Sri Lanka in lockdown-style Coronavirus curfew as count moves up, markets wobble
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.
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.
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.
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.
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.”
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)
Kithmina Hewage- Institute of Policy Studies