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Thursday June 1st, 2023

Sri Lanka aims at stable rupee, forex reserves, IMF engagement: Governor Lakshman

ECONOMYNEXT – Sri Lanka will aim for forex reserve collection and exchange rate stability and will engage with the International Monetary Fund based on the current policy framework, the island’s newly appointed Central Bank Governor W D Lakshman said.

Sri Lanka has depended on debt in the absence of foreign direct investments, he said.

Sri Lanka is at the moment in an IMF program after the central bank’s soft-pegged exchange rate regime got into a crisis in 2015/2016 due to liquidity injections to keep rates down.

“In the external sector, sluggish export performance, large trade deficits, persistent current account deficits, dependence on debt inflows in the absence of alternative levels of FDI inflows, as well as high foreign financing needs are major concerns,” Governor Lakshman said.

“In addition, we need to be watchful of developments in the global economy and financial markets as well.

“In this context, we hope to engage with the IMF, and other multilateral agencies while remaining within the framework of national policy to ensure that the country reverts to a sustainable path of reserve accumulation a prerequisite for exchange rate stability as well.”

The IMF program advocated higher taxes in a strategy called ‘revenue based fiscal consolidation’ dropping a classical liberal view of spending restraint to narrow deficits.

The current administration has cut taxes, and has said it will curtail spending until the economy recovered, but raising some concerns over deficits which had led to an outlook downgrade.

Spokesmen for the administration had also spoken in favour of a strong exchange rate, which requires a floating overnight rate to enforce.

Analysts have pointed out that the current IMF program had multiple anchor conflicts as Sri Lanka targeted a range of domestic and external anchors and goals both de facto and within the program.

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Sri Lanka may be heading for a triple anchor, ‘inflation targeting’ oxymoron: Bellwether

The program had a wide domestic anchor in the form of a performance criteria which analysts warned would leave the door open for loose enough monetary policy to get the rupee into trouble again.

There was also forex reserves target, which involved pegging, as well as a de facto Real Effective Exchange Rate targeting to keep an index below 100, but no ceiling on domestic assets or a floating overnight to provide the ability to enforce either targets.

In addition a perceived output gap was also targeted with excess liquidity and rate cuts with the IMF itself providing tool to calculate it

As result in 2018 just as the economy recovered from the previous crisis liquidity injections were made triggering another fall in the currency, requiring corrective policy generating an negative output shock and higher inflation and bad loans. (Colombo/Dec28/2019)

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Sri Lanka cuts petrol to Rs318 a litre, kerosene to Rs245

ECONOMYNEXT – Sri Lanka has cut petrol 92-Octane by 15 rupees to 318 rupees a litre and kerosene by 50 rupees to 245 rupees a litre from midnight May 31, the Ministry of Energy said.

Petrol 95 Octane will be raised by 20 rupees to 385 rupees, and Lanka Super Diesel 4 Star Euro 4 will be raised by 10 rupees to 340 rupees a litre.

Lanka Industrial Kerosene will be cut by 60 rupees a litre to 270 rupees.

Kerosene which is similar to jet fuel is usually the most expensive fuel in international markets followed by diesel and petrol is usually the cheapest.

Kerosene which is substantially cheaper than diesel is also used by buses to cut costs. (Colombo/May31/2023)

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Sri Lanka opposition slams purported licence-cancelling broadcast authority

ECONOMYNEXT – A purported Broadcast Authority in Sri Lanka that will allegedly have the power to cancel licenses issued to the media have come under criticism from the opposition.

Opposition Tamil National Alliance (TNA) legislator and lawyer M A Sumanthiran told reporters on Wednesday May 31 that the bill on the establishment of this statutory body, if enacted, could violate several fundamental rights including the people’s right to information.

“Everyone knows that there have been many attempts in recent times to impose constraints on people’s right to information. This authority will decide which information is true and whether it can be broadcast,” he said.

The proposed act will also empower the authority to cancel broadcast licenses of those who already hold them, said Sumanthiran.

The MP said that a similar attempt to bring in such legislation in 1997 was thwarted after then opposition United National Party (UNP) MP Gamnii Athukorala challenged it in the Supreme Court, which determined on May 05 that year that the bill would need a referendum in addition to a two-thirds majority in parliament for it to become law.

“The Supreme Court determined that it went against Article 10 of the Constitution,” said Sumanthiran.

“What we can see is that this violates several fundamental rights, so we strongly oppose this bill.

“It’s not just the media, but the people’s right to information is also challenged by this,” said Sumanthiran.

Main opposition Samagi Jana Balawegaya (SJB) MP Harsha de Silva said the purported bill is undemocratic.

“If these people are given the power to cancel a license – this isn’t objective, it’s subjective, meaning four or five people will decide this,” said the MP.

Authorising a person to censor the content of a broadcast channel would be wholly undemocratic, he said.

“They tried to do this through the Counter Terrorism Act but failed, so it seems they’re now trying to bring it in with this,” said de Silva.

“We see it as a death blow to democracy,” he said, urging the government not to go ahead with it.

“If not, we will oppose it vehemently and fight for the people’s democratic rights,” he said.

Meanwhile, the ruling Sri Lanka Podujana Peramuna (SLPP) said that, while it supports media freedom, the abuse of that freedom cannot be permitted.

SLPP general secretary and MP Sagara Kariyawasam told reporters on Wednesday that some media organisations abused their freedom to make false allegations against the party leadership.

“We are of the firm stand that the media must be independent and that that independence must be facilitated, but if anyone abuses media freedom as a sort of freedom of the wild ass, measures must be taken against that too,” said Kariyawasam.

“We saw how that freedom was enjoyed in the recent past making allegations with no basis. We saw how there were severe allegations made through the media that the Rajapaksas had engaged in thievery,” he said.

The MP claimed that the people voted in the UNP-led Yahapalana government in 2015 to investigate these allegations.

“But that government realised that there wasn’t even a single incident,” he said. (Colombo/May31/2023)

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Sri Lanka rupee closes at 290.25/75 to dollar, bond yields steady

ECONOMYNEXT – Sri Lanka’s rupee closed at 290.25/75 against the US dollar in the spot market on Wednesday, while bond yields were steady, dealers said.

The rupee opened at 293.25 /294.00 to the US dollar on Tuesday.

A bond maturing on 01.09.2027 closed at 26.70/90, following a steady from the open at 26.50/80 on Wednesday.

Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money. (Colombo/ May 30/2023)

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