An Echelon Media Company
Thursday June 8th, 2023

Sri Lanka President bets for China-inclusive Asia-led economy

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has said many Asian nations have already made a choice between China and the United States in a polarizing geopolitical situation and that choice is Asia accommodating the ambitious projects by both Beijing and Washington.

Wickremesinghe made these comments when he addressed at “Nikkei Forum: Future of Asia‟ held in Tokyo, Japan today on Thursday (25) and highlighted the importance of Asian states having a voice in shaping the region’s role amidst the evolving geopolitics on the global stage.

“We in Asia don’t want to choose between the U.S. and China,” Wickremesinghe told the gathering.

“Many of us cannot make that choice because we have already made our choice, and that choice is Asia,” he said.

Future of Asia is an international gathering where political, economic, and academic leaders from the Asia-Pacific region offer their opinions frankly and freely on regional issues and the role of Asia in the world.

The forum has been held by Nikkei every year since 1995 and it is considered to be one of the most important global conferences in Asia.

Wickremesinghe, invited in his capacity as Sri Lanka’s Finance Minister for the forum , said that all the Asian nations have benefited from the cooperation between the US and China in the post-Cold War era, but the subsequent rapid rise of China and the inability of the two countries to agree on China‟s role on the international stage have led to rivalry, which he referred as “needless tensions in our part of the world”.

China has launched an ambitious Belt Road Initiative (BRI) covering mainly Asia and Africa while the US, as an alternative, has pushed for Indo-Pacific Strategy in the region, stretching from our Pacific coastline to the Indian Ocean, home to more than half of the world’s people, nearly two-thirds of the world’s economy, and seven of the world’s largest militaries.

“We want an Asia that can accommodate the Indo-Pacific, the BRI, as well as the ASEAN Outlook on the Indo- Pacific,” Wickremesinghe said.

“The BRI is a strategy to increase China‟s influence in Asia and Africa through economic means. We, the members of the BRI, have no security arrangements with China, nor do we intend to enter into any security agreements with China.”

“The Indo-Pacific is an evolving concept with unanswered questions.”

Center of Geopolitics

Sri Lanka has become the center of geopolitical war between China and the US in South Asia with India, the world’s sixth largest economy is being a strong ally of the US. The island nation has been under pressure by both India and the West for allowing Chinese investments into the country, citing possible security concerns in the Indian Ocean, government sources have said.

Wickremesinghe said the US – China rivalry has given rise to a number of responses by the West especially to economic coercion and weaponizing of economic vulnerabilities.

“Yet some of these responses may result in a setback to trade integration in the region. Unlike the West, Asia is dominated by middle-income and low-income economies.”

“Of the 12 high-income economies in Asia, only 6 are outside West Asia. The rest of us, including China, India, and Indonesia, are middle income economies. We have to overcome the middle-income trap of economic stagnation.”

In addition to economic coercion, Wickremesinghe said, economic decoupling in which different asset classes that typically rise and fall together start to move in opposite directions, and similar measures contrary to the World Trade Organization rules are other impediments to trade integration.

“Needless to say that we in Sri Lanka and many other Asian nations are opposed to economic coercion: whether it be by one country coercing another using its economic power; or by indirect methods such as de-coupling, or friend-shoring – manufacturing and sourcing only from geopolitical allies – contrary to the WTO,” he said.

“Thus, the WTO system put in place three decades ago should not be by-passed for short term geo-strategic gains. The rules of the game cannot be changed arbitrarily. The losers will be the middle-income Asian countries.” (Colombo/May 25/2023)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka’s shares slip on profit taking and selling pressure

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

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.

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.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

Continue Reading

Sri Lanka Treasuries yields plunge, 12-month down 318bp

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

Continue Reading

Sri Lanka forex reserves rise US$722mn in May 2023

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed as deflationary policy and weak credit reduced ‘above the line’ outflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.

Related

No pre-determined level to stop Sri Lanka rupee appreciation: CB Governor

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.

Related

Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)

Continue Reading