An Echelon Media Company
Saturday March 2nd, 2024

Sri Lanka national inflation at 6.1-pct in June 2021, prices jump 1.5-pct

ECONOMYNEXT – Sri Lanka’s nation-wide inflation in the past 12-months measured by the National Consumer Price Index rose 6.1 percent, with prices jumping 1.5 percent during the month, data from the state statistics office said.

The National Consumer Price Index rose to 145.7 points in June from 143.6 points in June 2021 on top of a 1 percent rise in May 2021.

Food prices, among commodities that rise fastest in response to monetary policy were up 9.8 percent from a year earlier.

The NCPI was also 6.1 percent in May. The NCPI exceeded Sri Lanka’s ceiling policy rate of 5.5 percent at which money is supposed to be printed in April 2021.

In practice money is printed at around a 5.2 percent where a ceiling rate has been place for Treasury bills and it now serves as a de facto policy rate to monetize debt and inject liquidity in so-called Modern Monetary Theory.

Sri Lanka is rapidly losing foreign reserves as the liquidity is redeemed against a peg in partial convertibility.

Sri Lanka has in the past delayed rate hikes saying inflation was too low, or that food price rises are due to ‘supply constraints’ and triggered currency crises.

Sri Lanka’s rupee is loosely pegged to the US dollar and commodity prices pushed up by the Federal Reserve seep into the country through traded export prices and also imports.

The US fired ‘Powell bubble’ has been pushing up oil and other commodities around the world.

US inflation was 5.4 percent in June. But Fed chief Jerome Powell has said the inflation is ‘transitory’ and is continuing to print 140 billion dollars a month.

Classical economists had been warning from late last year that the US credit system has strongly recovered and inflation was going to exceed Fed targets. Some went so far as to suggest that Powell was delusional.

Related

Conditions ripe for global commodity super-cycle: Steve Hanke

US inflation will overshoot target, Powell delusional: Hanke

The US Fed has done the most damaged to the world among major central banks triggering the Great Depression after the ‘roaring 20s bubble’ after accidentally discovering open market operations, ending the centuries old gold standards in 1971 by trying to target and output gap.

In 2008/9 the Fed fired a massive housing and commodity bubble by delaying rate hikes and created a financial panic that is now known as the ‘Great Recession’.

Sri Lanka’s central bank also has a history of delaying rate hikes long enough to trigger currency crises and high inflation or both.

Sri Lanka’s central bank has the worst record among South Asian monetary authorities all of which have currencies derived from the Indian rupee at 4.70 to the US dollar at the time the Bretton Woods system was set up.

The Sri Lanka rupee had been depreciated to 203-208 levels from 4.70 when a Latin America style central bank was set up in 1950, compared to the second worst central bank in Pakistan which had busted its rupee to 160.

The Maldives Monetary Authority had given the most stability on an absolute basis, depreciating to only 15 units to the US unit, though on a relative level Bhutan and Nepal had maintained a 1 to 1 peg with the Indian rupee for about 7 decades.

However RBI is the third worst central bank after Pakistan.

Reserve Bank of India policy had deteriorated in recent years after its de facto anchor was shifted from a transparent 5 percent wholesale price index to a more opaque 2-6 percent consumer price index, critics say.

Bank of Bangladesh had maintained a peg at around 87 for almost a decade with less activist monetary policy, making the country an export powerhouse. (Colombo/July24/2021)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka eyes SOE law by May 2024 for better governance

ECONOMYNEXT – Sri Lanka is planning to pass a Public Commercial Business (PCB) Act improve governance of state-owned enterprise by May 2024 as part of an anti-corruption efforts following an International Monetary Fund assessment.

Sri Lanka’s state enterprises have been used by politicians to give ‘jobs of the boys’, appropriate vehicles for personal use, fill board of directors and key positions with henchmen and relatives, according to critics.

Meanwhile macro-economists working for the state also used them to give off-budget subsides or made energy utilities in particular borrow through supplier’s credits and state banks after forex shortages are triggered through inflationary rate cuts.

The government has taken billons of dollars of loans given to Ceylon Petroleum Corporation from state banks.

There have also been high profile procurement scandals connected to SOEs.

An SOE Reform Policy was approved by Sri Lanka’s cabinet of ministers in May 2023.

The Public Commercial Business (PCB) Act has now been drafted.

A holding company to own the SOEs will be incorporated and an Advisory Committee and Board of Directors will be appointed after the PCB law is approved, the statement said. (Colombo/Mar01/2024)

Continue Reading

Sri Lanka rupee closes at 308.80/90 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 308.80/90 to the US dollar Friday, from 309.50/70 on Thursday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.02.2026 closed at 10.65/75 percent up from 10.50/70 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent from 11.90/12.10 percent.

A bond maturing on 01.07.2028 closed at 12.15/35 percent down from 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent up from 12.30/45 percent.

A bond maturing on 15.05.2030 closed at 12.30/45 percent down from 12.35/50 percent.

A bond maturing on 01.07.2032 closed at 12.50/13.00 percent from 12.55/13.00 percent. (Colombo/Mar1/2024)

Continue Reading

Sri Lanka stocks close up 0.37-pct, Expo to de-list

ECONOMYNEXT – The Colombo Stock Exchange closed up 0.37 percent on Friday, and SG Holdings, the parent company of Expolanka Holdings Plc, said it was taking the company private.

Expolanka is the largest listed company on the Colombo Stock Exchange.

“Expolanka Holdings PLC has, at the Board Meeting held on 1st March 2024, considered a request from its principal shareholder and resolved to initiate the de-listing of the Company’s shares from the Official List of the Colombo Stock Exchange subject to obtaining necessary shareholder approval and regulatory approvals,” the company said in a stock exchange filing.

As per arrangements with SG Holdings Global Pte Ltd, the Company’s majority shareholder, it will purchase its shares from shareholders who may wish to divest their shareholding in the Company at a purchase price of Rs 185.00 per share. The share closed up at 150.50.

The broader All Share Index closed up 0.37 percent, or 39.47 points, at 10,691; while the S&P SL20 Index closed down 0.64 percent, or 19.59 points, at 3,037.

Turnover stayed above the 1 billion mark for the sixth consecutive day, registering 1.4 billion.

Crossings in Melstarcorp Plc (135mn) up at 89.50, Hatton National Bank Plc (64mn) up at 158.00, Hemas Holdings Plc (53mn) up at 75.00 and Central Finance Company Plc (26mn) up at 103.50, added significantly to the day’s turnover.

“The upward trend is continuing, with more retail buying also coming in, the number of trades was more than 10,000 today,” a market participant said. “Investors are looking for undervalued stocks and buying in quantities.” (Colombo/Mar1/2024).

Continue Reading