Industrial production slips in Nov. on refinery closure

Sri Lanka’s industrial production slipped in November 2021, ahead of the key festive month, weighed down by the coke and refined petroleum, as the foreign exchange crunch worsened prompting a temporary closure of the country’s only refinery. 

Accordingly, the Index of Industrial Production (IIP) edged down 3.01 percent from October to 106.2 index points in November, while on a year-on-year basis, the index slipped 
0.6 percent.  

The subcategory, coke and refined petroleum, was seen as the main drag on the index in November, as the main refinery in the country had to be closed for some time since the foreign exchange crunch spilled into the country’s energy sector. 

Unless brought under control, the power and energy crisis could soon threaten the rest of 
the industries, 

knocking the exports off course, as the country is now under daily power cuts of at least one hour, due to the lack of foreign exchange at the Ceylon Electricity Board to foot the furnace oil bill. 

The US $ 500 million energy funding line from India could alleviate the crisis to a certain extent. Yet, Sri Lanka’s foreign exchange troubles run deep, with the country having US $ 6.6 billion worth of foreign obligations due to be settled during 2022. 

Meanwhile, the rest of the sub-industry categories added gains during November from the previous month, signalling continued expansion in the activities after the lockdowns ended in October.

This condition was also reflected in the robust merchandise exports, which marked the sixth consecutive month of a billion dollars in earnings in November. 

For instance, the wearing apparels, which have a considerable weightage on the index, gained five index points from October levels to 106.0. 

The apparel and textile manufacturers saw some robust demand coming from their customers in the United States and Europe, with the return of consumer demand during 2021. 

For instance, the retail sales in the US for December grew by 16.9 percent the same month in 2020, reflecting a resurgence in consumer spending after a fuller reopening of the economy and government stimulus, which flushed the households with cash and savings. 

Meanwhile, the other key categories of the IIP, food products, beverages, other non-metallic mineral products, rubber and plastic products and chemical and chemical products, added gains in differing proportions during November.