Front Page

Front Page

Iraq war takes toll on Lanka
By Nilika Kasturisinghe
The crunch of the three-day-old US led military campaign against Iraq is beginning to affect Sri Lanka's economy as a Bill just passed last week by parliament to curb escalating consumer prices is yet to become law.

Worst hit are tea exports to the Gulf region with hardly any bidding in low grown teas at the Colombo tea auctions. Colombo banks have placed restrictions on transactions in West Asian currencies and the government has been forced to review the fuel prices.

The Articles and Services (Regulations and Maintenance) Bill passed in parliament on March 19 is yet to become law. This is because the Speaker has not yet given his assent.

Parliamentary Secretary General Priyani Wijesekara told The Sunday Times last evening that steps were being taken to get the Bill certified. The law was aimed at preventing sudden price increases or hoarding of goods in view of the War in Iraq and similar situations.

Consumer Affairs Minister Ravi Karunanayake, on whose behalf the Bill was presented in parliament, has left for Washington on an official tour. The Bill provides for the imposition of a fine and a maximum of a five-year jail term for persons found guilty of offences such as increasing prices and hoarding goods on the pretext of the war in Iraq.

As Sri Lanka began to feel the effects of the war, the government claimed it was closely monitoring the plight of some 170,000 Sri Lankans working in Kuwait and set up a 24 hour monitoring centre at the Foreign Employment Bureau to provide information to their relatives. By last afternoon the centre had handled 420 inquiries.
Foreign Ministry spokesman Gamini Kariyawasam confirmed that there were reports of Sri Lankans employed in Kuwait leaving to temporary camps. He said nine centers have been opened.

Most private bank branches at the Katunayake International Airport imposed restrictions on transaction of West Asian currencies. The Sampath Bank, has temporarily stopped changing Kuwaiti dinar and the Hatton National Bank will not accept any West Asian currency for an over-the-counter transaction, but will 'send on collection' thereby accepting to pay after realization, according to officials.

The Commercial Bank outlet at the airport stated it would accept up to 30 Kuwaiti dinars only. It would also encash only up to the value of Rs. 10,000 -15,000 in other Middle Eastern currencies. But, the two state banks, the People’s Bank and the Bank of Ceylon, were still providing encashing services.

Exporters to West Asia were also facing restrictions imposed by the banks. "The local banks are a little negative, regarding credit for export orders," Jayantha Karunaratne, Managing Director of Imperial Teas (Pvt) Ltd., told The Sunday Times.
"It is a hand-to-mouth situation now. Most of the exporters have large stocks in hand. Every exporter has about 1 ½ months of his real exports in hand," he said.
Our biggest market next to Russia is West Asia. The banks are taking a very negative attitude, Mr. Karunaratne said.

With the imposition of a war risk surcharge imminent, exporters are in a dilemma over repricing the goods. "Our insurance companies spoke to us and told us to be a little careful. Therefore when we are quoting figures we are already adding a little bit on our own," Mr. Karunaratne said. Due to cautious purchasing by West Asian buyers, it is learnt that one million kilos of low grown tea were held back at Wednesday's auction.

But, the full impact of it is expected next week. "The crunch will come next week, at the next auction," Tea Association, Chairman Rohan Fernando warned. Last week the low grown purchases were much less than usual. We have asked the government for relief measures, mainly supporting the middle and small exporters."

Tea Association CEO Niraj de Mel has held emergency consultations with the chief stake holders in the tea export field and sent a letter to Deputy Plantations Minister Navin Dissanayake, stressing the immediate requirements to safeguard the industry. The letter which was sent on Friday evening, in response to a telephone discussion with the Minister mapped out four important areas which needed attention, to protect the tea export industry.

The relief measures requested by the tea export industry, were extending the packing credit period from 90 to 180 days, instructing commercial banks to withdraw the restrictions and negotiate processing of documents of shipments sent to West Asia, requesting the government to provide extra warehouse facilities for private tea factory owners, and to consider providing loans at low interest rates to the factory owners.

Meanwhile, although the Ceylon Petroleum Corporation initially gave an assurance that fuel prices would not be affected immediately, Power and Energy Minister Karu Jayasuriya said prices were being reviewed. In Jaffna, petrol sales are already being restricted, while in the black market petrol is being sold at Rs. 100 a litre from the previous price of Rs. 50.

Back to Front Page