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Thursday June 1st, 2023

Sri Lanka money printing hits cable maker raw materials

ECONOMYNEXT – Sri Lanka’s ACL Cables Plc is finding it difficult to import raw materials from abroad because banks were rationing foreign exchange, customers were told amid the worst money printing in the country’s central bank history.

“Due to the current shortage of foreign currency at the banks, we are finding it difficult to source adequate quantities of raw materials from overseas supplies,” the firm said in a letter addressed to ‘valued stakeholders’.

The forex rationing by banks “will result in a short supply of materials very soon and we see signs of shortage since stock raw materials are hardly sufficient to meet the demand in the next two month,” the firms said.

Sri Lanka’s central bank ratcheted up money printing from around February 2020, under the current administration’s Saubhagya framework driving the rupee down from 182 to the US dollar to 230 in the over-the-counter market.

The central bank outdid the money printing from 2015 to 2018, which were carried out mainly through overnight injections, term repo injections and outright purchases of bonds outside auctions to target the call money rate or an output gap (growth).

The current administration shirted to full ‘stimulus’ mode resorting to wholesale purchases of bonds, implementing a Zimbabwe style re-finance credit program and crippling auctions with price controls.

Newly appointed central bank Governor Nivard Cabraal has scrapped the price controls and fingers are crossed that the bond markets will begin to operate in the next two weeks.

However the foreign exchange market is still under severe controls with no interbank spot trading to establish a price and an exchange rate peg of 203 decreed without monetary policy to back it up, leading to the breakdown of the credibility of the peg.

In an OTC market the US dollar is trading around 230 or higher with off-market settlements being made among friendly parties who use personal relationships to beg for dollars from exporters.

Amid money printing and forex shortages Sri Lanka’s main price control agency, the Consumer Affairs Authority has been creating shortages by slapping price controls. There is also an Argentina style ‘care prices’ program with a state-run retail network.

Sri Lanka’s central bank was set up by a US money doctor in the style of several in Latin America, modeled on Raoul Prebisch’s Banco Central de la República Argentina.

Many of the central bank’s set up by the Federal Reserve’s Latin America unit has collapsed and dollarized. Sri Lanka and Dominican Republic are among few that survived. (Colombo/Sept20/2021)

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Sri Lanka cuts petrol to Rs318 a litre, kerosene to Rs245

ECONOMYNEXT – Sri Lanka has cut petrol 92-Octane by 15 rupees to 318 rupees a litre and kerosene by 50 rupees to 245 rupees a litre from midnight May 31, the Ministry of Energy said.

Petrol 95 Octane will be raised by 20 rupees to 385 rupees, and Lanka Super Diesel 4 Star Euro 4 will be raised by 10 rupees to 340 rupees a litre.

Lanka Industrial Kerosene will be cut by 60 rupees a litre to 270 rupees.

Kerosene which is similar to jet fuel is usually the most expensive fuel in international markets followed by diesel and petrol is usually the cheapest.

Kerosene which is substantially cheaper than diesel is also used by buses to cut costs. (Colombo/May31/2023)

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Sri Lanka opposition slams purported licence-cancelling broadcast authority

ECONOMYNEXT – A purported Broadcast Authority in Sri Lanka that will allegedly have the power to cancel licenses issued to the media have come under criticism from the opposition.

Opposition Tamil National Alliance (TNA) legislator and lawyer M A Sumanthiran told reporters on Wednesday May 31 that the bill on the establishment of this statutory body, if enacted, could violate several fundamental rights including the people’s right to information.

“Everyone knows that there have been many attempts in recent times to impose constraints on people’s right to information. This authority will decide which information is true and whether it can be broadcast,” he said.

The proposed act will also empower the authority to cancel broadcast licenses of those who already hold them, said Sumanthiran.

The MP said that a similar attempt to bring in such legislation in 1997 was thwarted after then opposition United National Party (UNP) MP Gamnii Athukorala challenged it in the Supreme Court, which determined on May 05 that year that the bill would need a referendum in addition to a two-thirds majority in parliament for it to become law.

“The Supreme Court determined that it went against Article 10 of the Constitution,” said Sumanthiran.

“What we can see is that this violates several fundamental rights, so we strongly oppose this bill.

“It’s not just the media, but the people’s right to information is also challenged by this,” said Sumanthiran.

Main opposition Samagi Jana Balawegaya (SJB) MP Harsha de Silva said the purported bill is undemocratic.

“If these people are given the power to cancel a license – this isn’t objective, it’s subjective, meaning four or five people will decide this,” said the MP.

Authorising a person to censor the content of a broadcast channel would be wholly undemocratic, he said.

“They tried to do this through the Counter Terrorism Act but failed, so it seems they’re now trying to bring it in with this,” said de Silva.

“We see it as a death blow to democracy,” he said, urging the government not to go ahead with it.

“If not, we will oppose it vehemently and fight for the people’s democratic rights,” he said.

Meanwhile, the ruling Sri Lanka Podujana Peramuna (SLPP) said that, while it supports media freedom, the abuse of that freedom cannot be permitted.

SLPP general secretary and MP Sagara Kariyawasam told reporters on Wednesday that some media organisations abused their freedom to make false allegations against the party leadership.

“We are of the firm stand that the media must be independent and that that independence must be facilitated, but if anyone abuses media freedom as a sort of freedom of the wild ass, measures must be taken against that too,” said Kariyawasam.

“We saw how that freedom was enjoyed in the recent past making allegations with no basis. We saw how there were severe allegations made through the media that the Rajapaksas had engaged in thievery,” he said.

The MP claimed that the people voted in the UNP-led Yahapalana government in 2015 to investigate these allegations.

“But that government realised that there wasn’t even a single incident,” he said. (Colombo/May31/2023)

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Sri Lanka rupee closes at 290.25/75 to dollar, bond yields steady

ECONOMYNEXT – Sri Lanka’s rupee closed at 290.25/75 against the US dollar in the spot market on Wednesday, while bond yields were steady, dealers said.

The rupee opened at 293.25 /294.00 to the US dollar on Tuesday.

A bond maturing on 01.09.2027 closed at 26.70/90, following a steady from the open at 26.50/80 on Wednesday.

Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money. (Colombo/ May 30/2023)

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