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Tuesday November 29th, 2022

Sri Lanka may consider increased fuel quotas for police-registered tuktuks

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ECONOMYNEXT – Sri Lanka can consider increasing fuel quotas for full time threewheeler (tuktuk) drivers who register themselves at their local police stations, Power & Energy Minister Kanchana Wijesekara said.

Responding to questions posed by Opposition Leader Sajith Premadasa in parliament on Tuesday September 06, Wijesekara said that initial steps have been taken to increase the five-litres-per-week fuel quota issued to threewheeler drivers who have installed a meter on their vehicle and are registered with their local police station.

“We asked them to register with the police because it will make it easier to identify those who drive threewheelers as a full time business,” Wijesekara said.

Threewheeler drivers in the country have been complaining of the meagre fuel quota, saying that it is not adequate to run hires, after allegedly contributing to the fuel shortage by mass hoarding and black market activities during a forex crisis that made it difficult to import essentials. 

Threewheeler fares have also gone steeply up.

Premadasa questioned why certain organisations who hire out threewheelers as a business get a fuel quota of 15 litres a week when independent drivers only get five.

“You must think of the common man too,” Premadasa said.

Wijesekara replied that the change was done according to the requests of various threewheeler associations, after discussions. 

“Though the quotas are not enough when compared to the unlimited fuel given before the economic crisis, due to the unavailability of forex we have no other choice. Finding solutions in a short time has also been difficult,” Wijesekara said.

Wijesekara said that the fuel quotas were decided after examining the number of registered vehicles in the country as well as their tank capacity and how far they can run on a certain level of fuel.

It was decided to give priority to the manufacturing, public transport, fisheries, agriculture, and essential services industries, who play a significant role in the food security, public transport, and economic activities of the country, he said.

Ceylon Transport Board buses, private buses and trains were given prominence in the transport sector, he said.

It was estimated that Sri Lanka would need at least 3,000 MT of petrol to cover the daily needs. 

Wijesekara also responded to a question by Premadasa regarding financial relief for threewheeler drivers who were unable to earn enough to even pay off their leases due to the lack of sufficient fuel.

He said that the CBSL had already paved the way for fair interest rates and relief facilities. (Colombo/Sep06/2022)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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Sri Lanka new CB law to cabinet soon as IMF prior action

ECONOMYNEXT – Sri Lanka’s new central bank law will be submitted to the cabinet as a prior action of International Monetary Fund with clauses to improve governance and legalize ‘flexible’ inflation targeting, Central Bank Governor Nandalal Weerasinghe said.

Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

“The central bank’s ability to finance the budget deficit will be taken out. Thirdly the flexible inflation targeting regime will be recognized in the law as the framework.”

The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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