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Tuesday December 5th, 2023

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 finding ways to clear 1.1mn pending cases: Justice Minister

ECONOMYNEXT – Sri Lanka is taking a series of steps to speed up 1.1 million pending court cases and encourage alternative dispute solving mechanisms, Justice Minister Wijedasa Rajapakshe said.

“The delay in court cases is a serious problem,” Minister Rajapakshe told a briefing at the President’s Media Centre.

“We have already taken several steps to expedite cases.”

There were 5,680 cases in Supreme Court, 4,054 in the Court of Appeal, 6,168 in the High Court of Civil Appeal, 8,363 in the Commercial High Court, 28,000 in the High Court, 254,000 in District Courts and 791,000 in Magistrates Courts.

In 2015, only 49 percent of complaints to mediation boards were resolved. Following reforms, the ratio has been increased to 70 percent.

The value of disputes going to mediation board has been raised to one million rupees from 500,000 rupees.

To solve land problems in the post-war period, special mediation boards on property was set up in the North and the East.

Mediation boards on property will be set up in another 16 districts.

Commercial High Courts were increased to four from three.

Another Commercial High Court will be set up in the future. The consideration of cases that can go to a High Court was raised from 4 million rupees to 10 million rupees.

A commercial dispute resolution law will be introduced next January.

A small claims court has been established.

Case involving disputes below 2 million rupees can be directed to small claims court.

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Sri Lanka stocks close up as some investor interest returns

ECONOMYNEXT – The Colombo Stock Exchange closed up on Monday, CSE data showed.

The All Share Price Index was up 0.22 percent, or 23.33 points, at 10,743.59.

The S&P SL20 index was up 0.68 percent, or 20.60 points, at 3,067.73.

Turnover was at 708 million. The banks sector contributed 189 million, while the food, beverage and tobacco sector contributed 176 million of this.

Sri Lanka’s stock market has seen some investor interest return after last week’s news that the country had managed an agreement on a debt restructuring deal with an official creditor committee, and foreign funds for some development projects resumed.

Top positive contributors to the ASPI in the day were Sampath Bank Plc (up at 71.50), LOLC Holdings Plc (up at 379.00), and Commercial Bank of Ceylon Plc, (up at 90.90).

There was a net foreign outflow of 52 million.

Citrus Leisure Plc, which announced that its banquet hall and revolving restaurant at the Lotus Tower would launch on or around Dec 9, saw its share price rise to 6.20 rupees. (Colombo/Dec4/2023).

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Sri Lanka rupee closes broadly steady at 328.10/30 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 328.10/30 to the US dollar on Monday, from 328.00/10 on Friday, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.70/14.00 percent from 13.70/95 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.10 percent from 13.90/14.05 percent.

A bond maturing on 15.01.2027 closed at 14.00/14.10 percent from 14.05/10 percent.

A bond maturing on 01.07.2028 closed at 14.20/35 percent from 14.15/25 percent.

A bond maturing on 15.05.2030 closed at 14.25/45 percent, from 14.20/45 percent.

A bond maturing on 01.07.2032 closed at 14.05/40 percent, from 14.00/45 percent. (Colombo/Dec4/2023)

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