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Friday July 12th, 2024

Sri Lanka electricity generation returns to pre-crisis levels in first quarter

ECONOMYNEXT – Sri Lanka’s electricity generation has expanded 9.6 percent in the first quarter of 2024 to 1,469 GigaWatt hours, with sales to industry growing 14.3 percent, data published by the central bank shows.

Sri Lanka’s electricity sales has long been a proxy for economic activity and also gross domestic product (value added).

In the first quarter of 2024 the statistics office estimated real GDP to have grown 5.3 percent and nominal GDP 8.3 percent.

In the first quarter of any year, value added (GDP) in electricity is lower than other quarters due to a higher import content, amid dry weather.

Sri Lanka’s electricity generation contracted 12.1 percent to 3,748 GWh in the first quarter of 2023.

Sri Lanka’s first quarter electricity generation based on provisional data has now returned to pre-economic crisis and pre-pandemic levels, though still below 4,203 (revised) data of the crisis year 2022.

In 2021 and early 2022 Sri Lanka’s domestic demand was pushed to almost impossible levels by macro-economists who printed money to suppress rates, in their quest for flexible inflation targeting and potential output targeting.

In the last quarter of 2021 macroeconomists blew a 1.4 billion dollar hole in the balance of payments and in the first quarter of 2022 an 853 million dollar hole in part supported by sterilization of Asian Clearing Union deferred payments from India.

Sri Lanka defaulted on its external debt in peacetime Latin America style, in 2022 after surviving a 30 year civil war, as money was printed to target potential output and high level of inflation under flexible inflation targeting/flexible exchange rate) without a clean float.

The first wave of sovereign defaults in the 1980s also came after IMF’s Second Amendment to its articles left countries without credible anchor and reserve collecting central banks attempted money supply targeting without a clean float.

Sterilizing intervention is also a type of reserve money targeting.

Classcial economists had analysts have said the potential output targeting was conducted by economic bureaucrats violating the then monetary law (which had a stability mandate) but in a new monetary law backed by the International Monetary Fund, printing money for growth and printing money for inflation is legalized.

The central bank has allowed the exchange rate to appreciate in the first quarter of 2024 and undershot its 5 percent inflation target giving a strong stable foundation for economic activity to recover.

Analysts have however warned that as soon as money is printed to push up inflation as private credit recovers, currency instability will worsen and the country will take the first steps to a second default. (Colombo/June22/2024)

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Sri Lanka appoints new Attorney General

ECONOMYNEXT – Sri Lanka’s President Ranil Wickremesinghe has appointed K A Parinda Ranasinghe PC as Attorney General.

He was appointed in terms of Article 61E (b) of the Constitution of Sri Lanka, the president’s media division said.

The new AG received the appointment from President Wickremesinghe at the Presidential Secretariat on Friday.

He fills the post after the retirement of former Attorney General Sanjay Rajaratnam. (Colombo/Jul12/2024)

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Sri Lanka rupee closes stronger at 301.70/302.00 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed stronger at 301.70/302.00 to the US dollar on Friday, from 302.80/303.00 to the US dollar on Thursday, dealers said, while bond yields were up.

A bond maturing on 15.12.2026 closed at 10.90/11.00 percent, up from 10.85/95 percent.

A bond maturing on 15.12.2027 closed at 11.75/80 percent, up from 11.80/88 percent.

A bond maturing on 01.05.2028 closed at 11.90/12.00 percent.

A bond maturing on 15.09.2029 closed at 12.10/30 percent, up from 12.15/25 percent. (Colombo/Jul12/2024)

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Sri Lanka stocks close up, muted activity

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

The broader All Share Index closed up 0.35 percent, or 41.71 points, at 11,843; while the more liquid S&P SL20 Index closed up 0.56 percent, or 19.20 points, at 3,454.

Turnover was low at 653 million.

“The market picked up a bit from yesterday but it’s still below the psychological 12,000 mark,” Softlogic Stockbrokers said.

“Local retail participation drove the market predominantly.”

John Keells Holdings Plc brought in Rs109mn to the turnover, and the share closed flat at 194.50.

Melstacorp Plc contributed in Rs104mn to the turnover, and the share closed flat at 85.00.

Sentiment around the banking counters was mostly negative. Sampath Bank Plc closed down at 77.00, closed flat at 101.25, and Hatton National Bank Plc closed flat at 195.25.

The top contributors to the ASPI were Commercial Bank of Ceylon Plc (up at 103.50), Bukit Darah Plc (up at 397.00), and Hayleys Plc (up at 101.00).

Foreign participation remained low as well. There was a higher net foreign outflow of 101 million.

“Foreign selling was seen on John Keells Holdings, and banking counters; Hatton National Bank Plc (down at 195.00), Pan Asia Banking Corporation Plc (down at 20.70), and Commercial Bank of Ceylon Plc.

There was selective foreing interest on the diversified financials sector, particularly in companies that had vehicle leasing portfolios. “We think this might be due to the news of the vehicle import ban possibly ending.”

LOLC Holdings Plc closed up at 440.50, People’s Leasing and Finance Plc closed up at 12.20.

Softlogic Holdings Plc which announced the date of its rights issue, closed up at 8.50. (Colombo/Jul12/2024)

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