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Friday August 12th, 2022

Sri Lanka private credit tumbles in May, state credit also falls

ECONOMYNEXT – Sri Lanka’s private credit from commercial banks grew only 2.5 billion rupees in May 2022, amid a soft-peg collapse the lowest since a 2020 strict lockdown when credit turned negative for three months, while credit to government also fell, official data showed.

Sri Lanka’s private credit grew to only 7,754.5 billion rupees in May 2022 from 7,752.5 billion rupees in April with rupee denominated loans barely growing from 6,659.8 billion rupees to 6,659.8 billion rupees.

Loans dollar banking units to private sector fell to 794.6 billion rupees from 797.5 billion rupees in May which in dollar terms reflects a fall of about 130 million US dollars based on official end month exchange rates.

Meanwhile credit to state enterprises grew to 1,750.1 billion rupees in May from 1,725 billion rupees in April with rupee denominated debt rising by 71.6 billion rupees in May.

While the Ceylon Petroleum Corporation has raised prices, the Public Utilities Commission has failed to hike electricity prices for 7 years, leading to higher borrowings from banks, leading to pressure on interest rates and also money printing when rate rises are resisted.

State enterprise loans from foreign currency banking units fell to 222.1 billion rupees in May from 268.5 billion rupees a month earlier indicating a fall of around 160 million US dollars.

Credit to government fell marginally from 6548.1 billion rupees to 6,499.1 billion rupees, with both domestic and foreign banking units contributing.

Net central bank credit to government also marginal, though the central bank bought some bonds outright injecting permanent money into the banking system and reducing overnight injections.

In May Sri Lanka imported oil on a credit line from India, and state-run Ceylon Petroleum Corporation gave the balance rupees from customer sales to the Treasury after covering its losses.

However in June the credit line ran out.

There is another credit line for essential services which will bring some money to the Treasury as long is it used by private sector who will pay rupees to the government.

Sri Lanka’s rupee collapsed from 200 to 370 to the US dollar in a botched float after March though interest rates were raised in April to slow private credit and help save the soft-peg to the US dollar.

Sri Lanka’s private credit and the broader economy has to be smashed to pay state worker salaries without printing money try and save a soft-pegged exchange rate regime in 70 years of monetary instability since a soft-peg was set up in 1950.

The economic smashing has to be greater than in the past due to existence of a surrender requirement that pushes down the rupee, as well as delays in raising rates.

Soft-peggers call monetary instability ‘macro-economic instability’ and also manage to transfer the blame to imports and tax payers though private citizens are net savers and who have no ability to print money and de-stabilize the balance of payments and impose exchange and trade controls.

In May the rupee was transacting around 380 to the US dollar when a 360 to the US dollar and Undiyal premiums were falling, when a guidance peg was slammed at 360 to the US dollar with a surrender requirement still in place.

Sri Lanka is in a severe monetary crisis, with rising prices increasing malnutrition due to the collapse of a soft-peg after two years of money printing and failed float with a surrender requirement.

Inflation topped 50 percent in June.

Soft-pegs or flexible exchange rates cooked up in Latin America and the US after the Great Depression are peddled to third world countries where ‘economists’ have ‘fear of floating’ and ‘fear of currency boards’ and adopt unstable regime with anchor conflicts instead. (Colombo/July04/2022)

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Sri Lanka cancels visa of Scotswoman who documented anti-govt protests

ECONOMYNEXT – Sri Lanka’s Department of Immigration and Emigration has cancelled the visa of Kayleigh Fraser, a Scotswoman who had been documenting the country’s anti-government protests on social media.

Immigration officers had approached Fraser at her home on August 02 and confiscated her passport.

“This is what will happen if you raise your voice against state violence in Sri Lanka,” Fraser wrote on Wednesday August 10, posting a letter ordering her to leave the country by August 15.

“I am proud to have been a part of this. I am proud to have met so many of you. I have… so many social enterprises I want to work on here that I know will benefit so many,” Fraser said on Instagram.

“Deporting me is a massive, massive mistake for this country. The love I have for it and its people appears to be a threat to the current rulers. Does that sound right to you?”

Fraser posted that she was not prepared for the financial cost of flights and relocation, and that all her funds were in Sri Lankan currency, and that banks were not allowing foreign transactions.

Police spokesperson Nihal Thalduwa had told a privately owned news organisation that Fraser was sharing “negative content” about Sri Lanka via her social media.

“It is not right for a foreign national to be in our country and share such mass negative content. She is not a media personnel either, to cover the protests and GotaGoGama,” he has said.

Fraser has been vocal about state sanctioned violence against protestors.

News of Fraser’s deportation has caused a small riot on social media, with many protestors voicing out their support for the foreigner who documented and showed support next to them.

Seemingly indiscriminate arrests of protestors aided by an ongoing State of Emergency have both angered and frightened Sri Lankan protestors, and many active protestors have gone into hiding to evade arrest.

Some protestors said they were “taking a break” or “distancing themselves” due to continued harassment.

However, the authorities maintain that all arrests are in accordance with the law. The government has pointed to acts of retaliatory mob violence on May 09 and the forced occupation of government buildings by protestors on July 09.

“They are calling us terrorists for holding placards. This was such a peaceful protest, the only terrorism carried out was by the government against the people,” said an active protestor, who preferred not to be named.

Fraser wrote that Sri Lankans should not forget that they got to the streets for a system change.

“Live in such a way that your children will thank you for the world they inherit,” she said.

“It’s not over till it’s over. I have an unbelievable amount of high profile people fighting this order for me to leave.”(Colombo/Aug11/2022)



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Sri Lanka to acquire 35,000MT of petrol; unloading on Aug 12

ECONOMYNEXT-  Sri Lanka to receive a cargo of 35,000 metric tonns of petrol on Thursday August 11 with unloading scheduled for Friday, Minister of Power & Energy Kanchana Wijesekara said.

Wijesekara tweeted that the ship will arrive at the Colombo port Thursday night, and that the payment for the cargo had been completed with the support of the Central Bank by Wednesday.

The minister had said earlier on Wednesday that a separate cargo of crude oil is also expected on Saturday August 13, and from August 19 onwards, locally produced fuel is expected to be released to the market from the Sapugaskanda refinery.

Meanwhile, in an earlier report, Lanka IOC, a local unit of the Indian Oil Corporation (OIC), said a vessel carrying 30,000 metric tons of fuel for LIOC is scheduled to arrive between August 10 and 15.

Related: Three shipments of fuel to arrive in Sri Lanka by mid, end July, August: Lanka IOC

Meanwhile, Wijesekara said that 5.7 million people have signed up for the QR-code facilitated National Fuel Pass.

From July 21 up to now, Wijesekara said, a total of 54.9 million litres of fuel had been sold through 1,053 CPC fuel stations while 207 LIOC stations have sold 11.26 million litres of fuel. (Colombo/Aug11/2022)

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MPs nominated to Sri Lanka’s parliamentary committee on public finance

The sun sets over the Parliament at Shri Jayewardenepura

ECONOMYNEXT – Sri Lanka’s parliament has appointed members to its Committee on Public Finance, Speaker Mahinda Yapa Abeywardena said.

According to his announcement made in parliament on Wednesday August 10, in terms of the provisions of the Standing Order 121 of Parliament, MPs Bandula Gunawardana,  Vidura Wickramanayaka,  Nalin Fernando,  Anura Priyadharshana Yapa,  Vijitha Herath,  Duminda Dissanayake,  Shehan Semasinghe,  Premitha Bandara Tennakoon and Harsha de Silva have been appointed.

Indika Anuruddha Herath,  Siripala Gamalath, Seetha Arambepola, Suren Raghavan,  M A Sumanthiran,   Kavinda Heshan Jayawardhana,  Mujibur Rahuman,  Harshana Rajakaruna,  Chaminda Wijesiri,  Isuru Dodangoda,  Anupa Pasqual and  (Prof) Ranjith Bandara also have been appointed to serve as members in the Committee on Public Finance.

President Ranil Wickremesinghe tabled a proposed framework during his time as Prime Minister under President Gotabaya Rajapaksa for sectoral oversight committees in parliament with the objective of increased bipartisan parliamentary involvement in governance and policy-making.

Wickremesinghe told parliament on July 06 that under such a system, the entire parliament irrespective of party difference will participate in governance.

On July 06, he said he had approached former Speaker of Parliament Karu Jayauriya to formulate a proposal on activating the sectoral oversight committees.

Sectoral Oversight Committees shall function for the duration of Parliament and conduct its inquiries notwithstanding any adjournment or prorogation of Parliament, according to the parliament website.

The Committee of Selection shall determine the subjects and functions to be allocated to each Sectoral Oversight Committee.

The Sectoral Oversight Committees shall have the power to examine any Bill, any subsidiary legislation including Regulation, Resolution, Treaty, Report or any other matter relating to subjects and functions within their jurisdiction.

The Parliament, any Committee or a Minister may refer any matter to a Sectoral Oversight Committee having jurisdiction over the subject or function for its consideration and report. (Colombo/Aug11/2022)


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