Politics

Sri Lanka COPF chair deadlock persists despite president consenting to Harsha

MP Harsha de Silva (l) with President Ranil Wickremesinghe at the tea party hosted in parliament after the president’s throne speech. Image credit: President’s Media

Himal Kotelawala

Thursday May 25, 2023 12:53 pm

By Himal Kotelawala

Thursday May 25, 2023 12:53 pm

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has agreed to the appointment of main opposition Samagi Jana Balawegaya (SJB) MP Harsha de Silva as chair of the Committee on Public Finance (COPF) but disagreement within the committee has led to a deadlock, MPs said.

Opposition and SJB leader Sajith Premdasa told parliament on Thursday May 25 that the president has conveyed to SJB legislators de Silva and Kabir Hashim at a meeting attended by Prime Minister Dinesh Gunawardena and Leader of the House Susil Premajayantha that he is agreeable to the appointment.

“I would like to know if there is some problem within the government and if that is why the president’s directives are not followed,” said Premadasa.

Responding to the opposition leader, Chief Government Whip Prasanna Ranatunga acknowledged that the president had indeed agreed to de Silva’s appointment but government MPs in the COPF have expressed concern.

“As you said, the president has agreed, but in discussions between the MPs of the committee – we have no issue with Harsha de Silva – but our MPs have a small concern about his conduct,” said Ranatunga.

Chief Opposition Whip Lakshman Kiriella noted that parliament’s standing orders do not say that a committee chair cannot be appointed because MPs are opposed to it. Ranatunga, however, countered that majority support from the committee was needed, which Kiriella again refuted.

The issue of COPF chair has dragged for weeks now, said Premadasa asking why the government was so adamant on blocking de Silva’s appointment.

The SJB and other opposition groups have been crying foul over the government’s refusal to appoint the economist-turned-politician as COPF chair. An allegedly surreptitious attempt to have de Silva’s SJB colleague Mayantha Dissanayake came a cropper after Dissanayake, who had initially accepted the position, resigned mere days later. Government MPs have claimed that the SJB had wanted Dissanayake to step down due to internal rifts in the party.

For his part, de Silva has said the government has been violating parliamentary procedures and governance by running the committee without a chairman since January.

On May 12, the main opposition questioned the legality of raising a ceiling on Treasury bills to 6,000 billion rupees from 5,000 billion over dispute over the committee chairmanship.

Sri Lanka opposition questions legality of COPF decision on T-bills

(Colombo/May25/2023)

FILED UNDER: copf,economy,Harsha de Silva,lakshman kiriella,parliament,politics,Prasanna Ranatunga,Sajith Premadasa,Shehan Semasinghe,SJB,Sri Lanka,Treasury bills

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Markets

Sri Lanka’s shares slip on profit taking and selling pressure

Wednesday June 7, 2023 5:18 pm

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

Bonds & Forex

Sri Lanka Treasuries yields plunge, 12-month down 318bp

Wednesday June 7, 2023 4:04 pm

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

Bonds & Forex

Sri Lanka forex reserves rise US$722mn in May 2023

Wednesday June 7, 2023 3:48 pm

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed as deflationary policy and weak credit reduced ‘above the line’ outflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.

Related

Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)