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Wednesday June 19th, 2024

EU: Focused on non-discrimination, PTA during Sri Lanka’s GSP+ monitoring mission

President Gotabaya Rajapaksa in conversation with the EU delgation

ECONOMYNEXT – A European delegation which was in Sri Lanka to monitor the country’s compliance on key international conventions in order to continue a trade concession said it “significantly” focused on non-discrimination and the ongoing use of the Prevention of Terrorism Act (PTA) in its discussion with the government and other stakeholders.

The five-member EU delegation met President Gotabaya Rajapaksa, foreign, finance, and justice ministers, as well as members of the opposition and civil society including human rights defenders, trade unions, and employers to assess the progress of Sri Lanka’s pledges to comply with 27 international conventions in return for the Generalized Scheme of Preference Plus (GSP+) trade concession.

The visit comes after the European parliament in June adopted a resolution to consider withdrawing the concession that is estimated to be worth well above 500 million US dollars.

“There was a significant focus on non-discrimination, the respect for the rights of all communities in Sri Lanka, the ongoing use of the PTA, impediments to the exercise of fundamental freedoms, and the development of draft legislation on Non-Governmental Organisations (NGOs),” the delegation said in a statement.

“The meetings also reviewed drugs policy, environment and climate change, as well as corruption.”

The EU team’s monitoring mission was to assess if the bloc should withdraw the country’s largest trade concession that has helped the island nation’s top export garments, amid renewed concerns over human rights abuses against ethnic minorities.

“The effective implementation of international commitments forms the basis of Sri Lanka’s privileged access to the EU market,” EU Ambassador Denis Chaibi said in the statement.

“We have been working together with the Sri Lankan government since 2015 to advance the issues of concern and welcome the continued engagement.”

“The monitoring and engagement with the government of Sri Lanka will be the subject of regular reports to the European Parliament and the Council of Ministers.”

The European parliament’s key demand was for Sri Lanka to repeal the PTA, arguing that the legislation has been systematically used for arbitrary arrests and the detention of Muslims and minority groups in Sri Lanka.

International rights groups have asked the EU to demand Sri Lanka to comply with its obligations to continue the trade concession.

President Rajapaksa during the EU meeting has said that committees have been appointed and the Minister of Justice and the Attorney General have been instructed to study the reports of the committees. Immediate steps will also be taken to amend the necessary provisions of the PTA, he had said.

“President Rajapaksa also stated that the country would abide by the agreements on human rights in the world today,” the President’s Media Division (PMD) said in a statement on Monday soon after the meeting took place.

The EU is the second largest export destination for Sri Lankan products, and GSP+ has helped the country’s exporters to consolidate their position.

Around 7,000 Sri Lankan export items were covered under GSP+, of which around 60% were apparel, 11% were rubber products, 9% were gems and jewellery, 3% agriculture and around 17% other products, including wood products, toys and tableware. (Colombo/Oct07/2021)

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Central banks expect to increase gold reserves after buying 1,037 tonnes in 2023: Survey

ECONOMYNEXT – About 29 percent of central banks in the world intended to increase their gold reserves in 2023, up from 24 percent in 2023 and just 8 percent in 2019, a survey by the World Gold Council showed.

“The planned purchases are chiefly motivated by a desire to rebalance to a more preferred strategic level of gold holdings, domestic gold production, and financial market concerns including higher crisis risks and rising inflation,” the WGC said.

About 81 percent of 70 central banks that responded to the survey expected global central bank holdings of gold to go up, from 71 percent in 2023.

While in prior years, gold’s “historical position” was the top reason for central banks to hold gold, this factor dropped significantly to number five this year.

This year, the top reason for central banks to hold gold is “long-term store of value / inflation hedge” (88%), followed by “performance during times of crisis” (82%), “effective portfolio diversifier” (75%) and “no default risk” (72%).

Concerns about sanctions were listed as by 23 percent of emerging market central banks (0 advanced).

De-dollarization as a reason to hold gold gained ground, but was not among the main reasons.

About 13 percent of emerging market central banks listed de-dollarization as one of the reasons to buy gold up from 11 percent last year and 6 advanced nations said the same from zero last year.

Around 49 percent of central banks expected gold reserves to be moderately lower five year from now in the 2024 survey, against 49 percent in 2023 and 38 percent in 2022.

About 13 percent of central banks surveyed said US dollar reserves would be significantly lower in the 2024 survey, up from 5 percent in 2023 and 4 percent in 2022. (Colombo/June18/2024)

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Sri Lanka rupee closes weaker at 304.75/305.40 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed weaker at 304.75/305.40 to the US dollar Tuesday, down from 304.15 to the US dollar Friday, dealer said, while some bond yields edged up.

Sri Lanka’s rupee has weakened amid unsterilized excess liquidity from earlier dollar purchases.

Excess liquidity fell from as high as 200 billion rupees, helped by some sales of maturing bills and also allowing some term contracts to run out.

However the central bank has started to inject liquidity again below its policy rate to suppress interest rates.

On Tuesday 30 billion rupees was printed overnight at an average yield of only 8.73 percent.

Separately another 25 billion rupees was printed till June 25 at 8.09 percent to 9.05 percent, which was still below overnight the policy rate of 9.5 percent.

Nobody has so far taken the central bank to court for printing money beyond overnight at rates lower than the overnight rate.

Sri Lanka operates an ad hoc exchange rate regime called ‘flexible exchange rate’ which triggers panic among market participants, as the central bank stays away when spikes in credit either creates import demand or unsterilized credit is used up.

“If large volumes of unsterilized liquidity is left, the exchange rate has to be closely defended to prevent speculation involving early covering of import bills and late selling of exports proceeds,” EN’s economic columnist Bellwether says.

“Just as an appreciating or stable exchange rate leads to late covering of import bills, a falling rates leads to immediate covering of import bills.

“Keeping exchange rates stable is a relatively simple exercise but it is difficult to do so if short term rates are also closely targeted with printed money, as liquidity runs out, as if the country had a free float and no reserve target.”

“When there is a large volume of excess liquidity remaining (except those voluntary deposited for long periods by risk averse banks) the the interest rates structure is under-stated compared to the reported reserves.

“Interest rates would be a little higher than seen in the market if the liquidity was mopped up and domestic credit and imports were blocked to prevent the reserves from being used up.”

In East Asia there is greater knowledge of central bank operational frameworks, though International Monetary Fund driven flawed doctrine are also threatening the monetary stability of those countries, critics say.

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Vietnam selling SBV bills to stabilize the Dong, as Sri Lanka rupee also weakens

Sri Lanka’s rupee started to collapse steeply after the IMF’s Second Amendment in 1978 along with many other countries as flawed operational frameworks gained ground without a credible anchor.

A bond maturing on 15.12.2026 closed at 10.10/30 percent up from 10.05/30 percent Friday.

A bond maturing on 15.10.2027 closed at 10.60/57 flat from 10.60/80 percent.

A bond maturing on 01.07.2028 closed at 11.15/35 percent, up from 11.05/20 percent.

A bond maturing on 15.09.2029 closed at 11.80/90 percent unchanged.

A bond maturing on 15.10.2030 closed at 11.90/12.00 percent.

A maturing on 10.12.2031 closed at 11.95/12.10 percent.

A bond maturing on 01.10.2032 closed at down at 11.95/12.10 percent, down from 12.00/10 percent. (Colombo/Jun14/2024)

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Sri Lanka’s Ceylon Chamber links up with Gujarat Chamber

ECONOMYNEXT – The Ceylon Chamber of Commerce has signed an agreement with the Southern Gujarat Chamber of Commerce and Industry (SGCCI) to increase trade cooperation between India and Sri Lanka.

The MOU was signed by CCC CEO Buwanekabahu Perera, SGCCI President Ramesh Vaghasia, in the presence of Dr Valsan Vethody, Consul General for Sri Lanka in Mumbai, India.

“With the signing of the MoU, … the Ceylon Chamber of Commerce and SGCCI aim to facilitate trade between the two countries via initiatives such as trade fairs and delegations, business networking events, training programmes,” the Ceylon Chamber said in a statement.

“This partnership will open doors for Sri Lankan businesses to explore opportunities in Surat’s dynamic market and enable the sharing of expertise and resources between the two regions.”

Established in 1940, SGCCI engages with over 12,000 members and indirect ties with more than 2,00,000 members via 150 associations. It promotes trade, commerce, and industry in South Gujarat.

The region’s commercial and economic centre Surat has risen to prominence as the global epicenter for diamond cutting and as India’s textile hub, and is ranked the world’s 4th fastest growing city with a GDP growth rate of 11.5%

Surat’s economic landscape is vibrant and diverse. As India’s 8th largest and Gujarat’s 2nd largest city, it boasts the highest average annual household income in the country.

The nearby Hazira Industrial Area hosts major corporations like Reliance, ESSAR, SHELL, and L&T. (Colombo/Jun18/2024)

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