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Thursday April 18th, 2024

Sri Lanka to freeze hiring, halt new projects, target subsidies

ECONOMYNEXT – Sri Lanka’s state agencies have been asked to cut spending, overtime and no money will be allocated for new hires ahead of a preparing a budget for 2021 as tax cuts and Coronavirus had reduced state revenues.

There will be no provisions for new hires in 2022, Ministry Secretaries and Department chiefs have been told by the Treasury in a circular.

The public sector consumed 84 percent of taxes collected up to April and salaries and wages have exceeded the increase in tax collections up to April.

Sri Lanka has been hiring tens of thousands of unemployed graduates in an already bloated public service and giving them lifetime salaries and pensions.

Finance Minister Basil Rajapaska had told cabinet that no new appointment letters will be given, cabinet spokesman Minister Ramesh Pathirana said.

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Authorities have been printing money as bond auctions failed due to yield controls, triggering forex shortages.

Sri Lanka has now started allowing interest rates to go up which will help reduce money printing and forex shortages but bond auctions are still dysfunctional.

In order to reduce the corrective interest rate, the government has to reduce the deficit by cutting spending and raising new taxes.

However such moves are opposed by the so-called ‘anti-austerity brigade’ in most countries who advocate Keynesian stimulus, money printing and state expansion.

Cutting spending and raising taxes would hurt the public less than further steep falls in the currency and inflating prices, analysts have said.

Sri Lanka’s state workers union fearing salary cuts have already asked for a lockdown to be lifted so that private sector workers can go to work and generate taxes.

State agencies have been asked to reduce requests for overtime, use technology for online meetings instead of travelling at the cost of fuel and refreshments.

No requests should be made to lease new buildings and before extending leases, use of space in existing government buildings should be made.

Beneficiaries of welfare programs should be accurately identified and ineligible people excluded and programs of the central and provincial governments should be integrated.

Foreign funded projects on which commitments have been made should be completed fast.

Priority should be given to complete locally funded projects already started, and new projects without a completion date where commitments have not already been made will not be given allocations. (Colombo/Aug29/2021)

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Sri Lanka’s discussions with bondholders constructive: State finance minister

ECONOMYNEXT – Sri Lankan authorities continue to engage all debt restructuring negotiations in good faith, within principles of equitable treatment among creditors, and with maximum transparency within the norms of such negotiations, State Minister of Finance, Shehan Semasinghe has said.

“It is standard practice, when a representative group of bondholders is formed, to entertain confidential discussions with such group and its appointed advisors. In the case of Sri Lanka, the Ad Hoc Group of Bondholders represents holders controlling more than 50% of the bonds, which make them a privileged interlocutor for Sri Lanka,” Semasinghe said on X (twitter).

“It is well understood that given the price sensitive nature of the negotiations, and according to market regulations, discussions with the Group and its advisors are to be conducted under non-disclosure agreements. This evidently restricts the ability of the Government to unilaterally report about the substance of the discussions.

“The cleansing statement, which was issued on the 16th of April, at the conclusion of this first round of confidential discussions with members of the Group, aims at informing the Sri Lankan people, market participants and other stakeholders to this debt restructuring exercise, about the progress in negotiations. It provides the highest possible level of transparency within the internationally accepted practices in such circumstances.

“As informed in this statement, confidential discussions held in recent weeks with bondholders’ representatives proved constructive, building on the restructuring proposals presented by both parties. During the talks both sides successfully bridged a number of technical issues enabling important progress to be made. Sri Lanka articulated key remaining concerns that need to be addressed in a satisfactory manner.

“The next steps would entail further consultation with the IMF staff regarding assessments of the compatibility of the latest proposals with program parameters. Following these consultations, we hope to continue discussions with the bondholders with a view to reaching common ground ahead of the IMF board consideration of the second review of Sri Lanka’s EFF program.”

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Sri Lanka rupee weakens at 301.00/302.05 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 301.00/302.05 to the US dollar in the spot forex market on Tuesday, from 299.00/10 on Tuesday, dealers said. Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed stable at 11.30/35 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent up from 11.95/12.00 percent.

A bond maturing on 15.12.2028 closed at 12.10/20 percent down from 12.10/15 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent.

A bond maturing on 15.03.2031 closed at 12.30/50 percent. (Colombo/Apr17/2024)

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Sri Lanka Treasury Bill yields down across maturities

ECONOMYNEXT – Sri Lanka’s Treasuries yields were down across maturities at Wednesday’s auction with the 3-month yield moving down 7 basis points to 10.03 percent, data from the state debt office showed.

The debt office sold all 30 billion rupees of 3-month bills offered.

The 6-month yield fell 5 basis points to 10.22 percent, with 25 billion rupees of bills offered and 29.98 billion rupees sold.

The 12-month yield dropped 4 basis points to 10.23 percent with 18.01 billion rupees of bills sold after offering 23 billion rupees. (Colombo/Apr17/2024)

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