IPS makes its proposals for Budget 2022
Ahead of the presentation of the National Budget for 2022, the Institute of Policy Studies of Sri Lanka (IPS) outlines some policy areas of concern and puts forward proposals to be considered for inclusion in the forthcoming Budget.
Please note that this is Part-1 of IPS proposals for the Budget on health, education, human resources, women, vocational training, persons with disabilities and migration.
Health Improving child nutrition
An IPS study on child malnutrition reveals that the ‘life cycle effect’ is one of the main contributors to the high prevalence of child malnutrition, especially among the poor. The study shows that dietary issues are caused by food insecurity and the lack of awareness about proper nutrition among the poor. Among the country’s several nutritional programmes, the Maternal and Child Health (MCH) supplementation programme by the Family Health Bureau (FHB) is one of the most beneficial, as it covers the entire life course interventions, as recommended by the World Health Organization (WHO). However, this is the programme with the least resources at present.
The country’s annual public investment on key nutrition-specific interventions is approximately Rs. 15 billion. Of this, 40% is absorbed by the school meal programme, followed by the pregnant mother’s food allowance programme (37%) and the Thriposha programme (16%). The FHB medicine and supplements in the MCH programme accounted for only 5%.
Streamline existing nutrition programmes to focus on the most effective ones to improve nutrition outcomes. Expand budgetary allocations for the MCH programme and provide targetted benefits to the most vulnerable in other nutrition programmes. There is potential to gain some fiscal space by changing the supplementary feeding programme (Thriposha), for pregnant and lactating women, to target pregnant women at risk rather than all. Likewise, pregnant mother’s food allowance programme should be targetted in deprived regions.
Reducing smoking prevalence
Although smoking rates have come down considerably over time, still more than a quarter of males are smokers, and smoking remains a significant health threat killing more than 20,000 Sri Lankans, annually. Recent studies show that smoking is currently prevalent among selected population groups. Thus, there is a need to target specific groups (e.g., construction workers, drivers, youth groups those who are not in schools or any other education institute) to reduce smoking prevalence.
Launch targetted programmes to build awareness on the benefits of smoking cessation and provide cassation support to existing smokers. Existing programmes can be realigned to focus on high prevalence groups, so they do not impose an additional burden on government expenditure. But such programmes will help to reduce the tobacco smoking prevalence and reduced tobacco smoking-related illnesses, deaths, and the burden of cost.
Education Improving access to quality early childhood education
Early Childhood Care and Education (ECCE) sector is one of the most important sectors of education, providing a solid foundation for a child’s education trajectory. However, access to ECCE education in the country is low. In 2019, only 55.6% of 3 to 5-year-olds were enrolled in preschool education in the country. Further, there are large inequities in access to pre-school education with access lower in rural and estate sectors and among poorer households. Public presence in this sector in the provision of core as well as support services, such as curriculum development and teacher training, is inadequate.
Allocate public funds to implement ECCE policies that have been developed to improve access to the ECCE sector for low-income households, and to align ECCE education with general education. Government involvement is important in improving access to children from under-privileged backgrounds, through the provision of scholarships, or by setting up ECCE centres where there is low supply of ECCE centres. The functioning of ECCE should be monitored to improve quality.
Human Resources Development Improving access to quality vocational training
Scientific breakthroughs in a spectrum of fields, such as genetics, artificial intelligence, nanotechnology, and 3D printing, are feeding into innovations that redefine how people live, work, and interact with each other. These innovations are constantly creating and altering production processes and revolutionising the operations of a large spectrum of industries. These transformations are also restructuring labour markets and affecting labour markets in multiple ways. With the growing the demand for high skilled workers, tertiary level skills development is critical. However, the effectiveness of the Tertiary Education and Vocational Training (TVET) institutions in improving access to TVET is limited due to resource gaps, teacher shortages and governance issues.
Streamline the public sector provision of TVET education. Money saved from this can be used to provide eligible candidates financial support to participate in the most effective TVET programmes (public, private or joint) in the trades of their choice. Partnerships with the private sector and industry training can alleviate problems of lack of access to high-tech equipment. Invest in public sector capacity for provision of support services to the sector such as monitoring and evaluation, curriculum development, and the quality assurance of TVET institutions to improve the efficiency of the sector.
Women Increasing female labour force participation (FLFP)
Labour market data show that more women have become economically inactive due to COVID-19, lowering the already FLFP rate. As the COVID-19 related restrictions are relaxed, there will be more opportunities for women to participate in the labour market.
Provide training and job matching programmes to facilitate skills acquisition and improving employability, especially for women. Online training programmes can be facilitated by industries with labour shortages, with possible job opportunities for those successfully trained. These programmes can be coordinated by the institutions under the purview of the Tertiary and Vocational Education and Training (TVET) sector.
Persons with Disabilities Ensuring financial security of persons with disabilities (PWDs)
The cash assistance programme to assist PWDs implemented by the National Secretariat for Persons with Disabilities (NSPD) covers only a fraction of PWDs from low-income households. As of May 2020, the disability assistance programme covered 72,000 persons while another 37,492 persons were in the waitlist. Moreover, another 14,149 PWDs were identified during the first wave of the pandemic by the rural committees set up at the divisional level, as eligible for the cash assistance.
Assist all PWDs, especially those from low-income households to ensure their economic and financial security. Extending benefits to current waitlisted persons alone will require an additional budget allocation of around Rs 2,250 million in 2022 while extending it to those identified by the rural committees too (subject to a re-assessment of their eligibility) will require a further allocation of around Rs 849 million.
Migration Increasing reintegration support for returning migrant workers
Available estimates indicate that by early January 2021, a total of 128,470 Sri Lankans wanted to return, while only 60,470 or 47% had been repatriated. IPS pointed out that “such limited capacity to repatriate and delays in repatriation is the first indication of weaknesses in Sri Lanka’s preparedness for the return and reintegration of migrant workers in a crisis”. Limited social and psychosocial return and reintegration support for returnees restrict the capacity of a returned migrant worker to reintegrate with his family and community and contribute to the economy. Reintegration issues experienced during the pandemic were amplified by the low base level of return and reintegration support service structures that were operational in Sri Lanka before the pandemic.
Implement the existing policy on ‘Return and Reintegration’ introduced in 2015. A critical implementation aspect of this policy is integrating reintegration support policies into the mandates of the relevant ministries and providing necessary budgetary allocations for the same. This will result in faster and more successful reintegration of returnees to their families, communities and the economy.
Addressing gaps in recruitment sector for foreign employment
Given that the number of migrant workers has reduced drastically during the pandemic, concerted efforts will need to be made to facilitate foreign employment, when the situation improves. Findings from a study conducted by IPS shows several areas to focus on improving business practices of recruitment agents would be beneficial for promoting foreign employment. The absence of an effective international marketing strategy to promote Sri Lankan migrant workers to foreign employers have led to the recruitment agents micro-managing recruitments by resorting to unfair competitive behaviour with agents from other countries of origin. This leads to additional costs for the agent which is likely to be passed to potential migrant workers seeking employment.
Establish a centralised and effective international marketing strategy to promote migrant workers from Sri Lanka. This should be coordinated by the Ministry of Foreign Affairs and the State Ministry of Foreign Employment Promotion and Welfare, with necessary resources and budgetary allocations. The above proposal will improve the efficiency of recruitment agents. It will also indirectly contribute to increasing remittances.
Healthcare, Consumer and Agri propel Sunshine Holdings’ strong FY23 performance
Diversified Sri Lankan conglomerate Sunshine Holdings (CSE: SUN) recorded resilient revenue growth in a challenging macroeconomic environment, reporting notable top-line growth during the year ended 31 March 2023. Group’s Healthcare and Consumer sectors led growth while healthcare segment remained the major contributor to total Group revenue in FY23.
Sunshine recorded a consolidated Group revenue of Rs.51.9 billion for the year ended 31 March 2023, an increase of 61.3% over last year. Profit after tax (PAT) for the period in review was contracted by 28.0% to Rs. 3.6 billion. The gross profit improved by Rs.3.3 billion, up 31.9% YoY, compared to the previous year, driven by revenue growth. Gross profit margin for the period stood at 26.0%, a contraction of 580 basis points against the corresponding period last year.
The Group’s Healthcare business emerged as the largest contributor to Sunshine’s revenue, accounting for 46.1% of the total, while Consumer Goods and Agri Business sectors of the group contributed 36.6% and 16.9% respectively of the total Group revenue. The Group EBIT closed at Rs. 7 billion, an increase of 23.0% YoY.
Commenting on the results, Amal Cabraal, Chairman of Sunshine Holdings said, “The Group had to face and overcome tough economic factors and adverse market conditions which persisted throughout the year. These headwinds impacted some of the core sectors, and are expected to continue to do so in the short to medium term.”
However, Cabraal highlighted the Group’s commendable response to these challenges, adding, “Through robust cost management initiatives and process reengineering efforts, supported by the integration of digital technologies, Sunshine has delivered a strong performance in FY23. Despite the difficulties, the Group has displayed resilience, and takes an optimistic outlook on fortifying operations to further strengthen overall performance.”
Cabraal further emphasized that “Every possible measure has been taken to ensure business sustainability and continuity in the upcoming months.”
Healthcare sector recorded a revenue of Rs. 23.9 billion during FY23, a significant increase of 36.7% YoY backed by the improved performance in Pharmaceutical, Medical Devices and Manufacturing segments. EBIT for the sector was Rs. 3.0 billion with PAT of the sector increased by 13% YoY. Lina Manufacturing, the pharma manufacturing business, commenced commercial operations in the Metered Dose Inhalers (MDI) plant in July 2022, which was a significant milestone for the business.
Consumer Goods sector reported a 135.6% YoY increase in revenue to close at Rs. 19 billion in FY23. The revenue increase was predominantly driven by the addition of export business. The consumer brands Zesta, Watawala, Ran Kahata and Daintee continued to grow market shares, despite challenging consumer sentiment.
Agribusiness sector revenue increased by 35.4% YoY during FY21/22 to Rs. 8.8 billion, driven by the increase in palm oil NSA. PAT of the Agri sector closed at Rs. 2.3 billion for FY21/22, down by 33.6%.
ADB budget support loan doesn’t elicit positive response from bourse
By Hiran H.Senewiratne
The CSE did not react positively yesterday to the Asian Development Bank’s approval of a US$ 350 million loan as budget support, as part of Sri Lanka’s economic stabilization program, together with the rupee’s appreciation against the dollar, market analysts said.
“The ABD is supporting a series of policy reforms which are required to stabilize the economy and to spur growth. Budget support loans ease cash flows of the government and do not involve imports of goods. This has created some limbo for investors, market analysts said.
Consequently, shares edged- down in mid- day trade and ended on a negative note. The main All- Share Price Index was down by 118.97 points, while the most liquid index S&P SL20 was also down by 41.3 points.
Turnover stood at Rs 516 million without any crossings. In the retail market, top seven companies that mainly contributed to the turnover were, Dialog Axiata Rs 73.7 million (7.2 million shares traded), Lanka IOC Rs 54.42 million (426,000 shares traded), Expolanka Holdings Rs 51.7 million (382,000 shares traded), Prime Lands Residencies Rs 25.1 million (3.11 million shares traded), Browns Investments Rs 21.3 million (4.3 million shares traded), Hemas Holdings Rs 18.8 million (298,000 shares traded) and Elpitiya Plantations Rs 16.2 million (164,000 shares traded). During the day 38.3 million share volumes changed hands in 11000 transactions.
The rupee opened at Rs 296.50 /297.50 against the US dollar in the spot market yesterday, while bond yields were up, dealers said. The rupee closed at Rs 296.00 /297.50 to the US dollar on Friday after opening at around Rs 302.80/303.10.
Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money.
In the first year of an IMF program, a pegged central bank usually collects reserves and mops up liquidity generated from the purchases or there is a balance of payments surplus.
HNB reopens Student Savings Unit at St. Joseph’s College
Reaffirming its commitment to fostering financial literacy among students, Sri Lanka’s leading private sector bank HNB PLC, announced the reopening of its Student Savings unit at St. Joseph’s College, Colombo.
The reopening comes as part of the bank’s continued efforts to instil the habit of saving among young minds. The event was graced by the esteemed presence of St. Joseph’s College Rector, Rev. Fr. Ranjith Andradi, and the Managing Director/CEO of HNB, Jonathan Alles, Executive Director and Chief Operating Officer Dilshan Rodrigo who are distinguished past pupils of the College, along with Deputy General Manager- Retail and SME Banking Sanjay Wijemanne, Assistant General Manager, Network Management and Business Development Supun Dias and Head Office Branch Chief Manager, Dilanka De Silva.
During the ceremony HNB Managing Director/CEO, Jonathan Alles expressed his delight, stating, “We are extremely pleased to be a part of this momentous occasion, celebrating the reopening of the Student Savings Unit at St. Joseph’s College. Through this Unit, we aim to empower students with a deeper understanding of saving and the value of living within their means. By developing this essential life skill, students will be well prepared to fund their higher education and make other important investments in the future.”
The Unit will mainly offer student access to the wide range of savings products and investment plans available for minors. Moreover, the bank aims to create a digital payment ecosystem for the school also offering members of the staff and the Old Boys Association with exceptional services and benefits.
St. Joseph’s College Rector Rev. Fr. Ranjith Andradi, expressing his pride in the partnership, stated: “We are proud to be associated with HNB in reopening the Student Savings Unit. This initiative not only imparts valuable lessons in investing and saving but also instils a strong sense of financial management in our students. We believe this partnership will contribute to their progress and success.”
The Student Savings Unit, introduced by HNB in 1994, has played a pivotal role in promoting financial literacy among students. With 162 units established across Sri Lanka, HNB actively engages students in managing mini-banks within their schools, fostering leadership and financial responsibility. Each year, HNB provides comprehensive training to over 1,000 students, empowering them to become financially savvy individuals.
HNB is rated A (lka) by Fitch Ratings and was awarded the esteemed title of ‘Sri Lanka’s Best Corporate Citizen’ for 2022 by the Ceylon Chamber of Commerce. Other major accolades include being ranked among the Top 1,000 Banks in the World for six consecutive years by the acclaimed UK based “The Banker Magazine”, being adjudged the ‘Best Retail Bank in Sri Lanka’ for the 13th occasion by the Asian Banker, as well as securing a Top 5 position on Business Today’s Top 40 rankings for 2022.
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