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Monday December 4th, 2023

Sri Lanka trying to re-finance billion dollar CPC ‘Nick Leeson’ loan from state banks: report

ECONOMYNEXT – Sri Lanka is trying to re-finance billion US dollars out of more than two billion US dollars of unhedged forex loans taken by Ceylon Petroleum Corporation from state banks, which are causing massive losses as the currency weakens, a media report said.

Sri Lanka’s The Sunday Times newspaper quoted Energy Ministry Secretary K D R Olga as saying that CPC owed 2.081 billion US dollars to state-run Bank of Ceylon and People’s Bank.

The Sunday Times report said the government had set up a committee made up of Deputy Treasury Secretary Saman Fernando, CPC Managing Director Buddiha Ruwan Madihahewa to evaluate unsolicited bids from private international lenders to give a loan to the CPC.

The report quoted Olga as saying that the cabinet approval had been granted to evaluate the unsolicited proposals since calling for expressions of interest may create adverse impact.

The People’s Bank and Bank of Ceylon are charging 5.5 percent interest on the loans.

The government hoped to get a loan at below 3 percent with 10 year repayment and less than 3 percent interest, she was quoted as sayig.

A sovereign guarantee of for a billion US dollars would be given for the loan, using guarantees already issued to Bank of Ceylon and People’s Bank loans which are to be settled, she said.

Sri Lanka’s Keynesian policy makers have made the CPC borrow dollars from state banks to pay import bills instead of buying dollars from the forex market whenever the central bank printed money and created forex shortages, analysts have said.

In 2019, the CPC borrowed around 900 million US dollars taking the total loans under Treasury guarantees to 1.8 billion US dollars despite market pricing oil, as money was printed to target a call money rate and close an ‘output gap’.

CPC borrowed dollars despite having cash balances at state-run banks from crowding out consumption from market pricing oil under a price formula, effectively sabotaging the benefit of a price formula, as the cash was loaned to other borrowers to generate demand.

Analysts have likened the unhedged dollar borrowings of a utility which sells in rupees to a ‘Nick Leeson’ strategy.

Analysts believe that CPC is made to borrow dollars despite having a price formula due to a Keynesian belief system around what is known as ‘transfer problem’ where the link between domestic credit and international payments are mis-understood.


Nick Leeson-style losses at Sri Lanka’s CPC raise big questions

Sri Lanka debt crisis trapped in spurious Keynesian ‘transfer problem’ and MMT

In a 1929 debate classical economists including Swedish Nobelist Bertil Ohlin and French economist Jacques Reuff who late saved the French France tried convince John Maynard Keynes that Weimar Republics inability repay foreign dues came from to money printing and not a ‘transfer problem’

In 2018, the CPC ran a 104 billion rupee loss as the rupee was busted from 153 to 182 to the US dollar, making the utility run a 80 billion rupees forex loss.

The CPC’s total debt as of now amounts to 635 billion or 3355 million US dollars, the Sunday Times said.

Peoples’ Bank was owed 1,075 million and Bank of Ceylo 1,006 million dollars.

Oil suppliers have to be paid 597 million US dollars through Letters of Credit issued by the People’s Bank and 677 million dollars though LCs issued by the Bank of Ceylon, or a total of 1,74 million dollars the report said.

Bank loans and suppliers credit totalled 3,355 million US dollars or 635 billion rupees.

Two state agencies and Independent Power Producers (IPPs) also owed the CPC 151 billion rupees. (Colombo/June20/2021)

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Sri Lanka stocks close up as some investor interest returns

ECONOMYNEXT – The Colombo Stock Exchange closed up on Monday, CSE data showed.

The All Share Price Index was up 0.22 percent, or 23.33 points, at 10,743.59.

The S&P SL20 index was up 0.68 percent, or 20.60 points, at 3,067.73.

Turnover was at 708 million. The banks sector contributed 189 million, while the food, beverage and tobacco sector contributed 176 million of this.

Sri Lanka’s stock market has seen some investor interest return after last week’s news that the country had managed an agreement on a debt restructuring deal with an official creditor committee, and foreign funds for some development projects resumed.

Top positive contributors to the ASPI in the day were Sampath Bank Plc (up at 71.50), LOLC Holdings Plc (up at 379.00), and Commercial Bank of Ceylon Plc, (up at 90.90).

There was a net foreign outflow of 52 million.

Citrus Leisure Plc, which announced that its banquet hall and revolving restaurant at the Lotus Tower would launch on or around Dec 9, saw its share price rise to 6.20 rupees. (Colombo/Dec4/2023).

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Sri Lanka rupee closes broadly steady at 328.10/30 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 328.10/30 to the US dollar on Monday, from 328.00/10 on Friday, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.70/14.00 percent from 13.70/95 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.10 percent from 13.90/14.05 percent.

A bond maturing on 15.01.2027 closed at 14.00/14.10 percent from 14.05/10 percent.

A bond maturing on 01.07.2028 closed at 14.20/35 percent from 14.15/25 percent.

A bond maturing on 15.05.2030 closed at 14.25/45 percent, from 14.20/45 percent.

A bond maturing on 01.07.2032 closed at 14.05/40 percent, from 14.00/45 percent. (Colombo/Dec4/2023)

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Gov minister highlights abortion rights, sex-ed for children, and Sri Lanka men killing their women

ECONOMYNEXT – Sri Lanka’s legislators have politicized the topics of rape and violence without addressing the elephant in the room, Jeevan Thondaman, Minister of Water Supply and Estate Infrastructure Development said in parliament on Monday (4).

“All the members here are talking about rape. What happens after that? We must talk about abortion rights. That is not something anyone wants to touch on, and that is why we are in this place right now,” Thondaman said.

“Despite alarming statistics on rape and violence, women are often blamed and punished for it. The criminalisation of abortion is a major example of this.”

Sri Lanka has some of the most restrictive abortion laws in the world. According to a 2016 estimate by the Health Ministry, he said, approximately 658 abortions take place a day, and close to 250,000 a year.

“That’s 250,000 women whose lives you are endangering.”

He added that what was needed at this point in time was comprehensive sexual education (CSE) for children and young people.

“Only through CSE in schools will children and young people develop, accurate, age appropriate knowledge attitude and skills; positive values such as respect for human rights, gender equality, diversity and attitude and skills that contribute to a safe, healthy and positive relationship.”

Thondaman pointed out that CSE plays a pivotal role in preparing young people for a world where HIV, AIDS, sexually transmitted infections, unintended pregnancies, and sexual and gender based violence still pose a risk to their well-being.

“CSE basically empowers children take control and make informed decisions freely and responsibly.”

Thondaman also highlighted the findings of a 2021 study (Fatalities_20211109_UNFPA) by the UNFPA and the University of Kelaniya that showed that a majority of women killed in Sri Lanka were murdered by those close to them.

“62 percent of homicides of Sri Lankan women are committed by either an intimate partner, ex-partner or family member. 84 percent are killed in their own homes by someone they know.”

Police and the judiciary have failed Sri Lanka’s women, the minister pointed out.

“Only 5 percent of these cases, between 2013-2017, were ever concluded. Men claim they were provoked, or are of unsound mind or have mental illness: These have been successful defenses. And the Police often express sympathy to this narrative as opposed to the victim’s.”

“We have a history of protecting oppressors.”

It takes 7-10 years for a child rape case to conclude, he pointed out.

Establishment of child courts are needed, he said, as well as several legislative amendments. “The government is working on a new law to reform the domestic violence act, reform of marriage and divorce laws to ensure there is an easier path to divorce: no one should be forced to remain in a marriage that is either abusive or not healthy.” (Colombo/Dec4/2023)

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