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Tuesday November 29th, 2022

Sri Lanka state airline to fly to Europe after finding partner: Tourism Minister

ECONOMYNEXT – State-run SriLankan Airlines plans to find a joint venture partner by end 2018 and will resume flight to Europe, Tourism Minister John Amaratunga said.

"Unfortunately, the national carrier has stopped flights to Europe," Tourism Development Minister John Amaratunga said at a forum organized by the University of Colombo.

"Before end of the year, the cabinet is determined to go ahead with a joint venture with a world leading airline and get back to European destinations."

He said SriLankan flights have no seats, especially when operating from China.

Amaratunga said that the cabinet wants to further increase the fleet of the airline.

It is also not clear why the airline would want to fly to Europe when there is excess demand in Asia.

SriLankan Airlines had scrapped all routes to Europe except London, in a bid to cut losses and make it easier to find a partner.

It is not clear whether any new partner will choose to fly to Europe, which is competitive, and increase the fleet on the orders of the Cabinet.

The government is likely to take off some of the debt of the airline prior to a sale.

The airline had lost 163 billion rupees from 2009 to 2016, after Emirates exited as managing shareholder, after ex-President Mahinda Rajapaksa took personal offense at a Emirates management decision.

Under Emirates SriLankan Airlines operated with no help from tax payers.

An ongoing Presidential Commission is revealing gross mismanagement at the airline from 2006 to 2018.

SriLankan now has 13, A330 long haul aircraft and 14 A320/321 medium haul aircraft.

The airline cancelled a lease of four A350 long haul aircraft while incurring a penalty fee of 115 million dollars.

Mano Tittawella, consultant to the finance ministry said SriLankan had hired negotiators to convert the remaining order of four Airbus A350 aircraft into equipment more useful for its strategy. (Colombo/Oct/05/2018)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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Sri Lanka new CB law to cabinet soon as IMF prior action

ECONOMYNEXT – Sri Lanka’s new central bank law will be submitted to the cabinet as a prior action of International Monetary Fund with clauses to improve governance and legalize ‘flexible’ inflation targeting, Central Bank Governor Nandalal Weerasinghe said.

Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

“The central bank’s ability to finance the budget deficit will be taken out. Thirdly the flexible inflation targeting regime will be recognized in the law as the framework.”

The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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