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Thursday May 23rd, 2024

Sri Lanka rupee will be taken to Rs270 to dollar: President

ECONOMYNEXT – Sri Lanka’s rupee will be taken to 270 to the US dollar, President Ranil Wickremesinghe has said on a visit to the hill country, after saying in March that the currency will be taken to 280 to the US dollar by June.

“The rupee strengthen now,” President Wickremesinghe told a member of the public who said fertilizer prices were high, while he was inspecting Sri Lanka’s Pekoe Trail on a tea estate in Pussellawa.

“We will take it to 270. Then you can buy more for the rupee.”

Sri Lanka’s central bank can appreciate the rupee by operating deflationary monetary policy (selling down its securities portfolio to mop up liquidity) and buying dollars at slightly stronger rate through its ad hoc peg (exchange rate policy).

However, over the past few days excess liquidity has started to build up in money markets, which a large portion coming from inflationary operations (term and reverse repo operations).

On Tuesday net excess liquidity was 138 billion rupees, with banks borrowing 19.35 billion rupees from overnight reverse repo auction, 4.85 billion from a standing facility, and another 115 billion rupees through term facilities.

When the excess liquidity is turned into credit, rupee demand can rise.

Analysts have urged the central bank to allow some excess liquidity to remain from dollar purchases and refrain injecting money through domestic operations to over-trading banks to run a more consistent regime.

Sri Lanka’s central bank has busted the rupee from 4.70 to the US dollar since it was created by mis-targeting rates with domestic operations for rural credit, sterilizing interventions after credit picked up or through deliberate inflationary open market operations to print money for growth (macro-economic policy).

Rupee depreciation accelerated after 1978 in Sri Lanka after the country abandoned external anchoring coinciding with the IMF second amendment to its articles and operated a monetary regime without a credible anchor or anchor conflicts. The now familiar Latin America defaults started a few years later.

Sri Lanka’s rupee collapsed from around 130 to 370 levels with potential output targeting (printing money for growth) coming into play from around 2015 and eventually defaulted in 2022.

Sri Lanka’s macro-economists has persuaded president Ranil Wickremesinghe to allow them to create up to 7 percent inflation (a domestic anchor) under a new monetary law which allows implicit printing of money for growth.

Analysts have warned that Sri Lanka does not have a consistent single anchor monetary regime and flexible inflation targeting where the island ran into three currency crises with inflation under 5 percent is yet another deeply flawed operational framework.

However, over the last year the central bank has allowed the exchange rate to appreciate (a strengthening de facto external anchor) and 12-month inflation fell to just 0.9 percent in March as the external anchor overrode the domestic anchor, analysts say.

Before the 1970s parliaments around the world exercised substantial control on central bank operations blocking the ability of economic bureaucrats and other inflationists to expand money supply at will or depreciate currencies.

Before the ‘age of inflation’ and the Fed’s invention of the policy rate in the 1920s parliaments exercised full control over the value money through strict laws including outside the governing law of the central bank (the Bank Charter Act in the UK).

Before the ‘age of inflation’ and the rise of so-called spurious monetary doctrines in the 1920s, depreciation was not allowed in the UK after money was printed except with express permission of the parliament and cabinet, through a Bank Restrictions Act.

The current fashion is to claim that exchange rates are ‘market determined’, critics say, paving the way for to denying the key attributes of money as a store of value and a reliable denominator for future payments to the general public.

Related Sri Lanka rupee expected to reach 280 to US dollar by June: President

Sri Lanka’s central bank bought 700 million dollars from forex markets in March as the rupee appreciated.

Banking sources say there is a build up of delayed importer payments after President Wickremesinghe said last month that the rupee would go to 280 to the US dollar by June. Banks also tend to operate negative open positions when the currency appreciates.

The central bank itself however has not made any such claim with Governor Nandalal Weerasinghe only saying that the exchange rate will no longer be a one way bet.
(Colombo/Apr17/2024)

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Sri Lanka plans to expand Bingiriya export zone to 1,100 acres

ECONOMYNEXT – Sri Lanka is expanding an export processing zone in Bingiriya in Kurunegala and plans to link the area with Puttalam with roads and other infrastructure, Minister Bandula Gunawardana said.

A task force of ministerial secretaries will be appointed to carry out the tasks speedily, following a cabinet paper submitted by President Ranil Wickremesinghe said.

The Bingiriya zone already has 157 acres and another 282 acres is being developed by the Board of Investment, he said.

Steps would also be taken to acquire 666 acres.

There was no information whose lands would be acquired. (Colombo/May23/2024)

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Sri Lanka has power breakdowns amidst extreme weather

ECONOMYNEXT – The state-owned power utility, the Ceylon Electricity Board has reported over 36,900 breakdowns resulting in power interruptions to more than 300,000 consumers in the last three days due to inclement weather in the island, the power minister said.

“Additional service staff has been assigned to attend the breakdowns and the CEB management & service staff are working 24 hours to restore power to the affected consumers,” Minister of Power and Energy, Kanchana Wijesekera said on social media platform X (twitter).

Wijesekera said consumers could report power interruptions through the CEB hotline 1987, via SMS to 1987 with BD and the electricity consumer number to follow, or use the CEB Care app, or through http://cebcare.ceb.lk.

The South-East monsoon has seen floods, landslides and strong winds do damage to the utility provider’s infrastructure in the last week. (Colombo/May23?2024)

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Sri Lanka President calls for unity, sacrificing for a better tomorrow on Vesak day

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has recalled a sermon from the Buddha about sacrificing for a better tomorrow, and called for unity to heal and rebuild the country, as Buddhists celebrate Vesak.

Buddhists celebrate Vesak as commemorating the birth, enlightenment and passing away of the Buddha.

“At this challenging moment, we as a nation should cultivate the same great zeal for enlightenment that Buddha exemplified, inspired by his sermon, “Maththasukha parichchaga- passé che vipulan sukhan” – to sacrifice today for a better tomorrow,” President Wickremesinghe said in his Vesak day message.

“We must remember the advice of Lord Buddha, “Sabbattha Sammanaso,” to treat everyone equally and ensure we put it into practice as a country. This is the greatest offering we can present to the Buddha on this Vesak day.

“Regardless of race, religion, caste, or political affiliation, we must all unite to heal and rebuild our country. ”

The full statement is reproduced below:

The Vesak festival is a profoundly sacred day for Buddhists worldwide, commemorating the Buddha’s birth, enlightenment, and passing. Buddhists in Sri Lanka, along with their brethren around the globe, celebrate Vesak with deep devotion. They spend this period engaging in religious observances and venerating the Buddha with fervent devotion.

At this challenging moment, we as a nation should cultivate the same great zeal for enlightenment that Buddha exemplified, inspired by his sermon, “Maththasukha parichchaga- passé che vipulan sukhan” – to sacrifice today for a better tomorrow.

We must remember the advice of Lord Buddha, “Sabbattha Sammanaso,” to treat everyone equally and ensure we put it into practice as a country. This is the greatest offering we can present to the Buddha on this Vesak day. Regardless of race, religion, caste, or political affiliation, we must all unite to heal and rebuild our country. The principles of Lichchavi Raja Dharmaya will guide us in this endeavour.

Let us keep in mind that the primary aim of the Vesak festival is to foster spiritual growth and character development in a world rapidly advancing physically. I wish everyone a blessed Vesak festival.

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