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Friday December 9th, 2022

Sri Lanka protestors in human chain against President, PM as currency crisis bites

CHAIN OF PROTEST: Sri Lanka protestors linking hands across the Galle Face seafront as sun goes down.

ECONOMYNEXT- Sri Lanka’s protestors banded together in a human chain from Temple Trees, Prime Minister Ranil Wickremesinghe’s official residence to the iconic ‘Gota go Gama’ in front of President Gotabaya Rajapaksa’s office asking the two to step down as a currency crisis worsened.

Sri Lanka’s protests which reduced after Wickremesinghe was appointed are starting to gather pace as shortages continue with the central bank unable to restore monetary stability.

Protestors called for a ‘system change’ on Saturday as fuel queues lengthened and difficulties in paying for imported diesel, petrol and gas intensified amid continued money printing to pay salaries of state workers triggered forex shortages.

Sri Lanka went through three currency crises in rapid succession from 2015 under as money was printed under ‘flexible’ policies to boost growth (stimulus) and in 2019 taxes were also cut in a fiscal stimulus with state economists claiming that there was a ‘persistent output gap’ as growth fell from previous currency crises.

President Rajapaksa also banned chemical fertilizer imports to save 550 million US dollars in foreign exchange worsening the effects of the central bank crisis.

Failed President? Failed PM?

Saturday’s protest was largely focused on Prime Minister Wickremesinghe, under whom forex shortages have continued though interest rates have been raised by the central bank to smash economic activities which can reduce private credit and drive private savings to finance the budget deficit.

The central bank has again imposed a ‘guidance rate’ trying to enforce an exchange rate peg despite running out of reserves amid continued money printing.

The rupee fell 200 to the 360 to the US dollar in a botched attempt by the central bank to float the currency with a surrender requirement in place (forced sales of dollars to the central bank) and foods and basic essentials are now out of reach of the less affluent.

Malnutrition is also beginning to go up. A factory producing Triposha – a nutritional supplement aimed at combating malnutrition among children of low income families started in the 1970s when money printing and import controls were rife – is closed often without regular supplies of maize and soya beans.

Crisis cuts off vital food programme

Wickremesinghe was appointed Prime Minister after the President’s Rajapaksa’s brother was forced to step down from the post following widespread protests.

The appointment is said to have diluted protests somewhat, but after a month since the appointment and a fall from bad to worse, protestors are saying that he must step down, and the country must go for an election.

“Ranil was brought in ‘for the rescue’, but we know the cynical intentions behind all of that. It’s just politics as usual, and not the system change we are asking for,” said Chaminda Dias.

Dias was part of organizing the human chain, and an active protestor since the #GoHomeGota movement started.

International Approach

Many people waited for the Prime Minister’s more “diplomatic” and “international” approach to leadership in the hopes that he would help bring in much needed forex and international support to Sri Lanka.

However, the placards read different.

“Ranil is the International Face of the Rajapakshas” says one. “Ranil oyath fail” (Ranil you have failed too) says another.

“Ranil You Are Also Fail”

 

“We cannot give up until Gotabaya goes with Ranil, because as long as these useless leaders [are here] we will not get any assistance…even [from] our own people (migrant workers) living overseas,” said social Activist Vishaka Thilakarathna.

Wickremesinghe, a six time Premier now, has not captured public confidence, and got into Parliament through the National List.

Protesters called his appointment “undemocratic” and demanded an election.

Leisha Lawrence, an active protestor who had brought her sons along said “If we have billions to spend on defense and other things, why can’t we spare five billion for an election?”

Youth at the Protests

“I brought my sons along today because this is their future we are standing up for and they need to know what’s going on,” said Lawrence.

“They need to be a part of the solution, they need to be a part of pressuring the government in the next steps that need to be done.”

Her sons, Aaron, Ethan, Kieran and their friend Abiru say that they are “angry with Gota” for his part in the crisis that is depriving them of education.

“Our school is closed a lot. We’re losing a whole year of our life because our O Levels are also getting postponed.”

Sri Lanka’s Covid lockdowns and power cuts severely impacted school children, who missed out on studies and interactions with friends.

Several schools and the country’s largest state university were recently shut down due as fuel shortages intensified.

Crisis-hit Sri Lanka’s fuel shortage forces closure of schools, largest state university 

The boys wanted to encourage more young people to participate in protests.

“Just come, just show up.”

Sri Lankan youth are continuing activism through social media, but the young protesters want more people to take to the street and physically show dissent.

“We’re living through a moment in history, come and do your part. You wanna be able to tell the future gen you did your part.”

Protesting is a Privilege

But showing up physically is not an option for many, who are stuck in Sri Lanka’s ever growing fuel lines, or simply struggling to survive.

Two people died in fuel queues on June 16, bringing the death toll in queues to 10. The protesters who moved to Galle Face beachfront towards the evening observed one minutes silence in their memory.

“Gota how many more lives do you need to send home?” read one placard.

On June 15, a woman threw her child off a bridge in Wattala, and was prevented from taking her own life.

In March, a father of four died by suicide after struggling to pay off a loan of 10,000 rupees.

“People are dying on the streets. Mothers are throwing their children into the river because they don’t want to face the indignity of begging for food,” says Dias.

“That is all [Gota’s] responsibility.”

Many protesters said they were taking part in the human chain in solidarity for those who could not make it.

Nigel Karunaratne was part of a crew of cyclists at the protest. He said that the movement might have “lost a little steam” but it was important to speak out.

“Whatever changes that have come are because of the protests at Galle Face. Without them we would still be with Mahinda, Basil and the other cronies.”

The organizers of the human chain however, were happy with the turnout considering the extreme difficulties of living in Sri Lanka at the moment. (Colombo/June19/2022)

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Sri Lanka shares fall on profit taking after nine sessions

ECONOMYNEXT – Sri Lanka shares slipped on Friday after gaining for nine straight sessions reverting from its highest gain in more than seven weeks on profit taking, brokers said.

“Bourse regressed to red ending the 9-day winning streak as investors resorted to book profits in blue chip counters,” First Capital Market Research said in it’s daily note.

The main All Share Price Index (ASPI) closed 0.54 percent or 47.84 points lower at 8,843.90.

The market witnessed a turnover of 1.6 billion rupees, lower than this year’s daily average turnover of 2.9 billion rupees.

The market saw a net foreign inflow of 1 million rupees. The total net foreign inflow stood at 22 billion rupees so far for this year.

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.

The government is in discussions with Asian Development Bank (ADB) and World Bank to get loans of 1.9 billion US dollars after a reform program with the International Monetary Fund is approved.

A policy loan now being discussed with the World Bank may bring around 700 million US dollars, Coomaraswamy told a business forum organized by CT CLSA Securities, a Colombo-based brokerage.

The Asian Development Bank may also give around 1.2 billion US dollars most of which will be budget support, he said.

In the last few sessions, market gained after the Central bank governor said interest rates should eventually ease despite the fears of a domestic debt restructuring as inflation falls, increased liquidity in dollar markets, and the inter-bank liquidity improves.

The more liquid index S&P SL20 closed 0.59 percent or 16.77 points lower at 2,827.72.

So far in December ASPI gained 2.2 percent.

The ASPI gained 0.5 percent in November after losing 13.4 percent in October.

It has lost 27.6 percent year-to-date after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.

John Keells Holdings pulled the index down to close at 1.5 percent lower at 147 rupees.

Aitken Spence lost 2.0 percent to close at 141 rupees and Commercial Bank closed 1.4 percent down at 50.50 rupees a share. (Colombo/Dec09/2022)

 

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Sri Lanka bond yields end higher, kerb dollar Rs370/371

ECONOMYNEXT – Sri Lanka bonds yields ended up and the T-bills eased on active trade on Friday, dealers said.

The US dollar was 370/371 rupees in the kerb.

“The bond rates went up, however more interest was seen in the short term bills by the investors” dealers said.

A bond maturing on 01.05.2024 closed at 31.90/32.20 percent on Friday, up from 31.25/70 percent at Thursday’s close.

A bond maturing on 15.05.2026 closed at 30.30/31.30 percent steady from 30.30/31.00 percent.

The three-month T-bills closed at 30.75/31.30 percent, down from 32.00/32.25 percent.

The Central Bank’s guidance peg for interbank transactions was at 363.18 rupees against the US dollar unchanged.

Commercial banks offered dollars for telegraphic transfers between 371.78 and 372.00 for small transactions, data showed.

Buying rates are between 361.78 – 362.00 rupees. (Colombo/Dec 09/2022)

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Foreign minister, US ambassador discuss future assistance to crisis-hit Sri Lanka

ECONOMYNEXT — In a meeting in Colombo, Sri Lanka Foreign Minister Ali Sabry and US Ambassador to Sri Lanka Julie Chung discussed ways in which the United States can continue to support Sri Lanka going forward, the Ambassador said.

Chung tweeted Friday December 09 afternoon that the two officials had reflected on the “twists and turns” of 2022, at the meeting.

Minister Sabry was recently in Washington D.C. where he US Secretary of State Antony Blinken.

A foreign ministry statement said the two officials held productive discussions at the Department of State on December 02 on further elevating bilateral relations in diverse spheres, including the 75th anniversary of diplomatic relations which will be marked in 2023.

Incidentally, Sri Lanka also celebrates the 75th anniversary of its independence from the British in 2023, and President Ranil Wickremesinghe has given himself and all parties that represent parliament a deadline to find a permanent solution to Sri Lanka’s decades-long ethnic issue.

The US has been vocal about Sri Lanka addressing concerns about its human rights record since the end of the civil war in 2009 and was a sponsor of the latest resolution on Sri Lanka passed by the United Nations Human Rights Council. Unlike previous resolutions, this year’s iteration makes specific reference to the country’s prevailing currency crisis and calls for investigations on corruption allegations.

In the lead up to the UNHRC sessions in Geneva, Minister Sabry Sri Lanka’s government under then new president Wickremesinghe does not want any confrontation with any international partner but will oppose any anti-constitutional move forced upon the country.

On the eve of the sessions on October 06, Sabry said countries such as the United States and the United Kingdom, who led the UNHRC core group on Sri Lanka, are greatly influenced by domestic-level lobbying by pressure groups from the Sri Lankan Tamil diaspora.

These pronouncements notwithstanding, the Wickremesnghe government has been making inroads to the West as well as India and Japan, eager to obtain their assistance in seeing Sri Lanka through the ongoing crisis.

The island nation has entered into a preliminary agreement with the International Monetary Fund (IMF) for an extended fund facility of 2.9 billion dollars to be disbursed over a period of four years, subject to a successful debt restructure programme and structural reforms.

Much depends on whether or not China agrees to restructure Sri Lanka’s 7.4 billion dollar outstanding debt to the emerging superpower. Beijing’s apparent hesitance to go for a swift restructure prompted Tamil National Alliance MP Shanakiyan Rasamanickam to warn of possible “go home, China” protests in Colombo, similar to the wave of protests that forced the exit of former pro-China President Gotabaya Rajapaksa.

The TNA will be a key player in upcoming talks with the Wickremesinghe government on a solution to Sri Lanka’s ethnic issue. (Colombo/Dec09/2022)

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