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Tuesday February 27th, 2024

Sri Lanka CB advised Treasury to hike fuel prices, banking sector on brink of collapse: Minister

LETTER OF ADVICE: Sri Lanka’s Energy Minister Udaya Gammanpila holding up a letter from the central bank asking Treasury to raise fuel prices broadcast over privately owned NewsFirst television

ECONOMYNEXT – Sri Lanka’s central bank has written to the Treasury on May 31 advising it to raise oil prices and the Minister of Finance had approve the price hike in writing on June 10, Energy Minister Udaya Gammanpila said told reporters.

“The central bank sent an advisory letter (updadeshathmaker lipiyak) on May 31 to the Secretary Treasury to immediately raise fuel prices,” Minister Gammanpila told reporters, holding up the document, after he was asked to resign by ruling Sri Lanka Podujana Party Secretary.

“Due to the 600 billion rupees in loans to the (Ceylon) Petroleum Corporation there is a risk of the entire banking system getting destabilized (astha-wa-ra-vee) and collapsing (ka-dar-we-tee-may ava-dar-ner-muck).

The CPC itself had about 390 billion rupees in accumulated losses he said.

Sri Lanka has a habit of forcing the CPC to borrow US dollars instead of buyng dollars in the market after money printing by the central bank triggers forex shortages.

It is not clear why this is done, but analysts suspect it is due to a Keynesian mis-understanding of the monetary systems and external payments known as a spurious ‘transfer problem’. (Sri Lanka debt crisis trapped in spurious Keynesian ‘transfer problem’ and MMT)

In 2018 the CPC was forced to borrow dollars despite market pricing oil through a formula while rupee collected by the utility was kept it repo deals with state banks and loaned to third parties to import non-oil goods. (Nick Leeson-style losses at Sri Lanka’s CPC raise big questions)

Market pricing reduces spending power (or savings which can be loaned as credit) for non-oil consumption and investment, keeping the external sector in balance.

Market pricing energy to match the external sector with the domestic demand and halting the printing money through rate hikes and cutting state spending and raising taxes to match expenditure that cannot be cut, are the typical International Monetary Fund moves to stop currency crises.

Statists, some socialists and Keynesians generally label such moves as ‘austerity’.

Gammpapila rejected a call by Sri Lanka Podujana Party General Secretary Sagara Kariyawasam for him to resign.

He said written instructions were issued by Prime Minister Mahinda Rajapaksa on June 10 to raise fuel prices.

Under the Ceylon Petroleum Corporation Act, Finance Ministry approval was needed to raise oil prices, he said.

A cost of living committee made up of several ministers had decided to raise the prices on June 09 after discussion, he said. (Colombo/June14/2021)

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Sri Lanka police chief appointment against constitution: Opposition Leader

Samagi Jana Balavegaya leader Sajith Premadasa addresses the rally

ECONOMYNEXT – The appointment of Sri Lanka’s new police chief Deshbandu Tennakoon is against the constitution as the decision lacked required votes at the Constitutional Council, Opposition Leader Sajith Premadasa said.

President Ranil Wickremesinghe on Monday (26) appointed Deshbandu Tennakoon as the 36th Inspector General of Police (IGP) of the country after the Constitutional Council (CC) cleared the official who along with three other police officers were asked by the Supreme Court to compensate 2 million rupees in a fundamental rights case last year.

“CC didn’t approve IGP’s appointment. Votes: 4 for; 2 against; 2 abstentions. At least 5 votes are required for a decision,” Premadasa said in his X (Twitter) platform.

“Speaker has a casting vote only in case of a tie. 4/2 is not a tie! Constitution is being blatantly violated for the second time. Shame on you speaker!”

Speaker Mahinda Yapa Abeywardena was not reachable for a comment on the Opposition Leader’s claim.

The President Media Division (PMD) said the President appointed Tennakoon “as the IGP in accordance with the provisions of the Constitution”.

The island nation’s Supreme Court on December 14 ordered Tennakoon when he was the Acting IGP and three other officials to pay a compensation of 500,000 rupees each for the violation of the fundamental rights of an individual.

The Supreme Court also instructed the Police Commission to take disciplinary action against the said Police officers including Tennakoon after it considered the petition filed by W. Ranjith Sumangala who had accused the Police officers of violating his fundamental rights during his detention at Mirihana Police Station in 2011.

The Supreme Court held that the four police officers violated the fundamental rights of the petitioner by his illegal arrest, detention and subjection to torture at the Mirihana Police Station, which was under the supervision of Tennakoon at the time of the arrest. (Colombo/Feb 27/2024)

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All major party leaders Sri Lanka remained unpopular in January: poll

ECONOMYNEXT — All major party leaders in Sri Lanka continued to show negative favourability ratings in a January 2024 poll indicating continued unpopularity, with leftist leader Anura Kumara Dissanayake increasing his favourability by 12 points to -10.

The poll, run by the Institute for Health Policy (IHP), showed that favourability of opposition leader Sajith Premadasa declined by 9 points to -53 in January, while President Wickremesinghe’s also dropped by 9 points to -77.

The IHP said in a statement on February 22 that favourability estimates for each month are based on 100–500 interviews conducted during that month and during a few weeks before and afterward to ensure a minimum set of responses. The January 2024 estimates are based on 376 (Premadasa), 346 (Dissanayake), 361 (Wickremasinghe), and 121 (former president Gotabaya Rajapaksa) interviews.

According to the IHP, its Sri Lanka Opinion Tracker Survey (SLOTS) surveys a national sample of adults (ages 18 and over) reached by random digit dialling of mobile numbers, and others coming from a national panel of respondents who were previously recruited through random selection.

SLOTS tracks favourability by asking respondents if they have a favourable or unfavourable opinion of a public figure or institution: net favourability being the average of the positive (+100) and negative (-100) responses. All
estimates are weighted to match the national population with respect to age, sex, ethnicity, socioeconomic status, sector, province and past voting preference. Monthly estimates are based on samples of 100+ interviews pooled from interviews in each month and from weeks before and afterwards. As the January update uses a more recent data set than the previous update, there are small changes in estimates of favourability ratings for previous months.

According to the institute, the SLOTS survey has previously been funded by the Neelan Tiruchelvam Trust, the UK National Institute for Health and Care Research (NIHR), The Asia Foundation in Sri Lanka, and others.

“Current field work is financed by the IHP Public Interest Research Fund and others. The sponsors play no role in the study design, analysis, or interpretation of findings. Furthermore, the survey findings do not necessarily reflect the views or positions of past and present funders. Interested parties can contact IHP for more detailed data and results,” it said in the statement. (Colombo/Feb27/2024)

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Sri Lanka to seek private investments in water sector

ECONOMYNEXT – Sri Lanka is looking to form public private partnerships in the water sector, specifically to focus on rural water supply, Minister of Water Supply and Estate Infrastructure Jeevan Thondaman has said.

“Not privatization, but public private partnerships,” Thondaman said at a press briefing on Monday. “When we enhance private sector participation, we create a more competitive industry with better quality and cheaper prices.”

A water tariff formula, which will be reviewed annually or bi-annually, has been formulated and will be submitted to the cabinet, parliament and COPE committee, he said.

“Once this is in place, we will be able to attract investors to come on board. The water sector till now has not had a PPP model. We want to bring in private public sector partnerships in rural communities’ water supply; we believe they will be able to work hand in hand with community-based organizations to provide water to those who need it.

“I can give you one example, when you look at the water bottle that is being manufactured by the Water Board, you will see it’s from the Hanthana Estate; but people in Hanthana Estate still don’t have drinking water. There has been a top to bottom approach. Now we want to go rural first.

Most projects in the water sector had stalled post-crisis, Thondaman said, and the priority now was to resume them before attracting further investment into the sector. The minister said that there had been discussions with the Japan International Cooperation Agency (JICA) and the Asian Development Bank. (Colombo/Feb27/2024)

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