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Saturday January 28th, 2023

Sri Lanka inflation expectations said to be “very high”: ex-CB Governor

RESULTS: Sri Lanka’s central bank has made progress in putting the brakes on soaring inflation.

ECONOMYNEXT – Sri Lanka’s inflation expectations are said to be “very high” though the price index has started to grow at a slower pace, former Central Bank Governor Indrajit Coomaraswamy said.

“The IMF says inflation expectations are very high, even though inflation is coming down,” Coomaraswamy told an investment forum organized by CT CLSA Securities, a Colombo-based brokerage.

Participants of the forum who are in the central bank’s expectations survey should not just fill the questionnaire routinely but give some thought before doing so, he said.

Sri Lanka’s inflation (the rate of price increases) has slowed and some traded goods prices have fallen absolutely after the central bank raised rates and curbed private credit which is also helping maintain an exchange rate peg around 363 to the US dollar.

The 12-month inflation shown by the widely watched Colombo Consumer Price Index peaked at 69.8 percent in September and the National Consumer Price Index peaked at 73.8 percent.

Interest rates are still less than half the inflation and administrative financial repression has been threatened.

Mainly non-traded services components of the index are still going up as relative prices adjust.

Modern central bankers believe that expectations contribute to inflation and/or make their job harder, though critics say it is yet another victim blaming ideology developed by Western Mercantilists to escape accountability after mis-targeting interest rates.

In the 1970s Great Inflation period US Presidents Nixon and Carter and their economic advisors in particular popularized several victim blaming ideologies including wage-price-spiral inflation (blame the unions), exogenous shocks (blame the OPEC cartel) as well as speculators, monopolists, among others, until Fed Governor Volcker came in and killed inflation with monetary tightening. (Blaming the Victims: The Government’s Theory of Inflation)

A central bank is the only agency that can create inflation or stop it.

The US Fed has also started to tighten monetary policy aggressively in 2022 putting the brakes on global commodity prices. The US Fed earlier blamed ‘supply chains’ as producers and shippers struggled to cope with the sudden demand exerted by stimulus checques and monetary easing. President Putin is still blamed.

In Sri Lanka banks who are reluctant to lend due to risk aversion have deposited over 300 billion rupees in the central bank (a form of private sector sterilization of non-borrowed reserves), preventing earlier printed money from going to the market and creating demand and forex shortages.

Banks which overtraded with central bank money are borrowing about 150 billion rupees overnight from the window. Earlier this month the central bank injected 130 billion rupees into the banking system permanently in a bid to lower interest rates.

The kerb market rate has also stabilized around 370-375 to the US dollar for the past two months helping anchor traded goods prices. (Colombo/Nov28/2022)

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Sri Lanka utility to continue power cuts, regulator says no

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board has decided to continue power cuts, as the dry season hits the country despite orders to give 24 hours of power.

The utility said its Board “has decided to continue the demand management programme” and it has informed the regulator of this decision on January 27.

The Public Utilities Commission of Sri Lanka said it had not approved the power cuts “as it violate and affect the rights of 331,000 students sitting for the Advanced Level exams.”

Sri Lanka’s CEB has high running costs due to long term scuttling of planned coal plants by activists and lastly President Maithripala Sirisena.

‘CEB’s costs went up as demand went up since the last coal plant opening and steady collapse of the currency from 131 to 182 to the US dollar due to open market operations unleashed to suppress rates and operate a flexible inflation targeting by the central bank.

Even more aggressive liquidity injections after 2020 to target an output gap then busted the currency from 182 to 360 to the US dollar.

CEB has to use extra fuel from around February to April 2022 as the dry season hits reducing hydro power.

Sri Lanka’s Human Rights Commission has ordered the Ceylon Petroleum Corporation to supply fuel and banks to give credit for extra power.

Power Minister Kanchana Wijesekera has alleged that CPC officials agreed under duress and threat of jail sentence to supply fuel.

The CEB has to cut power in case demand outstrips supply to maintain frequency at 50 Hz to avoid cascading failures, according to sector analysts. (Colombo/Jan28/2023)

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Sri Lanka president suspends parliament till Feb 08

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has suspended parliament till February 08, according to a gazette notice.

Parliament will re-convene at 1000 am on January 08.

President Wickremesinghe told party leaders that he would make a speech, officially declaring his intention to give effect to the 13th amendment to the constitution on provincial councils.

Provincial councils, a power sharing arrangement backed by India as a solution to the ethnic Tamil have not yet been given police and land powers. (Colombo/Jan28/2023)

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Sri Lanka expects influx of global twins

ECONOMYNEXT – Sri Lanka’s expecting thousands twins and non-twin visitors including at least thirty contestants for a Twins Miss and Mr World 2023 contest, where they will join their counterparts in the country.

“We expect upwards of 4000 participants to arrive in the country for the event,” Founder and Chairperson Vice President Global Twins Multiple Birth Forum, Upuli Gamage told reporters.

“And we very much hope that this number will keep going up in the years to come.”

The country amidst an economic crisis is celebrating the Twins Miss & Mr World 2023 for the first time in the World in Sri Lanka to grab the attention of more than 30 countries.

Prospective Sri Lankan twins can apply for the local contest to be held in May. Winners will go the international event in July.

Twins contests are being held in 30 other countries and three participants will come from each country, according to the organizers.

“This event helps to build a positive image of the country while grabbing the attention of 50 countries,” Chairman Sri Lanka Tourism Promotion Bureau, Chalaka Gajabahu said.

“And I heard this can be go as a World record to the genus book, that will give country free PR, free digital media marketing, free social media marketing.”

The Sri Lankan Twins Organization along with the tourism authority has initiated this program including twins of this country as a promotional campaign in hopes of bringing in foreign revenue.

There will be series of events commencing from July 24 to 31 including a business forum for investors to interact. Visitors fro 30 countries are expected.

“Countries like Japan do such programs often and we too should, to grab foreign attention,” Consul General to Japan, Sunil Gamage said.

“This will help to build International bonds. This is an opportunity to bring investors.” (Colombo/Jan27/2022)

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