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Monday March 4th, 2024

Enactment process of Sri Lanka’s online safety act raises questions on law-making: CPA

ECONOMYNEXT — The process followed in enacting Sri Lanka’s controversial Online Safety Act (OSA) raises serious questions on law-making and its impact on constitutional democracy, the Centre for Policy Alternatives (CPA) said, urging the government to replace the act with a law that “genuinely addresses” concerns on online safety.

Claiming that the process of drafting the OSA was shrouded in secrecy, CPA said the rushed manner of its passage raises questions as to the intentions of the government in enacting a law that has significant implications for fundamental rights and the rule of law in Sri Lanka.

“CPA has previously commented on the substance and process followed with the Bill and challenged its constitutionality. In light of recent events surrounding the enactment of the OSA, CPA condemns the enactment of such a draconian law that can further limit freedom of speech and the right to dissent,” the organisation said.

“It is with concern that CPA notes the issues surrounding committee stage amendments of January 24, 2024. With the Supreme Court ruling requiring 31 amendments for the passage of the Bill with a simple majority in Parliament, questions were raised concerning the compliance with Article 78(3) of the Constitution which states that ‘Any amendment proposed to a Bill in Parliament shall not deviate from the merits and principles of such Bill’.

“CPA at the outset noted that the committee stage amendments proposed were substantial alternations, requiring the Bill to be withdrawn and re-gazetted. Despite this, the Government proceeded with the Bill, while failing to adopt mandatory changes required by the Supreme Court to pass the law with a simple majority.

For example, CPA said, the Supreme Court required that the State ensures that all persons involved in investigations maintain confidentiality of information obtained from the subject of investigations. However, the current Act contains no such protection (see page 60 of the determination). It was also determined by the Court that the inclusion of terminology such as “malicious” and “wantonly” was vague (see page 48 of the determination), yet, the OSA continues to use such wording in Section 14. Moreover, CPA noted, it was determined that certain services, such as emails that are the only user-generated content enabled by the service or SMS/MMS services, must be exempted from the OSA (see pages 59 to 60 of the determination). However, these changes were not made and the provisions on which the Supreme Court raised concerns continue under Section 27 of the OSA, thus raising concerns that the Supreme Court’s decision was selectively ignored.

“The government’s rush to enact the OSA and its disregard for the Supreme Court determination has resulted in a constitutional crisis, raising questions about the legality of the OSA. Moreover, by intentionally undermining the determination of the Supreme Court, the Government is setting a dangerous precedent that has implications for the rule of law and separation of powers in Sri Lanka.

“These concerns are also in the context of multiple other issues with the OSA that have been previously raised by CPA such as the broad powers of the Online Safety Commission, vague terminology and the role of experts, among others,” the organisation said.

In light of these and other concerns, CPA said it urges the Government to review the process and substance of the OSA, take immediate steps to repeal the OSA and introduce a law that genuinely addresses the concerns of online safety. CPA also called on the government to have a transparent and inclusive law-making process that provides time for stakeholder consultations and review.

“The processes followed with the enactment of the Personal Data Protection Act No. 09 of 2022 and Right to Information Act No. 12 of 2016 are some examples where sufficient time was taken to ensure the law-making process was transparent and that it factored in diverse viewpoints. Such practices of good governance are fundamental for Sri Lanka at its present stage of recovery and reform,” it said. (Colombo/Feb07/2024)

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Sri Lanka rupee opens at 308.20/50 to the US dollar

Sri Lanka stocks reversed its falling trend and gained for the first time in six sessions on Tuesday closed stronger on Tuesday (21).

ECONOMYNEXT – Sri Lanka’s rupee opened at 308.20/50 to the US dollar Monday, from 308.80/90 on Friday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.08.2026 was quoted stable at 10.90/11.00 percent.

A bond maturing on 15.09.2027 was quoted at 11.90/12.00 percent from 11.90/12.05 percent.

A bond maturing on 01.07.2028 was quoted at 12.20/30 percent from 12.15/35 percent.

The Colombo Stock Exchange opened up; The All Share was up 0.60 percent at 10,755, and the S&P SL20 was up 1.24 percent at 3,077. (Colombo/Mar4/2024)

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Sri Lanka central bank swaps top $3.2bn by December

ECONOMYNEXT – Sri Lanka’s central bank borrowed US dollars from various counterparties through swap transactions, which had topped 3.2 billion US dollars by December 2024, official data show.

The net short position, including swaps disclosed by the central bank, grew by over almost 1.28 billion US dollars from December 2022 to 3,280 million dollars.

The gross position grew from 2,263 million dollars to 3,280 million US dollars over the year.

The central bank supported some state banks with dollars to cover their dollar exposures, which had since been paid back.

By December reported gross reserves of the central bank was 4,491 million US dollars, against swaps of 3,280 billion US dollars.

Swaps of around 1500 related to the People Bank of China.

Swaps allow a central bank to increase gross reserves, without raising domestic interest rates.

Swaps with domestic counterparties lead to liquidity being injected into money markets, which can be mopped if domestic credit growth is moderate.

At the moment many private banks have large dollar positions invested outside the country, which cannot be used for transactions domestically because of a money monopoly given to macro-economists. (Sri Lanka repays debt or collects reserves of U$5bn via banking system since rate correction)

However unwinding swaps after private credit has picked, or engaging in swaps after private credit has picked up, may lead to money being injected to maintain the policy rate, leading to excess credit by banks and balance of payments deficits and or currency collapses, analysts say.

Central bank swaps in the third quarter of 2018 led to a collapse of the currency under the ‘exchange rate as the first line of defence’ policy peddled to Sri Lanka, critics have said earlier.

Domestic currency proceeds of swaps were the primary ammunition to bust East Asian currencies in 1997-98.

Any depreciation after the swap proceeds have been used for imports (effectively mis-targeting rates) a central bank will run a forex loss.

The PBOC however had put a rule, preventing the use of the swap after gross reserves fell below 3 – months of imports, preventing Sri Lanka from getting into further trouble through the use of official reserves for private imports.

Sri Lanka’s central bank also used borrowings from the Reserve Bank of India, via the Asian Clearing Union to run BOP deficits.

Losses from exposed dollar positions of central banks which have gained ‘independence’ from fiscal rules and parliaments and engaged in macro-economic policy, including the Fed, have led to taxpayers bearing the losses in the end.

Swaps were invented by the Fed in the early 1960s, as it deployed macro-economic policy (printed money for growth) threatening its gold reserves and the Bretton Woods system.

Sri Lanka has other borrowings also, including from the IMF, which has made net foreign assets of the central bank negative. (Colombo/Mar05/2024)

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Sri Lanka loses MICE tourists to Thailand on minimum room rates

ECONOMYNEXT – Sri Lanka has lost Meetings, Incentive Travel and Exhibition travelers to competitors in East Asia and India due to minimum room rates as higher standard rooms were available in other countries at lower prices, industry officials said.

President of the Sri Lanka Association of Inbound Tourist (SLAITO) Nishad Wijetunga said they the industry managed to retain a majority of booking made before the minimum room rates were imposed by the state last year.

“However, there were MICE groups that were supposed to come and cancelled Sri Lanka and went to places like Thailand and other parts of India and we lost,” Wijetunga told EconomyNext.

“We know that large groups of MICE (tourists) are affected.”

India is a key source of MICE tourists to Sri Lanka.

Sri Lanka’s businesses have got used to protectionism and try to push up prices with import taxes to extract more money from customers using the coercive power of the state, with tiles and steel being among the most prominent examples.

RELATED: Stand-alone hotels unviable in Sri Lanka due to high construction, capital costs

High priced tiles and steel in turn makes hotels expensive to build and make the leisure industry less competitive, analysts say.

However, in tourism, unlike in building materials customers are not trapped within the country and are free to move to other markets.

Managing Director of CEC Events and Travels, Imran Hassan, said the industry lost groups to East Asia due to minimum room rate.

In one instance, an operator was in discussions to get a group of 900 passengers.

“And that moved out to Thailand,” Hassan said. “Like that, there are many instances that the minimum room rate was not conducive.”

Thailand in 2023 attracted 28.04 million tourists.

A group that used to come to Sri Lanka annually used to take 40 to 50 five-star hotel rooms. This time Sri Lanka competed by offering lower standard.

“This year, they’re only giving 10 rooms to the five-star hotels,” Hassan explained. “They are staying in smaller hotels because they can’t afford it because it has become so expensive.”

“But overall, we are working with the authorities to correct it.

“We don’t mind demand and supply situation taking the rates up as in the Maldives. But what we are saying is keep an open market.”

RELATED : Sri Lanka should say good bye to minimum room rates: President

President Ranil Wickremesinghe has said Sri Lanka cannot progress with protectionism and the country has to learn to face competition. (Colombo/Mar04/2024)

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