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Tuesday November 29th, 2022

Cup of milk tea to cost 100 rupees in Sri Lanka: reports

ECONOMYNEXT – The price of a cup of milk tea in Sri Lanka shot up to 100 rupees on Sunday (20) after importers raised milk powder prices the previous day.

Media reports quoting All Island Canteen Owners Association President Asela Sampath said the price of a cup of milk tea was increased taking into consideration rising prices of essential commodities including sugar.

Milk tea — a mix of hot, strong tea with powdered milk and usually sugar — is a favourite beverage in Sri Lanka consumed by nearly all socioeconomic demographics.

The price of milk powder, an essential commodity in Sri Lanka, shot up by 250 rupees and 600 rupees per 400g and 1kg pack respectively on Saturday.

According to the Milk Powder Importers’ Association, a 400g pack will now be sold at 790 rupees while a 1kg pack will be sold at 1,945 rupees.

Milk powder is widely consumed in Sri Lanka in place of fresh milk and is recognised as an essential food item. However, the prevailing economic crisis had led to shortages in imported milk powder leading to long queues for the product, with importers demanding a price hike amid an artificially pegged foreign exchange regime.

The last milk powder price revision was in December 2021 — 400g by 60 rupees and 1kg by 150 rupees — but importers had persisted in their demand for a steeper increase claiming that it wasn’t enough.

Sri Lanka is currently going through one of the worst economic crises in its history and, though the currency has been floated, the prevailing dollar shortage continues to see queues across the island for essentials including fuel. (Colombo/Mar20/2022)

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Sri Lanka inflation expectations said to be “very high”: ex-Governor

RESULTS: Sri Lanka’s central bank has made progress in putting the breaks on soaring inflation.

ECONOMYNEXT – Sri Lanka’s inflation expectations are said to be “very high” though the price index has started to grow at a slower pace, former Central Bank Governor Indrajit Coomaraswamy said.

“The IMF says inflation expectations are very high, even though inflation is coming down,” Coomaraswamy told an investment forum organized by CT CLSA Securities, a Colombo-based brokerage.

Participants of the forum who are in the central bank’s expectations survey should not just fill the questionnaire routinely but give some thought before doing so, he said.

Central bankers believe that expectations contribute to inflation and/or make their job harder, though critics say it yet another victim blaming ideology developed by Western Mercantilists to escape accountability for suppressing interest rates.

In the 1970s Great Inflation period US Presidents Nixon and Carter and their economic advisors in particular popularized several victim blaming ideologies including wage-price-spiral inflation (blame the unions), exogenous shocks (blame the OPEC cartel), speculators, among others, until Fed Governor Volcker came in and killed inflation with monetary tightening. (Blaming the Victims: The Government’s Theory of Inflation)

A central bank is the only agency that can create inflation or stop it.

The US Fed has also started to tighten monetary policy aggressively in 2022 putting the brakes on global commodity prices. The US Fed earlier blamed ‘supply chains’ as producers and shippers struggled to cope with the sudden demand exerted by stimulus checques and monetary easing. President Putin is still blamed.

Sri Lanka’s inflation (the rate of price increases) has slowed after rates were allowed to go up and some traded goods prices have fallen absolutely after the central bank raised rates and killed private credit which is also helping maintain an exchange rate peg around 363 to the US dollar.

The 12-month inflation shown by the widely watched Colombo Consumer Price Index peaked at 69.8 percent in September and the National Consumer Price Index peaked at 73.8 percent.

Interest rates are still less than half the inflation and financial repression has been threatened.

Mainly non-traded services components of the index are still going up as relative prices adjust.

In the credit system banks who are reluctant to lend due to risk aversion have built up excess liquidity of over 300 billion rupees (a form of private sector sterilization of non-borrowed reserves), preventing earlier printed money from going to the market and creating demand and forex shortages.

Banks which overtraded with central bank money are borrowing about 150 billion rupees overnight from the window.

The kerb market rate has also stabilized around 370-375 to the US dollar for the past two months helping anchor traded goods prices. (Colombo/Nov28/2022)

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Sri Lanka opposition MP asks government to clarify “domestic creditors” for restructuring

MP Harsha de Silva (l) with President Ranil Wickremesinghe at the tea party hosted in parliament after the president’s throne speech. Image credit: President’s Media

ECONOMYNEXT – Sri Lanka’s opposition lawmaker Harsha De Silva asked the government to clarify “domestic creditors” in the debt restructuring amid a wait and see approach by markets.

Sri Lanka government has started discussions with its external creditors for debt restructuring, but some of the external debts are held by local investors as some local banks have bought international sovereign bonds (ISBs) and Sri Lanka Development Bonds (SLDBs).

Speaking at the Foreign Ministry’s budget debate in the parliament, De Silva, an economist by profession, citing a local paper report said there are conflicting reports in “domestic creditors”.

“One (report) where the governor of central bank Nanadalal (Weerasinghe) saying that Sri Lanka will be able to get IMF board approval by January 2023. And the second by Standard Chartered CEO Bingumal Thewarathanthri saying perhaps by March,” he told the parliament.

“And I quote ‘when there is clarity on the haircuts that is going to be borne by the foreign bond holders, bilateral creditors and domestic creditors’. Who does he (Thewarathanthri) referred to as domestic creditors? Local banks and individuals who have invested in ISBs and SLDBs or those who invested in LKR (Sri Lanka Rupees).”

“There has to be clarity on this. There are so many conflicting stories on how well the restructuring discussions are moving forward.”

Sri Lankan economists and financial experts have said a local debt restructuring could have adverse consequences in the economy including banking sector collapse and people coming to street against respective banks and government if they go for a hair cut.

Opposition parliamentarian Eran Wickremeratne said the country’s first priority should be to make sure the banking system stays stable. ‘

“I have taken the position that I’m against the local debt restructuring we have negotiated our way. I understand that there are gross financial requirements and issues. In the negotiation the time is going to be the issue,” he told EconomyNext on Friday.

“We won’t be able to push through some reforms as fast as we think. We may have to take more time if going to basically not allow an immediate local debt restructuring. What I mean by restructuring is restructuring is not the problem, but I’m not for a haircut.” (Colombo/Nov28/2022)

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Anwar: Not Malaysia’s Mandela, but something more

ECONOMYNEXT – Something extraordinary happened in Malaysia this week. After a bitterly fought general election with no clear winner, the King had the wisdom and the courage to appoint Datuk Seri Anwar Ibrahim as Malaysia’s 10th Prime Minister.

To those observing from the outside, it was a remarkable sight. So, one can only imagine the gravity of the moment from the point of view of Malaysia’s new Prime Minister.

Anwar Ibrahim travelled to Istana Negara for the ceremony on Thursday from Sungai Long with his wife, the accomplished and independently remarkable Datuk Seri Dr Wan Azizah Wan Ismail, who for 24 years, has taken her husband’s crusade against corruption and bigotry in Malaysia and made it her own. When Anwar was imprisoned, she stood in for him and embodied his cause with an authenticity and ferocity that saw her become Malaysia’s first ever female opposition leader.

When they arrived at the ceremony, one of the many dignitaries assembled for Anwar’s swearing in was Malaysia’s Chief Justice, Tun Tengku Maimun Tuan Mat, the first woman to hold that office, who herself has long stood out as a judge with little patience for corruption or abuse of power. Whether in the 1MDB appeals or in holding firm against other powerful special interests, she has embodied the kind of judicial independence for which Anwar has fought.

As Anwar, the Prime Minister in waiting, took the instrument of his appointment into his hand and began reciting his oaths, he must have felt the weight of every word he swore of the pledge he has long dreamt of taking. Perhaps no Malaysian politician has distinguished himself on the world stage as Anwar did as Malaysia’s finance minister between 1991 and 1998.

His outstanding performance in transforming the Malaysian economy and navigating the perils of the 1997 financial crisis, while lauded across the globe, threatened entrenched interests, leading not just to his sacking and repeated imprisonment, but to a systematic 24-year long campaign to tear him down, destroy his name, and vanquish the causes of good governance and egalitarianism that he stood for. It was a campaign that was almost comical in its corruption.

Beginning in September 1998, every time it ever looked like Anwar was raising his head and might score a major political victory, either an arrest, a court ruling, gerrymandering or some other element of state machinery interceded to intercept him and keep him from power.

His multiple imprisonments on what the world agrees are trumped up charges are well known, as is the black eye bestowed on him by the fists of Malaysia’s chief of police. However, it is often forgotten that his Pakatan Rakyat won a 51.4% majority of the popular vote at GE13 in 2013, “losing” the election in practice only because of the first past the post electoral system by which the votes were apportioned. Whatever else Malaysia’s elite entrenched special interests disagreed about, they all seemed to agree on one thing: stopping Anwar at all costs.

Most of those who sacrificed their conscience and integrity over the years to keep Anwar down are now out of the spotlight, shunned by the electorate, recognized for their crimes by the judiciary, or cast aside by their political handlers once their utility expired. None were present in the corridors of power at the royal ceremony last Thursday to witness the totality of their failure.

It was heartening to see the local markets react to Anwar’s appointment with the biggest rally they have shown in two years, and to see the world market respond through the Ringit seeing its best day in the currency market since 2016. As Anwar prioritizes tackling the skyrocketing cost of living for ordinary Malaysians in the backdrop of a looming global recession, these signals of confidence are a promising sign.

As he begins to combat poverty while forming his cabinet and steering a fragile coalition, the new Prime Minister will have to grapple with bringing about good governance, combatting corruption and ensuring judicial independence. With corruption as deep-rooted as Anwar himself has charged, he should expect and be prepared to combat the fiercest opposition and subterfuge. To those who live on graft, this is not just a matter of policy. They stand to lose everything, their livelihood and their liberty, if he succeeds.

It is difficult to argue against anti-corruption initiatives or transparency in government, so his opponents will try, as they did throughout his time in the opposition, to paint Anwar as an outsider, unpatriotic, anti-Malay, anti-Islam. It will be up to Anwar and those around him to ensure that from the bully pulpit of the Prime Minister’s office, he can show a larger swath of Malaysians who he is and unite them.

Anwar has the most essential quality of a unifying politician, in that he is a “we” politician and not a “me” politician. Notwithstanding the formidable cult of personality that has been built around him, he is quick to redirect any personal praise or flattery by sharing credit with others and putting them in the spotlight and doing so with a humility and sincerity that endears him to other leaders.

While Anwar Ibrahim is fond of calling himself a ‘village boy’ due to his affection for the simplest pleasures of life, there is nothing simple about his pedigree. He was born with UMNO in his blood, with an UMNO parliamentarian for a father and political organizer for a mother. He is accused of being anti-Malay for his egalitarian politics, even though his entire undergraduate education was devoted to the study of Malay culture, history and literature. The idea that he would oppose the legitimate interests of Malays is unthinkable.

So it is important that he succeed as Prime Minister where he failed as a candidate, in persuading more Malay people that they have nothing to fear from him. In fact, their interests are better served by a level playing field that would enable them to thrive and compete not just in the shelter of the cosy, subsidized affirmative action bubbles that other parties have tried to woo them with, but in the world at large.

Anwar’s in-depth study of the Bible does not make him any less devout a Muslim, but a stronger, more confident one. An unapologetic ally of the Palestinian people, Anwar’s opposition to the suffering imposed by Israelis on Palestinians is only sharpened, not blunted, by his assertion of Israel’s right to exist. He is confident in who he is. Even torture, and years spent in the darkest depths of solitary confinement in a gruesome prison cell were not able to make him waver in his values or political principles.

It is already evident that Anwar’s appointment has raised Malaysia’s standing in the world. Several governments who either vocally or privately protested the way he was treated over the last quarter century have responded to his appointment with a new vigor and eagerness to engage with Malaysia and deepen political and economic ties with the country. Anwar demonstrated in opposition that he has a gift for advocating for Malaysia on the world stage. As Prime Minister, this is a gift that will serve him in good stead.

Wherever they sit on the political spectrum, no Malaysian could deny the sincerity that Anwar brought to his first press conference on Thursday following his appointment. He means to do the job, and do it well, responding thoughtfully and obediently to the King’s direction to form a unity government. He has clearly taken to heart the words of the monarch that “those who won did not win everything, and those who lost did not lose everything.”

The lesson in that message for every politician is that Malaysians are sick and tired of political knife fighting, of “moves”, from Kajang moves to Sheraton moves. No doubt some confederacy of politicians are already plotting the next creative ‘move’ to bring Anwar down, but they may find themselves outmatched by history.

Pundits have quipped that Anwar’s journey this week was one of “prison to palace”, forgetting that he earned that particular honor on 16 May 2018, when he was released from prison and had to deal with the dizzying experience of being driven directly to the palace for an audience with then Yang di-Pertuan Agong Muhammad V. He has been dubbed Malaysia’s “Nelson Mandela” as both men were imprisoned for their politics and came to power soon after. But such reductions do little service to Anwar, whose time in prison, as horrific as it was, is not what defines him or best qualifies him to govern Malaysia in such perilous times.

Prime Minister Anwar was born Malay and has always been a devout Muslim. Unlike the African Mandela in white apartheid South Africa, Anwar was born to power. And he was not directly elected to his office by a clear majority as Mandela was, but instead, Anwar was appointed Prime Minister after no one won a majority. He is not Malaysia’s Mandela, or Malaysia’s Barack Obama. But history has examples more fitting of Anwar’s pedigree, principles and intellect.

There was another politician once, who, like Anwar, had the privilege of sailing into politics through an established political party. That politician too, like Anwar, was from the majority community, but over time grew to vocally oppose discriminatory policies and helped form a new political party. That politician too, like Anwar, was an accomplished orator and compelling communicator. And he did not directly win nomination for the American presidency in May 1860. Instead, he was selected following much debate after no candidate secured a clear majority. And just like Anwar will have to do in the coming days, President Abraham Lincoln had to assemble a broad coalition, a team of rivals, to get his country through the most perilous of times.

Prime Minister Anwar shares other qualities with America’s most revered President. Lincoln too was known for having little patience for pettiness, and to extend a hand of friendship to sworn rivals. The American President’s devotion to his children was also legendary. Anwar rarely responds to questions about his ordeal in prison without sharing his anguish that his five daughters and only son had to endure in watching their father suffer and be persecuted.

Having either taught or studied at schools of the calibre of Oxford, Georgetown and Johns Hopkins, an astute student of history such as Prime Minister Anwar has no doubt already drawn some of these parallels and knows how to take the right pages out of Lincoln’s book to thread the political needle and form a stable government. As a battle-tested politician, there is little doubt that if any Malaysian can rise to the challenge and hold together a team of rivals, it is Anwar Ibrahim.

For Anwar to truly succeed, he will have to transform Malaysian politics and bring about the paradigm shift in Malaysia’s political culture that his supporters have rallied behind for so long. Anwar may be the first Malaysian Prime Minister since independence who does not plan to leave behind a legacy for his children of titles, property, monuments or fortunes.

Anwar’s own oldest daughter, Nurul Izzah Anwar, in her congratulatory message to her father, said that the legacy she expects to be left for the next generation is not a material one, but one of “ideals, principles and values that cannot be bought or sold.” Over the last 24-years, Anwar, his family, his party, and their supporters have braved unimaginable odds to take this simple message to Malaysians.

Whatever policy compromises Anwar may have to make to assemble a stable coalition government, he, like Lincoln, will be defined by whether he is able to remain true to his core principles while governing effectively. After so many years of struggle, so many years of trying to awaken Malaysians to the future that could await them if they unleashed the potential of all Malaysians and empowered grassroots industries and businesses to thrive, Anwar will finally get a chance to show them through deeds instead of words.

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