History of Ceylon Tea

ECONOMYNEXT – The prices of Sri Lanka’s exports have risen faster than import prices up to October 2021 improving the ‘terms of trade’s though the country is in one of the worst currency crises in history after record money printing.

Sri Lanka’s exports hit 1.2 billion US dollars in October, up to 854 million US dollars in 2020, when an outbreak of Coronavirus in September hit the economy.

Global prices are running at three decade highs with the US Federal Reserve printing money after closing its excess liquidity window.

“The export volume index and unit value index increased by 9.5 per cent and 28.3 per cent, respectively, on a year-on-year basis, in October 2021,” the central bank said.

“This indicates that the increase in export earnings can be attributed to the combined impact of higher export volumes and prices.”

The import volume index fell 1.6 per cent while the unit value indices increased by 26.4 per cent, implying that the increase in import expenditure was mainly due to the price effect.

“Terms of trade, i.e., the ratio of the price of exports to the price of imports improved by 1.5 per cent in October 2021, compared to October 2020, as the increase in export prices surpassed the increase in import prices,” the central bank said.

Anglo-American Mercantilists frequently blame ‘deteriorating terms of trade’ not open market operations for monetary instability involving currency and balance of payments troubles.

Though export prices have generally gone up earnings from tea exports decreased by 2.4 per cent due to lower export prices (by 7.3 per cent) in October 2021, the central bank said.

A key Sri Lanka tea buyer Turkey has been hit by monetary instability after its central bank started targeting the 7-day call money rate dropping a policy corridor and high rates to stop inflation led to by President Erdogan to cut rates sending the Turkish Lira sliding.

Sri Lanka’s tea sector has also been hit by a artificial fertilizer ban.