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Saturday April 20th, 2024

Sri Lanka could run out of ink due to money printing: legislator

ECONOMYNEXT – Sri Lanka is in danger of running out of ink at the rate money is being printed opposition legislator Mujiber Rahuman said as emergency laws were invoked to seize food stocks as foreign exchange shortages and price controls created shortages.

“What has the government done during the last one and a half years?” opposition legislator Mujiber Rahuman questioned in a parliament which was debating the emergency laws.

“They have done one thing correctly. That is the printing 1,250 billion rupees. We feel money will be printed until the ink in the country is finished.”

Sri Lanka has printed record amounts of money to keep interest rates down in a ‘monetary stimulus’ triggering a balance of payments deficit of 2.3 billion US dollars in 2020 and a similar amount in 2021.

Foreign reserves fell to 2.8 billion US dollars in July and in August the central bank got a 150 million US dollars from a swap with Bangladesh’s central bank which had better monetary policy and maintained its peg around 87 to the US dollar for over a decade.

“Sri Lanka has set a record as the first country to get a loan from Bangladesh,” Rahuman observed.

On Friday 39 billion rupees were printed after a Treasury bill auction failed due to a yield controlled auction taking the total treasury securities owned by the central bank to 1,261 billion rupees.

Large volumes of printed money to pay state workers or injected to the banking system to keep rates down has triggered forex shortages and the new rupee have created import demand in excess of dollar inflows.

Similar problems had taken place in the 1970s when the central bank also was a top buyer of Treasury bills.

Analsyts have urged authorities to get the bond auctions working again to stop liquidity injections and help end forex shortages.

In August the central bank raised its overnight policy rate to 6.0 percent from 5.5 percent, but bond auctions remain under price controls triggering more money printing.

Rahuman said the central bank is publishing a rate of 202 to the US dollar in its website but importers had to pay around 230 to 231 to get US dollars from commercial banks.

Most countries that print money and have forex troubles have problems with imports and rising prices, leading to price controls and other interventions.

Price controls then reduces supplies or drive them underground, creating shortages and black markets. (Colombo/Sept06/2021)

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Sri Lanka discussing giving extra land, water for Chinese oil refinery

ECONOMYNEXT – Sri Lanka is in discussions with China’s Sinopec to give extra land and assure water supplies after the company decided to expand the capacity of a planned oil refinery in Hambantota, Energy Minister Kanchana Wijesekera said.

“There are concerns on how the water supply is going to be provided for the refinery,” Minister Wijesekera told reporters Friday.

The refinery will need more land and also revise conditions in a Board of Investment agreement, he said.

Read more
Sinopec to double capacity of new refinery in Sri Lanka’s Hambantota

Recommendations and decisions from Sri Lanka’s side had already been sent and Sinopec is expected to revert back in May.

“We are hoping to sign the agreement once everyone has agreed,” Wijesekara said.

The principle agreements are expected to be signed by June, he said.

The refinery could sell up to 10 percent of its output in the domestic market.

“There is no commitment by the government to purchase anything,” Minister Wijesekera said. (Colombo/Apr19/2024)

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Sri Lanka rupee closes weaker at 302.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 302.00/50 to the US dollar in the spot forex market on Friday, down from 301.50/302.00 a day earlier, dealers said.

There was increased demand for dollars after the central bank bought 715 million dollars from forex markets. In the previous two months it was buying on average about 200 million US dollars, leaving market participants and bank in a ‘oversold’ position.

There were some official dollars sales Friday dealers said.

READ Sri Lanka rupee quoted wide to US dollar as peg inconsistencies flare up

Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed at 11.30/40 percent down from 11.35/40 percent.

A bond maturing on 15.09.2027 closed at 11.95/12.05 percent up from 11.90/12.05 percent.

A bond maturing on 15.12.2028 closed stable at 12.15/25 percent.

A bond maturing on 15.09.2029 closed stable at 12.30/40 percent.

A bond maturing on 01.10.2032 closed stable at 12.40/50 percent. (Colombo/Apr19/2024)

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Sri Lanka stocks close down, banks trade down

ECONOMYNEXT – The Colombo Stock Exchange closed down on Friday, data on its site showed.

The broader All Share Index closed down 0.38 percent, or 44.80 points, at 11,753; while the S&P SL20 Index closed down 0.53 percent, or 18.46 points, at 3,456.

Turnover was at 1.4 billion. The diversified financials (Rs366mn) and banks (Rs266mn) sectors continued to see selling pressure.

“This was possibly due to uncertainty around the bond discussions,” market participants said.

With the exception of Sampath Bank Plc (up at 77.50) all other banks traded down in the day. Commercial Bank of Ceylon Plc was down at 104.50, Hatton National Bank Plc was down at 188.50, and DFCC Bank Plc was down at 77.00.

LOLC Finance Plc saw the most trades and closed up at 6.40. Another LOLC company, Browns Investments Plc, also saw high traded volumes and closed up at 5.60.

Softlogic Capital Plc was up at 7.00, and Softlogic Holdings Plc was up at 11.20. A trading suspension imposed on SHL.N0000 was lifted effective today as the company submitted the annual report for the year ended 31st March 2023.

However, shares of the Company will remain in the Watch List “due to Qualified Audit Opinion and Emphasis of matter on going concern in the Independent Auditor’s Report in the Audited Financial Statements for the year ended 31st March 2022.”

Dialog Axiata Plc, which announced its merger with Bharti Airtel Thursday, saw its share price close up at 11.90.

“There was some traction on index heavyweights,” market participants pointed out.

Top contributors to the APSI included Aitken Spence Plc (up at 134.50), Ceylon Tobacco Company Plc (up at 1,245.25, and Lion Brewery (Ceylon) Plc (up at 1,048.50).

There was a net foreign inflow of 5 million. (Colombo/Apr19/2024)

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