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Friday August 19th, 2022

Sri Lanka plans to cap forex risks of rupee bond investors through swap: Minister Cabraal

ECONOMYNEXT – Sri Lanka will offer to cap forex risks of investors in a bid to draw investors into rupee debt which will reduce the country’s dependence of international sovereign bonds and strengthen the external sector, State Minister for Finance, Capital Markets and State Enterprise Reform said.

“We want to encourage foreign investment in rupee bonds,” Minister Cabraal said. “To give comfort to investors we will provide a forward risk cover through a swap.

“Sri Lanka will be able to reduce its dependence on ISBs when we attract funds into rupee bond markets.”

Sri Lanka had almost 4 billion dollars worth foreign investments in rupee bonds sometime in 2014 but they had reduced over time to less than 12 billion rupees now.

Based on that trend Sri Lanka should have had around 7 billion dollars in rupee bonds now, he said.

“I think we can realistically attract about 3.5 billion US dollars over the next year which inflow would make a huge difference to Sri Lanka’s external account,” he said.

“When these foreign inflows start and gather momentum, our exchange rate will also strengthen, resulting in a very favourable impact on our public debt stock as well as debt servicing.”

Sri Lanka’s rupee tends to depreciate due to running monetary policy inconsistent with maintaining a pegged exchange rate regime, analysts have shown.

Sri Lanka’s rupee depreciated rapidly after 2015, under a so-called ‘flexible’ inflation targeting regime which involved pro-cyclical liquidity injections, coupled with real effective exchange rate targeting, sending the rupee down from 131 to 185 to the US dollar from 2015 to 2018.

Sri Lanka’s dollar denominated debt expands at each collapse of the peg and a subsequent fall in consumption slows economic output and drives up the deficit.

There have been calls to reform the central bank to restrain its ability to engage in pro-cyclical liquidity injections and sterilize the balance of payments to maintain monetary stability.

The rupee is now stable despite an expanding budget deficit, amid weak private credit, despite a higher fiscal deficit. (Colombo/Sept09/2020)

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Sri Lanka schedules 3-hour power cuts for Aug 20, 21: regulator

ECONOMYNEXT – Sri Lanka will impose power cuts of up to three hours on Saturday August 20 and Sunday August 21, Public Utilities Commission (PUCSL) Chairman Janaka Ratnayake said.

All areas (A, B, C, D, E, F, G, H, I, J, K, L, P, Q, R, S, T, U, V and W) will have power cuts of 1 hours and 40 minutes between 10.30 am and 06.00 pm and 1 hour 20 minutes from 06.00pm to 10.00 pm.

Click here for a detailed schedule.

The state-run Ceylon Electricity Board (CEB) said supply interruption time and restoration time will vary within 30 minutes as indicated above.

Sri Lanka’s daily scheduled power cuts that were reduced to one hour in July with power generation from hydro power plants contributing more than 50 percent to the main grid reducing thermal power plant use was extended to three hours last week due to a breakdown at the Norochcholai coal power plant.

According to officials, the breakdown happened in Unit 1 of Norochcholai which will take around two weeks to repair.

The Minister of Power & Energy said Unit 2 is undergoing scheduled maintenance work while Unit 3 will continue to operate. West Coast and other fuel power pPlants will be used to manage the supply, the ministry said. (Colombo/Aug02/2022)

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Sri Lanka guidance peg edges T-bond yield edge down

ECONOMYNEXT – Sri Lanka Central Bank’s guidance peg for interbank transactions edged down on Friday (19), while yields in Treasury bonds picked up slightly and in T-bill remain unquoted in dull trade, a day after the Central Bank announced the policy rates will remain stable, dealers said.

A bond maturing on 01. 06. 2025 closed at 27.95/28.05 percent on Friday, slightly up from 27.90/28.00 percent on Thursday.

No T-bills were quoted on Friday, dealers said.

Meanwhile Sri Lanka’s central bank announced a guidance peg for interbank transactions further weakened by three cents to 361.00 rupees against the US dollar on Friday from 360.97 rupees.

Data showed that commercial banks offered dollars for telegraphic transfers between 368.00 and 370.00 for small transactions.  (Colombo/ Aug 19/2022)

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Sri Lanka records 10 new COVID-19 deaths in 48 hours as case numbers rise

ECONOMYNEXT –  Sri Lanka recorded 10 COVID-19 deaths in the 48 hours from August 17 to 19 taking the country’s pandemic death toll to 16,640, health ministry data showed.

Sri Lanka is experiencing a slight increase in COVID-19 cases with the relaxation of public health restrictions relating to face masks and public gatherings.

Health authorities said the situation will be monitored constantly and have asked the general public to continue to follow basic hygiene measures in order to control the spread of the virus again in the community.

In August alone 2,924 new cases were recorded in Sri Lanka, with 84 deaths attributed to the disease.

So far in 2022, from January onward, health authorities have identified 81,157 patients to date.

Epidemiology unit data showed that 874 patients are currently receiving treatment, out of which 716 are receiving home based care.

The spread of the virus has increased with the use of public transport rising after an easing of a fuel crisis.

Sri Lanka is also facing difficulties in securing essential medicine supplies for the health sector due to a forex shortage.

Health officials said if the number of COVID-19 patients rise to a level the health sector cannot manage,  with the added issues of fuel and medical shortages, the health system might collapse.

“It is the responsibility of us all. There is no use trying to forcibly control people. We all have the responsibility to reduce or stop the spread of the virus before it gets out of control. We have been living with it for the past two years,” Deputy Director General of Health Services Dr Hemantha Herath said. (Colombo/Aug19/2022)

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