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Lanka needs US$1,285mn for three months of oil, US$500mn from India: Minister

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ECONOMYNEXT – Sri Lanka needs 1,285 million US dollar for oil imports in the next three months, of which 500 million will come from an Indian credit line, Energy Minister Udaya Gammanpila said, as the country grappled with forex shortages and global prices went up.

“For the next three months we have forecasted 1,285.5 million US dollars for oil imports,” Energy Minister Udaya Gammanpila said.

“We hope to get 500 million dollars from the credit line from India. We are talking to others we will tell parliament when we finalize them.”

The 500 million dollar credit line to be activated in April is a one year facility at 2.5 percent.

India this month gave consignment of diesel on an appeal by Sri Lanka ahead of the credit line being used officially.

He said oil prices were around 40 to 45 US dollars a barrel in 2020, about 55 to 65 in 2021 are around 90 to 100 million dollars in 2022 so far with Russian invasion of Ukraine pushing prices up, he said.

Brent crude had moved up to 101.40 dollars as he spoke.

As of February 24, Sri Lanka had following stocks of fuel:

Petrol 92 – for 10 days

Petrol 95 -for 40 days

Lanka Auto Diesel 08 days

Super Diesel – 8 days

From a ship that is now being unloaded 5000 metric tonnes of diesel would be given to the Ceylon Electricity Board and 4,200 MT to the Sojitz power plant, which would be enough to run it for six days, he said.

“Some stocks are also coming in the future,” he said.

Each week two to three ship come based on the projected fuel needs of the country, based on which tenders have been floated. However unloading of tankers have been delayed due to forex shortages.

Sri Lanka usually has stocks for 15 to 21 days before the forex crisis, Energy Ministry Secretary K D Olga has said.

Sri Lanka has been struggling to find foreign exchange to pay for oil with liquidity injections being made to keep interest rates down after giving reserves for imports.

When foreign reserves of a pegged central bank (which are savings) are given for imports, an equivalent fall in rupee reserves must take place in commercial banks to keep the economy in balance.

However in a pegged central bank with a policy rates, money is printed an re-inserted to banking system (sterilized reserve sale) preventing a correction in credit, the balance of payments and driving imports and economic activity to an unsustainable level.

Sri Lanka is now trying to get credit lines for fuel, instead of market pricing and offsetting domestic consumption and non-oil imports.

Credit lines (domestic consumption financed by foreign borrowings) will further widen the external current account deficit and national debt.

The Mercantilists who print money or finances budget deficits with foreign borrowings and state enterprises with credit lines then jump up and say there is a current account deficit or a ‘twin deficit’ in a country where private citizens are net savers.



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More than 6 bn worth of substandard drugs dispensed to patients

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The Committee of Public Accounts (COPA) has disclosed that Rs. 6,259 million worth of drugs faced a quality failure from 2011 to 2020 due to improper storage. The COPA report has further revealed that 99% of such drugs had already been dispensed to patients when the condition was brought to attention. In that situation, it was not possible to recover the cost of substandard drugs from the suppliers, the Parliament said.

The Committee on Public Accounts has directed the Ministry of Health, Nutrition and Indigenous Medicine to expedite the process of facilitating better storage of drugs to ensure their safety.

It has also been observed that the temperature in the warehouses, owned by the Medical Supplies Division, is maintained properly and that the medical supplies are stored in the corridors of the central drug warehouses and hospitals.

Furthermore, the Secretary to the Ministry has pointed out that if there is a system to detect the failure of drugs as soon as they are received, the loss can be recovered from the suppliers and if the quality testing of 60 drugs can be done by the State Pharmaceutical Corporation, this situation can be avoided to some extent.

These concerns and observations were contained in the first report of the Second Session of the Ninth Parliament on COPA, which was tabled in Parliament recently (20) by Prof. Tissa Vitarana, the Chairman of the Committee on Public Accounts.

The report contains information about the investigations of seven state institutions summoned before the Committee on Public Accounts and one Special Audit Report during the period from 04.08.2021 to 19.11.2021.

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CBSL Chief: Economy could be stabilised in year or so if …

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By Hiran H. Senewiratne

The prevailing Balance of Payments (BoP) crisis could lead to a major social crisis as the available foreign reserves were only sufficient for a few weeks’ imports, Governor of the Central Bank Dr. Nandalal Weerasinghe warned on Monday.

“The economy can be stabilised in the next 12 month if the IMF negotiations and debt restructuring are finalised within the next seven to eight months. Until then we have to support the poor people,” Dr. Weerasinghe said, addressing a seminar on the “State of the Economy and Talks with the IMF”. It was organised by the Press Club, together with the Press Institute, at Colombo Hilton.

The CB Governor said the current BoP crisis would worsen and, therefore the economic pain could only be minimised if essential policies and measures were implemented in an expeditious manner. But “IMF technical level virtual meetings are likely to conclude this week, and thereafter further discussion will take place to finalise everything,” Dr. Weerasinghe said.

Dr. Weerasinghe suggested that the monetary and fiscal authorities tighten the monetary policy by higher margins and fiscal policy by restoring tax rates to pre-2020 levels.

The Governor said, “We have three categories of creditors namely International Sovereign Bonds, which raise short term funds from global markets, which account for 35 percent of the government debt, while other two creditors are Paris Club and non-Paris Club (India and China).

Dr. Weerasinghe said that the country’s debt needed to be brought to a sustainable level. “For that purpose a debt sustainability analysis needs to be drafted with a fiscal policy for the IMF bailout”, he said.

Speaking about the country’s worsening economic fundamentals, Dr. Weerasinghe said: “The nation is currently experiencing a historically low economic growth and falling trend of per capita GDP since 2017 with rising levels of poverty. It is also running the highest fiscal deficits since 1988 with the lowest ever government revenue as a percent of GDP.

“Amid those developments Sri Lanka’ poverty level will increase, unemployment level soar and local industries will have to shut down due to restriction of importation of raw material. Therefore, we have to seek humanitarian assistance from the World Bank, Asian Development Bank and other bilateral and multilateral agencies”, the Governor said.

“We are seeking short-term bridging facilities from official creditors until an agreement is reached with creditors on restructuring,” he said.

In his presentation, Dr. Weerasinghe analysed the links between banking and the currency crises. He pointed out that the problems in the banking sector typically precede a currency crisis with the currency crisis deepening the banking crisis, thus activating a vicious spiral.

Sri Lanka also had the highest-ever government debt which was unsustainable at the moment. Debt dynamics might be worsening in the next few years unless the debt was restructured, he said.

Sri Lanka also recorded the highest rate of inflation in 12 years which was increasing sharply and was experiencing the highest-ever levels of money printing by the CBSL, he added

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Dragonfly thought to be extinct found again

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By Ifham Nizam

Scientists have rediscovered Sri Lankan Clubtail (Anisogomphus ceylonicus), one of the rarest species of dragonflies in the country. The team that made the discovery comprised Amila Sumanapala of the Department of Zoology and Environment Sciences, University of Colombo, T. Ranasinghe of the Butterfly Conservation Society of Sri Lanka, and D. Sumanapala of the Faculty of Graduate Studies, University of Sri Jayewardenepura. According to lead scientist Amila Sumanapala Sri Lankan Clubtail is one of the rarest species of dragonflies.

First collected in 1859, it was only known from the original collection and another collection record made a century after in 1962. This species had not been found anywhere in Sri Lanka for close to 60 years until the team encountered a larva during a survey conducted in 2021.

Anisogomphus ceylonicus is one of the few Odonates of Sri Lanka with no photographic records of a living specimen available hitherto.

The present observation provides the first photographs of a live A. ceylonicus larva and the most recent documentation of the species. These observations, coupled with previous work (Lieftinck 1971, Bedjanič & van der Poorten 2013), provide an improved understanding of the species, which might enable further targeted surveys to be made

It was first discovered from Ramboda over 140 years ago based on a female specimen, which was originally described as Gomphus ceylonicus and later assigned to the genus Heliogomphus by F.C. Fraser (Bedjanič & van der Poorten 2013). Almost a century later, Lieftinck (1971) collected an immature male and its exuvia of a clubtail dragonfly from Rambukpath Oya, 10 miles northwest of Hatton in 1962 and described it as Anisogomphus solitaris. However, Bedjanič & van der Poorten (2013) recognized that H. ceylonicus is conspecific with A. solitaris, and thus reassigned it to the genus Anisogomphus. Since the discovery of the species, only these two records have ever been documented (Bedjanič et al. 2014), despite odonatological surveys and numerous biodiversity explorations conducted countrywide.

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