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Sunday February 25th, 2024

Panic buying of petrol, diesel in Sri Lanka as money printing drives forex shortages

ECONOMYNEXT – Energy minister Udaya Gammanpila’s appeal to motorists this week to use fuel sparingly as the petroleum utility faced a forex shortage as money was printed to keep rates down and fund state expernse has sparked panic buying.

Long queues were seen at filling stations in Colombo and elsewhere on Friday after the ministry said it had diesel stocks for 11 days and petrol for 10 days.

Soon after hearing the country’s fuel stock position announce on radio on Thursday night, motorists rushed to fill up but found fuel depots had closed earlier than usual because of the daily night curfew starting at 10 pm.

By Friday morning, queues were forming outside pumping stations in Colombo and elsewhere.

“The reality is that we are in a foreign currency crisis,” minister Gammanpila said on Twitter on Tuesday “Please use fuel economically to save foreign currency for much needed medicine & vaccines.”

Earlier too, the outspoken minister had made it clear that the government was unable to hold large buffer stocks of fuel as the Ceylon Petroleum Corporation was unable to source the dollars needed to finance it.

As motorists rushed to fill up, minister Gammanpila tried to assure that the CPC had sufficient stocks.

“NO FUEL SHORTAGE,” the minister said in capital letters on Twitter and suggested that he would be the first to admit if there was one.

“I have repeatedly stated that if there was a fuel shortage, I would have told the nation before anybody else. I have always been truthful to the people and informed in advance about the price hike. The first to announce about the foreign currency crisis.”

By noon, many shed ran out of Octane 92 petrol and ordinary diesel. At the Alexandra Place shed in Colombo, there was no Super diesel and Octane 92 petrol by noon and hundreds of motorcyclists and diesel SUVs were turned away.

When motorists who usually buy 10 litres fill their tanks to the brim, sheds will run out of supplies until the next fuel delivery truck comes.

Meanwhile, the long queues for LP gas were not seen on Friday as dealers completely ran out of filled cylinders following a run on supplies after Laugfs Gas halted their operations saying they could not sell at the government regulated rates.

The gas shortage had already led to long queues to buy kerosene oil that is used as an alternative in stoves.

President’s Secretary P. B. Jayasundara had announced earlier this month that the country should reduce petroleum consumption and move towards renewable energy to avoid fuel rationing by the end of this year.

Sri Lanka on Thursday raised its overnight policy rate at which overnight money is printed from 5.50 percent to 6.00 percent, but most of the instability and reserve losses have come from money printed through ceiling rate in Treasuries auctions.

Money is printed partly to keep rates down and partly to fund state worker salaries and other spending, after a tax cut in December 2019 decimated state finances. (Colombo/Aug20/2021)

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Sri Lanka could get US$500mn from ADB in 2024

ECONOMYNEXT – Sri Lanka could receive 500 million US dollars in support from the Asian Development Bank in 2024 based on the progress of policy reforms, Country Director of the Manila-based lender, Takafumi Kadono said.

The ADB expect to go to its Board around March or April with a 100 million US dollar power sector loan subject to the cabinet of ministers of approving a revised electricity reform bill.

A 100 million dollar loan to support SMEs could also be approved in the early part of the year. Sri Lanka is setting up a credit guarantee agency to support credit for small firms.

A 200 million dollar credit for financial sector was also slated for the year. The ADB gave the first tranche of the financial sector policy loan late last year.

A $100mn for the water sector could also be approved later in the year.

Sri Lanka could get around 200 to 300 million US dollars a year at the lowest rate, or concessional ordinary capital resources (COL) rate of 2 percent.

The balance of would come at the ordinary capital resource rate linked to SOFR.

The ADB has also started work on a ‘Country Partnership Strategy’ for Sri Lanka covering the 2024-2028 period, Kadodo said. (Colombo/Feb25/2024)

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Sri Lanka’s multi-aligned foreign policy based on friendship: Min

ECONOMYNEXT – Sri Lanka’s multi-aligned foreign policy is based on friendship to all and enmity to none, its Minister of Foreign Affairs has said.

“Non-alignment means not becoming a bystander. Non-alignment means you are not forced or coerced into a camp to take sovereign decisions… you make your own choices. Whether it is commercial, security, regional or otherwise,” M U M Ali Sabry said on X (twitter).

“I have repeatedly stressed that sovereignty is the right to have your own opinion on what’s right and wrong, and to stand by your principles. Our multi-aligned foreign policy is based on friendship to all and enmity to none,” Sabry was quoting from his speech at the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) Foreign Policy Forum, on the theme ‘Reassessing Non-Alignment in a Polarised World’.

Sri Lanka is one of the founding members of the Non-Aligned Movement.

The strategically located island has been increasingly walking a fine line between opposing global factions as it seeks to come out of a financial crisis. (Colombo/Feb24/2024)

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Sri Lanka’s Commercial Bank Dec net down on tax provisions

ECONOMYNEXT – Sri Lanka’s Commercial Bank of Ceylon reported profits of 6.9 billion rupees from the December 2023 quarter down 21 percent, despite an improvement in net interest income and lower provisions, amid a change in tax provisions.

Pre-tax profits were 8.89 billion rupees up from 2.4 billion rupees. There was a 6.4 billion tax reversal last year compared to a 1.7 billion rupee tax charge this year.

Commercial Bank reported earnings of 5.26 rupees for the quarter. For the year to December 2023 earnings were 16.07 rupees per share on total profits of 21.1 billion rupees, down 11.3 percent.

Net fee and commission income was down 1.2 percent to 6.1 billion rupees.

Net interest income went up 16.8 percent to 25.5 billion rupees, with interest income rising marginally by 1.3 percent to 73.0 billion rupees and interest expense falling 5.45 percent to 47.5 billion rupees.

Loans and advances to customers grew 4.06 percent to 1.17 billion rupees in the year to December. Debt and other financial instruments fell 10.5 percent to 649 billion rupees.

Financial assets measured and fair value through other comprehensive income was at 287 billion rupees, up from 117 billion rupees.

Impairment charges were 13.1 billion rupees, down from 19.6 billion rupees last year.

Gross assets were up 6.45 percent to 2.36 billion rupees. Net assets were up 5.51 percent to 214 billion rupees. (Colombo/Feb24/2024)

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