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Ahead of IMF approval, Sri Lanka govt promises anti-corruption bill

Shihar Aneez

Wednesday March 8, 2023 12:53 pm

By Shihar Aneez

Wednesday March 8, 2023 12:53 pm

ECONOMYNEXT- Sri Lanka expects to present an anti-corruption bill to the parliament in coming days, Cabinet Spokesman said, as the island nation has been urged by the International Monetary Fund (IMF) to reduce corruption.

The IMF has urged Sri Lanka to reduce corruption vulnerabilities through improving fiscal transparency and public financial management, introducing a stronger anti-corruption legal framework, and conducting an in-depth governance diagnostic, supported by IMF technical assistance in return to a $2.9 billion loan.

Sri Lanka, in return of the loan, has agreed to reduce corruption vulnerabilities through improving fiscal transparency and public financial management, introducing a stronger anti-corruption legal framework, and conducting an in-depth governance diagnostic, supported by the IMF technical assistance.

The IMF on Tuesday said that Sri Lanka has now received financing assurances from all major bilateral creditors, which will pave the way for consideration by the IMF’s Board on March 20 the approval of the Staff Level Agreement reached on September 1, 2022 for financing under an Extended Fund Facility

“We have discussed it in the cabinet before and the act has already being drafted by the Minister of Justice Wijedasa Rajapaksa,” Cabinet Spokesman Bandula Gunawardena told the weekly cabinet briefing on Wednesday (8).

“It will be definitely presented to the parliament in the coming days.”

Most Sri Lankans are furious about systemic corruption with political leaders are ignorant of curbing them.

Activists and civil society officials have accused some politically influenced people of amassing wealth in an illegal way in foreign countries since 2005.

They have blamed failures to curb corruption for the unprecedented economic crisis which later turned into a political crisis.

Former president Mahinda Rajapaksa and his family members have been accused of acquiring wealth in abroad and many protesters during the prolonged three month protest last year have demanded proper investigations with the help of international organisations like the United Nations.

Rajapaksa has rejected such allegations.

The protests forced them president Gotabaya Rajapaksa and his elder brother ex-premier Mahinda to resign in the face of furious public agitations against their wrong economic policies.

The resignation of Rajapaksa led the parliament to elect Ranil Wickremesinghe as the president in an unprecedented manner.

However, President Wickremasinghe is yet to act on past corruptions under previous governments.

Last month Wickremesinghe said an Anti-Corruption Bill will be introduced and the government was taking steps to include the ‘Stolen Assets Recovery (StAR)’ initiative in this Bill, together with the assistance of the World Bank and the United Nations

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Markets

Sri Lanka’s shares slip on profit taking and selling pressure

Wednesday June 7, 2023 5:18 pm

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

Bonds & Forex

Sri Lanka Treasuries yields plunge, 12-month down 318bp

Wednesday June 7, 2023 4:04 pm

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

Bonds & Forex

Sri Lanka forex reserves rise US$722mn in May 2023

Wednesday June 7, 2023 3:48 pm

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed amid weak credit and better inflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.

Related

Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)