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IPS Proposals for the Interim Budget

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Food related issues coming to the fore in Sri Lanka (File pic)

Ahead of the presentation of the Interim Budget, the Institute of Policy Studies of Sri Lanka (IPS) has recommended policy proposals for inclusion in the forthcoming Budget. Some key policy issues and recommendations follow.

Trade Policy

Despite strict import controls, Sri Lanka’s trade deficit in merchandise goods widened in 2021. The slight increase was mainly due to the sharp price movements in the world market, with the import reduction patterns across categories being consistent with the post-pandemic controls. As consumer goods imports are prioritised, including food imports, it generates two key undesirable impacts. First, it impacts food security and nutrition needs. Second, high food prices will incentivise a further resource shift – such as labour – to agriculture, raise wage costs for sectors like manufacturing and impact their competitiveness. In this context, two key recommendations are:

Prioritise imports for industrial expansion and food security needs: IPS research shows that about 88% of food imports are now subject to quantitative or price restrictions. The Special Commodity Levy (SCL) on items such as canned fish, green/black gram, cowpea, palm oil, and black gram flour should be removed to ensure that food security and caloric needs are met. Licensing restriction on maize imports which feeds poultry production costs must also be revisited. Sri Lanka must prioritise fertiliser imports and reintroduce fertiliser subsidies to paddy and vegetable farmers to raise productivity and prevent a resource shift that will impact overall economic efficiency.

Focus on increasing exports in sectors that use minimum foreign raw materials: There are certain products in which Sri Lanka enjoys a comparative advantage in global markets, requiring low imported raw materials in production such as tea, spices and mineral products like graphite. To meet immediate needs, bottlenecks such as fertiliser shortages should be addressed to raise productivity and export earnings whilst mineral resources can be auctioned to increase revenues.

Education Policy

The COVID-19 pandemic and the current economic crisis have severely affected the education sector. Health concerns, union action, social unrest and transport issues have resulted in frequent school closures. Inadequate budget allocations and improper recruitment of teachers have deteriorated the quality of education. Recent news items have highlighted difficulties faced by schools due to shortages of paper and other materials necessary for the functioning of schools. Further, deterioration of school facilities has affected the effective functioning of schools. Interruptions to school-based relief measures such as the school meal programmes can also increase school dropouts and malnutrition. Data from the Ministry of Finance reveals that public investment in education has remained just above 1%. Of this minuscule allocation, a large share is spent on teacher salaries. Frequent absorptions to the teaching cadre to provide jobs to unemployed graduates has worsened this situation crowding out funds from other necessary education inputs.

The government has recommended online lessons as a solution to difficulties in conducting on-site school classes. But IPS research shows that the access to online lessons is not equitable due to poor access to the internet, lack of necessary devices and high cost of data. In this context, two key recommendations are:

Increase public investment in education: Public investment in education should be increased and an adequate share of such investments should be dedicated to increasing the quality of education delivery such as the maintenance of school facilities, paper, and maintenance of school-centred relief programmes (e.g. school meals). This can be done by putting a cap on the share of government spending on salaries and wages of total expenditure in education. Given the lower enrolment rates for A-Levels, the government should consider introducing targeted financial assistance programmes for deserving children from poorer families to continue their studies.

Minimise school closures due to transport issues: Increase the existing fleet of school buses and provide adequate fuel for school buses to limit school closures due to transport issues. Measures should also be taken to ensure that children do not travel long distances to attend schools so that schools can function uninterrupted even in times of crisis.

Food Security and Nutrition Policy

IPS research shows that long-term environmental, social, and economic trends heightened by domestic and international challenges have eroded the resilience of Sri Lanka’s agri-food systems. On the global front, the COVID-19 pandemic and the Russia-Ukraine conflict are generating a global recession with high world market prices of food, oil, and fertiliser. At the local level, crop failures have resulted from poor government policies such as the chemical fertiliser import ban. Inflationary pressures arising from a combination of factors including excessive money printing and the sudden free float of the exchange rate have also taken a toll on domestic food prices and food supply. All these have resulted in low farm incomes, high food prices, food shortages and hunger and malnutrition. In this context, two key recommendations are:

Introduce a targeted food ration scheme for the poor and strengthen nutritional assistance: As an immediate measure to help the poor and marginalised who are the most vulnerable, introduce a targeted food ration scheme covering essentials like rice, wheat flour and dhal. Strengthen nutritional assistance programmes such as the School Meals programme, ‘Thriposha’ and ‘Poshana Malla’. Support from the World Food Programme (WFP), Food and Agriculture Organization (FAO) and regional (SAARC) and bilateral sources can be sought for this purpose.

Promote community gardens in the short term: Promote community gardens that include neighbourhood community gardens and school gardens. The way a community garden is set up and maintained can vary greatly from one to the other. These can be established in an empty land and the neighbours can look after it. It can be even in private land where the neighbours can share the harvest in exchange for labour. Some examples of community gardens include Virginia Avenue Community Garden, Washington, D.C., and Community Gardens Australia.

Health Policy

Sri Lanka’s health system is recognised as an efficient, low-cost model. However, changing demographic and disease patterns along with domestic finance issues threaten the sustainability of the health sector. Inadequate service provision in the public sector and shortages of medicine and equipment are driving people towards the private sector causing inequities in access to healthcare, as not all can afford private sector healthcare. Over half of the existing budget is allocated for wages leaving very little resources for all other health inputs. As a result, investments in this vital sector have been curtailed over the past few years. Further, changing lifestyles have exacerbated the risk factors for non-communicable diseases (NCDs). Four major behavioural risk factors directly contribute to the escalating NCDs in the country: tobacco use, physical inactivity, alcohol misuse, and unhealthy dietary patterns. In this context, two key recommendations are:

(To be continued)



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Lanka inflation hit 70.2% in August

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Food prices climbed 84.6 percent, while prices of non-food items rose 57.1 percent in the crisis-hit island nation.

(Al Jazeera) Consumer inflation in Sri Lanka accelerated to 70.2 percent in August, the statistics department has said, as the island nation reels under its worst economic crisis in decades.The National Consumer Price Index (NCPI) rose 70.2 percent last month from a year earlier, after a 66.7 percent increase in July, the Department of Census and Statistics said in a statement on Wednesday.

Food prices climbed 84.6 percent, while prices of non-food items rose 57.1 percent in the tourism-dependent South Asian country of 22 million people.The Central Bank of Sri Lanka (CBSL) in August said the inflation rate would moderate after peaking at about 70 percent as the country’s economy slowed.

The NCPI captures broader retail price inflation and is released with a lag of 21 days every month.The more closely monitored Colombo Consumer Price Index (CCPI), released at the end of each month, rose 64.3 percent in August. It acts as a leading indicator for national prices and shows how inflation is evolving in Sri Lanka’s biggest city.

Sri Lanka’s economy shrank 8.4 percent in the quarter through June from a year ago in one of the steepest declines seen in a three-month period, amid fertiliser and fuel shortages.

“Inflation is expected to taper from September,” said Dimantha Mathew, head of research for Colombo-based investment firm First Capital. “However, inflation is only likely to moderate and reach single digits in the second half of 2023.”

An acute dollar shortage, caused by economic mismanagement and the effects of the COVID-19 pandemic, has left Sri Lanka struggling to pay for essential imports including food, fuel, fertiliser and medicine.

The country earlier this month reached a preliminary deal with the International Monetary Fund for a loan of about $2.9bn, contingent on it receiving financing assurances from official creditors and negotiations with private creditors.

India on Tuesday said it had begun talks with Sri Lanka on restructuring its debt and promised to support the crisis-hit neighbour mainly through long-term investments after providing nearly $4bn of financial aid.

The High Commission of India in Colombo said it held the first round of debt talks with Sri Lankan officials on September 16.

“The discussions held in a cordial atmosphere symbolise India’s support to early conclusion and approval of a suitable IMF programme for Sri Lanka,” the High Commission said.

Sri Lanka will make a presentation to its international creditors on Friday, laying out the full extent of its economic troubles and plans for a debt restructuring.

The Indian High Commission also said New Delhi would continue to support Colombo “in all possible ways, in particular by promoting long-term investments from India in key economic sectors”.

India’s support to Sri Lanka this year has included a $400m currency swap, a $1bn credit line for essential goods and a $500m line for fuel. In addition, India has also deferred payment on Sri Lankan imports of about $1.2bn and given a credit line of $55m for fertiliser imports.

The High Commission said India had continuing development projects worth about $3.5bn in Sri Lanka, whose president earlier this month asked his officials to resolve obstacles to projects backed by India. He did not specify the obstacles or the projects.

President Ranil Wickremesinghe has said Sri Lanka will turn a free trade agreement with India into a comprehensive economic and technological partnership.

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Raigam Wayamba Salterns Group turnover tops 1 bn

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Raigam Wayamba Salterns PLC saw its group turnover increase from Rs. 959.6 million to Rs. 1,147 million recording a growth rate of 19.5% year on year.Despite the fact that the financial year 2021/2022 was filled with many challenges, as a result of prudent management practices implemented and followed, the Raigam Wayamba Group was capable of reporting its ever-highest growth in 2021/2022,” said Chairman, Raigam Group, Dr. Ravi Liyanage.

Raigam Wayamba Salterns PLC, which was listed in the Colombo Stock Exchange (CSE) in 2010 is the front line player in the value added salt market in Sri Lanka and it supplies a range of consumer salt products under the popular brands “Isi”, “Ruchi”, “Welcome” and “Triple Washed” as well as various salt products used as an input for different industries in bulk form.All the consumer products of Raigam Wayamba Salters are SLS certified for its quality and consistency and the processes are ISO certified.’8

The Raigam Wayamba Salterns Group is equipped with salterns, salt refineries and processing plants located in Puttalam and Hambantota districts. In addition to that the raw material supply for these operations has been ensured by the 1,800 Acre saltern established in Kuchchaweli in Trincomalee District by the parent company of the Raigam Group. Further the Puttalam Salt Limited (one of the successor to the National Salt Corporation) is also an associate company of the Raigam Group.

The well-known Raigam brand and state of the art island wide distribution network are distinct strengths of the Raigam Group. The Raigam distribution network operates on a latest IT platform and also includes distribution channels for modern trade, industry and bakery sectors.

Sri Lanka’s economy which was under-performed for two years due to COVID pandemic situation was experiencing the impacts of the foreign exchange crisis in the latter part of the financial year 2021/2022. Despite the fact that the financial year 2021/2022 was filled with many challenges, as a result of prudent management practices implemented and followed, the Raigam Waymba Group was capable of reporting its ever-highest growth in 2021/2022.

The group turnover increased from Rs. 959.6 million to Rs. 1,147 million recording a growth rate of 19.5% Y to Y. At the same time the Profit after Tax grew from Rs. 149.7 million to Rs. 215.6 million at an annual growth rate of 44%. As a result of these successful financial performances the Earning Per share for the year stood at Rs. 0.76 compared to Rs. 0.53 in the corresponding year. This has made a significant impact on the value of the shareholders’ investment increasing the Net Asset Value Per Share form Rs. 5.06 to Rs. 5.74.

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Singer’s legendry sewing industry and Academies developing skills and entrepreneurship in Sri Lanka

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A name synonymous with Singer (Sri Lanka), Singer sewing machine has over the years become an indispensable product at local households, helping thousands of women and men to make a living through a sewing business. For over six decades, Singer has been manufacturing its trademark sewing machines in Sri Lanka. Singer brand has claimed many firsts in sewing machine innovations including the world’s first zig-zag machine and the first electronic sewing machine.

Singer Industries, a subsidiary of Singer (Sri Lanka) manufactures traditional, portable and digital sewing machines at a fully-fledged facility, where it provides direct employment for over 100 factory workers and accommodates around 150 service agents. The traditional sewing machines are of two variants such as the straight stich and the zig-zag sewing machine, while the portable and digital sewing machines cater to the modern customers. Singer Industries is mandated with assembly of sewing machines and manufacturing of cabinets and stands for sewing machines.

The sewing machine stands and cabinets are 100% locally manufactured with the help of local suppliers who also depend from sewing machine manufacturing. Singer Industries also consists of a strong R&D section for sewing machine innovations. All the sewing machines produced by Singer Industries are distributed by its parent company, Singer (Sri Lanka) through their 431 distribution touch points. Currently, Singer sustains its dominance as the market leader for domestic sewing machine industry with a market share of 85%. Among the facilities, Singer Industries provides to its customers, it has deployed special service technicians at island wide service centres for technical assistance and support related to sewing machines. Its YouTube channel has access to over 130 technical assistance videos to further support its valued customers.

The name ‘’Singer’’ is closely associated with sewing. One of its major contributions to the local sewing industry is the Singer Fashion Academy. For more than 60 years, the Academy has helped thousands of individuals to develop sewing skills and become entrepreneurs. The Fashion Academy conducts sewing courses and diplomas while a degree pathway is to be implemented soon to further support students. The Academy is also the first and only institute in the country to receive course validation status from the Chartered Society of Designers (CSD) in the UK.

As of today, the academy consists of 54 branches Island wide and offers 22 sewing courses, 2 diplomas and another 10 courses as part of its Diwi Saviya program for low-income families. Annually, over 5000 – 6000 students get enrolled in Singer Fashion Academy’s courses. In addition to the physical classes, the academy conducts online courses and also provides a recorded version of lessons to further facilitate students. During the last decade, over 60,000 students have successfully completed the Fashion Academy’s courses and some of these students have already started their own sewing businesses. The Fashion Academy has helped in developing the passion of sewing among Sri Lankans and as a result, sewing has become a hobby among many.

Sewing can be considered one of the most feasible self-employment opportunities with its potential to generate a good income. A business of one’s own is a luxury at present due to current economic crisis. Many individuals who started their sewing businesses from scratch have developed their businesses to highly profitable ones. Singer Fashion Academy has all the resources ready to help develop sewing skills and is committed to develop a skilled workforce for the betterment of the country.

(Company news release)

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