ECONOMYNEXT – Sri Lanka’s state-run Bank of Ceylon has agreed to give a loan of 22 billion rupees to the power utility to import coal utility after a tariff hike, Energy Minister Kanchana Wijesekera said.
Foreign exchange availability had increased in Sri Lanka’s after the island’s reserve collecting central bank halted inflationary policy (generally called money printing or the acquisition of domestic assets) which triggers forex shortages.
However, the CEB did not have rupee cashflows to pay for coal upfront, despite dollars being available in the banking system.
The CEB had also sought a 50 billion rupee loan from state-run People’s Bank to pay for renewable power producers, Wijesekera told reporters.
The CEB hiked rates 66 percent on February 15 to improve cashflows.
CEB owed 118 billion rupees to Ceylon Petroleum Corporation but talks are under way to get fuel for uninterrupted supply, he said.
Minister Wijesekera said the power price hike was a key milestone in getting an IMF program.
Getting credit from the central bank has now been prohibited by the IMF he said.
Sri Lanka’s rupee collapsed from 200 to 360 to the US dollar after two years of money printing and a float botched with as surrender rule.
In Pakistan the IMF has asked for subsidies to be removed after the currency collapsed from 229 rupees to the US dollar to around 270 tot the US dollar.
Currencies issued by reserve collecting central banks (soft-pegged) collapse due to artificially low interest rates enforced by open market operations, re-financing of private credit or monetizing debt to keep longer term rates down. (Colobmo/Feb18/2023)