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Wednesday June 19th, 2024

Sri Lanka power regulator vows not to allow cabinet driven power hike

ECONOMYNEXT –  Power regulator, the Public Utilities Commission of Sri Lanka (PUCSL) will not accept any electricity tariff hike even if the cabinet approves the power minister’s proposal, the PUCSL Chairman Janaka Ratnayake said.

The proposal to increase the electricity tariff in two stages this year was presented to the cabinet on Monday (02) by the Minister of Power and Energy Kanchana Wijesekera, but the approval has been delayed by a week amid strong opposition to the move.

“The proposal is based on false facts and figures. Therefore Even if the decision is taken by the cabinet, we will not accept it,” Ratnayake told reporters at a media briefing on Thursday (05).

“We have the power vested with us to reject it. Therefore we urge the public not to panic. The PUCSL is not considering any tariff hike at the moment”.

The proposed tariff hike is based on facts and figures presented by the state owned utility provider, Ceylon Electricity Board’s (CEB) General Manager, a senior engineer and the Ministry Secretary, Ratnayake said.

“Luckily the cabinet did not take any favourable decision in this regard. If they took a decision, it would have been based on wrong facts and figures” Ratnayake said.

“And therefore, we urge the cabinet members not to take a decision based on this illegal proposal but to properly go through the correct channels where the PUCSL will consider and take appropriate decisions”

“There is a department in CEB to make decisions on the tariff and the proposal of that should be passed by the Director Board of the CEB. However, the current proposal has not passed any of those stages”, he said.

The new proposal has suggested only to increase the tariff of 5 million people that are using below 90 units, and the ministry hopes to earn 100 billion rupees in 2023, Ratnayake said.

There are around 1.5 million households using below 30 units, and around 1.6 million uniots whilc are using below 60 units and 1.7 million families using below 90 units, according to Ratnayake.

“The eight rupees that we charged per unit for the below 30 unit category will go up to thirty rupees and the 120 rupees of fixed rate will be increased to 400 rupees. The 10 rupees per unit that was for the below 60 category, will go up to 37 rupees ,and the 16 per unit charge for below 90 and 120 category will go up to 42 rupees,” he said.

“The 50 rupees per unit for the above 120 units category and the 75 rupees for above 180 units category has not increased. The fixed fee will be increased by around 500 for those categories”.

He said, there was no need for a power tariff hike, considering the availability of the raw materials for power generation and a stable rupee after depreciating sharply.

The CEB is not managing the increased operational profit they get properly, he said adding that after the tariff hike in August,2022 the operational profit of the utility provider has gone up to 35 billion rupees.

“We strongly recommend the board to manage that amount earned from the citizens of this country properly, before going for a restructuring” he said. (Colombo/ Jan 5/2023)

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Central banks expect to increase gold reserves after buying 1,037 tonnes in 2023: Survey

ECONOMYNEXT – About 29 percent of central banks in the world intended to increase their gold reserves in 2023, up from 24 percent in 2023 and just 8 percent in 2019, a survey by the World Gold Council showed.

“The planned purchases are chiefly motivated by a desire to rebalance to a more preferred strategic level of gold holdings, domestic gold production, and financial market concerns including higher crisis risks and rising inflation,” the WGC said.

About 81 percent of 70 central banks that responded to the survey expected global central bank holdings of gold to go up, from 71 percent in 2023.

While in prior years, gold’s “historical position” was the top reason for central banks to hold gold, this factor dropped significantly to number five this year.

This year, the top reason for central banks to hold gold is “long-term store of value / inflation hedge” (88%), followed by “performance during times of crisis” (82%), “effective portfolio diversifier” (75%) and “no default risk” (72%).

Concerns about sanctions were listed as by 23 percent of emerging market central banks (0 advanced).

De-dollarization as a reason to hold gold gained ground, but was not among the main reasons.

About 13 percent of emerging market central banks listed de-dollarization as one of the reasons to buy gold up from 11 percent last year and 6 advanced nations said the same from zero last year.

Around 49 percent of central banks expected gold reserves to be moderately lower five year from now in the 2024 survey, against 49 percent in 2023 and 38 percent in 2022.

About 13 percent of central banks surveyed said US dollar reserves would be significantly lower in the 2024 survey, up from 5 percent in 2023 and 4 percent in 2022. (Colombo/June18/2024)

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Sri Lanka rupee closes weaker at 304.75/305.40 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed weaker at 304.75/305.40 to the US dollar Tuesday, down from 304.15 to the US dollar Friday, dealer said, while some bond yields edged up.

Sri Lanka’s rupee has weakened amid unsterilized excess liquidity from earlier dollar purchases.

Excess liquidity fell from as high as 200 billion rupees, helped by some sales of maturing bills and also allowing some term contracts to run out.

However the central bank has started to inject liquidity again below its policy rate to suppress interest rates.

On Tuesday 30 billion rupees was printed overnight at an average yield of only 8.73 percent.

Separately another 25 billion rupees was printed till June 25 at 8.09 percent to 9.05 percent, which was still below overnight the policy rate of 9.5 percent.

Nobody has so far taken the central bank to court for printing money beyond overnight at rates lower than the overnight rate.

Sri Lanka operates an ad hoc exchange rate regime called ‘flexible exchange rate’ which triggers panic among market participants, as the central bank stays away when spikes in credit either creates import demand or unsterilized credit is used up.

“If large volumes of unsterilized liquidity is left, the exchange rate has to be closely defended to prevent speculation involving early covering of import bills and late selling of exports proceeds,” EN’s economic columnist Bellwether says.

“Just as an appreciating or stable exchange rate leads to late covering of import bills, a falling rates leads to immediate covering of import bills.

“Keeping exchange rates stable is a relatively simple exercise but it is difficult to do so if short term rates are also closely targeted with printed money, as liquidity runs out, as if the country had a free float and no reserve target.”

“When there is a large volume of excess liquidity remaining (except those voluntary deposited for long periods by risk averse banks) the the interest rates structure is under-stated compared to the reported reserves.

“Interest rates would be a little higher than seen in the market if the liquidity was mopped up and domestic credit and imports were blocked to prevent the reserves from being used up.”

In East Asia there is greater knowledge of central bank operational frameworks, though International Monetary Fund driven flawed doctrine are also threatening the monetary stability of those countries, critics say.

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Vietnam selling SBV bills to stabilize the Dong, as Sri Lanka rupee also weakens

Sri Lanka’s rupee started to collapse steeply after the IMF’s Second Amendment in 1978 along with many other countries as flawed operational frameworks gained ground without a credible anchor.

A bond maturing on 15.12.2026 closed at 10.10/30 percent up from 10.05/30 percent Friday.

A bond maturing on 15.10.2027 closed at 10.60/57 flat from 10.60/80 percent.

A bond maturing on 01.07.2028 closed at 11.15/35 percent, up from 11.05/20 percent.

A bond maturing on 15.09.2029 closed at 11.80/90 percent unchanged.

A bond maturing on 15.10.2030 closed at 11.90/12.00 percent.

A maturing on 10.12.2031 closed at 11.95/12.10 percent.

A bond maturing on 01.10.2032 closed at down at 11.95/12.10 percent, down from 12.00/10 percent. (Colombo/Jun14/2024)

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Sri Lanka’s Ceylon Chamber links up with Gujarat Chamber

ECONOMYNEXT – The Ceylon Chamber of Commerce has signed an agreement with the Southern Gujarat Chamber of Commerce and Industry (SGCCI) to increase trade cooperation between India and Sri Lanka.

The MOU was signed by CCC CEO Buwanekabahu Perera, SGCCI President Ramesh Vaghasia, in the presence of Dr Valsan Vethody, Consul General for Sri Lanka in Mumbai, India.

“With the signing of the MoU, … the Ceylon Chamber of Commerce and SGCCI aim to facilitate trade between the two countries via initiatives such as trade fairs and delegations, business networking events, training programmes,” the Ceylon Chamber said in a statement.

“This partnership will open doors for Sri Lankan businesses to explore opportunities in Surat’s dynamic market and enable the sharing of expertise and resources between the two regions.”

Established in 1940, SGCCI engages with over 12,000 members and indirect ties with more than 2,00,000 members via 150 associations. It promotes trade, commerce, and industry in South Gujarat.

The region’s commercial and economic centre Surat has risen to prominence as the global epicenter for diamond cutting and as India’s textile hub, and is ranked the world’s 4th fastest growing city with a GDP growth rate of 11.5%

Surat’s economic landscape is vibrant and diverse. As India’s 8th largest and Gujarat’s 2nd largest city, it boasts the highest average annual household income in the country.

The nearby Hazira Industrial Area hosts major corporations like Reliance, ESSAR, SHELL, and L&T. (Colombo/Jun18/2024)

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