ECONOMYNEXT – Sri Lanka’s rupee has so far appreciated from around 360 to the US dollar to below 300 to the US dollar in 2023 amid complementary money and exchange policies of the central bank which is creating a virtuous policy cycle.

Currencies of reserve collecting central banks collapse when money and exchange policies conflict and more money than needed is supplied through open market operations, especially after using reserves for imports (sterilizing outflows).

Initial weakness of the soft-peg or a flexible exchange rate, then triggers a loss of confidence and panic, which then snowballs into outflows (flight) and delays in inflows, which requires extra high interest rates to slow domestic credit to match the outflows and reduce domestic investment and consumption.

If policy rates are kept fixed with new injections (reserve sales are sterilized) a vicious cycle of reserves sales and injections take place (contradictory money and exchange policy) until all reserves are lost and a float and a rate hike is forced upon the monetary authority.

Why is the Sri Lanka rupee appreciating now?

The short answer is that the rupee is appreciating, because under Governor Nandalal Weerasinghe, the central bank is not really printing money, credit has been contained with more market determined interest rates, and the currency has been allowed to appreciate by not buying up all the unspent inflows in a given day.

A currency will be under upward pressure if open market or liquidity operations are deflationary (liquidity from dollar purchases is withdrawn from the interbank market) and downward pressure if liquidity operations are inflationary (liquidity is injected through dollar or other asset purchases by the central bank) and the money is used by the domestic credit system and turned into loans.

At the moment domestic credit is weak and some banks, instead of giving loans, have deposited money in the central bank creating what is called a liquidity trap, also known as a private sector sterilization.

The government had also raised taxes and cut spending to reduce the growth of domestic credit. Energy ministry has market priced fuel and electricity. But as seen in 2018, if the central bank continues to print money, the rupee will fall despite hiking taxes and market pricing fuel.

Mostly interest is now being borrowed by the government, which is being rolled over as paper, including within the central bank, which is leading to an expansion of domestic assets of the central bank without any liquidity being released to other banks.

Is the rupee market determined?

No. No good money or stable currency is market determined. That is a common claim made by Mercantilists particularly after the break-up of the Bretton Woods in 1971-73. The mistaken ideas about money originally started to mainstream in the 1920s, which were ideas that were defeated in the earlier century and prevented balance of payments deficits and chronic inflation. A state owned central bank has unlimited powers through open market operations to expand the supply of money, which is usually called ‘monetary policy’. The ability of the central bank officials or economists to create extra money has to be constrained by an anchor, which limits the ability to conduct ‘monetary policy’.

Politicians or legislators have the lawmaking power to control ‘economists through strict laws imposed on the – usually – monopoly power given to a central bank of a country to over produce money, usually through an inflation or exchange rate target. The value of any currency is therefore determined by monetary policy which is constrained by an anchor, not the market.

Before 1971 the anchor was an exchange rate, gold or silver. Gold was a market selected anchor chosen by the people – users of money – in preference to other anchors. Under such a rule, central banks have an automatic limit to their money printing powers or monetary policy.

How do floating exchange rates work?

Floating exchange rates have targeted either money supply or an inflation index. Inflation targeting has partially failed in the US and EU areas by trying to ‘create jobs’ or increase output. They are now now suffering high inflation due to bad monetary policy and delaying tightening after blaming real economy phenomena like supply chain shocks for inflation. The lower the inflation target, and more transparent the index, the better the stability.

The price or rate of a floating exchange rate is determined purely by monetary policy (interest rate and liquidity operations) with no forex interventions. Clean floating exchange rates backed by appropriate monetary policy have turned out to be very strong and are generally called ‘hard currencies’. Most so-called hard currencies that emerged after the failure of the Bretton Woods soft-pegs are clean floats. The Swiss National Bank and Singapore Monetary Authority, which use currency board principles, are operating more complicated sets of policies.

In other words, the monetary anchor or rule will determine the value of the currency as well as domestic inflation, which are two sides of the same coin. When interest rates are raised and it works through the credit system (transmission mechanism), a floating currency will also appreciate against other currencies (based on their individual credit cycles) as well as real commodities.

Is the rupee a floating exchange rate?

No, the rupee is not a floating exchange rate because the central bank is collecting foreign reserves. It is a soft-peg or flexible exchange rate, which collapses suddenly when extra money is produced through various liquidity windows when credit demand is strong, and appreciates suddenly when liquidity is withdrawn and/or credit demand falls.

In a soft-pegged or flexible exchange rate, where the central bank collects reserves, exchange rate policy (interventions) will influence the value of the currency as well as monetary policy.

These central banks have two anchors, an inflation target (monetary policy) as well as interventions in the forex market (exchange rate policy).

The exchange rate is targeted in a fully discretionary non-transparent manner unconstrained by law. The non-transparent, deliberate, discretionary intervention is labelled ‘market determined’.

If the dollar purchase are less than withdrawals of liquidity permitted by a given interest rate regime and domestic credit (monetary policy) the exchange rate will appreciate.

This discretionary power of a money monopoly is deployed to depreciate a currency to maintain ‘export competitiveness’ based on Mercantilist ideology which triggers inflation, nominal interest rates higher than in countries with floating rates or hard pegs as well as strikes and social unrest, discouraging foreign investment.

So no, the rupees value is not market determined. Its value is determined by two anchors. If the two anchors conflict the rupee will fall, if they do not, the rupee will be stable or strengthen.

Are money and exchange rate policies in conflict now?

In recent months, liquidity generated from dollar purchases have disappeared into an overnight liquidity shortage, which has reduced from levels seen at the beginning of the year without being used in the economy. On the other side of the balance sheet of the central bank, the dollars have been loaned to foreign countries as foreign reserves. On December 31, money borrowed (printed) overnight from the central bank was about 561 billion rupees. The volume had fallen to about 120 billion rupees on June 01.

Separately banks have also deposited money in the central bank or kept in their RTGS accounts. The central bank has also bought some Treasury bills outright in partially offsetting amounts.

Conflicting money and exchange policies can be seen as rising domestic assets of a central bank (T-bills holdings) in the red line and falling net foreign assets. As a share of reserve money or the monetary base, net foreign assets decline.

That is what happens in a ‘balance of payments deficit or a currency crisis as seen in the graph. At the moment Treasury bill volumes have not fallen exactly line with foreign assets partly due to interest rollovers.

If interventions are made to build reserves and liquidity is not withdrawn through open market operations, amid weak credit, liquidity will build up until interest rates fall and credit resumes again. Interest rates will fall towards the lower policy corridor. Exchange policy will therefore determine monetary policy in that situation, which comes when an IMF reserve target is met amid weak credit.

Another way of describing a single anchor floating exchange rate is that reserve money will grow in step with domestic assets. In a hard peg reserve money will grow in step with foreign assets. In a soft-peg domestic assets will go up when money and exchange policies conflict in a vicious cycle. Complementary policy – as now will lead to a rise in foreign assets compared to reserve money.

In summary soft-pegs or flexible exchange rates collapse because there are two anchors which conflict in a vicious cycle of exchange interventions followed by liquidity injections to stop rates from going up.

Monetary policy in a country that goes to the IMF frequently, is usually partially constrained by a high inflation target, perhaps double or more of hard currencies, leading to higher inflation and instability than counties with better money.

In a hard peg, where the country has no need to go the IMF, there is only an exchange rate policy and no monetary policy, in other words only one anchor. The exchange rate therefore does not fall.

Are tourism receipts pushing up the currency?

Not really. Higher tourism receipts will widen the trade deficit, in a pegged or floating regime.

Tourism receipts bring inflows and can push up the rupee on the day it is converted only. A part of the receipts is immediately spent by the recipients, like tourism sector workers, directly on imports, say on fuel and foods. A part they may save in banks. The hotel companies will pay for electricity and also repay loans.

If credit demand is strong, these money deposited in banks will be loaned for new investments generating imports and widening the trade deficit. But higher tourism receipts will not create balance of payment deficit or pressure on the rupee.

If the central bank sells a Treasury bill in its portfolio to a bank and takes the deposited cash, or a similar amount of other money, banks will not be able to lend the money to the economy, and there will be a balance of payments surplus and upward pressure on the rupee.

If the central bank buys a Treasury bill and injects money, when credit has recovered, regardless of any tourism receipts, banks will give credit with the new money on top the tourism receipts. The rupee will be under upward pressure until interest rates are allowed to go up or reserves are sold to mop up the new money.

So, no tourism is not responsible for currency appreciation. The central bank is solely responsible for currency strength. It has the monopoly on creating or destroying money and controlling the real demand for money.

Is the foreign buying of Treasury bills driving up the rupee?

Inflows will only put temporary upward pressure on the day of the conversion if the dollars are sold in open market. If the central bank buys all the dollars from the foreign investor and creates new money there will be no rupee appreciation. If credit demand is strong, all inflows will eventually be spent by their recipients or loaned by banks and the trade deficit will go up.

If the central bank sells a security and mops up the money from the banking system it created in buying dollars from foreign investors, it will be able to keep the dollars it bought as reserves. If not, the money will be spent by their recipients – the party that sold the Treasury bill to the foreign investor, usually the government.

If the government uses the dollars from Treasury bills to repay foreign loans, the rupee will not appreciate and neither will the trade deficit expand.

Inflows through the financial account will boost imports and widen the trade and current account deficit, but will not create a balance of payments deficit or forex shortage, which is the result of expansionary open market operations or liquidity injections (monetary policy).

Either way it can be seen that monetary policy is the final driver of the exchange rate and foreign reserve changes. That is why large volumes of ‘bridging finance’ last year failed to stabilize the exchange rate or end forex shortages, until rates were raised.

The central bank can also sell a Treasury bill in its portfolio to a foreigner and take the money directly into its reserves without disturbing reserve money or interest rates or domestic credit (a reserve money neutral transaction). IMF loans before budget support loans were done in this manner.

From the foregoing it can be seen that any collecting of reserves and lending to foreign countries involves keeping interest higher than if reserves were not collected.

Are import controls the reason the rupee is appreciating?

Definitely not. Sri Lanka had 3,000 imports under control in 2021 and it eventually led to the biggest reserve losses and imports and eventual default.

At the time the central bank was refusing to roll-over Treasury bills and injecting money and this money was being loaned by banks driving unsustainable credit into permitted areas, for example building material for construction.

Imports of non-essential goods like cars which attract high rates of duty is usually controlled, leading to loss of revenues, more money printing and forex shortages.

Freeing import controls will not lead to a depreciation unless the central bank prints money to keep rates down. If a lot of loans are given to buy cars and the central bank prints money to keep rates down, then the rupee will fall. If not, banks will have to choose between cars and say financing an apartment or some other project, keeping the exchange rate stable.

If banks choose cars which have high tax rates over some other loan, government revenues will go up and interest rates can fall than if a loan was given involving imports of low taxed products.

Can an IMF reserve target drive the rupee down?

Yes. Any IMF reserve target, which is not accompanied by a market interest rate to reduce domestic credit can drive the rupee down. Usually in the first year of an IMF program when monetary policy is tight and private credit is weak or negative it is possible to both collect reserves and keep the exchange rate stable. If the central bank can resist the usual mercantilist demand for a ‘competitive exchange rate’ the currency can appreciate and the economy can recover faster and people will have no ‘pain’.

But in the second year of an IMF program rates are cut when the economy and private recovers. Rates are cut because inflation is low under a domestic anchor. The currency then slides if the rate cuts are enforced with domestic assets purchases as money and exchange policies conflict.

When credit demand recovers, and rate are cut, and attempts are made to buy dollars (increase foreign assets of the central bank) without a corresponding decline in domestic assets of the central bank, which is needed to curtail bank credit, the rupee can fall.

Again, monetary policy is the final driver.

Central bank reserve building is identical to debt repayment. Except that central bank reserve building is considered ‘below the line’ in BOP calculations. Debt repayment is ‘above the line’ and is part of the capital/financial flows section of the balance of payments. This is one of the reasons why East Asian countries with fixed or semi-fixed exchange rates have current account surpluses.

Can a resumption of debt repayments drive the rupee down?

A resumption of debt repayments will be accompanied by a resumption of debt funded foreign aid projects. There are also budget support loans. Resumption of debt repayment can lead to depreciation if there the domestic interest rate is insufficient to balance domestic credit at the given ‘flexible’ exchange rate.

This problem is generally explained by what is known as the impossible trinity of monetary policy objectives. If order to maintain a free capital or financial account (free capital flows or debt repayment) at a stable exchange rate, the central bank has to allow interest rates to change accordingly and the necessary changes allowed to take place through the domestic credit system.

That is why in a currency board, or gold standard central bank or in a free banking system when interest rates were market determined, capital flows were free under a fixed exchange rate.

Western central banks started to have balance of payments troubles from the 1920s and the pound Sterling lost its place as the pre-eminent currency in the world and inflation became permanent. J M Keynes thought a current account surplus was required to make external repayments and could not grasp the concept that debt repayments or investments abroad led to an improvement in the current account automatically if interest rates were not manipulated. This false doctrine is known as the ‘transfer problem’. By the time IMF was created after World War II the false doctrine was fully entrenched in most universities in UK and US. As a result, when the IMF was created by Keynes and Harry Dexter White, only current transactions were required to be free and capital controls were taken as a given.

West Germany rejected the false doctrine after World War II and France after 1960 with the New Franc. UK rejected these ideas in 1979 and removed exchange controls. (Colombo/June02/2023)

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe made a statement explaining the current status of the economy, reason for policy actions and his plans for the future to make the country a developed nation by 2048.

President Wickremesinghe, said previous attempts to reform the country was blocked by activist on the slogan of ‘selling the country’.

The full statement is reproduced below:

Since the day I took charge of our nation’s economy, I wanted to ensure you that Sri Lanka’s actual economic situation was made clear and transparent. Over the recent months, I have provided regular updates on Sri Lanka’s economic state, outlined strategies to overcome our challenges, and emphasized the role each of us must play for the betterment of our nation.

We have endured numerous hardships due to a struggling economy, but we are slowly making progress towards achieving stability. Our weakened and crippled economy from the crisis is gradually regaining its footing.

This achievement is a result of the correct policies and practices my government has implemented. It is also a testament to our collective effort as a nation in rising above the many challenges and hardships that came our way.

I would like to express my heartfelt gratitude to all Sri Lankans for persevering through these hardships for the sake of our motherland. If we continue on this path for just a little longer, I am confident we will be able to establish a stable economy free from the difficulties we endured together as a nation.

Sri Lanka is now ready to embark upon a journey of collective growth and prosperity.

In what manner should we proceed on this journey? Which practices should we adopt to ensure our progress?

Today, it is my honour to share with you a roadmap detailing the steps we intend to pursue to forge a brighter and prosperous future for all Sri Lankans.

Throughout my tenure as President, I have consistently emphasized the need for comprehensive economic and social reforms in Sri Lanka. In the 2023 Budget, I highlighted several reforms that aim to restructure and modernize the nation. It is crucial that we remain committed to these reforms to build a better future for Sri Lanka.

I want to remind you that some decisions we make may not always be popular. However, it is only by pursuing policies that are right and difficult can we uplift our country once again. I can assure you that if we remain committed to reform, we can create a nation where future generations can live freely and happily.

Unfortunately, some groups involved in traditional politics are actively working to hinder our economic revival. They are spreading false information about our reform agenda and intentionally misleading the public with claims that we are selling off the country.

Throughout history, these groups have continuously resorted to fear-mongering tactics, falsely asserting that our actions are driven by a desire to sell out our nation. They have deceived many Sri Lankans in the 1950s, 1960s, 1970s, and even the 1980s, instilling an irrational fear of the country being sold away. From then until now, these groups have disrupted real progress for economic reform by perpetuating this slogan of “selling the country”.

I am confident that you will no longer be deceived by such slogans. It is imperative for all of us to work diligently and to totally devote ourselves to the upliftment of our country. Our objective is to transform into a fully developed nation on the global stage by 2048. If we fail to align our economy with the modern world and the latest trends in technology, we will regress. The consequence of failure is the country becoming an economic colony. Let us forge ahead and shape our economy in a way that enables us to compete on the global stage. Let us carry out the necessary economic reforms for the greater good of our nation.

Through these economic reforms, our aim is to rectify misguided policies, programs, and projects. Rebuilding a bankrupt nation cannot be achieved by using traditional methods. We must adopt a fresh approach and embark on a new journey of transformation.

What are the outcomes of these economic reforms?

The cost of living for all Sri Lankans will decrease, and our standards of living will rise. Is that a mistake? Is it tantamount to selling our country? These reforms generate new opportunities for businesses to grow and thrive, ranging from small-scale enterprises to large-scale ventures. Is that a mistake? Is it a country being sold?

We are working to provide necessary relief and essential facilities to the poor and the most vulnerable segments of our society. Is that a mistake? Is it a betrayal of our country?

The burden of covering losses incurred by state owned enterprises will no longer placed on the people. Is that a mistake? Does it suggest a country’s sale?

A culture of accountability and transparency is being fostered. Is that a mistake? Does that mean the country is being sold? We are working to make Sri Lanka one of the world’s fastest-growing nations. Is that a mistake? Does that imply that the country is for sale?

The implementation of our economic reforms serves only to achieve sustainable development and prosperity for our country. Through these reforms, we will accelerate Sri Lanka’s modernization, expand our market, and encourage greater contributions from the international community toward our development.

We acknowledge that this journey is not an easy one, and we anticipate numerous challenges along the way. However, we are determined to overcome these obstacles. Our government is committed to always acting in the best interest of our country.

We will not allow anyone to drag our motherland back to where we were a year ago. Today, some individuals seem to have forgotten the hardships endured by Sri Lankans during that time. Our economy contracted by 8.7%, our foreign exchange reserves hit rock bottom, and we experienced one of the highest inflation rates in the world. Foreign loans went unpaid, pushing the country into bankruptcy. Food scarcity became a pressing issue, with people waiting in queues for days to obtain oil and gas. Agriculture suffered due to a lack of fertilizer, resulting in crop losses and helpless farmers. Businesses collapsed, leading to job losses and income sources drying up. Hospitals faced shortages of medication, schools had to close, and power cuts lasting 10-12 hours became commonplace. The country was in disarray, with people struggling to survive.

Unable to bear these hardships any longer, the people became restless and began to struggle. In the face of these tremendous challenges, I assumed the responsibility of managing the country’s economy as the Prime Minister. In such a difficult backdrop, I possessed only one source of strength: my unwavering belief and determination to safely guide our motherland across this arduous journey.

When we first took steps to stabilize the country, we implemented stringent financial controls. We recognized that our only way out of this crisis was to seek support from the International Monetary Fund (IMF). Thus, we initiated negotiations with them, which involved multiple rounds of lengthy discussions. Eventually, the IMF agreed to provide us with an Extended Credit Facility. Additionally, we embarked on programs to secure loan assistance from other financial institutions such as the World Bank and the Asian Development Bank.

During this challenging period, our neighbour India played a significant role in supporting us. Bangladesh and Japan also offered their support. Several countries, including China, India, Japan, and members of the Paris Club, agreed to restructure our debt, of which we are immensely grateful for on behalf of the Sri Lankan people. These collective efforts and collaborations are part of our commitment to achieving sustainable development and success for our country.

In our efforts to stabilize the country, we implemented strict financial controls, leading to significant cost savings. Additionally, our foreign workers have made valuable contributions to our nation-building endeavours. In the first quarter of this year, the remittances sent by foreign workers increased by 80.6% compared to 2022. Furthermore, our new tax policies have resulted in an additional income of Rs. 210 billion in the first quarter of 2023. These achievements highlight the positive impact of our measures on our economy.

Today, we are reaping the rewards of our hard work and dedication. Inflation, which had skyrocketed to 70 percent, has now decreased to 25.2 percent, lightening the burden of daily life for all of us. The entire population of Sri Lanka is experiencing a sense of relief given the improvements we made to the economy.

Now, let me explain our vision for the future and how we plan to move forward. We have built our roadmap on four key pillars that will shape our path ahead.

The 1st Pillar – Fiscal and Financial Reforms

We have successfully reached an agreement with the International Monetary Fund (IMF) regarding fiscal and financial reforms, which received approval from Parliament. We have initiated reforms in tax policies, revenue administration, and public financial management, and we will continue to pursue the successful delivery of these efforts. Our aim is to implement necessary reforms that will ensure long-term sustainability of public debt and the stability of our economy. Ultimately, we want to rebuild confidence in the Sri Lankan market.

In our pursuit of economic stability, we have implemented various cost reduction and containment measures since May 2022. We are taking further steps to minimize unnecessary expenses, emphasizing to government officials the need for prudent spending. Our approach includes:

1. Halting unnecessary expenditure,
2. Streamlining government activities to reduce costs,
3. Designing cost-effective government operations, and
4. Leveraging automation and digitalization to reduce costs while delivering quality services.

The 2nd Pillar – Investment Drive

Promoting investments play a crucial role in boosting a country’s economy. We also recognize the significance of collaboration between the public and private sectors in our journey towards economic growth. Our goal is to transform Sri Lanka into an export-oriented economy that is globally recognized, following the successful models of countries like South Korea and Singapore.

Furthermore, we aim to prioritize modern and sustainable efforts such as renewable energy, green hydrogen, and digitization. We can draw inspiration from the Andhra region of India, which has excelled in developing these areas. Such modern and sustainable initiatives are vital for the complete transformation of Sri Lanka’s economy.

Over the next few months, we will make a special invitation to the private sector to submit their own business proposals that align with our vision of modernization and sustainability. We will ensure transparency and openness by publicizing this call for proposals through mass media in a formal manner. We believe that a collaborative partnership between the public and private sectors will drive the engine to accelerate Sri Lanka’s economic growth and revival.

The selection of proposals is based on four key criteria:

1. Size of private investment,
2. Job creation,
3. Export contribution, and
4. Economic contribution.

To ensure the effective implementation of these business proposals, we will introduce a new system called the Lab methodology.

Under the Lab approach, we will bring together Government Ministers, government officials, subject matter experts, and key representatives from the private sector to collaboratively engage in detailed discussions over a period of six weeks. The aim is to collaboratively resolve any roadblocks hindering the roll-out of investments and projects by listening carefully to the private sector. During these discussions, comprehensive implementation plans will be developed, and the necessary facilities to support the implementation of these projects will be organized. Government stakeholders involved in the Labs will dedicate their full-time efforts to ensure the successful execution of these projects.

As President, I, along with the Cabinet Ministers, will actively participate in this event to demonstrate the government’s commitment to ensuring success of the Lab process.

Through the Labs, we aim to achieve three main objectives. They are to:

1. Accelerate the economic recovery through approved business proposals and projects
2. Create new employment opportunities, and to
3. Streamline the government machinery to facilitate the implementation of future projects by removing obstacles through transparent procedures.

In order to foster a conducive environment for investment, we also need to reform Sri Lanka’s trade practices, which have been structured under strict protectionist policies. It is time to remove these barriers that have discouraged investors and to promote a more open and welcoming approach.

3rd Pillar – Social Protection and Governance

We will also apply the Lab methodology to address social safety net concerns. We will engage various government ministries, departments, agencies, civil society representatives, and subject matter experts in the integration process of social security measures.

Over the years, the people of Sri Lanka have expressed three main demands: combating corruption, protecting the poor and vulnerable sections of society, and ensuring transparency in government actions and practices. We are actively working to meet these demands.

Through the Lab methodology, we will assess the adequacy of social security measures for the most vulnerable and disadvantaged sections of society. Our goal is to provide them with the necessary support and relief they require.

A special task force is being established to combat corruption across all sectors, including regulation, procurement, and political corruption. We are committed to implementing anti-corruption practices through a government mechanism that emphasizes accountability via modern techniques such as digitization.

4th Pillar – State Owned Enterprises Transformation

There are currently 430 public enterprises operating in 33 sectors of the economy. These enterprises employ 6% of the Sri Lankan population. However, many of these enterprises have garnered monopolistic positions in the market, hindering private investment. Price fixing, inefficient management, and poor entrepreneurship have weakened public finances, turning these institutions into national burdens that are dependent on the taxpayer.

Notably, entities like the Ceylon Petroleum Corporation, Ceylon Electricity Board, and Sri Lankan Air Lines have incurred significant operating losses, equivalent to 1.6% of the country’s GDP in 2021. It is unjust to burden the 22 million people of Sri Lanka with this debt. We must urgently undertake necessary reforms in our SOEs to ensure the turnaround and success of these enterprises.

We have already initiated the preparation of a restructuring plan for public enterprises. Additionally, we expect the chief officers of these enterprises to be committed to improving their performances. If they fail to meet the annual targets assigned to them, we will not hesitate to replace them with more suitable candidates.

Public Engagement

Public participation is crucial to our Labs. All outcomes from the lab discussion, including plans, analyses, and conclusions during the six-weeks will be shared with the public in a physical forum called the “Open Day”. This platform will allow the public to express their feedback to the lab outcomes and the nation’s reform efforts, of which their contributions will serve to further refine the implementation process.

I am actively taking steps to regularly present information about our reform and reorganization programs to the public. I believe that the President should make it an annual ritual to engage with the people and provide updates on our nation’s progress.

We recognize the importance of incorporating the views of all segments of society in implementing our roadmap towards growth and prosperity. After hearing from the public during the “Open Day”, we will transparently share the progress of the Labs along with the activities of the special task forces related to the economy through digital media. This will allow the public to observe the implementation of the plans in practice, and also be able to identify and resolve obstacles along the journey.

In the last quarter of this year, we will then work to unveil the national transformation plan to the public.

Following extensive efforts, we anticipate revealing the National Reorganization Plan during the final quarter of this year. This plan aims to offer the public the chance to witness the advancement of plan implementation and practices via digital media. Furthermore, it encompasses a systematic approach to shed light on challenges and barriers encountered during implementation. Consequently, it becomes feasible to swiftly identify and resolve obstacles and issues.
To coordinate the implementation of these plans, we are establishing a Presidential Delivery Bureau (PDB) comprising of high-ranking officials from both the public and private sectors. They will collaborate with the line ministries to ensure effective coordination throughout the implementation phase.

Building the future

These reforms are designed to benefit the entire population and foster the development of the entire country. We aim to enhance the living conditions of all Sri Lankans, including you. Our program is not exclusive to any particular segment but targets the entire nation. By doing so, we can enhance Sri Lanka’s international competitiveness in exports and create new opportunities for labour participation amongst the youth, leading to a fully stabilized economy within the next five years.

Ultimately, our vision is to become a fully developed country by 2048, with the responsibility for continued progress passed on to the next generation. We are preparing our youth for this role, and I have full confidence that they will lead our motherland towards this objective.

This work methodology is a collective effort to build the future for all of us and to ensure a better tomorrow for future generations to come.

Therefore, I invite all Sri Lankans to join me in this journey to create our new and shared future our beautiful country.

ECONOMYNEXT – Sri Lanka’s bonds ended low on Thursday dealers said, after the central bank cut is main policy rate by 250 basis points.

The Spot US dollar closed at 292.50/295.50 rupees after opening at 290/291 to the US dollar, dealers said.

The rupee closed at 290.25/75 to the US dollar Wednesday.

A bond maturing on 15.09.2027 closed at 24.50/90 percent down from 26.60/26.90 percent a day earlier dealers said.

A bond maturing on 15.05.2026 closed at 25.00/26.00 percent down 27.75/28.50 percent a day earlier.

A bond maturing on 01.05.2025 closed at 26.30/27.00 percent, down from 28.30/29.30 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.00/25 percent, down from 21.30/22.30 percent at last close.

The central bank cut is policy rate at which overnight money is injected to 14.0 percent to from 16.5 percent Thursday. There is a gap between the injection rate and market rates.

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Sri Lanka cuts policy rates 250 basis points amid BOP surplus

Sri Lanka exports down in April, trade deficit up from March, rupee stronger

Sri Lanka has not issued bonds recently and has mostly sold Treasury bills, ahead of a debt restructuring strategy being announced. (Colombo/ June 01/2023)