Economy

Sri Lanka IMF technical talks to continue

Wednesday May 11, 2022 10:05 am

ECONOMYNEXT – Technical talks between Sri Lanka officials and the International Monetary Fund are continuing and so that policy discussions can begin as soon a new cabinet is appointed, mission chief Masahiro Nozaki said.

“On our virtual mission during May 9-23, discussions at the technical level have just started and continue as planned so as to be fully prepared for policy discussions once a new government has been formed,” the Nozaki said.

“We are following developments in Sri Lanka closely and are concerned about rising social tensions and violence.

“We remain committed to assist Sri Lanka in line with the IMF’s policies.”

The IMF is usually called in after a central bank with a soft-peg (flexible exchange rate) triggers a currency crisis after economists print money to boost growth thinking they have ‘monetary policy independence’ but runs in to an anchor conflicts.

Such crises lead to depreciation, inflation, social unrest and political upheavals are normal. In Sri Lanka both the President and the ruling party, and opposition had expressed support for an IMF program.

High corrective interest rates, growth collapses, business failures and bad loans then follow.

Currency crises are not possible in floating exchange rates (there is monetary policy but no exchange rate policy) or a currency boards (there is exchange rate policy but no monetary policy) which are single anchor regimes.

IMF bailouts continue and the country will remain in the third world until the central bank is subject to strict monetary rules and taking away the discretion of the economists to print money to boost growth (output gap targeting with a peg) or for any other purposes.

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Debt Restructuring

Sri Lanka President cleared to discuss cancelled LRT after soured Japan relations

Tuesday May 30, 2023 12:57 pm

ECONOMYNEXT – Sri Lanka’s Cabinet of Ministers approved a proposal by President Ranil Wickremesinghe discuss resuming a Japan funded. Light Rail Transit (LRT) project cabinet spokesman said, as the island nation is in the process of mending ties with Tokyo.

However, any such deals are likely to take place after the debt restructuring and Sri Lanka starts to repay its foreign loans to come out of default, analysts say.

Former President Gotabaya Rajapaksa unilaterally cancelled the 1.5 billion US dollar LRT and East Container Terminal (ECT) projects in 2021. Japan agreed to fund the LRT project while it was one of the tripartite members of the ECT project along with India and Sri Lanka.

The abrupt cancellation hit the diplomatic ties between the two countries and Sri Lankan government officials have said Japan had given the project to Sri Lanka at a very lower financing cost.

President Wickremesinghe returned from Japan late last week after having met top officials of the Japanese government including its prime minister.

“In recent history, due to the stopping of several agreements and proposals suddenly, President Wickremesinghe went to Japan after creating the background to clear some of the worries we have,” Cabinet Spokesman Bandula Gunawardena told the weekly media briefing.

“Before he went, he got the approval from the cabinet to resume the discussion on the light railway project. He got the approval from the cabinet to get parliament approval for bilateral agreements signed or any other investments project. Any change or cancellation of a project could be done only with the approval of the parliament.”

Japan has backed Sri Lanka under Wickremesinghe’s presidency after the island nation declared sovereign debt default. (Colombo/May 30/2023)

Legal

Sri Lanka to tighten grip on television with broadcast law

Tuesday May 30, 2023 12:52 pm

ECONOMYNEXT – Sri Lanka has formulated a broadcast authority law to regulate electronic media which will be made public soon, Cabinet spokesman Minister Bandula Gunawardana said.

“The draft prepared by a cabinet subcommittee under Justice Minister Wijedasa Rajapaksa has discussed with various parties will be given to all media institutions and broadcast media,” Gunawardana said.

“We do not have to hide or force anyone. A legal framework that can be acceptable to all for all sectors.”

“In a week or two Minister Wijedasa will discuss with state and private stakeholders.”

At the moment Sri Lanka has issued frequencies without conforming to an “international procedures”, he said.

In Sri Lanka television frequencies are issued under a state television act.

Successive administrations in Sri Lanka has since around 1980 mis-used state television duopoly which including for conducting elections according to critics.

Private television as well a raio emerged around the 1990s and has since over shadowed state media.

There have been calls by ruling party politicians from time to time to control private media. There is now calls to control social media.

At a Committee on Public Accounts meeting of the Department of Government Information, ruling coalition legislators called for regulation of television content. (Colombo/May30/2023)

Bonds & Forex

Sri Lanka rupee at 296.75/297.25 to dollar at open, bond yields steady

Tuesday May 30, 2023 9:37 am

ECONOMYNEXT – Sri Lanka’s rupee opened at 297 /297.50 against the US dollar in the spot market on Monday, while bond yields were steady, dealers said.

The rupee closed at 296.75 /297.25 to the US dollar on Monday after opening around 296.50 /297.50 rupees.

A bond maturing on 01.09.2027 was quoted at 26.50/75 percent steady from Friday’s close at 26.50/65 percent.

Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money. (Colombo/ May 29/2023)