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Saturday April 20th, 2024

Sri Lanka raised fuel prices to strengthen economy, rupee: President’s office

ECONOMYNEXT – Sri Lanka has raised fuel prices to strengthen the economy, the rupee and the banking system which has loaned over 652 billion rupees to the Ceylon Petroleum Corporation, the President’s office said.

The administration has come under fire for the price hike as an election promise was given that prices would be maintained with a fuel price stabilization fund, through which revenue was to have been collected with the high prices maintained when oil prices collapsed last year.

“..[T]hese price increases are only one key factor in a common strategy that strengthens the local economy,” a statement from the President’s office said.

“It aims to strengthen the country’s banking system and maintain low interest rates, reduce foreign exchange spending and strengthen the exchange rate.”

In a dramatic move Secretary of President Gotabaya Rajapaksa’s Sri Lanka Podujana Party called for the resignation of Petroleum Minister Udaya Gammanpila after the fuel price hike.


Sri Lanka ruling party kindles resignation drama over fuel price hike

Sri Lanka to hike fuel prices, jettisoning price control strategy

However the statement said a cost of living committee chaired by President Rajapaksa along with Prime Minister Mahinda Rajapaksa had examined the reasons for the price hike.

Crude oil prices had risen to 70 dollar a barrel, from 45 dollars in 2020, when the oil import bill was 2,325 million dollars, down from 3,677 million in 2020.

In 2020, the oil bill was likely to be 4000 billion US dollars, the statement said.

The Ceylon Petroleum Corporation was also losing money and had loans of 652 billion due to the Bank of Ceylon and People’s Bank.

“As the Ceylon Electricity Board (CEB) has also to repay nearly Rs. 85 billion in loans to the two banks, the Treasury has issued bonds on loans given by the state banks and it has to pay a higher interest on the loans as well,” President’s office said.

Sri Lanka has faced severe forex shortages in 2020 with record money printing.

Analysts have called for laws to restrain Sri Lanka’s central bank’s ability to inject money, so that monetary stability would be maintained, trade could take place and the economy allowed to grow.

The money printing pegged central bank was set up by a US ‘money doctor’ in 1950 in the style of Argentina’s central bank.

Similar pegged central banks set up by the Latin America unit of the Federal Reserve with cookie-cutter monetary laws in South and Central America, the Middle East and Asia have ended up in import substitution and sovereign default with some degenerating into dictatorships, critics have said.

In the absence of central bank money printing, the money available to spend domestically or imports will be limited to inflows.

Sri Lanka had free trade, and a fixed exchange rate before 1950 when a currency board without money printing powers like Singapore and Hong Kong was in operation.

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Sri Lanka discussing giving extra land, water for Chinese oil refinery

ECONOMYNEXT – Sri Lanka is in discussions with China’s Sinopec to give extra land and assure water supplies after the company decided to expand the capacity of a planned oil refinery in Hambantota, Energy Minister Kanchana Wijesekera said.

“There are concerns on how the water supply is going to be provided for the refinery,” Minister Wijesekera told reporters Friday.

The refinery will need more land and also revise conditions in a Board of Investment agreement, he said.

Read more
Sinopec to double capacity of new refinery in Sri Lanka’s Hambantota

Recommendations and decisions from Sri Lanka’s side had already been sent and Sinopec is expected to revert back in May.

“We are hoping to sign the agreement once everyone has agreed,” Wijesekara said.

The principle agreements are expected to be signed by June, he said.

The refinery could sell up to 10 percent of its output in the domestic market.

“There is no commitment by the government to purchase anything,” Minister Wijesekera said. (Colombo/Apr19/2024)

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Sri Lanka rupee closes weaker at 302.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 302.00/50 to the US dollar in the spot forex market on Friday, down from 301.50/302.00 a day earlier, dealers said.

There was increased demand for dollars after the central bank bought 715 million dollars from forex markets. In the previous two months it was buying on average about 200 million US dollars, leaving market participants and bank in a ‘oversold’ position.

There were some official dollars sales Friday dealers said.

READ Sri Lanka rupee quoted wide to US dollar as peg inconsistencies flare up

Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed at 11.30/40 percent down from 11.35/40 percent.

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

A bond maturing on 15.12.2028 closed stable at 12.15/25 percent.

A bond maturing on 15.09.2029 closed stable at 12.30/40 percent.

A bond maturing on 01.10.2032 closed stable at 12.40/50 percent. (Colombo/Apr19/2024)

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Sri Lanka stocks close down, banks trade down

ECONOMYNEXT – The Colombo Stock Exchange closed down on Friday, data on its site showed.

The broader All Share Index closed down 0.38 percent, or 44.80 points, at 11,753; while the S&P SL20 Index closed down 0.53 percent, or 18.46 points, at 3,456.

Turnover was at 1.4 billion. The diversified financials (Rs366mn) and banks (Rs266mn) sectors continued to see selling pressure.

“This was possibly due to uncertainty around the bond discussions,” market participants said.

With the exception of Sampath Bank Plc (up at 77.50) all other banks traded down in the day. Commercial Bank of Ceylon Plc was down at 104.50, Hatton National Bank Plc was down at 188.50, and DFCC Bank Plc was down at 77.00.

LOLC Finance Plc saw the most trades and closed up at 6.40. Another LOLC company, Browns Investments Plc, also saw high traded volumes and closed up at 5.60.

Softlogic Capital Plc was up at 7.00, and Softlogic Holdings Plc was up at 11.20. A trading suspension imposed on SHL.N0000 was lifted effective today as the company submitted the annual report for the year ended 31st March 2023.

However, shares of the Company will remain in the Watch List “due to Qualified Audit Opinion and Emphasis of matter on going concern in the Independent Auditor’s Report in the Audited Financial Statements for the year ended 31st March 2022.”

Dialog Axiata Plc, which announced its merger with Bharti Airtel Thursday, saw its share price close up at 11.90.

“There was some traction on index heavyweights,” market participants pointed out.

Top contributors to the APSI included Aitken Spence Plc (up at 134.50), Ceylon Tobacco Company Plc (up at 1,245.25, and Lion Brewery (Ceylon) Plc (up at 1,048.50).

There was a net foreign inflow of 5 million. (Colombo/Apr19/2024)

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