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Monday December 4th, 2023

Sri Lanka rupee is floated, Rs230 a guidance: CB Governor

ECONOMYNEXT – Sri Lanka’s forex markets are braced for a float of the rupee after the central bank said it will no longer hold the rupee at 200 to the US dollar, amid suggestions that further monetary tightening is needed to prevent a steep fall of the rupee.

The central bank itself has called for tighter fiscal policy to help manage the exchange rate better.

The central bank said on Monday night “greater flexibility in the exchange rate will be allowed to the markets with immediate effect and it was “of the view that forex transactions would take place at levels which are not more than Rs. 230 per US dollar.”
Central Bank Governor Nivard Cabraal said the change in stance was needed to given the changing global scenario.

“We have given a guidance. It is a float,” Cabraal told EconomyNext. “We stand ready to take additional policy measures.”

However the current policy measures were sufficient, he said.

The central bank has also suggested hiking fuel and energy prices to the government as part of an 8 point plan.

The central bank is awaiting a response to the 8 point plan, Cabraal said.

Hiking taxes and fuel prices bring in tighter fiscal policy allowing the central bank to better conduct monetary policy.

Hiking fuel prices and taxes would reduce domestic credit and reduce the required corrective interest rate.

Sri Lanka has to free float the rupee and not try to peg it at a new level, former Deputy Governor W A Wijewardane said.

“In principle allowing the exchange rate is the right move,” he said. “But if this is a devaluation and they try to keep at 230 it will not eliminate the parallel exchange rates. The kerb rate will simply go up.”

A float will end interventions (reserves for imports) and their sterilization with new money, which triggers new import demand.

However recent interest rate hike of 100 basis points is not enough, he said.

“This interest rate hike is also not enough,” Wijewardane said. “Just increasing it by 1 percent is not enough.

“Inflation is at 15 percent and the budget deficit is high. The rate has not addressed the macro-economic imbalances.”

If interest rates are too low to curb domestic credit and finance the budget, the rupee can fall further than required.

Sri Lanka business chambers also suggested pre-emptive debt restructuring which would also reduce the corrective interest rates.

RelatedSri Lanka should market price energy, re-structure debt, go to IMF: biz chambers

Analysts had also warned that a surrender requirement to the central bank which create money will also undermine the exchange rate further. (Colombo/Mar08/2022 – Update IV)

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Sri Lanka stocks close up as some investor interest returns

ECONOMYNEXT – The Colombo Stock Exchange closed up on Monday, CSE data showed.

The All Share Price Index was up 0.22 percent, or 23.33 points, at 10,743.59.

The S&P SL20 index was up 0.68 percent, or 20.60 points, at 3,067.73.

Turnover was at 708 million. The banks sector contributed 189 million, while the food, beverage and tobacco sector contributed 176 million of this.

Sri Lanka’s stock market has seen some investor interest return after last week’s news that the country had managed an agreement on a debt restructuring deal with an official creditor committee, and foreign funds for some development projects resumed.

Top positive contributors to the ASPI in the day were Sampath Bank Plc (up at 71.50), LOLC Holdings Plc (up at 379.00), and Commercial Bank of Ceylon Plc, (up at 90.90).

There was a net foreign outflow of 52 million.

Citrus Leisure Plc, which announced that its banquet hall and revolving restaurant at the Lotus Tower would launch on or around Dec 9, saw its share price rise to 6.20 rupees. (Colombo/Dec4/2023).

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Sri Lanka rupee closes broadly steady at 328.10/30 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 328.10/30 to the US dollar on Monday, from 328.00/10 on Friday, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.70/14.00 percent from 13.70/95 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.10 percent from 13.90/14.05 percent.

A bond maturing on 15.01.2027 closed at 14.00/14.10 percent from 14.05/10 percent.

A bond maturing on 01.07.2028 closed at 14.20/35 percent from 14.15/25 percent.

A bond maturing on 15.05.2030 closed at 14.25/45 percent, from 14.20/45 percent.

A bond maturing on 01.07.2032 closed at 14.05/40 percent, from 14.00/45 percent. (Colombo/Dec4/2023)

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Gov minister highlights abortion rights, sex-ed for children, and Sri Lanka men killing their women

ECONOMYNEXT – Sri Lanka’s legislators have politicized the topics of rape and violence without addressing the elephant in the room, Jeevan Thondaman, Minister of Water Supply and Estate Infrastructure Development said in parliament on Monday (4).

“All the members here are talking about rape. What happens after that? We must talk about abortion rights. That is not something anyone wants to touch on, and that is why we are in this place right now,” Thondaman said.

“Despite alarming statistics on rape and violence, women are often blamed and punished for it. The criminalisation of abortion is a major example of this.”

Sri Lanka has some of the most restrictive abortion laws in the world. According to a 2016 estimate by the Health Ministry, he said, approximately 658 abortions take place a day, and close to 250,000 a year.

“That’s 250,000 women whose lives you are endangering.”

He added that what was needed at this point in time was comprehensive sexual education (CSE) for children and young people.

“Only through CSE in schools will children and young people develop, accurate, age appropriate knowledge attitude and skills; positive values such as respect for human rights, gender equality, diversity and attitude and skills that contribute to a safe, healthy and positive relationship.”

Thondaman pointed out that CSE plays a pivotal role in preparing young people for a world where HIV, AIDS, sexually transmitted infections, unintended pregnancies, and sexual and gender based violence still pose a risk to their well-being.

“CSE basically empowers children take control and make informed decisions freely and responsibly.”

Thondaman also highlighted the findings of a 2021 study (Fatalities_20211109_UNFPA) by the UNFPA and the University of Kelaniya that showed that a majority of women killed in Sri Lanka were murdered by those close to them.

“62 percent of homicides of Sri Lankan women are committed by either an intimate partner, ex-partner or family member. 84 percent are killed in their own homes by someone they know.”

Police and the judiciary have failed Sri Lanka’s women, the minister pointed out.

“Only 5 percent of these cases, between 2013-2017, were ever concluded. Men claim they were provoked, or are of unsound mind or have mental illness: These have been successful defenses. And the Police often express sympathy to this narrative as opposed to the victim’s.”

“We have a history of protecting oppressors.”

It takes 7-10 years for a child rape case to conclude, he pointed out.

Establishment of child courts are needed, he said, as well as several legislative amendments. “The government is working on a new law to reform the domestic violence act, reform of marriage and divorce laws to ensure there is an easier path to divorce: no one should be forced to remain in a marriage that is either abusive or not healthy.” (Colombo/Dec4/2023)

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