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Thursday April 18th, 2024

Sri Lanka rations fuel to motorists as currency crisis continues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation (CPC) on Friday rationed fuel sales to most customers, saying it will speed up distribution and make more available fuel to more customers as the country grappled with the worst central bank crisis in the country’s history.

“This is to increase our efficiency in distributing fuel. This will be temporary,” the CPC chairman Sumith Wijesinghe told Economy Next.

Ceiling have been placed for most segments of customers from 1.00 pm Friday.

Motorcycles are given up to 1,000 rupees worth petrol which is less than 4 liters.

Three wheelers can get up to 1,500 Sri Lankan rupees ($4.5) worth or 6 litres of petrol or 8.5 litres of diesel.

Cars, Vans, and Jeeps are given up to 5,000 rupees ($15) worth fuel which is 19.7 litres of petrol or 28.4 litres of diesel.

Wijesinghe said in a statement that sales to buses, trucks and commercial vehicles are not rationed.

The move comes three days after Sri Lanka declared “preemptive default” on its all foreign loans saying it cannot service debt.

Sri Lanka is facing severe forex shortages after the central bank stopped interest rates from going up after taxes were cut in 2019 December and printed large volumes of money, creating forex shortages and pressuring a soft-peg with the US dollar.

The fuel shortage has hit the power generation and the government has been imposing extended power cuts – sometimes 13 hours per day.

India helped Sri Lanka with a 500 million fuel credit line which started in mid March. However, government sources say the Indian credit line is almost exhausted now.

The CPC chief early this week said they are discussing with India to secure another 500 million dollar credit line and looking for a number of other fuel credit proposals to manage the next few months.

Like now the central bank also printed money in 2015/2016 and 2018 created fore shortages and made the CPC borrow dollars. The central government also borrowed heavily in capital markets as forex shortages emerged, except in 2017 and 2019 when when monetary stability was maintained. (Colombo/April 15/2022)

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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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