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Saturday June 3rd, 2023

Sri Lanka targets US$3.5bn forex reserves by end 2021

ECONOMYNEXT – Sri Lanka is expecting to boost the island’s foreign exchange reserves which had fallen to 2.3 billion US dollars by October to 3.5 billion US dollars by the year end, Central Bank Governor Ajith Nivard Cabraal said.

Sri Lanka has lost forex reserves steadily from around August 2019 as inflation policy involving liquidity injections began despite having a pegged exchange rate.

Sri Lanka’s gross foreign currency reserves have plummeted 70 percent to 2.3 billion dollars in the first 10 months of the year and efforts are under-way to boost it with swaps and other borrowings.

“It will include several other swaps as well and it will be at least 3.5 billion US dollars,” he told a post-monetary policy media briefing in Colombo.

The central bank in its six-month policy framework announced on October first had estimated an inflow of 10.85 billion US dollars in the three months through December.

That inflows include 1 billion US dollar bilateral loans, 300 million US dollar multilateral loans, 300 million US dollar syndicated loans, 1 billion US dollars from swaps with other central banks, 4.3 billion US dollars from both merchandise and service exports and 1.8 billion US dollars from worker remittance.

Sri Lanka has 1.5 billion US dollar equivalent Renminbi swap with the People’s Bank of China, which is not drawn down.

“The Chinese one if we take it into our books by drawing the cash then it will be included, but otherwise it won’t. Right now we are taking the reserves without the Chinese loans,” he said.

Governor Cabraal said the RMB is an international reserve currency which can be counted among reserves.

He said Sri Lanka had some RMB assets already.

Sri Lanka’s 81 billion US dollar economy is facing heightened risk of sovereign debt default according to rating agencies which have downgraded the currency to CCC.

Cabraal however said money to repay debt in 2022 has been earmarked and there will be no default.

Foreign reserves of a pegged monetary regime go down as dollars are given in exchange for the newly printed money (convertibility) to prevent the exchange rate from falling.

Sri Lanka has found it more difficult to maintain monetary stability after call money rate targeting with excess liquidity began about five years ago, analysts have said, forcing the central bank and government to borrow abroad to repay loans or run-down existing reserves. (Colombo/Nov25/2021)

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Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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