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Saturday June 3rd, 2023

Sri Lanka opposition questions legality of COPF decision on T-bills

Opposition leader Sajith Premadasa (r) – File photo

ECONOMYNEXT – Sri Lanka’s opposition has questioned the legality of raising a ceiling on Treasury bills to 6,000 billion rupees from 5,000 billion, citing a dispute over the chairmanship of the parliamentary Committee on Public Finance (COPF).

Legislators representing the main opposition party the Samagi Jana Balawegaya (SJB) speaking in parliament on Friday May 12 objected to the COPF approving a proposal to raise the Treasury bill ceiling because the committee does not have a permanent chairman, which the party said raised questions of its legality.

Opposition and SJB leader Sajith Premadasa said the party had consented to the proposal to urgently raise the Treasury bill ceiling at a meeting of parliament’s Business Committee Thursday May 11 afternoon. He claimed that, at a “secret” meeting of COPF held some hours later, the decision was approved by an acting chairman partial to the government.

According to Premadasa, Treasury officials and State Minister of Finance Shehan Semasinghe had sought parliament’s approval for raising the limit on Treasury bills as there were some urgent payments pending, totalling 200 billion rupees: that is, 100 billion rupees worth of Treasury bonds that were maturing, 60 billion rupees in coupon payments and 40 billion rupees to be paid back to multilateral financial agencies.

“We learned that the ceiling had been reached. This was a matter of national importance and any divisions, political or otherwise, were immaterial. You asked the Business Committee to support it, and we agreed,” said Premadasa.

However, he claimed, at the COPF meeting held at 3pm that was “convened in secret” and overseen by what he called a “puppet”, a one trillion rupee increase was approved sans any discussion, debate or cost benefit analysis.

Premadasa claimed that at Business Committee meetings the government is more honest about Sri Lanka’s economic situation which he implied was quite contrary to the rosy picture painted for the people outside parliament.

After much debate and discussion, the opposition expressed its support to the decision to raise the Treasury bill limit, he said.

“But what happened after? You brought in your kangaroo chairman,” he said.

“In a single pen stroke, one trillion was approved,” he added, mocking what he claimed were the government’s pretensions about scientifically approaching financing decisions.

“How can you appoint a puppet and take such decisions?  These kinds of performances cannot be allowed.”

SJB MP Lakshman Kiriella also claimed that the COPF, which he said was an illegal committee, had made its decision in just one minute.

“There was no discussion about what these funds were being raised for,” he said.

State Minister of Finance Semasinghe contested Kiriella’s claim. He said officials had clearly explained to party leaders that the Treasury limit had to be raised by one trillion rupees because the demand for bonds had dropped and because the interest rate for bonds had gone up to 28 percent.

“We also talked about situations that may arise until domestic debt is restructured. There is no question of legality here.

“Yesterday’s COPF meeting didn’t end in one minute. Treasury officials offered the same explanation to the committee that it gave the party leaders. The expenditures due next Monday were also highlighted. It was upon broad discussion of this that the COPF gave its approval,” said Semasinghe.

Any dispute over the chairmanship of COPF is a matter that must be resolved separately, the state minister said, adding that it was not fair to misinterpret what transpired after everything had been explained.

The government first announced the planned Treasury bill limit hike on May 03 at the weekly cabinet press briefing by cabinet spokesman and Minister Bandula Gunawardena who said that, by end March 2023, Sri Lanka had already had a stock of 4,636 billion rupees of Treasury bills in issue.

Treasury bills are sold in three, six and 12 months with three-month bills rolled over four times, six-month bills twice and one-month bills once. New funds are also raised with fresh funds.

Sri Lanka’s interest rates have shot up to around 25 percent after the latest currency collapse from flexible inflation targeting/output gap targeting which led to external sovereign debt default requiring domestic debt restructuring to meet International Monetary Fund (IMF) debt sustainability requirements.

For the year 2023, Sri Lanka’s parliament had set a gross borrowing limit of 4,979 billion rupees, of which 4,526 billion was from local sources. Another 1,453 was from foreign sources.

Meanwhile, the SJB and other opposition groups have been crying foul over the government’s refusal to appoint SJB MP Harsha de Silva as COPF chair. An allegedly surreptitious attempt to have de Silva’s SJB colleague Mayantha Dissanayake came a cropper after Dissanayake, who had initially accepted the position, resigned mere days later. Government MPs have claimed that the SJB had wanted Dissanayake to step down due to internal rifts in the party.

MP de Silva has said the government has been violating parliamentary procedures and governance by running the committee without a chairman since January.


Sri Lanka economic governance violated over headless CoPF: Harsha



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

More deaths reported at Sri Lanka fuel queues

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)

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

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)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

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)

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