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Monday December 5th, 2022

Sri Lanka President ends import ban that raised an ugly stink

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has ended a ban on the import of beauty care products and deodorants, slapped amidst the worst currency crisis in the history of the island’s intermediate regime central bank.

Sri Lanka’s beauty care industry sector had warned that it received a body blow from the import ban at a time when demand from customers were anyway hit and they were forced to shed staff.

Other small and medium industries also said they had run out of inputs and spares due to import bans.

From November 22, deo-odorants, anti-perspirants, shampoo, toilet waters and dental floss could be imported. Wigs and hair dryers were also allowed.

Sri Lanka’s macro-economists got the power to print money in 1950 when a soft-pegged (intermediate regime) central bank styled after Argentina’s BCRA was set up based on the post-1931 Mercantilism that gripped Western-nations after the Great Depression.

In 1969 – mostly after printing money for rural credit – macro-economists misled politicians in to enacting an import control law to curb economic freedoms of the citizenry instead of tightening the monetary law of the country to prevent them from mis-targeting of interest rates.

Macro-economists also caused politicians to enact draconian exchange controls, crimininalizing attempts to protect their savings from state-expropriation, instead of retraining their powers to suppress rates through open market operations.

Three years before the Mercantilist import control law was enacted, J R Jayewardene who was instrumental in setting up the Latin America style central bank in 1950, hired the best classical economist in South Asia, BR Shenoy to give advice to the country’s economic bureaucrats.

“..[T]he Balance of Payments difficulties cannot be solved by intensifying the rigorous of exchange control and import restrictions; nor by extending the schemes for expanding domestic production to substitute import goods — the so called measures for “economising” on foreign exchange,” Shenoy wrote in 1966.

“Intensification of the rigorous of exchange control and import restrictions may reduce the
quantum of import goods flowing into the market.

“It cannot reduce the flow of moneys seeking to purchase goods, either for consumption or for investment. This flow of money is determined by the national product and the inflationary part of the Net Cash Operating Deficit.”

Over half a century later the same controls and the same money printing has continued.

In the 1970s, the entire economy was closed. In 1977 the economy was re-opened but the central bank was not restrained. In 1980 Jayewardene, then-President hired Goh Keng Swee, the economic architect of Singapore, probably the best classical economist East Asia had produced, to advise him.

At the time macro-economists were printing money both to finance the deficit and to sterilize interventions (after using reserves for imports).

“A three-fold expansion of the volume of Treasury bills in a year has few precedents in the world,” Goh told the President.

“The impact has already been felt in the large increase in prices this year and further price increases cannot be avoided next year.”

Goh advised Jayewardene to watch the “volume of Treasury bills bought by the central bank.”

“This is by far the most important statistic to watch,” he said in 1980 in advise that the country’s economists had ignored for decades while politicians dreaming about becoming a Singapore.

When the currency collapses he said Jayewardene it will “not be possible to retain your policy of free imports,” he told in 1980.

Meanwhile in November 2022 the gazette notice said adhesive sheets, wooden planks, parquet, bags, trunks, mitten gloves, sails, brake linings, crucibles, refractory bricks, freezers and milk chillers would also be allowed to be imported. (Colombo/Nov24/2022)

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Time right for elections, Sri Lanka Podujana Peramuna ready to face any poll: Basil

File photo: SLPP national organiser Basil Rajapaksa

ECONOMYNEXT — The time has come for an election in Sri Lanka and the ruling Sri Lanka Podujana Peramuna (SLPP) is ready to face any election, SLPP national organiser Basil Rajapaksa said, dismissing claims that the party has come to fear elections in the face of growing unpopularity and increased factionalisation.

Speaking to reporters at an event held in Colombo Monday December 05 morning to mark the fourth anniversary of the party’s media centre, Rajapaksa handwaved off assertions that the SLPP has splintered in the wake of the mass protests that ousted his brother and former President Gotabaya Rajapaksa.

“No, our party hasn’t fragmented, not the way this cake was cut,” he said, pointing to the cake that was cut to celebrate the media centre’s anniversary.

“There may be some [dissenters], but we are with the people,” said Rajapaksa.

Political analysts, however, note that the once mighty SLPP has indeed fractured to at least four or five distinct factions. One group, according to party sources, is with President Ranil Wickremesinghe who is keen to involve younger SLPP legislators in his economic reform agenda. The second is with former Media Minister Dullas Alahapperuma who launched an unsuccessful bid for the presidency and was roundly defeated by Wickremesinghe at the July 19 presidential vote in parliament. The third group now sits as independent MPs in parliament, while a fourth faction are with former President Mahinda Rajapaksa, the SLPP patriarch.

There is another group that remains loyal to Basil Rajapaksa, though all but one SLPP legislator voted for the 21st amendment to the constitution that prohibited dual citizens from entering parliament. Rajapaksa, a dual citizen with US passport, recently returned to the island after a private visit to his second home.

The former finance minister, who resigned after a wave of protests that demanded his departure along with that of his presidential brother, for their alleged role in Sri Lanka’s prevailing currency crisis, the worst in decades, was in a jovial mood at the anniversary event on Monday and was seen heartily indulging reporters who were throwing loaded question after loaded question at him.

Asked about future plans of the SLPP, Rajapaksa quipped that they couldn’t be revealed to the media at this stage.

“However, time has come for an election. It’s difficult to say how it will be at present, but as a party, we’re ready to face any election,” he said.

Rajapaksa’s apparent confidence in facing an election is in direct contrast to speculation that the SLPP is banking on President Wickremesinghe’s refusal to dissolve parliament anytime soon. Opposition lawmakers have accused Wickremesinghe of providing sanctuary and promising security to the deeply unpopular party by not calling early elections.

“We have won every election we faced so far. We are thankful to the Sri Lankan people for that. If we were unable to meet their expectations 100 percent, we regret that. We will correct any shortcomings and will work to fulfill the people’s aspirations,” said Rajapaksa.

Asked if he is going to remain in active politics despite the blanket ban on dual citizens, the former minister said, again with a chuckle: “Active politics… well, I’m not in governance anymore. Governance [for me] has been banned by the 21st amendment. So no, I’m not in governance, but I am in politics,” he said.

Pressed about possibly entering parliament again, he said: “How can I?”

Nor is Rajapaksa saddened by the development, he claimed. “No, I’m happy about it,” he said.

The former two-time finance minister, noted for his clash of views with Wickremesinghe when the latter was invited by then President Gotabaya Rajapaksa for a round of discussions on economic recovery, was cautiously complimentary when asked about the new president. It was the SLPP’s backing that guaranteed Wickremesinghe his lifelong ambition.

“I think that selection was the correct one. We have maintained from the start that all of us in government or opposition must be able to freely engage in politics,” he said, referring to assurances that the president has purportedly given SLPP parliamentarians that they will not face the kind of retaliatory mob violence that engulfed the nation on May 09 after alleged SLPP goons attacked peaceful anti-government protestors in Colombo.

A reporter asked if Rajapaksa believes the incumbent president is capable of taking the country on the right path to recovery?

“The first task was accomplished, by allowing us to engage in politics and to get on the streets. There are economic and other issues, and we have high hopes that they will be resolved,” he said. (Colombo/Dec05/2022)

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Sri Lanka proposed power tariff not to recover past losses: Minister

ECONOMYNEXT – The government has not proposed a power tariff increase to recover past losses, Minister of Power and Energy Kanchana Wijesekera in response to a statement attributed the head of the power regulator commission.

“The proposal that was presented was for an automatic cost reflective tariff mechanism to be implemented to supply uninterrupted power & to recover the current cost of power supply,” Minister Wijesekera said in message.

“Govt has not proposed to recover past loses of CEB from a tariff revision…”

The cabinet of ministers had given the nod tariff revisions twice a year to prevent large losses from building up as in the past.

The Public Utilities Commission has disputed costs protected for the power utility saying the petroleum utility was keeping large margins in selling fuel.

The government in a budget for 2022 also proposed to tax surcharge to recover losses.

The regulator also disputed power demand forecasts.

Also read; Sri Lanka regulator disputes CEB costs, demand projections for 2023

The PUCSL cannot increase tariffs to recover past losses, Chairman Janaka Ratnayake said. (Colombo/Dec05/2022)

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Sri Lanka’s shares gain in mid market trade

ECONOMYNEXT – Sri Lanka’s shares edged up in mid day trade on Monday (05), continuing the positive run for seven straight sessions on news over a possible debt restructuring from Paris Club, analysts said.

All Share Price Index gained by 0.69% or 60.10 points to 8,829, while the most liquid shares gained by 0.96% or 26.59 points to 2,801.

“The market was pushed up over the news of a potential 10 year debt moratorium,” analysts said.

The Paris Club group of creditor nations has proposed a 10-year debt moratorium on Sri Lankan debt and 15 years of debt restructuring as a formula to resolve the island nation’s prevailing currency crisis. 

Related – Paris Club proposes 10-year moratorium in 15-year Sri Lanka debt re-structure: report

The market generated a revenue of 2.1 billion rupees.

Top gainers during 1130 hours were Expolanka, Browns Investment and LOLC.  (Colombo/Dec05/2022)


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