Economy

Bangladesh – Sri Lanka Preferential Trade Agreement: Gains and Policy Challenges

Despite enhanced trade partnerships in South Asia, intra-regional trade is far from reaching its theoretical potential. Similar production patterns and competitive sectors can be the causes. However, bilateral discussions to further lower trade costs continue. The ongoing Bangladesh-Sri Lanka discussions on a preferential trade agreement (PTA) will benefit from knowing the potential gains from reducing bilateral trade costs. In addition, knowledge of products with a higher potential for export gains will help optimise the economic benefits from a trade deal. The ex-ante estimates predict modest gains for Sri Lanka and Bangladesh in absolute terms, even after completely removing the sensitive list. Given that the estimated modest economic gains of a Bangladesh-Sri Lanka PTA do not justify a trade deal that requires substantial resources for negotiations, the PTA should have fewer regulatory measures and tariff concessions for the products on the offensive lists to maximise the economic benefits of a PTA between the two countries.

Sri Lanka’s Sovereign Foreign Debt: To Restructure or Not?

The landscape of sovereign borrowing has evolved from a small group made up of multilateral organisations, a few commercial banks, and the ‘Paris Club’ of rich countries to something much more complicated. In recent decades, emerging markets and developing economies have borrowed proportionately more from international bond markets with their dispersed private investors, and tapped new non-Paris Club lenders like China. From the sovereign’s perspective, this makes a potential debt restructuring operation particularly complicated.

Black, White and Grey Markets: The Dynamics of Foreign Exchange and Remittances in Sri Lanka

Despite the pandemic and related difficulties in remitting, inward remittances to Sri Lanka had picked up by December 2020 to record year-over-year growth of 5.8 %, contrary to all expectations. The reasons for such a quick rebound include catching up on postponed remittances, accumulated terminal employment benefits and savings-related remittances of migrant workers laid off due to the pandemic, receipt of counter-cyclical remittances from less frequent remitters and the shift from informal to formal channels. In the current context of the foreign exchange crisis in Sri Lanka, the latter is the most critical factor to focus on.

Healing the Ozone Layer: The Need for a National Cooling Policy (NCP) for Sri Lanka

The ozone layer is located in the lower stratosphere at a height of 15 to 30 kilometres above the earth, protecting it against the sun’s harmful ultraviolet (UV-B) radiation. It is like a blanket that protects the planet; a reduction in ozone concentration increases solar radiation damaging plants, animals, and human beings. Human-induced depletion of the ozone layer due to excessive emissions of ozone-depleting substances (ODS) which are primarily used in the cooling sector is a major global environmental concern. This blog discusses the importance of a National Cooling Policy (NCP) for Sri Lanka as a part of IPS’ ongoing research, to phase out ODS to prevent ozone depletion and mitigate global warming.

GSP+ Withdrawal: How Would it Impact Sri Lanka’s Economy?

Sri Lanka’s preferential access to the vital European Union (EU) market faces fresh challenges after the European Parliament’s special resolution adopted in June 2021. The GSP+ is a non-reciprocal trading arrangement whereby Sri Lanka does not have to lower tariffs in return but is required to implement certain non-trade related conventions to benefit from preferential access. The GSP+ arrangement slashes import duties to zero for vulnerable low and lower-middle-income countries that implement 27 international conventions related to human rights, labour rights, environment protection, and good governance. This article assesses the impact of a hypothetical withdrawal of GSP+ on Sri Lanka’s exports to the EU: the largest single trading bloc, with the United Kingdom (UK), accounting for 30% of Sri Lanka’s exports.

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