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Friday December 9th, 2022

Sri Lanka non-oil imports down in March 2022 as soft-peg collapses

ECONOMYNEXT – Sri Lanka’s non-oil imports fell 17.7 percent to 1,299.1 million US dollars in March 2022 from 1.57 billion US dollars a year earlier, while total imports also fell 5.6 percent, as a soft-peg with the US dollar collapsed steeply after two years of money printing.

Sri Lanka’s rupee soft-peg (intermediate regime which is neither a float nor a hard peg) to the US dollar collapses frequently as the central bank in the country prints money to keep rates down making it impossible to maintain the exchange rate.

Monetary instability intensified after the adoption of a flexible inflation targeting regime coupled with output gap targeting (printing money to stimulate growth) and the country defaulted in 2022, in the wake of three currency crises in seven years.

Money is usually printed by economists in Sri Lanka in collusion with the Finance Ministry, which is also run by economists seconded from the country’s intermediate regime central bank.

Politicians, the ordinary public who are net savers and cannot balance of payments trouble since they cannot print money, and cannot also create excess imports since they are net savers are then blamed by the country’s economists and import controls are slammed.

Bank credit, fired by low interest rates and printed money then flow into non-controlled areas triggering even higher levels of imports until the entire nation is impoverished by the collapse of the unstable peg now called a ‘flexible exchange rate’.

In March consumer goods fell 25 percent, to 282 million US dollars with sugar imports halving to 22.7 million US dollars from 50.8 million dollars, in a broad based fall.

Intermediate goods grew 4.2 percent to 1.17 billion US dollars, with petroleum and coal imports rising 49.7 percent to 519 million US dollars.

Investment goods, fell 13.9 percent to 358 million US dollars. Machinery and equipment fell 17 percent to 227.2 million US dollars.

Newly appointed central bank Governor Nandalal Weerasinghe hiked policy rates, helping slow private credit, reduce money printing, and drive more savings to the budget deficit via higher market rates.

The intermediate regime favoring ‘economists’ of the country have depreciated the currency for 72 years claiming it will boost ‘competitiveness’ but triggered inflation, social unrest, and overall instability making the country an unattractive investment destination in the process.

Backers of the unstable flexible exchange which break due to anchor conflicts have resisted calls to set up a clean floating exchange with a single domestic anchor or an East Asian style hard peg with a single external anchor or East Asian or GCC style peg with a significant level of credibility.

In March the currency collapsed steeply as the central bank allowed the peg to break in response to calls from intermediate regimists, without raising interest rates, leading to a predictable collapse.

The rupee fall was intensified with a surrender rule, critics have said. The rupee inflated around 50 percent officially in March to 299 to the US dollar in March from 200 at the beginning. (Colombo/May21/2022)

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Foreign minister, US ambassador discuss future assistance to crisis-hit Sri Lanka

ECONOMYNEXT — In a meeting in Colombo, Sri Lanka Foreign Minister Ali Sabry and US Ambassador to Sri Lanka Julie Chung discussed ways in which the United States can continue to support Sri Lanka going forward, the Ambassador said.

Chung tweeted Friday December 09 afternoon that the two officials had reflected on the “twists and turns” of 2022, at the meeting.

Minister Sabry was recently in Washington D.C. where he US Secretary of State Antony Blinken.

A foreign ministry statement said the two officials held productive discussions at the Department of State on December 02 on further elevating bilateral relations in diverse spheres, including the 75th anniversary of diplomatic relations which will be marked in 2023.

Incidentally, Sri Lanka also celebrates the 75th anniversary of its independence from the British in 2023, and President Ranil Wickremesinghe has given himself and all parties that represent parliament a deadline to find a permanent solution to Sri Lanka’s decades-long ethnic issue.

The US has been vocal about Sri Lanka addressing concerns about its human rights record since the end of the civil war in 2009 and was a sponsor of the latest resolution on Sri Lanka passed by the United Nations Human Rights Council. Unlike previous resolutions, this year’s iteration makes specific reference to the country’s prevailing currency crisis and calls for investigations on corruption allegations.

In the lead up to the UNHRC sessions in Geneva, Minister Sabry Sri Lanka’s government under then new president Wickremesinghe does not want any confrontation with any international partner but will oppose any anti-constitutional move forced upon the country.

On the eve of the sessions on October 06, Sabry said countries such as the United States and the United Kingdom, who led the UNHRC core group on Sri Lanka, are greatly influenced by domestic-level lobbying by pressure groups from the Sri Lankan Tamil diaspora.

These pronouncements notwithstanding, the Wickremesnghe government has been making inroads to the West as well as India and Japan, eager to obtain their assistance in seeing Sri Lanka through the ongoing crisis.

The island nation has entered into a preliminary agreement with the International Monetary Fund (IMF) for an extended fund facility of 2.9 billion dollars to be disbursed over a period of four years, subject to a successful debt restructure programme and structural reforms.

Much depends on whether or not China agrees to restructure Sri Lanka’s 7.4 billion dollar outstanding debt to the emerging superpower. Beijing’s apparent hesitance to go for a swift restructure prompted Tamil National Alliance MP Shanakiyan Rasamanickam to warn of possible “go home, China” protests in Colombo, similar to the wave of protests that forced the exit of former pro-China President Gotabaya Rajapaksa.

The TNA will be a key player in upcoming talks with the Wickremesinghe government on a solution to Sri Lanka’s ethnic issue. (Colombo/Dec09/2022)

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India smogs out Sri Lanka’s China tower observers

 

ECONOMYNEXT – Sri Lanka’s Chinese-built Lotus Tower has halved visitors to its observation deck an official said as dirty air flowing from India triggered air quality warnings and schools in the capital closed.

“Masks are mandatory at the observation deck and roughly around 50 to 60 can go up to the observation deck at a time, time limits have not been altered and still persists at 20 minutes for observation,” the official told EconomyNext.

Prior to the smog, 120 observers were permitted at once to the deck.

However, even after limitations the Lotus Tower has continued to draw visitors, and revenues are coming in, the official said.

The tower built with a Chinese loan by the cash rich Telecom Regulatory Commission has been described by critics as a white elephant that eats the money earned from telecom operators mainly as spectrum fees.

Sri Lanka’s National Building Research Organization (NBRO) said India air heavily polluted with particulate matter was flowing across the island into a depression in the South West Bengal Bay. (Colombo/Dec09/2022)

 

 

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Mystery mattress sparks innuendo-filled row in Sri Lanka parliament

File photo of a mattress

ECONOMYNEXT — A mysterious luxury mattress said to have been paid for by a private company has found its way to the president’s office in the parliament complex, an opposition MP claimed, leading to an innuendo-filled exchange of words between the MP and the chief government whip.

Main opposition Samagi Jana Balawegaya (SJB) MP Buddhika Pathirana told parliament on Friday December 09 that on July 28, a week after President Ranil Wickremesinghe was sworn in, some “items” had been transported to the parliament complex.

“None of these items were purchased by parliament. A private company had paid for them,” said Pathirana, announcing his intention to table all receipts.

According to the MP, the items had been moved to the space allocated for the president’s office inside the parliament building. Among these items had been a luxury mattress that the Matara district MP claimed was one foot thick.

“Why has a mattress like that been brought here, and why is it in the president’s office? As far as I know, nobody sleeps in that room. This raises a serious question as to whether someone goes to bed in that room,” he said.

“Either the president has to sleep in it or it’s his staff,” he added.

Pathirana urged Prime Minister Dinesh Gunawardena to appoint a committee of MPs to investigate the matter, and the MP volunteered to inspect the bed himself.”

“We’ll also go and take a look. That’ll be good for president’s security and for that of this House. Can things paid for by a private company be brought in here?”

MP Pathirana claimed that though it was said that President Wickremesinghe had covered all expenses of his swearing in ceremony with his private funds, the company that paid for the mysterious mattress had in fact made the payments.

Pathirana’s SJB colleague Hesha Withanage who came to the MP’s defence amid howls of laughter from the government benches said it was a serious matter, urging the lawmakers not to make light of it. Withanage claimed that he had in his possession a letter directing an unnamed authority to provide the company in question 20 acres of land in Hambegamuwa, Hambantota.

He did not elaborate.

Chief Government Whip Prasanna Ranatunga, meanwhile, told Pathirana and the SJB that the Speaker had said he would look into the matter.

“The speaker has said he will look into it. You’re not going to sleep in that bed, are you? I don’t know if you do and if that is why you’re so interested.

“There are much more important things to discuss. Talk about problems of the country without talking about about beds,” he said. (Colombo/Dec09/2022)

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