these LCs being dishonoured, a total of more than 14,000 vehicles comprising 10,780 Motorcycles, 2640 trishaws and 537 Cars specifically ordered for Sri Lankan market conditions were prohibited from being imported.

The vehicle import ban imposed last year has taken a toll on vehicle buyers by constricting the market at a time when the need for personal transportation is more acute. To make matters worse, the resulting imbalance of demand vs. supply has caused prices of used vehicles skyrocket within a short time span, and has led to unscrupulous activities at the expense of the consumer, such as odometer tampering.

Speaking on behalf of the CMTA, Chairman Yasendra Amerasinghe said, “Considering the rampant increase of COVID-19 cases at this time, with various potent variants of the virus spreading throughout the island, personal mobility represents the safest option for citizens who have no choice but to travel. The CMTA very much agrees with Minister Rambukwella’s statement that cancellation of confirmed LCs will affect the credibility of our banks and country. We strongly urge the government to apply the same standard to LCs for vehicles for government servants including doctors, and the general public as it has applied for luxury SUVs for MPs. We hope that there would be no double standard.”

Furthermore, the CMTA mentioned that it had been reminding the government of a proposal for Quota that It had submitted in March, at the request of the President’s Secretariat, to which no response had been given. This proposal was based on a minimum volume of vehicle imports for the industry to survive until the import ban is lifted.

Concerns were also raised as to how this purchase had been carried out without an open tender, with queries as to whether it complies with government procurement guidelines.

Founded in 1920, the Ceylon Motor Traders Association (CMTA) is affiliated to the Ceylon Chamber of Commerce and is widely accepted as the voice of the Sri Lankan Automotive Industry.

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