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Saturday March 2nd, 2024

Sri Lanka central bank controversy with President erupted without prior discussion: Governor

ECONOMYNEXT – A tongue lashing given by President Gotabaya Rajapaksa over a delay in the central bank giving loans with re-finance (printed money) erupted without prior discussion, but the issue has been resolved a channel of communications established, Governor W D Lakshman said.

“This is something that had given rise to a lot of debate, accusations and counter accusations,” Governor W D Lakshman told reporters in Colombo in Sinhalese.

“The central bank as a representative agency of the government, as part of it, has to do certain thing on behalf of the government.”

The issue raised new questions over the independence of the institution which had depreciated the currency from 4.70 to 185 to the dollar since independence from British rule in the worst performance among pegged South Asian monetary authorities through money printing.

President Rajapaksa slammed the central bank in public after summoning Governor Lakshman to his office, over a delay in giving credit to Coronavirus affected companies with printed money (central bank re-finance) at time when the rupee was already under pressure and imports were controlled.

Responding to questions from reporters Governor Lakshman said there had been no prior discussion before the institution and officials were summoned for the meeting.

“If such a question had been asked it would have happened in a different way,” Governor Lakshman said.

“Later when there were problematic situations on two occasions, the problem was solved in that way. I acted and got a discussion early we have started a process to inform the Prime Minister and President.

“We have now solved this problem and are working with some agreement.”

President Rajapaksa’s brother Mahinda Rajapaksa, who is Prime Minister is also the Finance Minister.

“About this credit program, the Cabinet took certain decisions, and the central bank was informed to carry them out,” Governor Lakshman explained.

“Usually the Monetary Board meets, and decides on the most appropriate way and implements it.”

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Sri Lanka central bank complied with govt directions as allowed by law: Deputy Governor

By the time the order to re-finance (print) 150 billion rupees came the central bank had already decided to re-finance 50 billion rupees, which also exceeded the agency capital calculated at about 28 billion rupees.

“In the series of events that were shown as controversial what happened the Monetary Board had met twice at special meetings and were discussing,” Governor Lakshman said.

He after a discussion late into the night, a way was found to implement the decision which had to be ratified through a Board Paper the following week, when the controversial took place.

“But as I said we had arrived at a way do after at least three rounds of discussions when this sad event happened,” he said.

There have been calls to reform the institution to give it more independence and the new administration also suspended a monetary law that would have given it more independence.

But in 2018 the central bank engaged in pro-cyclical policy and also created liquidity through dollar rupee swaps and triggered a currency crisis without any political pressure when full de facto independence had been given raising questions about the validity of central bank independence, unless the agency was committed to providing monetary stability.

Sri Lanka’s central bank was one of a series of soft-pegs set up with assistance of experts from the Federal Reserve’s Latin America department in particular with sweeping money printing powers that generated severe monetary instability and political unrest, critics say. (Colombo/July 14/2020)

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Sri Lanka eyes SOE law by May 2024 for better governance

ECONOMYNEXT – Sri Lanka is planning to pass a Public Commercial Business (PCB) Act improve governance of state-owned enterprise by May 2024 as part of an anti-corruption efforts following an International Monetary Fund assessment.

Sri Lanka’s state enterprises have been used by politicians to give ‘jobs of the boys’, appropriate vehicles for personal use, fill board of directors and key positions with henchmen and relatives, according to critics.

Meanwhile macro-economists working for the state also used them to give off-budget subsides or made energy utilities in particular borrow through supplier’s credits and state banks after forex shortages are triggered through inflationary rate cuts.

The government has taken billons of dollars of loans given to Ceylon Petroleum Corporation from state banks.

There have also been high profile procurement scandals connected to SOEs.

An SOE Reform Policy was approved by Sri Lanka’s cabinet of ministers in May 2023.

The Public Commercial Business (PCB) Act has now been drafted.

A holding company to own the SOEs will be incorporated and an Advisory Committee and Board of Directors will be appointed after the PCB law is approved, the statement said. (Colombo/Mar01/2024)

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Sri Lanka rupee closes at 308.80/90 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 308.80/90 to the US dollar Friday, from 309.50/70 on Thursday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.02.2026 closed at 10.65/75 percent up from 10.50/70 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent from 11.90/12.10 percent.

A bond maturing on 01.07.2028 closed at 12.15/35 percent down from 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent up from 12.30/45 percent.

A bond maturing on 15.05.2030 closed at 12.30/45 percent down from 12.35/50 percent.

A bond maturing on 01.07.2032 closed at 12.50/13.00 percent from 12.55/13.00 percent. (Colombo/Mar1/2024)

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Sri Lanka stocks close up 0.37-pct, Expo to de-list

ECONOMYNEXT – The Colombo Stock Exchange closed up 0.37 percent on Friday, and SG Holdings, the parent company of Expolanka Holdings Plc, said it was taking the company private.

Expolanka is the largest listed company on the Colombo Stock Exchange.

“Expolanka Holdings PLC has, at the Board Meeting held on 1st March 2024, considered a request from its principal shareholder and resolved to initiate the de-listing of the Company’s shares from the Official List of the Colombo Stock Exchange subject to obtaining necessary shareholder approval and regulatory approvals,” the company said in a stock exchange filing.

As per arrangements with SG Holdings Global Pte Ltd, the Company’s majority shareholder, it will purchase its shares from shareholders who may wish to divest their shareholding in the Company at a purchase price of Rs 185.00 per share. The share closed up at 150.50.

The broader All Share Index closed up 0.37 percent, or 39.47 points, at 10,691; while the S&P SL20 Index closed down 0.64 percent, or 19.59 points, at 3,037.

Turnover stayed above the 1 billion mark for the sixth consecutive day, registering 1.4 billion.

Crossings in Melstarcorp Plc (135mn) up at 89.50, Hatton National Bank Plc (64mn) up at 158.00, Hemas Holdings Plc (53mn) up at 75.00 and Central Finance Company Plc (26mn) up at 103.50, added significantly to the day’s turnover.

“The upward trend is continuing, with more retail buying also coming in, the number of trades was more than 10,000 today,” a market participant said. “Investors are looking for undervalued stocks and buying in quantities.” (Colombo/Mar1/2024).

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