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Thursday April 18th, 2024

Sri Lanka President calls for a giving Christmas in deepest ever currency crisis

BORN IN POVERTY: A Christmas card depicting the birth of Jesus in shelter for livestock.

ECONOMYNEXT – Sri Lanka’s President Ranil Wickremesinghe has called for the Christmas to be made into an opportunity to help those in need as the island suffers the effects of the worst currency crisis of its central bank.

“In the country’s current unprecedented economic crisis, it is important for the people to extend compassion to one another, and assist each other,” President Wickremesinghe said in his Christmas message.

“This would be a salutation to the testaments of Jesus Christ. The birth of baby Jesus in impoverished surroundings signifies the dedication of His life to creating a better society.”

Christians believe that Jesus was born in a barn or cave among livestock after his parents went for an annual Roman census, to he city of Bethlehem which was crowded with visitors.

“It is appropriate to recall the appeal of His Holiness Pope Francis for a humble Christmas this year, with the savings from reduced spending on gifts to be donated to the needy and value humanity,” President Wickremesinghe said.

Most of the world has been hit by the highest inflation seen since the 1970s great inflation period and early 1980s after reserve currency central banks printed money to accommodate a Coronavirus crisis.

1970s style strikes are breaking out in Western nations after the ‘stimulus’.

Sri Lanka’s rupee fell from 200 to 360 in 2022 to the US dollar after the central bank printed money for two years to target an output gap throwing marginal groups into poverty and the poor into near starvation.

The central bank has depreciated the currency from 4.70 to 182 to the US dollar up to 2020 by printing money to suppress interest rates.

There have been calls to change the governing law of the central bank to block economic bureaucrats from mis-using central bank independence to suppress rates through ‘flexible’ policy.

Since the end of a 30-year civil war the central bank triggered currency crises in 2012, 2015/16, 2018 and 2020/22 engaged in unprecedented ‘cover up’ foreign borrowings – quaintly called ‘bridging finance’ in the island – and defaulted in April 2022. (Colombo/Dec24/2022)

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Sri Lanka’s discussions with bondholders constructive: State finance minister

ECONOMYNEXT – Sri Lankan authorities continue to engage all debt restructuring negotiations in good faith, within principles of equitable treatment among creditors, and with maximum transparency within the norms of such negotiations, State Minister of Finance, Shehan Semasinghe has said.

“It is standard practice, when a representative group of bondholders is formed, to entertain confidential discussions with such group and its appointed advisors. In the case of Sri Lanka, the Ad Hoc Group of Bondholders represents holders controlling more than 50% of the bonds, which make them a privileged interlocutor for Sri Lanka,” Semasinghe said on X (twitter).

“It is well understood that given the price sensitive nature of the negotiations, and according to market regulations, discussions with the Group and its advisors are to be conducted under non-disclosure agreements. This evidently restricts the ability of the Government to unilaterally report about the substance of the discussions.

“The cleansing statement, which was issued on the 16th of April, at the conclusion of this first round of confidential discussions with members of the Group, aims at informing the Sri Lankan people, market participants and other stakeholders to this debt restructuring exercise, about the progress in negotiations. It provides the highest possible level of transparency within the internationally accepted practices in such circumstances.

“As informed in this statement, confidential discussions held in recent weeks with bondholders’ representatives proved constructive, building on the restructuring proposals presented by both parties. During the talks both sides successfully bridged a number of technical issues enabling important progress to be made. Sri Lanka articulated key remaining concerns that need to be addressed in a satisfactory manner.

“The next steps would entail further consultation with the IMF staff regarding assessments of the compatibility of the latest proposals with program parameters. Following these consultations, we hope to continue discussions with the bondholders with a view to reaching common ground ahead of the IMF board consideration of the second review of Sri Lanka’s EFF program.”

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Sri Lanka rupee weakens at 301.00/302.05 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 301.00/302.05 to the US dollar in the spot forex market on Tuesday, from 299.00/10 on Tuesday, dealers said. Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed stable at 11.30/35 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent up from 11.95/12.00 percent.

A bond maturing on 15.12.2028 closed at 12.10/20 percent down from 12.10/15 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent.

A bond maturing on 15.03.2031 closed at 12.30/50 percent. (Colombo/Apr17/2024)

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Sri Lanka Treasury Bill yields down across maturities

ECONOMYNEXT – Sri Lanka’s Treasuries yields were down across maturities at Wednesday’s auction with the 3-month yield moving down 7 basis points to 10.03 percent, data from the state debt office showed.

The debt office sold all 30 billion rupees of 3-month bills offered.

The 6-month yield fell 5 basis points to 10.22 percent, with 25 billion rupees of bills offered and 29.98 billion rupees sold.

The 12-month yield dropped 4 basis points to 10.23 percent with 18.01 billion rupees of bills sold after offering 23 billion rupees. (Colombo/Apr17/2024)

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