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Friday September 30th, 2022

Ranil – Mahinda powwow over Sri Lanka economic recovery

ECONOMYNEXT – Sri Lanka’s Prime Minister Ranil Wickremesinghe and opposition leader Mahinda Rajapaksa had met with finance bigwigs for talks on an economic recovery program after Easter Sunday blasts, a minister has said.

"Participated in good meeting with Opp Leader @PresRajapaksa n his team…," State Minister for Econmic Reforms, Harsha de Silva said in a message.

"Positive move to shed at least some political differences at a time like this, even temporarily."

De Silva said Finance Minister Mangala Samaraweera, Secretary to the Treasury and Governor of Sri Lanka’ central bank were in the meeting to discuss ‘post 21/4 economic recovery program.’

Sri Lanka’s finance ministry has given debt moratoria and subsidized credit especially for the tourism sector which was worst hit from the blasts.

The blast came just as Sri Lanka was recovery from monetary instability in 2018, which sent the rupee careening from 182 to the US dollar from 153. It has since recovered t 176 to the US dollar as credit slowed.

Sri Lanka’s soft-peg collapsed in 2018 after rates were cut just as private credit was picking up, requiring slightly higher rates to maintain monetary stability.

Capital flight worsened after investors were spooked after Mahinda Rajapaksa was suddenly appointed Prime Minister by President Maithripala Sirisena.

Monetary stability had returned in the first quarter of 2019, when Islamist Easter Sunday blasts hit the economy on April 21, hitting confidence followed by anti-Muslim riots – which officials say were politically motivated.

A credit slowdown has led to an import collapse, a sure sign of weak economic activity.

The International Monetary Fund extended a reform program in May. Sri Lanka runs to the IMF when the soft-peg collapses.

The IMF was set up as part of the Bretton Woods system of failed soft-pegs. Sri Lanka built the soft-peg to enter the Bretton Woods and gained IMF membership the next day, ending a hard peg that has bought stability to the country for over 60 years. (Colombo/June03/2019)

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