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Wednesday February 1st, 2023

Sri Lanka rupee plunges as car registrations collapse under import controls

ECONOMYNEXT – Sri Lanka rupee has fallen from 186 to around 194 to the US dollar in January 2021 as new car imports and registrations plunged to historic lows amid import controls, data shows.

Total new registrations fell to 3,256 units in January 2021 down from 34,475 a year earlier, according to Sri Lanka vehicle registry data compiled by JB Securities, a Colombo-based brokerage.

Motor car registrations fell to 195 in January 2021 from 2,536 a year earlier.

SUVs and crossovers fell to 161 from 787 last year.

Vans fell to 78 from 911.

Three wheelers fell 20 to from 767.

Two wheelers were down to 1,228 from 26,588.

Meanwhile the rupee fell from 186.40 in December 2020 to 194.40 to the US dollar in January 2021.

Sri Lanka has imposed severe import controls in a Mercantilist belief that foreign exchange and balance of payments troubles (monetary instability) are caused by imports rather than credit driven by printed money (central bank credit or liquidity injections).

Oil also tends to pressure the currency when subsidies are finance by loans from state banks re-financed by central bank with printed money to keep interest rates down.


Sri Lanka SOE, govt credit surge in Jan 2021, private down

Sri Lanka has been printing unprecedented volumes of money over 2020 under so-called Modern Monetary Theory to finance the deficit and keep interest rates down.

The low rates and injections made rupee yields fall below domestic dollar yields and turned forward premiums negative. The central bank then banned forward covering.

In 2018 Sri Lanka printed money mostly through open market operations to control interest rates amid an private credit pick-up despite taxes being hike to bring down the budget deficit and oil being market priced to crowd out domestic non-oil consumption.

In 2018 the rupee started to collapse just as gold imports were banned. (Colombo/Mar01/2021)

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Sri Lanka coconut prices ease at auction

ECONOMYNEXT- Sri Lanka’s coconut auction prices fell in the last auction in January 2023, with average prices going down by 4.1 percent at an auction on January 26, data showed.

The average price for 1,000 nuts fell to 80.811.89 from 84,116.85 a week earlier at the weekly auction conducted by Sri Lanka’s Coconut Development Authority.

The highest price was 87,300 rupees for 1,000 nuts down from the previous week’s 90,200 rupees, while the lowest was 72,500 down from 73,000 rupees.

The auction offered 469,564 coconuts and 300,983 nuts were sold. (Colombo/ Feb 01/2023)

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Sri Lanka shares edge up at close

ECONOMYNEXT- Sri Lanka’s shares edged up on Wednesday pushed as investors bought in to beaten down shares following the previous session’s drop, market analyst said.“

At this price level what we are seeing is a lot of confidence from the investors to collect when the prices drop. So, the market is not falling sharply,” a market analyst said.

Market had also seen buying in Expolanka shares on speculation that the parent company of SG Holdings was buying back into the shares.

All Share Price Index (ASPI) edged up by 0.96 percent or 84.96 points to 8,950.01.

The most liquid index S&P SL20 gained 1.27 percent or 35.02 points to 2,799.53.

Banking and Insurance counters had seen interest on the back of positive sentiments from the IMF.

The central bank has said it could cut interest rates in future when the the country sees fall in inflation, which has already started decelerating.

The market saw a turnover of 1.5 billion rupees today,lower than the month’s daily average of 1.8 billion rupees and nearly half of 2022 average turnover of 2.9 billion rupees.

The bourse saw a flow of net foreign inflow of 45 million rupees extending the net offshore buying to 1.9 billion so far this year.

Top gainers of the day were Commercial Bank, Expolanka, and Ceylinco Insurance. (Colombo/Feb01/2023)






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Sri Lanka bond yields down at close

ECONOMYNEXT – Sri Lanka’s bond yields were down at close following a bond auction on Wednesday, dealers said while a guidance peg for interbank transactions remained unchanged.

“The rates were steady at the auction,” a dealer said.

“This can be a signal to the market saying the rates will go down in the future.”

A bond maturing on 01.07.2025 closed at 32.40/60 percent, down from yesterday’s 32.60/85 percent.

A bond maturing on 01.05.2027 closed at 29.10/35 marginally down from yesterday’s 29.20/75 percent.

The Central Bank’s guidance peg for interbank US dollar transactions remained unchanged at 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 371.38 rupees on Friday, data showed. (Colombo/Feb 01/2022)

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