Economy

Sri Lanka national inflation hits 11.1-pct in November 2021 after money printing

Wednesday December 22, 2021 6:52 am

ECONOMYNEXT – Sri Lanka’s nation-wide inflation measured by the National Consume Price Index accelerated to 11.1 percent in November 2021 up from 8.3 percent, after record money printing to maintain low interest rates, despite a surging budget deficit.

The National Consumer Price Index hit double digits for the first time since it started to be compiled from 2014.

The NCPI grew 3.1 percent in November to 155.3 points.

Food prices jumped 5.5 percent in the month.

The food sub-index was up 16.9 percent in the 12-monts to November 2021, while non-foods also rose 1 percent in the months.

Food prices have risen 35 percent since August 2019 when the central bank began inflationary policy buying back bonds from old deficits to inject liquidity as part of ‘output gap targeting’.

In December and January of every year food prices generally rise but in 2021 the rise had been unusually high, amid heavy rains and a fertilizer ban which hit farmers.

From February 2020, record volumes of money was injected through central bank profits transfers, outright deficit finance and Covid-refinance.

Later ceiling prices were placed on bonds auctions, and hundreds of billions of rupees of securties were bought into the central bank balance sheets to general liquidity and balance as the auctions failed.

Sri Lanka authorities have a repertoire of excuses to print money and keep rates down and delay rate hikes until currency crises have been triggered.

Sri Lanka inflation is going up as the Federal Reserve also follows loose policy and fuel and export prices of goods also go up.

However the money printing central bank was set up in 1950 under US advice supposedly to follow ‘independent monetary policy’ and break up the Sterling Area currency boards, according to critics.

Sri Lanka keeps inflation indices down by suppressing market pricing of energy, uses that also as an excuse not to allow rates to go up and then later claims, ‘administered prices’ pushed up inflation.

There have been calls to change the monetary law to block the ability of the Monetary Board create inflation and currency depreciation with discretionary independence. (Colombo/Dec22/2021)

Cancel reply

1 Sri Lanka to make state interventions on cement, steel, aluminum prices: Minister

2 Sri Lanka rupee appreciation squeezes exporters

3 Sri Lanka cuts policy rates 250 basis points amid BOP surplus

4 Sri Lanka professionals, vehicle owners, over 18s, to register under income tax law

5 No pre-determined level to stop Sri Lanka rupee appreciation: CB Governor

Economy

Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

Friday June 2, 2023 5:52 pm

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

Bonds & Forex

Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

Friday June 2, 2023 5:21 pm

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

Markets

Sri Lanka’s shares edge up on positive macroeconomic sentiments

Friday June 2, 2023 5:18 pm

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80, while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)