![]() 6th May 2001 |
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NewsInflation high, growth moderate in 2001: CBBut with greater macro economic stabilitySri Lanka is expecting moderate economic growth of 4.5 percent and high inflation this year but with greater macro economic stability against 6 percent growth in 2000 , the Central Bank said. The bank's economic research director Dr A.G. Karunasena said consumer prices and inflation would rise in the first half of the year due to the lagged impact of administered prices of various commodities while the rate of increase would slow down in the second half. Annual average inflation is projected to rise to 9.5 percent this year from 6.5 percent in 2000, the bank said in its annual 2000 report released to the media last week. Inflation accelerated to 9.5 percent last month from 4.1 percent in the same month in 2000 due to increases in diesel, kerosene, gas and electricity prices that have in turn triggered a rise in the cost of food and other goods. The price of diesel, used extensively in the transport of goods, has risen by more than 100 percent in the past year. The government announced a wage freeze for six months in last month's budget, to trim spending, which is seen putting more pressure on the people, already reeling from a string of price increases in the past year. Among favourable macro economic indicators this year is a significant turnaround in the balance of payments. The Central Bank report said this year's BOP would record a lower current account deficit of $ 463 million and an overall surplus of $ 140 million compared to a current account deficit of $1.0 billion and an overall deficit of $ 516 million in 2000. Last year's deficit was precipitated by extra defence spending of $ 200 million, an additional $ 400 million on crude oil purchases due to rising world market prices, increased use of expensive thermal power instead of hydro power and postponing the sale of government assets due to weak market conditions. Karunasena told reporters that the report for the first time included a section on the economic outlook for this year and a medium term outlook which would be beneficial to policymakers and industry. The report said slow growth in agriculture, moderate growth in the manufacturing sector and a reduction in the growth rates in trade and other services "are expected to be the main causal factors for local economic growth." Other than tea production which is seen rising, rice and rubber ouput are expected to fall or record moderate growth this year. The bank said a general economic slowdown in advanced and developed countries is seen hurting Sri Lankan exports. Growth in the United States, Sri Lanka's biggest export destination, is expected to drop to 1.5 percent this year from 5 percent in 2000. Europe and Britain, the other two major Sri Lankan export markets, are expected to grow moderately by 2.4 percent and 2.6 percent, respectively, in 2001. The government last month said it planned to cut the overall budget deficit to 8.5 percent this year from 9.9 percent in 2000, a figure the Central Bank said it hoped would be maintained. "The achievement of the envisaged fiscal targets is necessary to improve macroeconomic stability and release more resources for private sector investment while reducing pressure on interest rates. As the leeway in the budgetary outturn for any unexpected change is very limited, every effort would need to be made to take prompt corrective measures to adjust for any revenue shortfall or expenditure increase," the report said. The bank said total international reserves which fell to $ 2.1 billion last year from $2.5 billion in 1999 and $3.0 billion in 1998, was expected to improve this year with better private inflows and foreign aid. Sri Lanka got a tremendous boost in mid-April when the IMF and donors endorsed a $523 million overseas assistance package to help the country boost economic growth and shore up foreign exchange reserves. The package, approved by the IMF executive board on April 20, consisted of a $253 million standby credit facility from the agency and a total of $270 million from other donors, including the World Bank, the Asian Development Bank, the U.S. and Japan. The IMF said its approval paved the way for other donor funds The Central Bank said the first tranche of $ 131 million from the IMF contribution had already been received, considerably boosting foreign reserves. In the medium term growth prognosis, the bank gave two scenarios - one with strong policy adjustments and accelerated reform adjustments and the other with moderate policy adjustments and slower implementation of reforms. Among the envisaged reforms are lower defense expenditure, freezing civil service wages, stopping new hires in government and cutting costs. In addition this the government has said it planned to adjust administered prices for petroleum products, public transport and utilities to reflect changes in international oil prices instead of subsiding these costs as has been the case earlier. The IMF said in a statement on April 20 that the government had to accelerate privatization, strengthen the integrity of the banking sector, improve public administration, the financial position of public enterprises and the labor market. Commercial Bank goes to MawanellaMawanella, a busy trading town en-route to Kandy, has been linked to Sri Lanka's largest computer-linked banking network through the 83rd branch of Commercial Bank of Ceylon Limited, which was opened there recently. The new branch is connected to 82 branches of the Bank situated island-wide through ComNet. The facilities offered include a 24-hour banking facility through the CAT Automated Teller Machine and Tele-banking facilities in addition to all the normal banking facilities. Commercial Bank's Managing Director, Amitha Gooneratne declared open the new branch in the presence of many leading personalities and residents of the area. Speaking at the occasion, Mr. Gooneratne said he was confident that the new Commercial Bank branch would be the best bank in Mawanella, because no other bank offers the latest technology and the speedy and courteous service offered by the staff of the Bank. He said that the research conducted before the setting up of the branch showed that people in Mawanella needed an efficient bank like Commercial Bank with a widespread network. He said there was severe competition among banks for business at present, and the only way Commercial Bank could differentiate itself was through superior service to customers. Management specialist at seminarCIMA An international expert on supply chain management will be in Sri Lanka later this month to conduct a seminar on key issues pertaining to this area in the wake of globalisation of economies. Dr B Mahadevan, Associate Professor in Production & Operations Management at the Indian Institute of Management Bangalore will be the resource person for this seminar organised by the Chartered Institute of Management Accountants (CIMA). The event, scheduled for May 24, will focus on the latest global trends that could be applied to upgrade systems, procedures, value systems while leaving room for change to gain an edge over competitors in an era of globalisation of economies. "Although the globa-lisation of economies have brought in much scope for domestic and multinational companies it has put immense pressure on such organisations, making cost, quality, delivery and flexibility key factors influencing buyers. The increasing demands of customers have intensified competition among these service providers necessitating in an effective supply chain.† In these circumstances, surviving intense competition is a vital concern and supply chain management will address its importance," Pravir Samarasinghe, Chairman of the CIMA's Management & Professional Development Committee said. HSBC Chief in Sri LankaDavid Eldon, Chairman of the Hong Kong and Shanghai Banking Corporation is due to arrive in Sri Lanka on May 8 and will stay until 11 May 11. During his visit Mr. Eldon will attend the opening of the HSBC branch at the Union Place on May 10. He will also take part in the luncheon meeting organised by the council for Business with Britain and speak on "the E-volution on banking -an HSBC perspective, also on May 10. Mr, Eldon started his banking career with an Australian banking group in London in 1964. He joined HSBC Bank Middle East in 1968. He was made an executive Director of the in January 1994. Chief Executive officer in 1996 and Chairman in January 1999. Mr, Eldon was also appointed a director of HSBC holdings Plc on January 1999. Harnessing wild thinkingA Two-Day workshop on "Harnessing Wild Thinking" was organized by Worldview Institute and recently held at Hotel Taj, on Golden Pond. This workshop was the result of a collaboration between Worldview lnstitute and TIMS Management Consulting, Singapore. The session leaders were Lau Siew Kiang and Woh Weng, who are directors of TIMS. Both trainers have run management training programmes for the private as well as public sector organizations in Singapore, including the Police Department. The programme was highly interactive and was restricted to sixteen participants at senior management level. Some of the topics covered were, getting out of being 'stuck', using systems thinking with creative work environments, CAP steps, solutions generation, balancing outputs of 'left' and 'right' brain. Mr. Nalin Jayasuriya, Managing Director & CEO of Worldview Global Education Ltd., in his opening address, stated that the problem solving technique for the future will depend greatly upon creativity, the daring to be different and the ability to think 'outside the box'. CTC alerts govt of a potential shortfall in estimated excise revenues for 2001Ceylon Tobacco Company has announced a significant decline in volumes during the first quarter of 2001. Domestic sales volumes decreased by 8.7% against the same period last year. According to a company press release, this unprecedented decline is attributed to many consumers switching from Bristol to low priced illicitly manufactured white cigarettes. This is due to the widening price vacuum between Bristol (Rs. 6.50) and brown beedis (Rs. 0.50), which has encouraged illicit manufacture of "white" cigarettes (Rs. 1.00 - Rs. 1.50), on which no excise is paid. The illicitly manufactured "white" cigarettes, which are similar in length and appearance to the CTC brands are estimated to have grown to as much as 1.3 billion cigarettes per annum (30% of CTC sales) with over 250 brands freely available in the market. The illicit white cigarettes have become a fast growing threat not only to the government and CTC, but also to the legal brown beedi industry as well. CTC estimates that, if current sales trends continue, the government could face a shortfall of Rs. 1 billion on its excise collections in 2001. "The existing law clearly differentiates between cigarettes and beedis," stated Fred Combe, Managing Director of CTC, "These illicit manufacturers are trying to position their brands as beedis to avoid excise, when it is very clear they are cigarettes". The issue has been highlighted to all the relevant authorities so that urgent action can be taken to eradicate this menace. Coming down further and furtherThe benchmark indexes which started from historical lows of 416.4 & 629 at Friday's closing in the previous week came down further with a stagnant market also having an impact on the government issue of treasury bills worth 3.2 billion rupees. The All Share Price Index (ASPI) and the Milanka Price Index (MPI) recorded declines of 0.56 points and 2.33 points respectively up to Thursday. The first week of the month, started with the Korea Ceylon Footwear Manufacturing Company Ltd. officially informing its share holders of the winding up of the affairs of the company due to lack of funds. Without an infusion of fresh equity funds, the company is unable to meet its day-to-day expenses and pay its debts to sustain operations. Accordingly, the company has decided to initiate steps to wind up the affairs of the company by petitioning the District Court of Colombo for a final decision. Market analysts said the market downturn was due to investors expectation of interest rates coming down, which would further affect the cost of funds. Investors are also expecting the the IMF standby credit to provide a boost to the market. Sri Lankan tea exports for the first quarter of 2001 rose by 6.5% compared with the same period in 2000. This is a good omen, showing a recovery in the plantation sector. According to brokers, high grown teas will be a good investment on a long-term basis. With the government imposing restrictions on the import of genetically modified food under Food Act no. 26 of 1980, a boost is expected in the food & beverages sector. This upswing will be on a long-term basis. According the market analysts, the share prices of companies involved in the food & beverage sector may have an effect from this issue. Among the large transactions which took place were 60,000 shares of Central Finance Company Ltd. trading at Rs. 30/-, 11,000 shares of Distilleries Company of Sri Lanka Ltd. at Rs. 3/75, 10,000 shares of Colombo Dockyards Ltd. trading at Rs 9/25 and 123,5000 shares of John Keells Holdings Ltd. at Rs. 33/-. A lethargic market was seen throughout the week, which closed at 415.84 & 626.67. - Ashwin Hemmathagama People's Bank launches Jaya Siri 2 programSeven hundred People's Bank officials consisting of Regional Managers, Branch Managers and senior executives met at the BMICH recently to discuss the newly launched Jaya Sri 2 Promotion. After a successful run with the first Jaya Sri programme, People's Bank is re-launching the next phase of the programme with a new look and a new face. "Jaya Sri 2 is more vibrant and exciting," Derek Kelly, CEO/GM said. "This promotion has a host of new and valuable prizes specially tailored to appeal to the Bank's strong rural base, in addition to its urban customer. For example, premium motor boats, tractors and hand tractors are among the new regional draw prizes, in addition to the daily prizes of gold coins, monthly prizes of cars, computers, fridges, scooters and motorbikes, and the Grand Annual Prize of a Mitsubishi Montero." "We have to make this deposit mobilization campaign a great success, using our strong rural base" said Mano Tittawella, Chairman of the People's Bank when he discussed the challenges facing the Sri Lankan economy and the role of the banking sector with those at the briefing. "It is going to be tough for us in the future, but we need to work together as we did for the first Jaya Sri programme to make Jaya Sri 2 a success." Bank managers who made the biggest contribution to last year's Jaya Sri programme were recognized with certificates for their contribution towards the Short Term Deposit Mobilization Programme and Short Term Action Plan. |
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