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Tuesday November 29th, 2022

President Gotabaya says no deal with Bathiudeen over 20A

WARM WELCOME – Irrigation Minister Chamal Rajapaksa welcomes Rishard Bathiudeen to event in Vavuniya/Facebook – File photo

ECONOMYNEXT – Sri Lanka’s President has shot down speculation that he is “cutting a political deal” with a powerful Muslim politician to get his support for a Parliamentary vote which will pass Constitutional changes giving him sweeping authoritarian powers.

Earlier this afternoon President Gotabaya Rajapaksa posted on his official Facebook page that “ensuring national security is the first and foremost responsibility of my government. I emphasize that our government has not entered into any political deal with Parliament member Rishad Badurdeen (sic).”

Bathiudeen (corrected spelling) is a controversial Muslim Member of Parliament whose brother Riyard Bathiudeen, has been alleged to have links to the extremist groups that bombed three churches and three Hotels on Easter Sunday 2019 killing nearly 300 people.

Groups supporting President Rajapaksa have vilified Bathiudeen as a terrorist in a sustained campaign through the Presidential elections and the recently concluded Parliamentary poll.

The President’s Social Media post follows a press conference by Sri Lanka’s most prominent Christian prelate, Malcolm Cardinal Ranjith, Roman Catholic Archbishop of Colombo on Saturday in which he said he was “astounded and dismayed” that a powerful Muslim politician’s brother detained under special laws for his alleged part in the Easter Sunday attacks has been set free.

Ranjith said he cannot comprehend how a person who the “police said had dealings with the Easter bombers, did business with them and engaged in discussions with them is suddenly found to be entirely innocent and released unconditionally.”

At his press conference, Ranjith played back a recording of an interview the Police Spokesman Superintendent Jaliya Senaratne did with a prominent pro-government private Television channel in which the police said that the person recently released had “close dealings” with the bombers.

“Seeing this the victims of the attacks, who are my flock, are disturbed at this turn of events as many are still crippled by their injuries. They are expecting justice and fairness from those who are ruling the country. But recent events have given rise to a reasonable suspicion that this may not happen,” Ranjith said.

Ranjith wondered aloud whether the government was cutting a “political deal” with Bathiudeen to get his support for the controversial 20th Amendment to the Constitution and therefore releasing brother from detention.

In what appeared to be an indirect riposte, President Rajapaksa said “I am not prepared to hand over the power of arresting or arbitrarily releasing people to politicians, as happened in the past. I assure my citizens that I will not forsake the trust that they have placed in me and I will most certainly continue to work towards strengthening the trust we have built” the President said.

Adding fuel to the fire was an event that took place October 2 where Bathiudeen was seen at a ceremony held in Vavuniya talking and smiling with State Minister of Defence Chamal Rajapaksa, the eldest member of Sri Lanka’s leading political family.

He denied that Bathiudeen, whom his party attacked during the campaign, was there to negotiate but only as a representative of the people.

“There was no talk of the 20th Amendment, I do not consider the narrow-minded who may see it that way,” he said. (Colombo October 4, 2020)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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Sri Lanka new CB law to cabinet soon as IMF prior action

ECONOMYNEXT – Sri Lanka’s new central bank law will be submitted to the cabinet as a prior action of International Monetary Fund with clauses to improve governance and legalize ‘flexible’ inflation targeting, Central Bank Governor Nandalal Weerasinghe said.

Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

“The central bank’s ability to finance the budget deficit will be taken out. Thirdly the flexible inflation targeting regime will be recognized in the law as the framework.”

The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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