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Thursday December 1st, 2022

Sri Lanka must not overlook Russia in favour of IMF, says MP Weerawansa

ECONOMYNEXT – Sri Lanka’s former Industries Minister and now independent MP Wimal Weerawansa said the island nation must not overlook “traditional ally” Russia in its efforts to overcome a worsening economic crisis, particularly with regard to ongoing negotiations with the International Monetary Fund (IMF).

Weerawansa told parliament on Wednesday June 22 that he and a group of independent MPs held talks with Russian Ambassador to Sri Lanka Yury Materiy on Tuesday. The envoy had told the MPs that Sri Lanka had not made any “serious request in writing” for Russian assistance.

The meeting had also focused on the recent controversy surrounding a court case filed in Sri Lanka against Russia’s national carrier Aeorflot, which has now been resolved.


Sri Lanka court suspends enjoining order issued against Russian Aeroflot flight

The former minister faulted President Gotabaya Rajapaksa for not explaining the circumstances of the case to Russian President Vladimir Putin.

Weerawansa also sought an explanation from the government as to why Sri Lanka was not reaching out to Russia, which he said has always extended unconditional support to the country.

He claimed the ambassador has said Russia could offer Sri Lanka assistance on humanitarian grounds though it has no provisions to offer financial support to a country that has defaulted on its external debt.

Quoting Foreign Minister G L Peiris, Weerawasna claimed that the reason Sri Lank hasn’t signed any agreements with Russia with regard to fuel purchase or other assistance was fears of losing out on an IMF programme.

“Just waiting for IMF doesn’t resolve the pain on the ground. Why are we pinning everything on the IMF?” he said.

The US Ambassador to Sri Lanka had also told a former government minister at the start of the Galle Face anti-government protests that if protesters were taken into police custody, Sri Lanka would have to step out of the IMF programme, claimed Weerawansa.

“Are we trying to get out of this crisis by being caught in a western trap?” he demanded.

Responding to the MP, Prime Minister Ranil Wickremesinghe said the IMF has not once mentioned Russia in their discussions with Sri Lanka.

A delegation of IMF officials are currently in Sri Lanka for preliminary talks, and according to Wickremesinghe, discussions have focused solely on reforms and increasing export revenue and other such matters.

“The IMF has never mentioned Russia, Russian oil, or the Ukraine war,” he said.

“A team of representatives from the US Department of the Treasury will also arrive in Sri Lanka next Monday (June 27). They will not discuss Russia,” he added. (Colombo/Jun22/2022)

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Sri Lanka’s inflation eases to 61-pct in November

ECONOMYNEXT – Sri Lanka’s 12-month inflation in the capital Colombo fell to 61 percent in November 2022 from 66 percent in October as price stabilized after interest rates were allowed to go up and the exchange rate was pegged around 360 to the US dollar.

The widely watched Colombo Consumer Price Index fell absolutely 0.5 percent to 242.6 points in November after falling .04 percent in the October.

Food prices fell 1.5 percent after falling 2.0 percent a month earlier. The sub-index containing gas fell 0.5r percent and transport fell 3.6 percent.

But some services continued to go up, as relative prices adjusted to the steep fall in the currency after two years of money printing to suppress rates.

Health costs went up 5.7 percent. Furnishing and routine maintenance rose 0.4 percent.

Sri Lanka’s central bank hiked policy rates to 15.5 percent in April and pulled back on longer term money printing, allowing market rates to go to around 30 percent.

The exchange rater is pegged around 363 rupees with a surrender rule where banks are forced to sell dollars to the central bank for new liquidity.

The ongoing currency and inflation crisis is the worst in the history of the central bank.

Sri Lanka’s Latin America style central bank was set up in 1950 giving powers to the country’s macro-economists the power to mis-target rates, create currency crisis and high inflation. (Colombo/Nov30/2022)

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Sri Lanka shares close at one-month high

ECONOMYNEXT – Sri Lanka shares closed at one month high on Wednesday gaining for the fourth session on news that government is in talks with ADB and World Bank to get a 1.9 billion dollar loan facility, brokers said.

The main All Share Price Index (ASPI) closed 3.3 percent or 276.02 points higher at 8,651.23, highest index gain in since November 01.

“Investor participation improved on the back of confirmed talks with multilateral and bilateral lenders including world banks and ADB for USD 1.9Bn after IMF board level agreement is reached,” First Capital Market Research said in it’s daily note.

Former Central Bank Governor Indrajit Coomaraswamy said in a forum on Monday that the government is in discussion with ADB and World Bank to get loans of 1.9 billion US dollars after a reform program with International Monetary Fund is approved

A policy loan now being discussed with the World Bank may bring around 700 million US dollars, Coomaraswamy told a business forum organized by CT CLSA Securities, a Colombo-based brokerage.

The Asian Development Bank may also give around 1.2 billion US dollars most of which will be budget support, he said.

The market witnessed a turnover of 3.3 billion rupees, higher than this year’s daily average turnover of 2.9 billion rupees. This is the highest turnover generated since October 04.

In the last few sessions market gained after Central bank governor said market rates should eventually ease despite the fears of a domestic debt restructuring as inflation falls, increased liquidity in dollar markets, and the inter-bank liquidity improves.

In the past sessions, the index continued to fall on the speculation of a local debt restructuring although no proper decision has been taken so far.

The market saw a foreign inflow of 39 million rupees. The total net foreign inflow stood at 18.33 billion rupees so far for this year.

The more liquid index S&P SL20 closed 3.4 percent or 89.78 points higher at 2,730.08.

The ASPI has fallen 0.5 percent in November after losing 13.4 percent in October.

It has lost 29.2 percent year-to-date after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.

Sampath Bank pushed the index up to close at 10.9 percent to 36.6 rupees.

Other top gainers were Browns Investment gained 15.4 percent to close at 7.5 rupees and LOLC gained 9.4 percent to close at 411.3 rupees.(Colombo/Nov30/2022)

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Sri Lanka bonds, T-bills ease, overall market dull

ECONOMYNEXT – Sri Lanka’s treasury bonds eased and T-bill yields fell on the speculation on talks with ADB and World Bank to obtain financial aid but the over all market was dull on Wednesday while the Central Bank’s guidance peg remained unchanged, dealers said.

“During the day, secondary market witnessed some buying interest on the back of speculations on yields easing while talks about financial aid from ADB and World Bank further strengthened interest,” First Capital Market Research said in it’s daily note.

A bond maturing on 01.05.2024 closed at 32.00/60 percent on Wednesday, down from 32.30/90 percent on Tuesday.

A bond maturing on 07.07.2025 bond closed at 30.80/31.30 percent up from 30.30/31.25 percent on Tuesday.

A bond maturing on 15.05.2026 closed at 31.00/30 percent down from 31.10/31.30 percent on Tuesday.

The three-month T-bills closed at 32.30/33.25 percent, down from 32.60/33.00 percent.

The Central Bank’s guidance peg for interbank transactions remained unchanged at 363.19 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers between 371.79 and 372.10 for small transactions, data showed.

Buying rates are between 361.79 – 362.00 rupees. (Colombo/Nov 30/2022)

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