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Sunday December 3rd, 2023

Sri Lanka’s CPC makes Rs88bn profit as rate-mistargeting ends

POLICY RATE LOSS: The biggest losses in SOEs, including the central bank came from mis-targeted policy rate which led to a currency collapse. The forex losses at SOEs including the Central Bank was about Rs1.3 trillion in 2022.

ECONOMYNEXT – Sri Lanka’s Ceylon Petroleum Corporation has made an 88.6 billion rupee profit in the first eight months of 2023, partly helped by currency appreciation, a Finance Ministry report said, compared to a loss of 716 billion rupees last year amid a currency collapse.

Currencies collapse when soft-pegged (flexible exchange rate) central banks print money to mis-target short-term interest rate, which are then blamed on ‘budget deficits’.

When currencies are inflated and depreciated by the monetary authority, on various pretexts, SOEs have to engage in never ending price increases.

In Sri Lanka the CPC built up large foreign borrowings as it was barred from buying dollars in recent currency crises triggered by the central bank printing money to boost growth (targeting potential output) including in 2018 when fuel was market priced people were taxed to bring the deficit down.

In the first eight months of 2023 CPC’s revenues grew 28.6 percent to 921.8 billion rupees, up 28.6 percent from 716.6 billion a year earlier amid market pricing.

As a result, CPC posted gross profit of 121.6 billion rupees in the first eight months, compared to a gross loss of 23.2 billion rupees last year.

CPC has other operational costs including finance.

With the appreciation of the rupee in 2023, the CPC has recorded a profit of 88.6 billion rupees.

In 2023 Sri Lanka’s SOE with dollar loans including the money producing SOE, the central bank make large losses on their net dollar borrowings.

The central bank had borrowed and busted dollar from the IMF and the Reserve Bank of India especially through the Asian Clearing Union.

Energy SOE’s in countries with depreciating Saltwater/Cambridge flexible monetary regimes supported by the International Monetary Fund including in Pakistan and Sri Lanka make large losses when the currencies collapse from the bureaucratically decided non-market policy rate.

In Laos, where the currency collapses like in Sri Lanka (neighboring Cambodia is dollarized and free from the grip of inflationist macro-economists) energy SOEs debt are the biggest component of sovereign debt. (Colombo/Nov18/2023)

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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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