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Friday June 14th, 2024

Sri Lanka money printing in 2022 reaches Rs588bn in first quarter

ECONOMYNEXT – Sri Lanka has printed 588 billion rupees in the first quarter of 2022, taking the total money printed since January 2020 to target an output gap to 2.3 trillion rupees, data from the central bank shows.

Sri Lanka’s intermediate regime central bank has triggered the worst currency crisis in its 70 year old history.

The money injected to the banking system in the current cycle does not include central bank profit transfers at least one of which was made in February 2020 which also create currency pressure and a balance of payment deficit when the reserves are sold to defend the peg.

In 2020 according to official data 505 billion rupees was printed (central bank credit) though the year ended with 206 billion rupees in injected liquidity remaining as excess reserves which were counted as printed money the following year.

Sri Lanka started actively printing money despite having a deadly unstable intermediate regime after the end of a 30-year civil war triggering frequent balance of payments crisis and excessive foreign borrowing as foreign exchange shortages emerged.

Money was printed particularly after 2015 to target an output gap (Keynesian stimulus) despite the peg, eventually driving the country to default.

In 2020 taxes were also cut saying there was a ‘persistent output gap’ and the central bank put price controls on bond auctions to prevent the taxes released to the private sector from ending up in the budget deficit through market interest rates.

The money printed in 2022 includes reserve sales made to repay loans.

When money is printed it is difficult to control inflation, or stabilize the exchange rate through a float (a suspension of convertibility) despite higher interest rates.

The rupee has fallen steeply following an attempt to float the currency in March, hampered by a surrender rule and also low interest rates.

From January 2020 to March 2022, reserve money has grown 49 percent, broad money 52 percent and the food price index 51 percent. (Colombo/May15/2022)

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Sri Lanka opposition leader proposes Grama Rajya system in addition to 13A

Opposition leader Sajith Premadasa (r) – File photo

ECONOMYNEXT — Sri Lanka opposition leader Sajith Premadasa has proposed devolving power to the village level through a Grama Rajya system in addition to implementing the 13th amendment to the constitution.

Speaking at an event in Jaffna on on Wednesday June 12, Premadasa said all provinces will benefit from the 13th amendment.

“Whatever one’s ethnicity, religion, status or region, this country has citizens of equal level. They’re all Sri Lankan citizens.

“There is no division or grouping.  As we give you and every other province what you should be given through the 13th amendment, we must implement a Grama Rajya system,” Premadasa said, addressing a crowd of school children and other attendees.

Premadasa’s assurance of implementing the 13th amendment has already drawn some protest in the south.

A collective of civil society organisations held a protest outside the office of the leader of the opposition in Colombo on Thursday June 12.

Calling itself the ‘Coalition Against Partition of Sri Lanka’, the group carrying national flags marched up to the opposition leader’s office Thursday June 13 morning and demonstrated against the full implementation of the 13th amendment.

“We arrived here today to hand over a missive against devolving police powers, land powers and judicial powers. If Mr Premadasa is inside, come outside,” Jamuni Kamantha Thushara, Chairman of the Citizen’s Movement Against Fraud, Corruption, and Waste, was seen declaring at the site.

“First of all, tell us what we stand to achieve by dividing and giving away the north and east,” said another protestor, warning against bringing the 13th amendment “anywhere here (paththa palaathe)”.

A police officer at the scene the protestors that a secretary to the opposition leader was ready to accept their letter.

“In Kilonochchi, he says the 13th amendment will be implemented. The votes in the north are going to be decisive this election. To win those votes, President Ranil Wickremesinghe, Sajith and Anura Kumara Dissanayake all say they will implement the 13th. We will not allow this country to be divided into nine pieces,” said Thushara.

Ven Balangoda Kassapa Thero, who was arrested on June 06 during a protest against the new Electricity Act, was also seen at Thursday’s protest. The Buddhist monk requested for a debate with Premadasa on the matter of the 13th amendment. (Colombo/Jun12/2024)

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Sri Lanka rupee closes flat at 303.85/95 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed broadly flat at 303.85/95 to the US dollar on Thursday, from 303.80/304.00 to the dollar the previous day, dealers said. Bond yields were down.

A bond maturing on 15.12.2026 closed at 10.00/30 percent, down from 10.20/40 percent.

A bond maturing on 15.10.2027 closed at 10.60/75 percent.

A bond maturing on 01.07.2028 closed at 11.00/15 percent, down from 11.15/40 percent.

A bond maturing on 15.09.2029 closed at 11.80/85 percent.

A bond maturing on 15.05.2030 closed at 11.85/12.05 percent, down from 11.90/12.05 percent.

A bond maturing on 01.10.2032 closed stable at 11.95/12.15 percent. (Colombo/Jun13/2024)

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Sri Lanka sells Rs295bn in 2027 to 2031 bonds

ECONOMYNEXT – Sri Lanka has sold 295 billion rupees in 2027, 2029 and 2031 bonds, data from the state debt office showed.

The debt office sold an offered 60 billion rupees of 15 October 2027 at an average yield of 10.30 percent.

All offered 125 billion rupees of 15 September 2029 bonds were sold at 11.00 percent.

All 110 billion rupees offered of 01 December 2031 bonds were sold at 12.00 percent. (Colombo/May13/2024)

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