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Friday December 9th, 2022

Sri Lanka opens floodgates for corruption in power sector: Harsha

ECONONOMYNEXT – Sri Lanka has opened the floodgates for corruption by ending competitive bidding for private renewable power plants opposition legislator Harsha de Silva, who tried to limit high feed in tariffs only to plants below 10 Mega Watts said.

“Due to non transparent procurement and corruption we pay so much more than necessary for electricity,” de Silva said in a message after the ruling party rejected his proposal to limit procurement corruption.

“One bright spot was the requirement for competition in renewable projects but had delays. Instead of fixing the problem they did away w competition. Horrible decision.

It will be interesting to see how the IMF, World Bank, ADB views this absolutely unacceptable new development in #SriLanka.

“This is 180 degrees opposed to what donors would want from us begging for dollars. This will open a floodgates for corruption.”

Some observers say Chinese funding built up a contractor class in the country which was able to influence the polity of the country, but Western donor agencies has promoted the renewable lobby at a time when their prices were un-competitive allowing them to develop ways of influencing public policy.

In many developed nations the renewable firm had to use public relations sometimes called ‘green washing’ to win special subsidies from the policies and influence public policy.

However renewable technologies have now matured and developing countries can use them at market rates and most cost-effective technologies are also emerging allowing grids of poor countries to handle unstable supply from highly volatile renewable sources.

Under then Minister Ajith Perera, renewable feed in tariffs collapsed under competitive tendering allowing investors without political clout to enter the renewable energy business.

Defying conventional wisdom, prices for smaller plants were lower than expected despite their smaller scale due to lowered barriers of entry in the form of the required investment.

Sri Lanka’s Podujana Party with ex-Prime Minister Mahinda Rajapaksa voted with 120 votes in favour and 36 votes against to do away with competitive tendering for renewable power plants.

There were 13 abstentions.

De Silva’s amendment to limit higher prices to only plants below 10 MegaWatts was also rejected.

Recent tenders have also not been approved by political authority pending the removal of competitive tendering, unions have charged.

Meanwhile Power Minister Kanchana Wijesekera said CEB unions have blocked renewable projects and that is why the Electricity Act was changed and power cheaper than thermal would be introduced.

But Sri Lanka’s power distribution is a state monopoly and renewable developers have to wait until the state-run Ceylon Electricity to sell to it.

Under Sri Lanka’s power sector unbundling model, the distribution companies are state owned and cannot directly buy power and the power producers are not responsible for collecting revenues, giving an incentive to bloat feed in tariffs for which they are not responsible to customers, critic say.

As as result they do not have to put in ‘risk capital’.

In India privatized power companies are ‘Holistic Integrated Power Utilities’ who can generate their own power and also distribute creating a direct business incentive to reduce generation costs instead of getting average costs. (Colombo/June10/2022)

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Sri Lanka shares fall on profit taking after nine sessions

ECONOMYNEXT – Sri Lanka shares slipped on Friday after gaining for nine straight sessions reverting from its highest gain in more than seven weeks on profit taking, brokers said.

“Bourse regressed to red ending the 9-day winning streak as investors resorted to book profits in blue chip counters,” First Capital Market Research said in it’s daily note.

The main All Share Price Index (ASPI) closed 0.54 percent or 47.84 points lower at 8,843.90.

The market witnessed a turnover of 1.6 billion rupees, lower than this year’s daily average turnover of 2.9 billion rupees.

The market saw a net foreign inflow of 1 million rupees. The total net foreign inflow stood at 22 billion rupees so far for this year.

The Paris Club group of creditor nations has proposed a 10-year debt moratorium on Sri Lankan debt and 15 years of debt restructuring as a formula to resolve the island nation’s prevailing currency crisis.

The government is in discussions with Asian Development Bank (ADB) and World Bank to get loans of 1.9 billion US dollars after a reform program with the 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.

In the last few sessions, market gained after the Central bank governor said interest 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.

The more liquid index S&P SL20 closed 0.59 percent or 16.77 points lower at 2,827.72.

So far in December ASPI gained 2.2 percent.

The ASPI gained 0.5 percent in November after losing 13.4 percent in October.

It has lost 27.6 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.

John Keells Holdings pulled the index down to close at 1.5 percent lower at 147 rupees.

Aitken Spence lost 2.0 percent to close at 141 rupees and Commercial Bank closed 1.4 percent down at 50.50 rupees a share. (Colombo/Dec09/2022)


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Sri Lanka bond yields end higher, kerb dollar Rs370/371

ECONOMYNEXT – Sri Lanka bonds yields ended up and the T-bills eased on active trade on Friday, dealers said.

The US dollar was 370/371 rupees in the kerb.

“The bond rates went up, however more interest was seen in the short term bills by the investors” dealers said.

A bond maturing on 01.05.2024 closed at 31.90/32.20 percent on Friday, up from 31.25/70 percent at Thursday’s close.

A bond maturing on 15.05.2026 closed at 30.30/31.30 percent steady from 30.30/31.00 percent.

The three-month T-bills closed at 30.75/31.30 percent, down from 32.00/32.25 percent.

The Central Bank’s guidance peg for interbank transactions was at 363.18 rupees against the US dollar unchanged.

Commercial banks offered dollars for telegraphic transfers between 371.78 and 372.00 for small transactions, data showed.

Buying rates are between 361.78 – 362.00 rupees. (Colombo/Dec 09/2022)

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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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