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Thursday February 29th, 2024

Sri Lanka inching forward on 76th independence as people backed difficult program: President

ECONOMYNEXT – Sri Lanka is inching forward from bankruptcy because people backed a program to stabilize the country amid great hardships, President Ranil Wickremesinghe said in his independence day message.

When Sri Lanka marked the 75th day of independence last year the country was labelled bankrupt.

“Undergoing various hardships, becuase the majority of the people supported a long term program to rebuild country we are now inching forward,” President Ranil Wickremesinghe said.

“If we go in this road, the difficulties will fade away. The cost of living will become lighter. Economy will become stronger. Mother Sri Lanka will flower.”

Sri Lanka defaulted in 2022 after the most aggressive growth by printing money (macro-economic policy) ever deployed macro-economists in the country in the history of the central bank which was set up in 1950.

The central bank in the course of mis-targeting rates for various reasons (re-financing rural credit, other private credit, sterilizing interventions) to suppress rates had depreciated the currency from 4.70 to 184 by 2020 by denying monetary stability to the nation.

The 2020 exercise of extreme macro-economic policy to close a ‘persistent output gap’ led to the collapse of the currency to 330 and the exercise to re-estabilish credibility in the rupee led to two years of contraction.

Trade and exchange controls swiftly as the central bank became more activist along with post Keynesianism took off in the West especially in the 1960s, eventually leading to the collapse of the Bretton Woods in 1971 and the ‘closed economy’.

Before the central bank was set up, Sri Lanka (then Ceylon) had a currency board, like Singapore, Hong Kong and somewhat similar to the Dubai, tying the hands of macro-economists and giving stability to the general public, especially less affluent classes.

Under the currency board Sri Lanka was considered only second to Japan in several indictors at the time of independence. The country’s foreign reserves equaled 11 month of imports. In 2022 the central bank’s reserves were negative after it borrowed dollars to print money.

“When Sri Lanka became an independent nation is 1948, the expectation of the international community was that Sri Lanka would become a developed nation in Asia,” Prime Minister Wickremesinghe said.

“We had all the background factors for that. But in the end we became a bankrupt nation.”

“We should not make the mistakes we have done in the past. That the current path is correct is correct has been proved before the entire world. We should be determined to go on this path and on this independent day.

I am asking all Sri Lankans in the country and outside to help the country to help to the extent they can to re-build Sri Lanka.

Sri Lanka’s rupee has been allowed to appreciate from 360 to 325 levels and to around 315 this week, with the help of deflationary monetary policy.

The 76th Independence Day celebrations are celebrated in the presence of Thai Prime Minister Srettha Thavisin.

Thailand had one of the least activist central banks even during the break up the of Bretton Woods and in the steep growth period had negative net assets and strong fiscal metrics as a result of monetary stability.

Thailand’s peg had only broken a few times in the first few years after the the IMF’s second amendment and the East Asian crisis in 1997, while Sri Lanka repeatedly goes to the IMF after mis-targeting rates. (Colombo/Feb04/2024)

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Sri Lanka’s RAMIS online tax collection system “not operatable”: IT Minister

ECONOMYNEXT – Sri Lanka’s online tax collection system RAMIS is “not operatable”, and the Ministry of Information Technology is ready to do for an independent audit to find the shortcomings, State IT Minister Kanaka Herath said.

The Revenue Administration Management Information System (RAMIS) was introduced to the Inland Revenue Department (IRD) when the island nation signed for its 16th International Monetary Fund (IMF) programme in 2016.

However, trade unions at the IRD protested the move, claiming that the system was malfunctioning despite billions being spent for it amid allegations that the new system was reducing the direct contacts between taxpayers and the IRD to reduce corruption.

The RAMIS had to be stopped after taxpayers faced massive penalties because of blunders made by heads of the IT division, computer operators and system errors at the IRD, government officials have said.

“The whole of Sri Lanka admits RAMIS is a failure. The annual fee is very high for that. This should be told in public,” Herath told reporters at a media briefing in Colombo on Thursday (29)

“In future, we want all the ministries to get the guidelines from our ministry when they go for ERP (Enterprise resource planning).”

President Ranil Wickremesinghe’s government said the RAMIS system will be operational from December last year.

However, the failure has delayed some tax collection which could have been paid via online.

“It is not under our ministry. It is under the finance ministry. We have no involvement with it, but still, it is not operatable,” Herath said.

“So, there are so many issues going on and I have no idea what the technical part of it. We can carry out an independent audit to find out the shortcomings of the software.”

Finance Ministry officials say IRD employees and trade unions had been resisting the RAMIS because it prevents direct interactions with taxpayers and possible bribes for defaulting or under paying taxes.

The crisis-hit island nation is struggling to boost its revenue in line with the target it has committed to the IMF in return for a 3 billion-dollar extended fund facility. (Colombo/Feb 29/2024) 

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Sri Lanka aims to boost SME with Sancharaka Udawa tourism expo

ECONOMYNEXT – Sri Lanka is hosting Sancharaka Udawa, a tourism industry exhibition which will bring together businesses ranging from hotels to travel agents and airlines, and will allow the small and medium sector build links with the rest of the industry, officials said.

There will be over 250 exhibitors, with the annual event held for the 11th time expected to draw around 10,000 visitors, the organizers said.

“SMEs play a big role, from homestays to under three-star categories,” Sri Lanka Tourism Promotion Bureau Chairman, Chalaka Gajabahu told reporters.

“It is very important that we develop those markets as well.”

The Sancharaka Udawa fair comes as the Indian Ocean island is experiencing a tourism revival.

Sri Lanka had welcomed 191,000 tourists up to February 25, compared to 107,639 in February 2023.

“We have been hitting back-to-back double centuries,” Gajabahu said. “January was over 200,000.”

The exhibition to be held on May 17-18, is organized by the Sri Lanka Association of Inbound Tour Operators.

It aims to establish a networking platform for small and medium sized service providers within the industry including the smallest sector.

“Homestays have been increasingly popular in areas such as Ella, Down South, Knuckles and Kandy,” SLAITO President, Nishad Wijethunga, said.

In the northern Jaffna peninsula, both domestic and international tourism was helping hotels.

A representative of the Northern Province Tourism Sector said that the Northern Province has 170 hotels, all of which have 60-70 percent occupancy.

Further, domestic airlines from Colombo to Palali and the inter-city train have been popular with local and international visitors, especially Indian tourists. (Colombo/Feb29/2024)

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Sri Lanka rupee closes at 309.50/70 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 309.50/70 to the US dollar Thursday, from 310.00/15 on Wednesday, dealers said.

Bond yields were slightly higher.

A bond maturing on 01.02.2026 closed at 10.50/70 percent down from 10.60/80 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.10 percent from 11.90/12.00 percent.

A bond maturing on 01.07.2028 closed at 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.30/45 percent up from 12.20/50 percent.

A bond maturing on 15.05.2030 closed at 12.35/50 percent up from 12.25/40 percent.

A bond maturing on 01.07.2032 closed at 12.55/13.00 percent up from 12.50/90 percent. (Colombo/Feb29/2024)

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