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Friday August 19th, 2022

Sri Lanka import controls misguided; doesn’t solve the real problem: Eran

ECONOMYNEXT – Sri Lanka’s import controls which has left the economy mired in a plethora of regulations does not solve underlying economic problems in the country, opposition legislator Eran Wickremaratne said.

Interest rates were being held down artificially and it was hurting savers and pensioners who had savings.

Wickremeratne, a former state minister for finance said foreign reserves were falling and it was being boosted with swap contracts.

He said interest rates were being controlled on the basis of Modern Monetary Theory and large volumes of money had been printed.

Sri Lanka’s foreign debt was one of the highest among middle income countries.

“When we delay corrective policies, the country will get into greater difficulties,” he warned.

Budget deficits had been understated by moving away from cashflow based accounting, he said.

Government revenue were fallen and revenues were being lost due to various tricks with gazettes. A sugar scam involving sudden tax changes may have cost 11 billion rupees to the Treasury he sad.

Wickremeratne, said in the 1970s a closed economy showed the failure of a controlled economy.

“At the time a license was needed to get new clothes for a weeding,” Wickremeratne said. “The controls and conditions also create unrest among the youth.”

In the 1970s the central bank was printing large volumes of money as it could not enough Treasury bills to real buyers.

The central bank was purchasing large volumes of money by rejecting bids at bill auctions.

In the 1970s the draconian exchange and import controls were placed after printing money, bringing many economic activities to a standstill.

“The Treasury had to finance its expenditures increasingly by resort to Treasury bills despite the fact that no significant tenders forthcoming to absorb the successive issues of Treasury bills,” an economist at the central bank had written in the monetary authority’s 25th anniversary publication.

“The responsibility of absorbing the unsubscribed portion of the Treasury bill issue fell on the central bank.

“A major drawback in financing of budget deficits with central bank credit is that while the process involves an expansion in the money supply, it is not necessarily accompanied by an expansion by a corresponding increase in national product.

“Consequently, increased demand emanating from central bank financing of budget deficits had to be satisfied by increased recourse to foreign supplies with resulting pressure on the country’s external payments.

“Thus, though the Government fiscal problem and the balance of payments deficits were two distinct problems, they were nevertheless inter-related, in that the balance of payments deficits and loss of external assets arose partly out of the method by which the government sought to finance its deficits.

“With the continued loss of reserves and the accumulation of external liabilities, the ability of the Central Bank to maintain the international value of the rupee was gradually undermined.”

Wickremeratne said inflation was going up and energy prices were also showing signs of moving up.
The US Federal Reserve under Jerome Powell was also printing record volumes of money, and there have been warnings of a new commodity bubble like in 2007. (Colombo/Feb11/2021)

Comments (2)

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  1. Asiri seneviratne says:

    I mean converting others is not necessary to go to heaven

  2. sampath says:

    time to new government to show up their performance.

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Comments (2)

Your email address will not be published.

  1. Asiri seneviratne says:

    I mean converting others is not necessary to go to heaven

  2. sampath says:

    time to new government to show up their performance.

Sri Lanka schedules 3-hour power cuts for Aug 20, 21: regulator

ECONOMYNEXT – Sri Lanka will impose power cuts of up to three hours on Saturday August 20 and Sunday August 21, Public Utilities Commission (PUCSL) Chairman Janaka Ratnayake said.

All areas (A, B, C, D, E, F, G, H, I, J, K, L, P, Q, R, S, T, U, V and W) will have power cuts of 1 hours and 40 minutes between 10.30 am and 06.00 pm and 1 hour 20 minutes from 06.00pm to 10.00 pm.

Click here for a detailed schedule.

The state-run Ceylon Electricity Board (CEB) said supply interruption time and restoration time will vary within 30 minutes as indicated above.

Sri Lanka’s daily scheduled power cuts that were reduced to one hour in July with power generation from hydro power plants contributing more than 50 percent to the main grid reducing thermal power plant use was extended to three hours last week due to a breakdown at the Norochcholai coal power plant.

According to officials, the breakdown happened in Unit 1 of Norochcholai which will take around two weeks to repair.

The Minister of Power & Energy said Unit 2 is undergoing scheduled maintenance work while Unit 3 will continue to operate. West Coast and other fuel power pPlants will be used to manage the supply, the ministry said. (Colombo/Aug02/2022)

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Sri Lanka guidance peg edges T-bond yield edge down

ECONOMYNEXT – Sri Lanka Central Bank’s guidance peg for interbank transactions edged down on Friday (19), while yields in Treasury bonds picked up slightly and in T-bill remain unquoted in dull trade, a day after the Central Bank announced the policy rates will remain stable, dealers said.

A bond maturing on 01. 06. 2025 closed at 27.95/28.05 percent on Friday, slightly up from 27.90/28.00 percent on Thursday.

No T-bills were quoted on Friday, dealers said.

Meanwhile Sri Lanka’s central bank announced a guidance peg for interbank transactions further weakened by three cents to 361.00 rupees against the US dollar on Friday from 360.97 rupees.

Data showed that commercial banks offered dollars for telegraphic transfers between 368.00 and 370.00 for small transactions.  (Colombo/ Aug 19/2022)

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Sri Lanka records 10 new COVID-19 deaths in 48 hours as case numbers rise

ECONOMYNEXT –  Sri Lanka recorded 10 COVID-19 deaths in the 48 hours from August 17 to 19 taking the country’s pandemic death toll to 16,640, health ministry data showed.

Sri Lanka is experiencing a slight increase in COVID-19 cases with the relaxation of public health restrictions relating to face masks and public gatherings.

Health authorities said the situation will be monitored constantly and have asked the general public to continue to follow basic hygiene measures in order to control the spread of the virus again in the community.

In August alone 2,924 new cases were recorded in Sri Lanka, with 84 deaths attributed to the disease.

So far in 2022, from January onward, health authorities have identified 81,157 patients to date.

Epidemiology unit data showed that 874 patients are currently receiving treatment, out of which 716 are receiving home based care.

The spread of the virus has increased with the use of public transport rising after an easing of a fuel crisis.

Sri Lanka is also facing difficulties in securing essential medicine supplies for the health sector due to a forex shortage.

Health officials said if the number of COVID-19 patients rise to a level the health sector cannot manage,  with the added issues of fuel and medical shortages, the health system might collapse.

“It is the responsibility of us all. There is no use trying to forcibly control people. We all have the responsibility to reduce or stop the spread of the virus before it gets out of control. We have been living with it for the past two years,” Deputy Director General of Health Services Dr Hemantha Herath said. (Colombo/Aug19/2022)

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