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Sunday February 25th, 2024

Sri Lanka critical on independence day, opportunity to rectify our errors: President

ECONOMYNEXT – Sri Lanka going though a critical time as the 75th anniversary of independence from British rule is being marked on February 04, President Ranil Wickremesinghe has said.

“Our 75th Anniversary of Independence from colonial rule is being observed during an extremely critical and challenging time in the  country,” he said in an independence day message.

“It is, indeed, a decisive moment. However it presents an opportunity for us not only to review our strengths and gains as a  nation but also to rectify our errors and failures.”

Sri Lanka is now in the grip of the worst currency crisis in the history of its intermediate regime, central bank with the rupee falling from 182 to 360 to the US dollar in the current credit cycle.

President Wickremesinghe, is taking unpopular political decisions to stablize the country under a program with the International Monetary Fund, as his predecessors had done before him.

Sri Lanka got independence from the British on February 04, 1948.

At the time economic bureaucrats did not have the power to depreciated the currency by printing money to manipulate interest rates down, but were strictly rule bound and no IMF programs were necessary.

In August 28, 1950, a group of economic bureaucrats were given ‘monetary policy independence’ to print money undermining a peg with gold (1.99 grains of gold) and the US dollar – which was also on a gold standard at 22 units an ounce.

At the time the rupee was only 4.76 to the US dollar.

Sri Lanka joined the IMF the next day, on August 29. Economic bureucrats who mis-targeted rates have since take the country to the IMF 16 times.

As money was printed and forex shortages emerged the population rapidly lost their economic freedoms. First first exchange controls, then trade controls were brought to enable the central bank to continue printing money for extended periods, and avoid prudent monetary policy.

In 2005 Sri Lanka got market access. In 2022 the country defaulted as other market access countries with monetary instability had done in the 1980s and 1990s. Market access countries in the 1980s and 1990s were mainly in the Latin America.

“There is a new economic and social reform agenda before the country  with the objectives focusing first on recovery and then on renewed  development,” President Wickremesinghe said.

“It is imperative for us to unite in its implementation so  that we can emerge with a high level of economic prosperity.”

However there is no attempt to change the flexible inflation targeting under the IMF program, giving monetary policy independence to economic bureaucrats.

Highly discretionary flexible policies where money is printed to reach a 5 percent inflation target is to be legalized as part of the program, just as similar regime was set up in 1950 the day before IMF membership was obtained.

The full statement is reproduced below:

President’s Independence Day Message

Our 75th Anniversary of Independence from colonial rule is being observed during an extremely critical and challenging time in the  country.

It is, indeed, a decisive moment. However it presents an  opportunity for us not only to review our strengths and gains as a  nation but also to rectify our errors and failures.

Since 1948, we have, as a nation, undergone many tests and travails –  from riots, insurgencies and war to natural disasters.

These  experiences have left us with a sense of inculcated resilience that  has made us revive better when faced with adversity. Therefore, I am  confident that even at this juncture we will pool our energies as the  daughters and sons of one mother to rise up from the current economic  abyss and build back stronger.

There is a new economic and social reform agenda before the country  with the objectives focusing first on recovery and then on renewed  development. It is imperative for us to unite in its implementation so  that we can emerge with a high level of economic prosperity.

I pledge  today to make the extremely difficult though vital decisions to  achieve this goal with courage and determination. I anticipate the confidence and support of you, the people of our country, in this  endeavour.

I also take the opportunity to thank you, the Sri Lankan expatriate  community, for your contribution towards the development of our  motherland despite your distance. I would like to invite you to join  us in securing a bright future for the younger generation of Sri  Lankans who are at the vanguard of economic and social development. 

Your faith and investment in the unique and creative ideas of our talented youth who lack capital could give considerable hope and be of  immense benefit to our country in this crisis.

On this historic anniversary, let us all resolve to meet the  challenges of this year with further patience and fortitude.

I extend warm felicitations to you, Sri Lankans, here and aboard.

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  1. Navin Weeraratne says:

    Who can’t admit spending a ton on independence day was a dumb and tasteless idea, talks about fixing mistakes.

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  1. Navin Weeraratne says:

    Who can’t admit spending a ton on independence day was a dumb and tasteless idea, talks about fixing mistakes.

Sri Lanka could get US$500mn from ADB in 2024

ECONOMYNEXT – Sri Lanka could receive 500 million US dollars in support from the Asian Development Bank in 2024 based on the progress of policy reforms, Country Director of the Manila-based lender, Takafumi Kadono said.

The ADB expect to go to its Board around March or April with a 100 million US dollar power sector loan subject to the cabinet of ministers of approving a revised electricity reform bill.

A 100 million dollar loan to support SMEs could also be approved in the early part of the year. Sri Lanka is setting up a credit guarantee agency to support credit for small firms.

A 200 million dollar credit for financial sector was also slated for the year. The ADB gave the first tranche of the financial sector policy loan late last year.

A $100mn for the water sector could also be approved later in the year.

Sri Lanka could get around 200 to 300 million US dollars a year at the lowest rate, or concessional ordinary capital resources (COL) rate of 2 percent.

The balance of would come at the ordinary capital resource rate linked to SOFR.

The ADB has also started work on a ‘Country Partnership Strategy’ for Sri Lanka covering the 2024-2028 period, Kadodo said. (Colombo/Feb25/2024)

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Sri Lanka’s multi-aligned foreign policy based on friendship: Min

ECONOMYNEXT – Sri Lanka’s multi-aligned foreign policy is based on friendship to all and enmity to none, its Minister of Foreign Affairs has said.

“Non-alignment means not becoming a bystander. Non-alignment means you are not forced or coerced into a camp to take sovereign decisions… you make your own choices. Whether it is commercial, security, regional or otherwise,” M U M Ali Sabry said on X (twitter).

“I have repeatedly stressed that sovereignty is the right to have your own opinion on what’s right and wrong, and to stand by your principles. Our multi-aligned foreign policy is based on friendship to all and enmity to none,” Sabry was quoting from his speech at the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) Foreign Policy Forum, on the theme ‘Reassessing Non-Alignment in a Polarised World’.

Sri Lanka is one of the founding members of the Non-Aligned Movement.

The strategically located island has been increasingly walking a fine line between opposing global factions as it seeks to come out of a financial crisis. (Colombo/Feb24/2024)

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Sri Lanka’s Commercial Bank Dec net down on tax provisions

ECONOMYNEXT – Sri Lanka’s Commercial Bank of Ceylon reported profits of 6.9 billion rupees from the December 2023 quarter down 21 percent, despite an improvement in net interest income and lower provisions, amid a change in tax provisions.

Pre-tax profits were 8.89 billion rupees up from 2.4 billion rupees. There was a 6.4 billion tax reversal last year compared to a 1.7 billion rupee tax charge this year.

Commercial Bank reported earnings of 5.26 rupees for the quarter. For the year to December 2023 earnings were 16.07 rupees per share on total profits of 21.1 billion rupees, down 11.3 percent.

Net fee and commission income was down 1.2 percent to 6.1 billion rupees.

Net interest income went up 16.8 percent to 25.5 billion rupees, with interest income rising marginally by 1.3 percent to 73.0 billion rupees and interest expense falling 5.45 percent to 47.5 billion rupees.

Loans and advances to customers grew 4.06 percent to 1.17 billion rupees in the year to December. Debt and other financial instruments fell 10.5 percent to 649 billion rupees.

Financial assets measured and fair value through other comprehensive income was at 287 billion rupees, up from 117 billion rupees.

Impairment charges were 13.1 billion rupees, down from 19.6 billion rupees last year.

Gross assets were up 6.45 percent to 2.36 billion rupees. Net assets were up 5.51 percent to 214 billion rupees. (Colombo/Feb24/2024)

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