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Sunday December 3rd, 2023

Sri Lanka’s central bank buys bonds in new money printing phase

ECONOMYNEXT – Sri Lanka’s central bank has bought bonds up to 2.2 years, going beyond 12 month Treasury bills beginning a new phase of money printing.

The central bank is now paying lip service that  it is ‘not printing money’, but has injecting cash in multiple ways, to trigger several currency crises since 2015, generating instability and spooking foreign investors.

The central bank bought a total of 8.3 billion rupees bonds at an auction conducted on September 25.

About 2.6 billion rupees were printed for around 1 year 7 months at 8.60 percent, another 5.1 billion rupees were printed for over 1 year and 10 months for 8.67 percent.

Another 605 billion rupees were printed at 8.77 percent for around two year and three months.

Under then Governor A S Jayewardene, a classical style economist, the central bank stopped printing money through bond purchases.

Sri Lanka’s monetary policy has deteriorated in recent years with the rupee collapsing from 131 to 182 to the US dollar and currency crises coming in quick succession.

During the 2015/2016 crisis, analysts have also noted ‘operation twist’ style activity by the central bank.

Banks deposited 33 billion rupees of excess liquidity in the overnight window and repo auctions on September 26.

The rupee closed at 181.80/182.00 to the US dollar in the spot market on Thursday.

The central bank operates a highly unstable peg called the ‘flexible exchange rate’ where both money and exchange policies are selectively used to depress the rupee, at its own discretion, critics have pointed out.

Excess liquidity including base money injected through dollar purchases to operate a pegged exchange rate is kept for extended period of time until the rupee falls.

When the rupee falls it is not defended until the fall is ‘disorderly’. However dollars are bought to inject money without a similar ‘disorderly’ gain.

The central bank also injects money through forex swaps in the same way foreign speculator hit East Asian currencies through the offshore swap market. Sri Lanka does not have an off-shore swap market for foreigners to swap dollars for rupees, but the counterparty is the Treasury.

The central bank also buys dollars from the Treasury outright at market rates with no ‘disorderly appreciation’ rule.

Growth has collapsed under monetary instability. The country also has large volumes of foreign debt. Analysts warn that Sri Lanka is running out of room to survive monetary crises. (Colombo/Sept26/2019)

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Sri Lanka UGC wants to boost number of IT-related degrees

ECONOMYNEXT – Sri Lanka’s University Grants Commission is of the view to boost the number of Information Technology (IT) related degrees in state universities with an aim to pave the way for a digital economy.

Sri Lanka’shigher education system has been producing more graduates in Arts stream while the degrees in highly demanded IT and other engineering services are being looked at only now.

“We do have a high demand for engineering, science, AI, computer and electronical engineering

studies,” Chairman of University Grants Commission, Sampath Amaratunga, told reporters at aa media briefing on Friday

“However, while avoiding neglecting the humanities, we should develop new IT skills.”

Amaratunga confirmed that a student who studied in any stream could obtain an IT degree, including students who studied in the arts stream.

The UGC data show that out of 18,490 engineering technology stream students who sat for their Advanced Levels (A/L) in 2022, 10634 were eligible for university.

“Even streams like agriculture should be encouraged to use technology,” Amaratunga said. (Colombo/Dec 2/2023)

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Sri Lanka leader inaugurates Climate Justice Forum at COP28 in Dubai

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe launched Climate Justice Forum (CJF) at the ongoing 2023 United Nations Climate Change Conference (COP28) held in Dubai in a move to gather support for vulnerable nations hit by climate-change led disasters.

This year’s climate summit held in Dubai’s EXPO2020 features a raft of issues for countries working to find common ground in tackling climate change, including whether to phase out fossil fuels and how to finance the energy transition in developing countries.

Wickremesinghe inaugurated the Climate Justice Forum at COP28 on Saturday and emphasized the critical importance of addressing climate issues with a sense of justice and equity.

The President had been in talks with many nations vulnerable to climate change disasters including African and South American countries to get their support for the CJF.

The move is to compel advanced and developed countries to look into the poor nations hit by the climate changes and help them to get over economic and debt burdens by either investing more in green energy initiatives or writing off debts to ease financial pressure.

Sri Lanka, which is now facing an unprecedented economic crisis, has seen increasing losses and damages, both human lives and physical properties due to climate change-led disasters like floods, drought, and earth slips.

In his speech at the COP28 forum, Wickremesinghe on Friday said the Climate Justice Forum will provide a platform for constructive and proactive engagements. (Dubai/Dec 2/2023)

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Sri Lanka IMF review goes to executive board on December 12

ECONOMYNEXT – The first review of Sri Lanka’s International Monetary Fund program is scheduled to go the lender’s Executive Board for consideration on December 12.

Sri Lanka officials were expecting the review to be completed in December as soon as official creditors gave their assurances.

According to the notice Sri Lanka had missed one performance criterion and has requested modifications.

Sri Lanka has outperformed on a number of quantity targets including inflation. In addition to quantity PCs there was also one non-accumulation of arrears.

There would also be re-phasing of access. The review was originally expected around September with another review based on December data, leading to September and March disbursements.

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