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Saturday May 25th, 2024

Sri Lanka in lockdown-style Coronavirus curfew as count moves up, markets wobble

DESERTED: Colombo’s usually crowded Galle Face beach front is deserted as Sri Lanka is on non-essential Coronavirus holiday.

ECONOMYNEXT – Sri Lanka Friday announced lockdown-style curfews to cover the entire country, while island’s Coronavirus count went to 66, stocks plunged and the central bank slammed import controls as a rupee soft-peg was pressured amid liquidity injections and global volatility.

“Everyone should remain in their homes during this period,” Acting Police Chief C D Wickremeratne said in a notice.

Action will be taken under the quarantine ordinance against any curfew breakers, he warned. The quarantine ordinance was originally promulgated by British rulers.

The curfew will remain in place until Monday, March 23.
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For areas which had curfew yesterday the curfew started at 1200 noon and curfew will start in other areas at 1800hours.

Essential service and media could travel showing their identity cards, the statement said.

“This is not the usual type of curfews we have where you are asked not to travel on the road but can go the next house,” Deputy Inspector General Ajith Rohana said in a television interview on Thursday.

“You cannot even go to your neighbor’s house. I have heard some people have having parties during curfew.”

Police had said action will be taken against any gatherings.

Sri Lanka’s Health Ministry data showed that confirmed Coronavirus cases had gone up to 66 while another 213 persons were under observation.

Many of the confirmed were from quarantine, but Sri Lanka has been rounding up a few returnees who were on the loose.

Health Minister Pavithra Wanniarachchi said on March 19, that the government was careful about going in for full lockdowns seen in some other countries. She said Sri Lanka had started several control measures earlier than some other countries.

Sri Lanka has blocked arrivals except for returning Buddhist pilgrims, but allowed those leaving the country to go, instead of fully closing the airport.

Transit passengers are also allowed. As a result, planes still come, cargo can still move in an out, and any remaining foreigners can also move out.

Health minister says Sri Lankans not taking COVID-19 seriously enough

The three day curfew came as Minister Wanniaarchchi warned that some Sri Lankans were not taking the request to stay at home seriously.

Markets Wobble

Sri Lanka’s stocks plunged over 11 percent measured by the Standard and Poor’s SL 20 Index, in the biggest intra-day fall seen for the index before recovering, while the benchmark All Share Index fell over 5-percent as the government slapped full days curfews over the weekend.

The Colombo Stock exchange said trading will halt at 1200 noon to allow staff to get home.

Stocks had steadied to be down 10.7 percent by the S and P SL20 Index, in the second hour of trading, after a 30 minute trading halt, data from the Colombo Stock Exchange showed.

Sri Lanka’s sovereign bond yields have risen sharply over the two weeks, amid global volatility with nervous foreign investors selling out.

Rating agencies were spooked by a so-called stimulus in which value added taxes were slashed.

The yield on Sri Lanka’s 10 year sovereign bond maturing on 03/28/2030, had risen to around 16.7 percent from around 7.8 percent in the first week of March and was quoted around 57 cents to the dollar based on Bloomberg data dealers said.

Related

Sri Lanka stocks down 11-pct amid Coronavirus fears, trading to stop at 1200noon

Sri Lanka sovereign bond yields rise

Information Minister Bandula Gunewardene said the government was planning to build a 200 billion rupee fund by keeping retail fuel at current levels and taxing distributors in a move that is considered prudent.

However the central bank has cut rates and made ‘helicopter drop’ style liquidity injections despite operating a soft-pegged exchange rate.

Any pegged regime that maintains monetary stability and refrains from liquidity injections can benefit from the moves of the anchor currency analysts say.

Import Curbs

The rupee fell to below 188 to the US dollar in the spot market.

Sri Lanka’s central bank halted the imports of cars, perfumes, tyres, footwear, air conditionors, refrigerators, mobile phones, televisions and washing machines, in what the central bank said was “urgent measures to ease the Pressure on the Exchange Rate and Prevent Financial Market Panic due to the COVID-19 Pandemic.”

Related

Sri Lanka halts imports of cars, electronics, perfumes, after soft-peg pressure

Banks have been asked by the central bank not to help customers to import any of the controlled items, which the central bank called ‘non-essential’ either through letters of credit (LCs), documents against acceptance or payment (DA/DP).

Sri Lanka has repeatedly slapped import curbs after following liquidity policies incompatible with maintain the exchange rate. In recent years, risks to the exchange rate hard worsened with call money rate targeting, analysts had said.

“Even the US has this problem,” Information Minister Bandula Gunewardne said. While US markets have plunged, the dollar – free floating exchange rate – has appreciated against key currencies.

Sri Lanka has also delayed elections scheduled for April 25 with the head of the elections commission saying the agency was crippled due to sporadic holiday and curbs on movement. (Colombo/Mar20/2020)

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Melco’s Nuwa hotel to open in Sri Lanka in mid-2025

ECONOMYNEXT – A Nuwa branded hotel run by Melco Resorts and Entertainment linked to their gaming operation in Colombo will open in mid 2025, its Sri Lanka partner John Keells Holdings said.

The group’s integrated resort is being re-branded as a ‘City of Dreams’, a brand of Melco.

The resort will have a 687-room Cinnamon Life hotel and the Nuwa hotel described as “ultra-high end”.

“The 113-key exclusive hotel, situated on the top five floors of the integrated resort, will be managed by Melco under its ultra high-end luxury-standard hotel brand ‘Nuwa’, which has presence in Macau and the Philippines,” JKH told shareholders in the annual report.

“Melco’s ultra high-end luxury-standard hotel and casino, together with its global brand and footprint, will strongly complement the MICE, entertainment, shopping, dining and leisure offerings in the ‘City of Dreams Sri Lanka’ integrated resort, establishing it as a one-of-a-kind destination in South Asia and the region.”

Melco is investing 125 million dollars in fitting out its casino.

“The collaboration with Melco, including access to the technical, marketing, branding and loyalty programmes, expertise and governance structures, will be a boost for not only the integrated resort of the Group but a strong show of confidence in the tourism potential of the country,” JKH said.

The Cinnamon Life hotel has already started marketing.

Related Sri Lanka’s Cinnamon Life begins marketing, accepts bookings

(Colombo/May25/2024)

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Sri Lanka to find investors by ‘competitive system’ after revoking plantations privatizations

ECONOMYNEXT – Sri Lanka will revoke the privatization of plantation companies that do not pay government dictated wages, by cancelling land leases and find new investors under a ‘competitive system’, State Minister for Finance Ranjith Siyambalapitiya has said.

Sri Lanka privatized the ownership of 22 plantations companies in the 1990s through long term leases after initially giving only management to private firms.

Management companies that made profits (mostly those with more rubber) were given the firms under a valuation and those that made losses (mostly ones with more tea) were sold on the stock market.

The privatized firms then made annual lease payments and paid taxes when profits were made.

In 2024 the government decreed a wage hike announced a mandated wage after President Ranil Wickremesinghe made the announcement in the presence of several politicians representing plantations workers.

The land leases of privatized plantations, which do not pay the mandated wages would be cancelled, Minister Siyambalapitiya was quoted as saying at a ceremony in Deraniyagala.

The re-expropriated plantations would be given to new investors through “special transparency”

The new ‘privatization’ will be done in a ‘competitive process’ taking into account export orientation, worker welfare, infrastructure, new technology, Minister Siyambalapitiya said.

It is not clear whether paying government-dictated wages was a clause in the privatization agreement.

Then President J R Jayewardene put constitutional guarantee against expropriation as the original nationalization of foreign and domestic owned companies were blamed for Sri Lanka becoming a backward nation after getting independence with indicators ‘only behind Japan’ according to many commentators.

However, in 2011 a series of companies were expropriation without recourse to judicial review, again delivering a blow to the country’s investment framework.

Ironically plantations that were privatized in the 1990s were in the original wave of nationalizations.

Minister Bandula Gunawardana said the cabinet approval had been given to set up a committee to examine wage and cancel the leases of plantations that were unable to pay the dictated wages.

Related

Sri Lanka state interference in plantation wages escalates into land grab threat

From the time the firms were privatized unions and the companies had bargained through collective agreements, striking in some cases as macro-economists printed money and triggered high inflation.

Under President Gotabaya, mandating wages through gazettes began in January 2020, and the wage bargaining process was put aside.

Sri Lanka’s macro-economists advising President Rajapaksa the printed money and triggered a collapse of the rupee from 184 to 370 to the US dollar from 2020 to 2020 in the course of targeting ‘potential output’ which was taught by the International Monetary Fund.

In 2024, the current central bank governor had allowed the exchange rate to appreciate to 300 to the US dollar, amid deflationary policy, recouping some of the lost wages of plantations workers.

The plantations have not given an official increase to account for what macro-economists did to the unit of account of their wages. With salaries under ‘wages boards’ from the 2020 through gazettes, neither employees not workers have engaged in the traditional wage negotiations.

The threat to re-exproriate plantations is coming as the government is trying to privatize several state enterprises, including SriLankan Airlines.

It is not clear now the impending reversal of plantations privatization will affect the prices of bids by investors for upcoming privatizations.

The firms were privatized to stop monthly transfers from the Treasury to pay salaries under state ownership. (Colombo/May25/2024)

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300 out of 1,200 Sri Lanka central bank staff works on EPF: CB Governor

ECONOMYNEXT – About 300 central bank staff out of 1,200 are employed in the Employees Provident Fund and related work, Governor Nandalal Weerasinghe said, with the function due to be transferred to a separate agency after a revamp of its governing law.

“When it comes to the EPF there is an obvious conflict of interest. We are very happy to take that function out,” Governor Weerasinghe told a forum organized by Colombo-based Advocata Institute.

“We have about 300 staff out of 1,200 including contract staff, almost 150 of permanent staff is employed to run this huge operation. I don’t think the central bank should be doing this business,”

The EPF had come under fire in the past over questionable investments in stocks and also bonds.

In addition, the central bank also faced a conflict of interest because it had another agency function to sell bonds for the Treasury at the lowest possible price, not to mention its monetary policy functions.

“There has been a lot of allegations on the management of this fund. This is the biggest fund of the private sector; about 2.6 million active, I think about 10 million accounts.

“When it comes to EPF, obviously there’s another thing. We obviously have, in terms of resources, on the Central Bank, that has a clear conflict because we are responsible for the members.

“We have to give them a, as a custodian of the fund, we have to give them a maximum return for the members.

“For us to get the maximum return, on one hand, we determine the interest rates as multi-policy. On the other hand, we are managing public debt as a, raising funds for the government.

“And on the third hand, this EPF is investing 90 percent in government securities. And also, interest rates we determine, and they want to get the maximum interest. That’s a clear conflict, obviously, there’s no question.”

A separate agency is to be set up, he said.

“It’s up to the government or the members to determine to establish a new institution that has a trust and credibility and confidence of the members that this institution will be able to manage and secure an interest and give them a reasonable return, good return for their lifetime savings,” Governor Weerasinghe said.

“The question is that how whether we have whether we can develop that institution, whether we have the strong institution with accountability and the proper governance for this thing.

“I don’t think it should be given completely to a private sector business to run that. Because one is that here we have no regulatory institution. Pension funds are not a regulated business.

“First one is we need to establish, government should establish a regulatory agency to regulate not only the EPF business fund, there are several other similar funds are not properly regulated.

“Once we have proper regulations like we regulate banks, then we can have a can ensure proper practices are basically adopted by all these institutions.

“Then you can develop an institution that we who can run this and can be taken back by the Labour Department. I’m not sure Labour Department has the capacity to do all these things.”

While some EPF managers had come under scrutiny during the bondscam and for questionable stock investments, in recent years, it had earned better returns under the central bank management than some private funds that underwent debt restructuring according to capital market analysts with knowledge of he matter. (Colombo/May24/2024)

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