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Sunday May 19th, 2024

COVID-19 vaccine: When must Sri Lanka act?

ECONOMYNEXT – With 165 deaths and 8,812 active cases reported at the time of writing, Sri Lanka has yet to announce a concrete plan to acquire a COVID-19 vaccine. Public health experts, lawmakers on both sides of the aisle, and other commentators have made various pronouncements on the pressing need to secure a vaccine best suited for Sri Lanka’s people and her ailing economy. Others, however, including experts, advise against rushing into importing a vaccine, suggesting instead that the government concentrate its efforts on containing the spread of the virus for the time being. The calls for a decision either way have become louder in the wake of the establishment’s ill-advised, alarmingly anti-science endorsement of an untested indigenous miracle cure.

State Minister of Primary Health Care, Epidemics and COVID Disease Control Sudarshini Fernandopulle told EconomyNext on Friday (18) that it is still early days. Sri Lanka’s health authorities, she said, have focused their attention on the different vaccines developed by international pharmaceutical and biotechnology companies but, in the absence of sufficient data, a decision has yet to be made.

“It is too soon to tell which vaccines would be the best for our country and would be compatible with our citizens,” she said.

The state minister said the government has been in talks with the World Health Organisation (WHO) to ensure that 20 percent of the population will receive a COVID-19 vaccine for free through the COVAX initiative once the WHO has approved a vaccine.

COVAX, a global initiative spearheaded by Gavi, an international vaccine alliance, and the Coalition for Epidemic Preparedness Innovations (CEPI), aims to equitably cover 20 percent of a signatory nation’s vaccine needs, irrespective of income level. Some 190 countries have signed up for the programme, including wealthy nations such as the UK and Canada.

The WHO said in a statement on Friday (18) that COVAX had arrangements in place to access nearly two billion doses of COVID-19 vaccine candidates.

“For the vast majority of these deals, COVAX has guaranteed access to a portion of the first wave of production, followed by volume scales as further supply becomes available. The arrangements announced today will enable all participating economies to have access to doses in the first half of 2021, with first deliveries anticipated to begin in the first quarter of 2021 – contingent upon regulatory approvals and countries’ readiness for delivery,” the statement said.

Sri Lanka’s readiness for delivery is unclear, at best.  State Minister Fernandopulle said the country’s infrastructure shortcomings such as cold chain issues also present practical difficulties with regard to storing a vaccine, particularly the Pfizer-BionTech which must be stored at -70 degrees Celsius.

“Transporting that vaccine at that temperature is not very practical in Sri Lanka,” she said

Pointing to a lack of clarity in the effectiveness of the vaccines currently being rolled out in the UK and elsewhere, Fernandopulle said more information was needed. For instance, both the Pfizer-BionTech and Moderna vaccines are said to be 95% effective. However, as pointed out by the Vaccine and Infectious Diseases Forum of Sri Lanka (VIDFSL), these are preliminary phase three results that have yet to be peer-reviewed.

The state minister noted that the duration of  immunity to the novel coronavirus following vaccination is also unclear.

“We’re not told how many times we have to get it. For example, we know the polio vaccine is for a lifetime. With this, we don’t know,” she said.

According to Fernandopulle, in the event a vaccine eventually arrives in the island, high risk groups and frontline workers as well as members of the armed forces and police will be given priority.

The minister gave an assurance that Sri Lanka will import a vaccine that is deemed best suited for the country, though she did not commit to a timeline. The Sunday Times reported quoting a government official today that Sri Lanka is in talks with the World Bank to secure a Rs 10 billion loan to purchase a vaccine.

“We are still studying this. We will bring in the best and the safest vaccine for patients and citizens in the country as soon as possible. Financially we are under no stress. Funds will be given by the World Bank. The president, too, provides his fullest support,” she added.

Meanwhile, Executive Director and fellow of the Institute for Health Policy (IHP) Dr Ravindra Rannan-Eliya said Sri Lanka ought to take its time in working out a strategy for vaccinating the country against COVID-19.

“I don’t think we should rush. We don’t have thousands dying right now. Only two vaccines are approved by some countries, and we don’t have critical data even for those, in particular their ability to stop transmission,” he said.

Speaking to EconomyNext on Friday (18), Dr Rannan-Eliya said the countries who urgently need vaccines today are those with rampant COVID-19 spread and thousands dying.

“We are not in that category, unless the government has decided it has changed the national strategy of aiming at elimination, without telling us. It may have since ministers are now saying we should live with the virus. if you have eliminated the virus, you don’t need vaccines urgently, unless people need to travel abroad,” he said.

According to Dr Rannan-Eliya, to prevent transmission, Sri Lanka needs to vaccinate 90% of the population, an endeavour that is not economically viable at present, to say the least.

“This could easily cost 1% of GDP, and the protection might only last one to two years. We can’t blame the government alone, since our limited fiscal capacity stems from decades of cutting taxes. We’ve chosen to reduce tax collection (10% of GDP) below the average in Sub-Saharan Africa (18% of GDP). Business people will understand that choices have consequences. One of those is that we can’t afford to buy vaccines for everyone with our own money,” he said.

Though COVAX will give Sri Lanka 20% for free, the WHO has yet to approve a vaccine, a process that will take several months. Dr Rannan-Eliya is looking at a timeline between 2021 to 2022.

While it is unclear at present when exactly the WHO will approve a vaccine, The National Geographic reported earlier this month that COVAX’s bargaining power was at risk. The programme’s funding depends on donations from its signatories, the magazine said, which have been slow to arrive.

“Meanwhile, some 9.8 billion doses of COVID-19 vaccines are already reserved as of November 30, and more than half are dedicated to well-off countries through pre-purchase agreements. Assuming the vaccines prove effective, the United States has already secured enough doses to vaccinate its population twice over. For the UK, it’s thrice. And if it fulfills its orders, Canada could offer five doses to all of its 38 million citizens with some left over,” the NatGeo report said.

Dr Rannan-Eliya believes it is possible to eliminate the virus in Sri Lanka through tight border control and through rigorous testing, among other measures.

“This is a fraction of the cost of vaccinating everyone in the next 12 to 18 months. Plus, vaccinating everyone will not eliminate the virus anyway, since the initial vaccines are probably not good enough to do that.

“Our best option is to eliminate the virus using proven methods, maintain secure borders through 2021 and then pick the best and most affordable vaccine options in about six months time when more vaccines will be available and prices have started to drop. It would probably be prudent to raise taxes/reduce debt to pay for coverage for all in say 2022 or 2023,” he said.

In the meantime, Dr Rannan-Eliya said, vaccines will be needed for people leaving the country. If it is for personal reasons, he said, the cost should be borne by the traveller, but for other travels, the state will have to find the funds.

“Maybe a charge on incoming tourists might be an option since they will increase the cost for us of keeping the virus at low levels as we “live with the virus”, which [seems to be] the new policy?” he said.

Dr Rannan-Eliya reiterated that Sri Lanka ought not to rush.

“Pfizer would cost us USD 20 x 2 doses x 20 million people = USD 800 million. This does not include other deployment costs, indemnifying Pfizer for side effects and paying compensation ourselves since Pfizer will not. Even that will not remove the need for other measures, since transmission and deaths will still occur if we open borders,” he said.  (Colombo/Dec19/2020)

Comments (4)

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  1. Ruchira says:

    Beg to differ with Dr. RR. Being able to stop the disease is a good enough reason to have the vaccine. Imagine if you are in a high risk group (or even if you are not) and you get Covid19 and die of it or hospitalize with severe complications that require intensive care, while a vaccine that could have prevented all that is available for a mere 20 dollars in Singapore but not in Sri Lanka because our National policy didn’t think it was the cost effective thing to do! I am sure what he means is that the govt should not invest in vaccination this early but it could be made available for a price in the private sector for any individual who wants it regardless of they are going to travel or not. Otherwise it’s a ridiculous policy. I am sure we can do better than this and actually come up with a strategy based on several criteria like affordability and risk profile. Especially considering that there’s no guarantee that we would or even could succeed in eliminating the virus as he suggests.

  2. Ruchira says:

    This news that is about 2 weeks old claims that Pfizer’s vaccine could prevent transmission of the virus as well as stop the disease. Not sure if the claim has been since then proven or not. Nevertheless posting here as it is relevant to subject matter.

    https://www.manchestereveningnews.co.uk/news/uk-news/pfizers-covid-vaccine-could-stop-19659049?utm_source=facebook.com&utm_medium=social&utm_campaign=sharebar

  3. Ruchira says:

    To vaccinate or not is not the question; where as to vaccinate with which (vaccine) is!

    Sri Lanka according to media reports have ordered 18 million Oxford Astra Zeneca vaccines following the donation of 0.5 million of them by the Indian government. However elsewhere in the world, in Switzerland and several other European Union countries like Germany, Italy and France this vaccine has been rejected, on the grounds that its efficiency is still not sufficiently proven especially in the elderly age group to authorize its use! This is while in Switzerland and in many other countries of the western hemisphere, both the Pfizer and Moderna vaccines are already approved and being rolled out.

    Read more here:
    https://amp.ft.com/content/a6a6d64c-a337-4af4-9525-d194571c7887?__twitter_impression=true&s=04

    Sri Lanka’s decision to import Oxford Astra Zeneca vaccine seems like a decision based on economics rather than health and perhaps influenced by other geopolitical pressures too; not necessarily because it is the best vaccine available out there. There’s no talk of getting down any of the other two major vaccines – Pfizer and Moderna, both of which, if my memory is right have efficiency levels of 90% or above. I think it’s 94.5% for the Pfizer vaccine compared to 80% upper limit (I believe) of Oxford AZ vaccine. In addition mRNA vaccines like Pfizer and Moderna it seems are not only less affected by the new variants of the virus that everyone is concerned of but also could be produced faster, according to recent comment on twitter by Dr. Rannan-Eliya.

    Excuses of sorts are given indirectly for not importing any of these vaccines. One of the main reasons being that we could not afford the Pfizer vaccine. Another is that the cold storage requirements for this vaccine makes it unsuitable or less suitable for a tropical country like ours! Both these are not necessarily good or valid points in my opinion.

    If i am right Pfizer has a ready made cold storage units in which these vaccines could be stored and transported. You only have to buy those units along with the vaccine. Considering that the temperature requirements in any case are not the room temperature, to me it looks like that it does not matter whether you are a tropical country or a temperate country as long as you have a way of maintaining the cold chain. It’s time the officials tell us what the exact requirements are that makes it unsuitable for a country like Sri Lanka!

    In addition with regards to the price, according to what I read, in the UK to give two jabs of Pfizer vaccine costs, including the cost of cold storage device, only 30 GBP compared to 4 or 5 GBP for Oxford AZ! Now convert those numbers in to Sri Lankan rupees and see what the cost for an individual is and whether you as an individual could not afford it!

    If the government is unable to buy the Pfizer vaccine en masse to be freely distributed and vaccinate people, there’s no reason why it shouldn’t allow the private sector to import it and make it available for those who could afford it and are willing to pay for it! This will not only provide a choice to people who wants to get vaccinated, to be made with specialist consultation and opinion, with regards to what the best vaccine for them, on an individual basis. It will also reduce the burden resting on the government of vaccinating the population, at least to some degree!

    I wonder why no one, professionals and politicians alike, is talking about it! Nor are any of the journos! At least I didn’t see any.

    It is disappointing performance by the administration when you are deprived of the best that money could buy, in this case for a very reasonable price, especially when it could be a life and death situation for some!

    Why aren’t the people not demanding the best for them from the government? Why are the experts silent? Why isn’t their a critical appraisal comparing the different vaccines and their suitability for the country and different demographic and risk groups, available in the local public domain for people to be aware and educate themselves as to what could be the best vaccine for them, in consultation with their doctors!?

    Why? Why? Why? – is the biggest question!

  4. Ruchira Kitsiri says:

    13.02.2021 – My 4th comment here on this news item.

    Scientists at the University of Sri Jayawardenapura has confirmed that the UK Covid19 variant has been found from multiple locations within Sri Lanka. (1)

    Another important variant is the South African (SA) one. It is said that 90% of South African Covid19 infections are due to this variant. It has also been found that Oxford AZ vaccine is only 10% effective against this variant, in light of which South Africa has suspended it’s programme immunization with Oxford AZ! (2)

    While the UK variant has already spread across many countries of the world, bow according to latest news in Sri Lanka too, it will be only a matter of time before the SA variant does the same and arrive in Sri Lanka.

    In the light of these develooments are we still going to immunize 9 million plus Sri Lankans with Oxford AZ vaccine frim the Serum Institute?

    (1) https://www.newsfirst.lk/2021/02/12/uk-covid-strain-found-in-sri-lanka-dr-chandima-jeewandara/amp/?__twitter_impression=true

    (2) https://www-aljazeera-com.cdn.ampproject.org/c/s/www.aljazeera.com/amp/news/2021/2/7/south-africa-suspends-astrazeneca-vaccine-rollout

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Comments (4)

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  1. Ruchira says:

    Beg to differ with Dr. RR. Being able to stop the disease is a good enough reason to have the vaccine. Imagine if you are in a high risk group (or even if you are not) and you get Covid19 and die of it or hospitalize with severe complications that require intensive care, while a vaccine that could have prevented all that is available for a mere 20 dollars in Singapore but not in Sri Lanka because our National policy didn’t think it was the cost effective thing to do! I am sure what he means is that the govt should not invest in vaccination this early but it could be made available for a price in the private sector for any individual who wants it regardless of they are going to travel or not. Otherwise it’s a ridiculous policy. I am sure we can do better than this and actually come up with a strategy based on several criteria like affordability and risk profile. Especially considering that there’s no guarantee that we would or even could succeed in eliminating the virus as he suggests.

  2. Ruchira says:

    This news that is about 2 weeks old claims that Pfizer’s vaccine could prevent transmission of the virus as well as stop the disease. Not sure if the claim has been since then proven or not. Nevertheless posting here as it is relevant to subject matter.

    https://www.manchestereveningnews.co.uk/news/uk-news/pfizers-covid-vaccine-could-stop-19659049?utm_source=facebook.com&utm_medium=social&utm_campaign=sharebar

  3. Ruchira says:

    To vaccinate or not is not the question; where as to vaccinate with which (vaccine) is!

    Sri Lanka according to media reports have ordered 18 million Oxford Astra Zeneca vaccines following the donation of 0.5 million of them by the Indian government. However elsewhere in the world, in Switzerland and several other European Union countries like Germany, Italy and France this vaccine has been rejected, on the grounds that its efficiency is still not sufficiently proven especially in the elderly age group to authorize its use! This is while in Switzerland and in many other countries of the western hemisphere, both the Pfizer and Moderna vaccines are already approved and being rolled out.

    Read more here:
    https://amp.ft.com/content/a6a6d64c-a337-4af4-9525-d194571c7887?__twitter_impression=true&s=04

    Sri Lanka’s decision to import Oxford Astra Zeneca vaccine seems like a decision based on economics rather than health and perhaps influenced by other geopolitical pressures too; not necessarily because it is the best vaccine available out there. There’s no talk of getting down any of the other two major vaccines – Pfizer and Moderna, both of which, if my memory is right have efficiency levels of 90% or above. I think it’s 94.5% for the Pfizer vaccine compared to 80% upper limit (I believe) of Oxford AZ vaccine. In addition mRNA vaccines like Pfizer and Moderna it seems are not only less affected by the new variants of the virus that everyone is concerned of but also could be produced faster, according to recent comment on twitter by Dr. Rannan-Eliya.

    Excuses of sorts are given indirectly for not importing any of these vaccines. One of the main reasons being that we could not afford the Pfizer vaccine. Another is that the cold storage requirements for this vaccine makes it unsuitable or less suitable for a tropical country like ours! Both these are not necessarily good or valid points in my opinion.

    If i am right Pfizer has a ready made cold storage units in which these vaccines could be stored and transported. You only have to buy those units along with the vaccine. Considering that the temperature requirements in any case are not the room temperature, to me it looks like that it does not matter whether you are a tropical country or a temperate country as long as you have a way of maintaining the cold chain. It’s time the officials tell us what the exact requirements are that makes it unsuitable for a country like Sri Lanka!

    In addition with regards to the price, according to what I read, in the UK to give two jabs of Pfizer vaccine costs, including the cost of cold storage device, only 30 GBP compared to 4 or 5 GBP for Oxford AZ! Now convert those numbers in to Sri Lankan rupees and see what the cost for an individual is and whether you as an individual could not afford it!

    If the government is unable to buy the Pfizer vaccine en masse to be freely distributed and vaccinate people, there’s no reason why it shouldn’t allow the private sector to import it and make it available for those who could afford it and are willing to pay for it! This will not only provide a choice to people who wants to get vaccinated, to be made with specialist consultation and opinion, with regards to what the best vaccine for them, on an individual basis. It will also reduce the burden resting on the government of vaccinating the population, at least to some degree!

    I wonder why no one, professionals and politicians alike, is talking about it! Nor are any of the journos! At least I didn’t see any.

    It is disappointing performance by the administration when you are deprived of the best that money could buy, in this case for a very reasonable price, especially when it could be a life and death situation for some!

    Why aren’t the people not demanding the best for them from the government? Why are the experts silent? Why isn’t their a critical appraisal comparing the different vaccines and their suitability for the country and different demographic and risk groups, available in the local public domain for people to be aware and educate themselves as to what could be the best vaccine for them, in consultation with their doctors!?

    Why? Why? Why? – is the biggest question!

  4. Ruchira Kitsiri says:

    13.02.2021 – My 4th comment here on this news item.

    Scientists at the University of Sri Jayawardenapura has confirmed that the UK Covid19 variant has been found from multiple locations within Sri Lanka. (1)

    Another important variant is the South African (SA) one. It is said that 90% of South African Covid19 infections are due to this variant. It has also been found that Oxford AZ vaccine is only 10% effective against this variant, in light of which South Africa has suspended it’s programme immunization with Oxford AZ! (2)

    While the UK variant has already spread across many countries of the world, bow according to latest news in Sri Lanka too, it will be only a matter of time before the SA variant does the same and arrive in Sri Lanka.

    In the light of these develooments are we still going to immunize 9 million plus Sri Lankans with Oxford AZ vaccine frim the Serum Institute?

    (1) https://www.newsfirst.lk/2021/02/12/uk-covid-strain-found-in-sri-lanka-dr-chandima-jeewandara/amp/?__twitter_impression=true

    (2) https://www-aljazeera-com.cdn.ampproject.org/c/s/www.aljazeera.com/amp/news/2021/2/7/south-africa-suspends-astrazeneca-vaccine-rollout

Sri Lanka may have to depend on India or nuclear to reach low carbon target: researcher

DOUBLE WHAMMY: In Sri Lanka’s driest period, wind potential also goes down, a researcher and policy advocate says

ECONOMYNEXT – Sri Lanka will need to either connect to India or set up a nuclear power plant if the country is to reach its renewable energy targets due the country’s weather patterns, a researcher and policy advocate has said.

Sri Lanka has set ambitious goals for renewable electricity generation by 2030, apparently without much prior study or any costs being revealed when the target was set by President Gotabaya Rajapaksa.

Rohan Pethiyagoda, a taxonomist and researcher who had also been senior state officials involved in policy at one time said overall Sri Lanka used a large volume of biomass (firewood) for cooking.

“We need to recognize, of course, that about 60 percent of Sri Lankan households still use firewood as their primary fuel,” Pethiyagoda told a climate forum organized by Sri Lanka’s Ceylon Chamber of Commerce.

“Bless them, because they reduce our dependence on fossil fuels for cooking. Even the tea industry, one of our largest exports, uses biomass as its primary fuel for about 90 percent of its production.”

In the electricity sector, where the renewable lobby and other activists oppose coal on the basis of carbon emissions based on international trends, as well as dust, base load still has to be generated if thermal generators are replaced.

Solar power is available only for a few hours in daytime and it can also vary depending on cloud cover.

Hydro power (run of the river plants) is more stable but is dependent on rain. Large hydros with storage can be used for peaks, industry analysts say.

Wind is available throughout the day but can also be unstable. The problem of variability (non-firm energy) can be solved to some extent through ramping and battery storage at additional cost, analysts say.

A renewable plant in Poonakary with battery storage was priced at around 48 to 49 rupees (about 15 US cents) based on public statements.

Meanwhile Pethiyagoda said Sri Lanka’s weather patterns created an additional problem.

“We have this unusual thing for our renewable energy in Sri Lanka, that at the tail end of the northeast monsoon, from about December to April, we have a dry period in this country, which means that our hydro potential during those months goes down,” Pethiyagoda said.

“Now, as luck would have it, our wind potential goes down at the same time.”

As a result, Sri Lanka needs a reliable alternative to the current coal baseload.

“So for that reason especially, we need to look at either connecting to India’s grid in the long term or having a nuclear facility in Sri Lanka if we want to be low carbon. And of course, we need to replace our vehicle fleet.”

“And our base load can probably come from nuclear,” Pethiyagoda said.

“But whichever way we do it, the cheaper way would be for us to connect to India’s grid.

“Whichever way we do it, we’re looking at an investment of about 40 billion dollars. And then we have the problem of looking at how wind and solar will behave.”

It was not clear what the 40 billion dollar investments would be made up of.

Sri Lanka’s external debt as at December 2024, including unpaid principal after default was 37.3 billion US dollars.

In 2021 when the 70 percent target was unveiled in President Gotabaya Rajapaksa’s election manifesto power engineers said a 53 percent energy share planned for 2030 in a general plan at the time was was equal to that of Germany.

Pushing up the share to 70 percent would require billions of dollars of extra investments, they said.

Related

Sri Lanka generation plan renewable power share for 2030 equal to Germany: CEB engineers

After the central bank cut rates and triggered an external default however, Sri Lanka growth, and power demand in the next few years is expected to be lower than before extreme macro-economic policy.

Related Sri Lanka to invest US$11bn by 2030 to meet renewable target

In 2023, the CEB said about 11 billion US dollars would be needed to meet the 70 percent target. (Colombo/June19/2024)

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Sri Lanka President discusses Starlink with Elon Musk

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has discussed connecting the island to the Starlink satellite system with its founder Elon Musk, his office said in a statement.

President Wickremesinghe has met Musk at a World Water Forum High-Level Meeting in Indonesia.

President Wickremesinghe discussed “the implementation of Starlink in Sri Lanka & committed to fast-tracking the application process to connect SL with the global Starlink network,” the statement said.

Starlink is a low earth orbit satellite network, connected to Musk’s SpaceX group. (Colombo/Jun19/2024)

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Sri Lanka’s CEB March 2024 profits Rs84bn with capital gain, fx strength

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board group has reported profits of 86 billion rupees with the help of 25.9 billion rupees of capital gains from a transfer of shares, interim accounts show.

The rupee also appreciated in the quarter which keeps imported fuel prices low.

As a standalone entity, the Ceylon Electricity Board, made profits of 84.6 billion rupees in the March quarter.

CEB’s revenues rose 38.5 percent to 167 billion rupees in the March 2024 quarter, while cost of sales fell 26.1 percent to 105.0 billion rupees giving gross profits of 62.7 billion rupees.

The CEB also reported 30.6 billion rupees of other incomes and gains in the March quarter, up from 3.1 billion rupees last year.

Other Income and Gains

The utility said it made a 25.9 billion rupee capital gain from transferring LTL Holdings shares to West Coast Power an IPP in which other entities have a majority holding.

In the quarter the rupee also appreciated.

A rupee appreciation will help reduce the carrying cost of dollar loans and also reduce the cost of imported thermal fuels and maintenance costs of spares.

The central bank allowed Sri Lanka’s exchange rate to appreciate from 324.40 rupees in December 2023 to 300.17 on March 2024 amid deflationary policy and weak private credit allowing imported fuel costs also to fall.

Especially after 1978, after rate cuts drove the country into balance of payments crises, the central bank had collected reserves with free market interest rates, but has not usually allowed the exchange rate to re-appreciate despite generating a BOP surplus with deflationary policy.

Un-anchored Bad Money

Before 1978, when an apparently doctrinally foxed International Monetary Fund abandoned both external and specie anchors simultaneously after the Fed closed its gold window triggering the Great Inflation period, Sri Lanka also did not depreciate its currency, analysts have pointed out.

Related Why the IMF is hated now and is backing bad money in Sri Lanka and Latin America

Since it was set up in 1951, the central bank has printed money under various dual anchor conflicting Saltwater-Cambridge ideologies (re-financing rural credit, sterilizing outflows, potential output targeting, yield curve targeting) to create forex shortages and currency crises and started to go the IMF from the mid-1960s.

From 1978, after the IMF’s second amendment to its Articles denied the central bank a credible external and domestic anchor simultaneously, the currency stated to depreciate steeply.

The government was therefore unable to balance its budget and state enterprises were also unable to balance their budgets running large losses whenever the rupee fell and energy prices went up.

After abandoning its external and specie anchor the central bank followed a anchor conflicting regime involving money supply targeting without a floating exchange rate in the 1980s.

The ideology was rejected in toto by Singapore, Malaysia, Hong Kong, Thailand and China.

Since the end of a civil war macro-economists have followed inflation targeting without a floating exchange combined with extreme macro-economic policy to target potential output, eventually driving the country into external default.

Budgets went haywire in the early 1980s as the rupee fell, despite then President JR Jayawardene cutting subsidies and ending price controls (administered prices) two years earlier, in reforms that Singapore’s economic architect and one-time Finance Minister Goh Keng Swee said were “economic reforms which most people had considered politically impossible.”

Goh who set up a currency board in Singapore rejecting Cambridge-Saltwater ideology, warned JR not to destroy the rupee.

“Exchange rate policies involve many complicated technical issues which I do want to discuss here,” he said.

“On balance, the disadvantage of a depreciating rupee will, I believe, outweigh the advantages. Most of the products whose prices are administered are ether wholly imported or contain a high import content. About a quarter of rice consumption is imported.

“All wheat from which four and bread are produced is imported. The same holds true of kerosene and milk powder.

“Bus fares ware largely determined by the rupee price of imported oil and spare parts. Fertilizers are also mostly imported.”

At the time Sri Lanka had hydro-electricity.

Capital Injections

Some of the CEB’s dollar loans were been taken over by the central government after the steepest currency collapse in the history of the central bank in 2022 and external default.

The CEB’s contributed capital as at end March 2024 was 991.4 billion rupees up from 865.1 billion rupees.

With the March quarter profits with some financial engineering involving the asset sale and the government equity injection, the CEB’s group accumulated losses reduced to 456 billion rupees from 575 billion rupees.

The CEB ran large losses as the regulator failed to raise tariffs as macro-economists printed money to target potential output over the past decade.

From 2011 to 2022 the rupee fell from 113 to 370 to the US dollars as the central bank ran un-anchored monetary policy the regulator only raised prices in 2022.

Energy Minister Kanchana Wijesekera said the last price cut was also made possible due to rupee appreciation.

With no potential output targeting (no inflationary open market operations), the country has started to recover from the stability that has been provided up to now amid weak private investment credit.

Sri Lanka’s private credit is now starting to recover.

Based on past trends of using statistics instead of classical economic principles (cutting current current interest rates with inflationary open market operations of a money monopoly based on historical inflation rates under ‘data driven monetary policy’ without regard to domestic credit) analysts have warned of a return to monetary instability under potential output targeting. (Colombo/May19/2024)

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