The Sri Lankan rupee has been experiencing fluctuations against the US dollar, impacting various sectors such as the stock market and bond yields. Foreign investors have sold government securities, and state-run Litro Gas Lanka Ltd. raised prices of LPG. Argentina's dollarization plan draws criticism, similar to reactions in Sri Lanka. Opposition predictions contradict forecasts by financial institutions. The government proposes measures for state sector workers and funds for health and education sectors. Leftist leader Anura Kumara Dissanayake gains favorability. The IMF program and the Central Bank of Sri Lanka have differing forecasts. Taxes on imported beedi wrapping paper are reduced, and the Ceylon Petroleum Corporation may sell fuel below the formula price. Sri Lanka's tea export revenues grow. The Supreme Court faults individuals and the Monetary Board for the economic crisis. The US International Development Finance Corporation looks to fund companies and banks in Sri Lanka.
In October 2023, Sri Lanka's tea exports fell by 4.1% compared to the previous year, reaching 18.2 million kilograms. However, rupee revenues increased from 333 billion to 354 billion. From January to October, exports were down 5.6% to 199 million kilograms. The average export tea price decreased from $6.13 in March to $5.25 in October. Iraq, Turkey, Russia, and the UAE were the main buyers of Sri Lanka's tea [bf703bca].
The Central Bank of Sri Lanka reduced its policy rate to 10% in October in an effort to stabilize inflation. The bank also emphasized the importance of financial institutions passing on the monetary easing measures to market interest rates. Sri Lanka is expected to hold presidential and parliamentary elections in 2024, and a Sri Lankan minister warned of emerging racism targeting ethnic minorities. The minister highlighted past instances of racism and called for unity. Sri Lanka is set to host an international music show featuring Indian musicians in collaboration with Canada and Malaysia. However, concerns have been raised about the proposed minimum room rates for hotels in Sri Lanka, as it may affect the country's competitiveness as a tourist destination [bf703bca].
In March 2024, Sri Lanka's exports reached $1,139 million, the highest since August 2022. The growth in exports outpaced the increase in merchandise imports, with textiles and garments showing strength. Textile and garment exports reached $444.9 million, the highest level since December 2022. Petroleum product exports increased by 134.6 percent. Sri Lanka imported goods worth $1,507.7 million, driven by fuel imports. The trade deficit for March was $369 million, reflecting a normalizing economy [e21dd898].
Sri Lanka's tea producers have expressed concern over a government order to increase wages by 70%. The tea industry, which generates around $1.3 billion in revenue and employs approximately 615,000 workers, argues that the wage hike will make their tea globally uncompetitive and reduce dollar earnings. The government has mandated an increase in worker salaries from 1,000 rupees to 1,700 rupees ($5.66) per day, a move that the industry says will raise tea production costs by 45%. The Sri Lankan Labour Ministry has warned that plantation companies refusing to comply with the wage hike could be taken over by the government. Implementing the wage hike is estimated to cost plantation companies an additional 35 billion rupees [b3144018].
In April 2024, Sri Lanka earned US$ 877.6 million from merchandise exports, up 3.4 percent from a year ago. Imports recorded US$ 1,435.2 million, up just 0.3 percent from a year ago. This resulted in a trade deficit of US$ 557.7 million, eased from US$ 582.6 million a year ago. For the four months, the deficit was recorded at US$ 1,777.1 million, up from US$ 1,479.0 million in the corresponding period in 2023. The rising trade deficit reflects an expanding economy after a prolonged contraction caused by ultra-tight monetary and fiscal policies. April exports received contributions from almost all major categories, with a decline in garment exports. Agricultural exports increased by 2.8 percent, with tea exports up 2.2 percent. Coconut and coconut related products saw a robust increase of 18.2 percent. Fuel imports declined by 31.3 percent, while textiles and textile articles rose by 14.1 percent. Investment goods such as machinery, building materials, and transport equipment rose between 21.7 percent and 63.4 percent. Consumer goods imports slipped 2.1 percent, with medical and pharmaceutical imports falling sharply by 49.0 percent.