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Sunday April 14th, 2024

Sri Lanka central bank has to be restrained for free trade to succeed: Bellwether

ECONOMYNEXT – Sri Lanka’s car owning bureaucrats, politicians and central bankers have started to tighten auto imports in a return to the same old vicious trade controls that follow every bout of money printing showing the urgency of central bank reforms to ensure that any free trade agenda succeeds.

All this shows the importance of reforming Sri Lanka’s soft-pegged central Bank to ensure that any free trade agenda that is pursued is not rolled back and economic nationalism and xenophobic anti-import biases does not re-emerge.

Double Standard Serfdom

These people who impose controls on the hapless citizenry have almost without fail bought tax slashed or tax free cars, in this unjust serfdom that is called Sri Lanka where all private sector people are second class citizens to be economically raped for the benefit of rulers, bureaucrats and unemployed graduates.

In the last column The Price Signal by Bellwether outlined controls usually imposed on the people by rulers who mis-use a flawed central bank, to print money and destroy the currency, with cars being a favourite whipping boy.

This column pointed out that in the past, car imports were restricted including by raising taxes and raising limits on letters of credit.

The central bank raised loan to value ratios of cars this time soon after the last column was published. An attempt was also made to float the rupee.

But upping the loan-to-value ratio is not necessarily a bad thing from a prudential point of view as it may safeguard lenders in a downturn, but it does not address the fundamental issue of printing money to finance, suddenly-hiked state worker salaries and other subsidies.

Car imports, whatever said and done, brings massive taxes to help solve the expanded ‘Yahapalanaya’ deficit for every dollar spent.

Money is fungible

When credit is directed to some other sector, the same foreign exchange will still be lost, but dollar per dollar, tax revenues will be reduced.

The key problem here is loans financed by central bank credit. As long as loan – any loan – is financed by deposits, the economy remains in balance. Whether the loan is likely to go bad is another issue entirely.

Since money is fungible it is not possible to say which loan is being financed by central bank credit.

In the past taxes have been raised on electric goods and other items defined as ‘luxuries’ for Sri Lanka’s citizen serfs by a viciously interventionist elected ruling class and bureaucracy.

The BOP problem came from a state intervention in interest rates and injections of rupee reserves to the banking system by the purchase of Treasury bills by the Central Bank which in turn accommodated another state intervention – a massive hike in state salaries.

The only reason to tax cars if any should be to increase revenue.

The problem can be solved by reducing state interventions, not increasing them, since the balance of payments crisis itself is due to contradictory monetary and exchange policy, where money is printed while trying to intervene in forex markets.

Failed Float?

The Central Bank floated the rupee on September 04, which could have ended sterilized foreign exchange sales, by ending one set of contradictory state interventions.

However early data shows that that contradictory policy is continuing and the float has failed for all intents and purposes. Up to the third week of September as this column is being written over 250 million US dollars may have been lost to interventions.

Some of it has been due to capital flight from bond markets and not necessarily imports fired by printed money. But if even part of the capital flight was accommodated by a reduction in domestic credit and not an expansion of central bank credit, less foreign reserves would be lost.

Sri Lanka has progressively restricted trade after this money printing central bank was built in 1950 abolishing a currency board for political purposes by then Finance Minister J R Jayewardene.

He also fell victim to a diplomatic onslaught by the US State Department to break the ‘Sterling area’ of Britain which had survived for a century or more and create a dollar pegged soft pegged Bretton Woods system which collapsed in just over 20 years.

Self-sufficient Utopia

In 1971-73, when the Bretton Woods collapse Sri Lanka closed her entire external trade, imposed unimaginably draconian foreign exchange controls, dual exchange rates as well as price controls and rationing which created black markets and generally managed to boost unemployment to almost 20 percent by various interventions.

It must be said that President Nixon also imposed massive economic controls (Nixon Shock) in the run up to independently floating exchange rates, as money was printed to finance the Vietnam War amid the legacy problems of Lyndon Johnson’s ‘Great Society’ programs.

The Nixon shock was rolled back because economics survive in some universities in the US and there were real liberals still in the US.

But there was no one in Sri Lanka to stop trade controls in the 1970s as in this country economics appear to be dead and has been replaced by Mercantilism, Marxism and a false belief in a Nazi autarky style self-sufficient utopia.

Sri Lanka exchange controls came thick and fast from 1952, soon after the Central Bank was created.

The post-independent isolation of Sri Lanka involving a mania for ‘saving foreign exchange’ and ‘import substitution’ all came from the BOP troubles of the soft-peg.

All this shows that any free trade agenda would be rolled back in the guise of ‘saving foreign exchange’ and ‘domestic production’, unless the Central Bank was reformed.

It is the flawed soft-peg that allows Mercantilists, nationalists, and advocates of a Nazi autarky to raise their heads.

The ideal solution would be to establish a currency board as a one-off sweeping reform, but a second-best solution would be to reform the Central Bank so that excessively fool hardly and anti-poor actions are legally prohibited through suitable changes to the monetary law.

This column is based on ‘The Price Signal by Bellwetherpublished in the October 2015 issue of the Echelon Magazine. To read Bellwether columns as soon as they are published, subscribe to Echelon Magazine at this link. The i-tunes app can be downloaded from here.

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LGBTQIA+ Rights: Europe and South Asia See Similar Discriminatory Practices

ECONOMYNEXT – The rights and protections of the LGBTQIA+ community have been fraught with challenges and continue to be so, despite the many gains achieved in recent years.

Nor are those handful of rights universally applied, a recent discussion which looked at the European and South Asian perspectives on same-sex rights and unions revealed. Most developed nations have introduced protections for those identifying as LGBTQIA+, and a view from a distant lens paints a picture of tolerance. Yet, a closer look at the European arena throws up the many gaps that are evident in the application of the law.

In the so-called conservative South Asian nations, changes to legislation are slow to be implemented. That may come as a surprise, for, contrary to popular belief, same-sex relationships were culturally acceptable in the South Asian region and is not a Western concept points out Ruhaan Joshi, a Public Policy Practitioner from India.

Society’s view on same-sex relationships dimmed with the imposition of Western values and the criminalisation of such relationships with the advent of colonial rule.

While the LGBTQIA+ communities in South Asian countries currently battle to have same-sex relationships decriminalised and their unions legally accepted, the irony is that countries that first made such relationships punishable by law have moved on to be more welcoming, though some discriminatory practices continue.

Joshi was part of a discussion themed ‘On Being Queer and LGBTQIA+ in South Asia and Europe, held in Germany on April 9 this year. The discussion which included the release of two papers which examined the rights and protections of the LGBTQIA+ community in Europe and South Asia, respectively, was organised by the Friedrich Naumann Foundation for Freedom.

Joining Joshi in the discussion were lawyer and parliamentarian Premnath C Dolawatte from Sri Lanka, Milosz Hodun, President, Projekt Polska Foundation, Poland, Michael Kauch, a Member of the European Parliament and RENEW Europe Group and Inaya Zarakhel, a Dutch-Pakistani actress and an activist on Queer Rights, who moderated the discussion. The two papers were presented by Hodun and Joshi, respectively.

In his opening remarks, Kauch pointed out that while the view of the liberals is that the rights recognized in one member nation of the EU must be accepted by all member countries, that is not the ground reality, the issue of Rainbow families being a case in point.

In the context of the European Union, though the Court of Justice has ruled on the freedom of movement of those in same-sex partnerships and their families, the ruling is not universally applied by member nations.

In Italy, and some European nations, surrogacy which helps childless couples to become parents is illegal. In other situations where same-sex parents are of different nationalities a child in that union faces restriction of movement or the possibility of being stateless if one parent hails from a country where such parental rights are not recognised.

Hodun meanwhile stated that in Poland transgender persons must first sue their parents for the gender assigned to them at birth, to have their gender marker changed on documents.

Some countries such as Russia and Azerbaijan resort to State-sponsored homophobia, and in many instances politicians and political parties promote such biases to boost their voter base it was pointed out. Even where laws are in place for the protection of LGBTQIA+ rights, there is no political will to implement them.

In Europe where migrants arrive in droves seeking asylum, and are frowned upon by many of those countries, LGBTQIA+ members face even more discrimination Hodun says, both by other refugees and governments, where most often the state ignores the situation despite the guidelines issued by the UN and the European Court of Justice. Hate speech and hate crimes too are on the rise he adds stating that at least 80 per cent go unreported.

Increasingly the LGBTQIA+ community has experienced a diminishing of their safe spaces as right-wing and populist governments are elected across the globe. Taking a dig at feminism, meanwhile, Kauch states that though feminists uphold a woman’s right to opt for an abortion, they take a different approach on the topic of surrogacy.

Dolawatte who waded into unchartered waters when he presented a Private Member’s Bill to decriminalise same-sex relationships through an amendment to section 365 of the Penal Code and the repealing of section 365A in its totality, is hopeful that the Bill will pass its third reading. It’s been an uphill battle he says, referring to the case filed in the Supreme Court against the Bill. The court ruled in his favour.

He had little or no support from his own party members, but says the President of the country, and younger party members are with him on this issue. Apart from making Sri Lanka a safe space, it would encourage foreign nationals identifying as LGBTQIA+ to visit without fear, and thus boost tourism he opines.

As Joshi states society has come a long way from when LGBTQIA+ were made fun of and were subject to violence to the positive portrayal in movies. Such movies are also well-received by society. Transgender identity has a distinct recognition in South Asian religious beliefs. Hijra, Khwaja Sara or Kinnar are some names given to transgender folk and they have, since ancient times been an accepted group in society. On the one hand, there’s Afghanistan and the Maldives which make no allowances for the LGBTQIA+ community, while Nepal became the first South Asian nation in 2023, to register a same-sex marriage, Joshi states. In most South Asian nations, the courts have ruled in favour of relaxing the rules against this community, and, like in Europe, it is the governments that drag their feet.

For governments to change their stance, society must take the lead in fighting for the unconditional dignity of the individual, freedom of movement, and safeguarding the tenets of democracy, he says adding that it must also run parallel with the LGBTQIA+ community looking beyond themselves at issues that impact democratic values, and the societal restrictions non-LGBTIQIA+ groups face, such as opposition to inter-caste marriage and the right to adopt outside their caste systems and equal access to many other privileges.

While the panellists advocated working together across the global divide as a step towards achieving equal rights for all, Dolawatte also called for caution; too much pressure on such issues from Europe he said may not be welcome, and must be handled with care.

With right-wing and populist governments getting elected across the globe, Kauch claims the forthcoming EU elections will prove crucial in deciding how future and current governments ensure tolerance and diversity amongst their citizenry.

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Sri Lanka making new economic laws to embed structural reforms

ECONOMYNEXT – Sri Lanka is making new laws and also revising old legislation following a comprehensive review of past experience and lessons learned, Treasury Secretary Mahinda Siriwardana has said.

Most of these new laws focus on structural changes of the existing executive and administrative structures, Siriwardana was quoted as saying in a speech to ministry officials on April 08.

The laws related to public finance, procurement, public private partnerships, state enterprises and also a law on the offshore economy.

The following new laws are being made:

a. Public Financial Management Bill
b. Public Debt Management Bill
c. Economic Transformation Bill
d. Management of State Owned Enterprises Law
e. Public Private Partnership (PPP) Law
f. Investment Law
g. Public Procurement Bill
h. Unified Labor Law Bill
i. Food Security Bill
j. Public Asset Management Bill
k. Microfinance and Credit Regulatory Authority Bill
l. Secured Transaction Bill
m.Offshore Economic Management Bill
n. New law for facilitating proposed agricultural land lease programme
Public Service Employment Bill
o. Sri Lanka Accounting and Standard Monitoring Act

Changes are planned to the following laws

a. Amendments to Agrarian Development Act
b. Amendments to Excise Ordinance
c. Amendments to Customs Ordinance
d. Amendments to Finance Act
e. Amendments to Foreign Exchange Act. Colombo/Apr15/2024)

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After PM’s Chinese visit, US NSA talks to Sri Lanka President’s advisor on peace, security

ECONOMYNEXT – The United States National Security Advisor (NSA) Jake Sullivan held talks with Sri Lanka President’s Senior Advisor on National Security Sagala Ratnayaka focusing on regional security issues this week.

The conversation between the two comes days after Sri Lanka Prime Minister Dinesh Gunawardena ended an official visit to China in which he met President Xi Jinping and his counterpart Li Qiang in Beijing amid discussions over further investments in Sri Lanka and concerns over banning Chinese research ships.

The United States along with India is highly concerned over increasing Chinese influence in Sri Lanka, which is located in a strategic location in the Asia.

China already owns a port and a proclaimed land next to the main Colombo port in Sri Lanka and analysts say the Beijing’s ownership of assets has raised doubts if China is planning to use Sri Lanka as a military base. China has denied this and said its relationship with Sri Lanka is only based on commercial aspects.

The discussion between Sullivan and Ratnayaka focused on a range of crucial topics aimed at bolstering bilateral relations between the two nations, the President’s Media Division (PMD) said.

“Central to their discussion was the unwavering U.S. commitment to supporting Sri Lanka’s security and sovereignty,” the PMD said in a statement.

“Acknowledging Sri Lanka’s ongoing endeavours, Sullivan emphasized the importance of completing the fiscal, monetary, and governance aspects of the IMF program.”

The US along with India has raised possible threats of increasing Chinese influence in Sri Lanka, government officials have said. Both  countries see China as a security threat to the Indian Ocean region, they say.

“The conversation also delved into future prospects for collaboration between the two countries, exploring avenues for enhanced cooperation in various spheres,” the PMD said.

“Sullivan conveyed his keen interest in fostering continued engagement with Sri Lanka, underscoring the mutual objective of advancing peace and security in the region.”

“This dialogue marks a pivotal moment in U.S.-Sri Lanka relations, demonstrating a shared commitment to promoting stability and prosperity in the Indo-Pacific region.” (Colombo/April 13/2024)

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