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Tuesday November 29th, 2022

Sri Lanka Navy seizes petrol hoard worth 900,000 rupees

ECONOMYNEXT – Sri Lanka Navy (SLN) has seized 2,030 liters of petrol worth 900,000 rupees in a raid conducted in Kalpitiya, Puttalam, the navy said.

An SLN statement released Monday August 22 said the smuggled and hoarded petrol was ready to be transported in two vehicles by three suspects and was found during a navy operation carried out on Saturday August 20 in the Sengumalawatta area.

The suspects along with their two lorries and the fuel were taken into custody and have been handed over to the Kalpitiya police.

The apprehended suspects were identified as residents of Kalpitiya, Wariyapola and Rathnapura, and are from 28 to 48 years of age, the statement said. 

The suspects along with petrol and the vehicles were handed over to the Kalpitiya Police.

Sri Lanka has been going through a severe fuel crisis, and over a thousand arrests have been for hoarding petrol or diesel.

As per the Petroleum Products (Regulation and Control Of Supplies) Act: “From and after the date of coming into operation of this Part of this Act, no person other than the Corporation or a vendor shall, if such person is not an approved consumer of petrol, stock or have in his possession any quantity, of petrol, it shall be lawful for any authorized officer to enter and search any premises, vehicle, vessel or aircraft in which petrol is stored or suspected to be stored, for the purpose of ascertaining the quantity of petrol stored therein.” 

Only a predetermined quantity of petrol as set by the law can be stored in private premises that aren’t a fuel station or an authorised vendor.

According to police, 1,321 individuals have been arrested for hoarding fuel and 1,387 raids have been conducted for hoarding and storing of fuel

The seizures made as August 10 are as follows: 

155,502 liters of diesel 

44,777 liters of petrol 

20, 208 liters of kerosene 

(Colombo/Aug22/2022)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a twitter.com message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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Sri Lanka new CB law to cabinet soon as IMF prior action

ECONOMYNEXT – Sri Lanka’s new central bank law will be submitted to the cabinet as a prior action of International Monetary Fund with clauses to improve governance and legalize ‘flexible’ inflation targeting, Central Bank Governor Nandalal Weerasinghe said.

Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

“The central bank’s ability to finance the budget deficit will be taken out. Thirdly the flexible inflation targeting regime will be recognized in the law as the framework.”

The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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