An Echelon Media Company
Monday November 28th, 2022

Sri Lanka’s economic consequences of the peace; monetary instability and trade lockdown: Bellwether

ECONOMYNEXT – While Sri Lanka defeated the Tamil Tigers in 2009 and the Coronavirus in 2020 – the battle is not yet over – it is rapidly losing the war with monetary stability, and the country is in a trade and foreign exchange lockdown that was not seen during the height of the civil war.

Sri Lanka’s central bank is printing unprecedented volumes of money, despite upcoming foreign debt and downgrades the country has suffered.

In 2018, Sri Lanka suffered a downgrade despite tax hikes and the deficit being brought down by the then-Finance Minister Mangala Samaraweera, showing very well that no policy framework will work without monetary stability.

As the German (Federal Republic) Minister Karl Schiller said – Stability may not be everything but without stability everything is nothing.

Economic consequences of the peace

Sri Lanka’s monetary policy has progressively deteriorated after the civil war; starting from 2011/2012 balance of payments crises.

As a result, the country is now in severe monetary and balance of payments problems it did not suffer even during the height of the war.

As this column is written more than 220 billion rupees has been printed and 1.3 billion US dollars have been lost.

Amid currency falls in 2018 despite severe fiscal corrections, the sovereign rating had been downgraded to B- as warned in these columns earlier due to the country’s obsession with low non-market interest rates.

Related

Sri Lanka needs monetary discipline to avoid further downgrades: Bellwether

Sri Lanka heading for uncertainty with low rate obsession: Bellwether

This column warned several times that if the central bank continued with these policies that same thing that happened to pre-World War II Weimar Republic Germany would happen to Sri Lanka.

If Sri Lanka is to progress it has to follow the German policies after World War II, followed by the Ordoliberals, which led to the German Economic Miracle.

When John Maynard Keynes wrote Economic Consequences of the Peace, he could very well have been writing about Sri Lanka and in fact this country is under the same illusions.

Sri Lanka’S current monetary policies also have some parallel with what happened in Nazi Germany.

Of ÖFFA bills and Contractor bills

Sri Lanka’s Central Bank is set to monetize billions of contractor bills, after monetizing over Rs100 billion of private bank loans with bank re-finance – money printing.

The contractor bills would be monetized with 1 percent money from the Central Bank in a scheme similar to that hatched in Nazi Germany to circumvent budget and Central Bank rules.

In fact Sri Lanka’s Central Bank promoted by New Dealers in the US – which destroyed the Philippines and South Vietnam by promoting bad leaders and almost destroyed Korea (and Japan) has much more leeway to create money than the Reichsbank.

In 1932, the then German cabinet in consultation with Reichsbank Governor Hans Luther cooked up a scheme to finance government spending without directly printing money for the Treasury.

Bills would be issued through a company (like a contractor) called the German Society for Public Works (Deutsche Gesellschaft für öffentliche Arbeiten AG) which would be discounted (re-financed) by the Reichsbank to finance public buildings.

They were called the Öffa bills. Luther agreed to re-finance only a small portion.

After Hitler became Chancellor in 1933 he wanted the scheme to be expanded.

Hans Luther disagreed and was replaced by Hjalmar Schacht, who started a similar scheme called MEFO bills.

MEFO bills were issued by the Metallurgical Research Corporation (Metallurgische Forschungsgesellschaft) another similar shell company, which would given to banks to get money, and in turn would be discounted/re-financed by the Reichsbank on demand.

Deferred

MEFO bills carried an interest rate of 4 percent. Though issued for six months, they were extendible by 90 days. Schacht extended the maturity to reduce the chances of the bills coming up for redemption.

Germany resorted to MEFO bills because the Reichsbank law prevented direct financing of the deficit. Under John Exter’s Monetary Law no such prohibition exists and the discounting of contractor bills and the re-financing of COVID-19 loans comes on top of direct financing of the deficit of hundreds of billions of rupees.

On available data over 400 billion had been injected to the banking system so far, and 1.3 billion US dollars had been lost up to June.

The central bank is engaging in swaps like the Philippines central bank to boost reserves. About 150 billion in re-finance is to be issued. The exact volume of contractor bills has not been disclosed.

Nobody knew the exact volume of MEFO bills issued either. However when they eventually matured there was a huge explosion in money supply around 1939.

They created foreign exchange problems for Germany and gold losses (which were boosted with the reserves of new countries that Hitler conquered), leading to Hitler to make his well-know ‘Export or Die’ speech which was repeated by J R Jayewardene during monetary instability after 1978.

In Sri Lanka contractor bills would be immediately discounted, not five years down the line.

The effects would be seen fast. The other reason that Hitler resorted to MEFO bills was to circumvent budget rules set by the Versailles treaty.

By issuing bills which can be discounted though the central bank budget rules were circumvented.

IMF e-libraby: Germany in the Interbellum: Camouflaging Sovereign Debt

Budgetary Control

“Inflation is anti-democratic,” explained classical economist Ludwig von Mises. “Democratic control is budgetary control. “The government has but one source of revenue – taxes.”

“No taxation is legal without parliamentary consent. But if the government has other sources of income it can free itself from this control.”

There are other troubling facets in recent data released by the Central Bank. The agency had printed Rs50 billion for an ‘energy stabilization’ fund. This fund was supposed to be built out of taxes.

Why is printed money needed? Also how legal are these funds outside of the consolidated fund?

Sri Lanka has made a game of presenting a non-credible budget to parliament and then finding ways to undermine it especially after the war. These include funding the Road Development Authority and the National Water Supply and Drainage Board with guarantees.

The RDA funding tends to understate the deficit in the year debt is incurred. The money is later paid out of capital spending because the agency has no revenue.

Sri Lanka is now under budget problems also due to the lack of elections. That is probably why contractor bills are not settled by selling government bonds which is the simple solution, but a subterfuge like the MEFO bills is resorted to.

However it may also be due to the desire for ‘stimulus’ or the obsession with low interest rates that had led to high interest rates and a slump later.

Keynes Haunts through REER Targeting, Stimulus

Sri Lanka’s latest downgrade came in the wake of a fiscal ‘stimulus’ in the form of tax cuts and monetary ‘stimulus’ in the form of rate cuts and liquidity injections.

However, it is a mistake to blame the troubles only on the most recent ‘stimulus’.

The reason for the ‘Keynesian stimulus’ was the slump in 2019, which was created by liquidity injections and rate cuts in April 2018, the so-called ‘buffer strategy’ and also the July Soros-style swaps in the form of a monetary stimulus.

The reason such a monetary stimulus was done was due to targeting the call money rate and also targeting the potential output gap.

The International Monetary Fund taught the central bank to calculate the output gap. When Fed Governor Arthur Burns, targeted the output gap the entire Bretton Woods system collapsed in 1971. The Great Recession was due to the so-called dual mandate.

Many of Burns’ claims – that there was a component of non-monetary inflation – had been heard in Sri Lanka over the last few years.

The bloating of the debt and the slowing economy is due to currency collapse.

Under Governor Indrajith Coomaraswamy a real effective exchange rate (REER) was targeted by depreciation amid claims that East Asia ‘undervalued’ their currencies – a false charge frequently leveled by US Mercantilist in Western media which was taken to a new level by Trump in a trade war.

In 1993, China, in fact, stopped devaluation and fixed the Yuan. Japan fixed the currency at 360 after its own episode of Economic Consequences of the Peace, luckily because Joseph Dodge, a US banker who worked in post-war Germany with Ordoliberals, was helicopter dropped to Tokyo.

He stopped not MEFO bills but ‘Fukkin bonds’, which were also bought by the Bank of Japan for a reconstruction bank and fixed the currency at 360 and ended dual exchange rates and inflation when up to 600 yen was paid under a multiple exchange rate system.

The Yen exchange rate remained until the Bretton Woods collapsed in 1971 and has since appreciated to 110 to the US dollar amid claims by US Mercantilists that the Yen was undervalued and it needed appreciation to stop the trade deficit.

But Japan’s trade deficit with the US did not disappear, because the US was deficit spending with foreign loans (exporting debt) and getting a lot of FDI (exporting investments), which was the real reason for the gap.

In the same way the trade deficit with China did not disappear either after the Yuan was appreciated from 2005. However China’s growth has fallen and interest rates have been volatile.

Economic Nationalism

Depreciation and REER targeting is a problem with Keynesianism and so-called Lost Generation of economists that follows the Cambridge dons’ teaching.

Despite lessons from East Asia’s best performing nations including Singapore, Taiwan, Thailand, Korea (and Japan earlier) that strong currencies create stability and preserve domestic capital, facts are ignored in favour of ideology.

“The days are gone in which most persons in authority considered stability of the exchange rates to be an advantage,” wrote Mises as far back as 1944 but he could have very well been talking of the REER targeting exercise of the last administration.

“Devaluation of a country’s currency has now become a regular means of restricting imports and expropriating foreign capital.

“It is one of the methods of economic nationalism. Few people now wish stable foreign exchange rates for their own countries.

“Their own country, as they see it, is fighting the trade barriers of other nations and the progressive devaluation of other nations’ currency systems.

“Why should they venture to demolish their own trade walls?”

The words were echoed by then-Governor Coomaraswamy in early October after the rupee fell sharply amid liquidity injections.

“Things like potatoes and onions, we are producing more which can compete with imports,” Coomaraswamy told reporters.

Related Onions, potatoes to cushion Sri Lanka depreciation shock

Each time the rupee collapsed other Central Bankers, including Arjuna Mahendran, have also claimed it made Sri Lanka more ‘competitive’, while Singapore’s exchange rate appreciated from 3 to 1.2 from the collapse of the Bretton Woods, Hong Kong fixed it though a currency board.

Malaysia, Korea and Thailand also pegged strongly and had only one East Asia crisis.

“The Keynesian school passionately advocates instability of foreign exchange rates,” noted Mises.

Spurious Transfer Problem

Sri Lanka not only believes in devaluation to promote exports, but also believes that their foreign exchange shortages are caused by the lack of exports or imports or both, rather than monetary instability.

This is also an idea dating back from Keynes’s Economic Consequences of the Peace.

Before World War II, Western leaders were led to believe that German war reparations were triggering forex shortages in Weimar Republic Germany and not money printing.

“The Allies were from the very beginning of the negotiations handicapped by their adherence to the spurious monetary doctrines of present day statist economics,” wrote Mises.

“They were convinced that the payments represented a danger to the maintenance of monetary stability in Germany and that Germany could not pay unless its balance of trade was ‘favourable’.

“The truth is that the maintenance of monetary stability and of a sound currency system has nothing whatever to do with the balance of payments or of trade.”

“If a country neither issues additional quantities of paper money nor expands credit, it will not have any monetary troubles.”

“An excess of exports is not a prerequisite for the payment of reparations. The causation, rather, is the other way round. The fact that a nation makes such payments has the tendency to create such an excess of exports.”

“There is no such thing as a ‘transfer’ problem.

“If the German Government collects the amount needed for the payments (in Reichsmarks) by taxing its citizens, every German taxpayer must correspondingly reduce his consumption either of German or of imported products.

“Thus collecting at home the amount of Reichsmarks required for the payment automatically provides the quantity of foreign exchange needed for the transfer.”

To retain the ability to pay foreign debt, Sri Lanka’s government must sell debt domestically at auctions (which is a type of default of domestic debt) without the Central Bank printing money to take up a part of the issue or the whole of it as has happened recently.

Whether the money is taxed or borrowed, the private citizens will be crowded out and imports will be reduced and there will be a surplus of dollars to buy. If it is borrowed rather than taxed, the rationing is done through the credit system via interest rates.

External Sector Lockdown

Instead of flying high – or at least moving forward with some confidence like Vietnam with sovereign bonds trading at a premium with Coronavirus under control – Sri Lanka is now in an external lockdown with import and exchange controls and unable to rollover bonds.

Related

Sri Lanka import controls extended indefinitely amid money printing

Sri Lanka extends Coronavirus exchange controls till Jan 2021 after printing money

If money printed to boost credit and rates are kept low, not only will there be balance of payments problems but prices will also rise or inflation in current terms – in classical terms inflation was an inflation of the money supply.

Recent currency collapses did not lead to proportionate rises in prices partly due to negative dollar inflation at times (falling commodity prices) but also due to private sector productivity gains made in the years prior to deprecation.

Unlike in the past the component of food has been reduced in the Consumer Price Index following basket changes made over the last decade, which tends to keep prices low as private sector productivity absorbs part of the depreciation.

A part of the deprecation was also absorbed by falling margins of private firms. But now firms can hardly pay salaries, much less absorb more losses.

Import controls will not only strangle the economy, but it will also lead to losses of revenue. Import substation tax arbitrageurs will, in the meantime, have a field day collecting taxes that would have gone to the state.

There will also be increased smuggling which may also lead to the transmission of Coronavirus. This country was not put in this kind of economic straight jacket even at the height of the war, when Deputy Governor W A Wijewardene was running monetary policy and Nivard Cabraal was Governor.

In 2008 foreign financing was a negative -Rs4.4 billion when the entire deficit was financed domestically for the first time in post-independence history. Not even in 1955 when there was a budget surplus was foreign financing negative.

That was the year direct placements were started outside of auctions after giving high rates of interest to savers and the EPF, which came under fire after the bond scam.

Direct placements made in 2008 helped avoid money printing and probably headed off an even severe external meltdown.

“All Governments, however are firmly resolved not to relinquish inflation and credit expansions,” Mises said.

“They have sold their souls to the devil of easy money.”

Sri Lanka needs to radical shift away from the policies involving monetary instability, nationalism (economic and otherwise) and the regime uncertainty of pulling the rug from under the private sector with fluid policies and expropriation which has kept the country back from independence.

Otherwise, the devil will come to collect. This time the interest will be high.

This column is based on ‘The Price Signal by Bellwetherpublished in the July 2020 issue of the Echelon Magazine. To read Bellwether columns as soon as they are published, subscribe to Echelon Magazine at this link. The i-tunes app can be downloaded from here(Colombo/July23/2020)

FILED UNDER:

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Anwar: Not Malaysia’s Mandela, but something more

ECONOMYNEXT – Something extraordinary happened in Malaysia this week. After a bitterly fought general election with no clear winner, the King had the wisdom and the courage to appoint Datuk Seri Anwar Ibrahim as Malaysia’s 10th Prime Minister.

To those observing from the outside, it was a remarkable sight. So, one can only imagine the gravity of the moment from the point of view of Malaysia’s new Prime Minister.

Anwar Ibrahim travelled to Istana Negara for the ceremony on Thursday from Sungai Long with his wife, the accomplished and independently remarkable Datuk Seri Dr Wan Azizah Wan Ismail, who for 24 years, has taken her husband’s crusade against corruption and bigotry in Malaysia and made it her own. When Anwar was imprisoned, she stood in for him and embodied his cause with an authenticity and ferocity that saw her become Malaysia’s first ever female opposition leader.

When they arrived at the ceremony, one of the many dignitaries assembled for Anwar’s swearing in was Malaysia’s Chief Justice, Tun Tengku Maimun Tuan Mat, the first woman to hold that office, who herself has long stood out as a judge with little patience for corruption or abuse of power. Whether in the 1MDB appeals or in holding firm against other powerful special interests, she has embodied the kind of judicial independence for which Anwar has fought.

As Anwar, the Prime Minister in waiting, took the instrument of his appointment into his hand and began reciting his oaths, he must have felt the weight of every word he swore of the pledge he has long dreamt of taking. Perhaps no Malaysian politician has distinguished himself on the world stage as Anwar did as Malaysia’s finance minister between 1991 and 1998.

His outstanding performance in transforming the Malaysian economy and navigating the perils of the 1997 financial crisis, while lauded across the globe, threatened entrenched interests, leading not just to his sacking and repeated imprisonment, but to a systematic 24-year long campaign to tear him down, destroy his name, and vanquish the causes of good governance and egalitarianism that he stood for. It was a campaign that was almost comical in its corruption.

Beginning in September 1998, every time it ever looked like Anwar was raising his head and might score a major political victory, either an arrest, a court ruling, gerrymandering or some other element of state machinery interceded to intercept him and keep him from power.

His multiple imprisonments on what the world agrees are trumped up charges are well known, as is the black eye bestowed on him by the fists of Malaysia’s chief of police. However, it is often forgotten that his Pakatan Rakyat won a 51.4% majority of the popular vote at GE13 in 2013, “losing” the election in practice only because of the first past the post electoral system by which the votes were apportioned. Whatever else Malaysia’s elite entrenched special interests disagreed about, they all seemed to agree on one thing: stopping Anwar at all costs.

Most of those who sacrificed their conscience and integrity over the years to keep Anwar down are now out of the spotlight, shunned by the electorate, recognized for their crimes by the judiciary, or cast aside by their political handlers once their utility expired. None were present in the corridors of power at the royal ceremony last Thursday to witness the totality of their failure.

It was heartening to see the local markets react to Anwar’s appointment with the biggest rally they have shown in two years, and to see the world market respond through the Ringit seeing its best day in the currency market since 2016. As Anwar prioritizes tackling the skyrocketing cost of living for ordinary Malaysians in the backdrop of a looming global recession, these signals of confidence are a promising sign.

As he begins to combat poverty while forming his cabinet and steering a fragile coalition, the new Prime Minister will have to grapple with bringing about good governance, combatting corruption and ensuring judicial independence. With corruption as deep-rooted as Anwar himself has charged, he should expect and be prepared to combat the fiercest opposition and subterfuge. To those who live on graft, this is not just a matter of policy. They stand to lose everything, their livelihood and their liberty, if he succeeds.

It is difficult to argue against anti-corruption initiatives or transparency in government, so his opponents will try, as they did throughout his time in the opposition, to paint Anwar as an outsider, unpatriotic, anti-Malay, anti-Islam. It will be up to Anwar and those around him to ensure that from the bully pulpit of the Prime Minister’s office, he can show a larger swath of Malaysians who he is and unite them.

Anwar has the most essential quality of a unifying politician, in that he is a “we” politician and not a “me” politician. Notwithstanding the formidable cult of personality that has been built around him, he is quick to redirect any personal praise or flattery by sharing credit with others and putting them in the spotlight and doing so with a humility and sincerity that endears him to other leaders.

While Anwar Ibrahim is fond of calling himself a ‘village boy’ due to his affection for the simplest pleasures of life, there is nothing simple about his pedigree. He was born with UMNO in his blood, with an UMNO parliamentarian for a father and political organizer for a mother. He is accused of being anti-Malay for his egalitarian politics, even though his entire undergraduate education was devoted to the study of Malay culture, history and literature. The idea that he would oppose the legitimate interests of Malays is unthinkable.

So it is important that he succeed as Prime Minister where he failed as a candidate, in persuading more Malay people that they have nothing to fear from him. In fact, their interests are better served by a level playing field that would enable them to thrive and compete not just in the shelter of the cosy, subsidized affirmative action bubbles that other parties have tried to woo them with, but in the world at large.

Anwar’s in-depth study of the Bible does not make him any less devout a Muslim, but a stronger, more confident one. An unapologetic ally of the Palestinian people, Anwar’s opposition to the suffering imposed by Israelis on Palestinians is only sharpened, not blunted, by his assertion of Israel’s right to exist. He is confident in who he is. Even torture, and years spent in the darkest depths of solitary confinement in a gruesome prison cell were not able to make him waver in his values or political principles.

It is already evident that Anwar’s appointment has raised Malaysia’s standing in the world. Several governments who either vocally or privately protested the way he was treated over the last quarter century have responded to his appointment with a new vigor and eagerness to engage with Malaysia and deepen political and economic ties with the country. Anwar demonstrated in opposition that he has a gift for advocating for Malaysia on the world stage. As Prime Minister, this is a gift that will serve him in good stead.

Wherever they sit on the political spectrum, no Malaysian could deny the sincerity that Anwar brought to his first press conference on Thursday following his appointment. He means to do the job, and do it well, responding thoughtfully and obediently to the King’s direction to form a unity government. He has clearly taken to heart the words of the monarch that “those who won did not win everything, and those who lost did not lose everything.”

The lesson in that message for every politician is that Malaysians are sick and tired of political knife fighting, of “moves”, from Kajang moves to Sheraton moves. No doubt some confederacy of politicians are already plotting the next creative ‘move’ to bring Anwar down, but they may find themselves outmatched by history.

Pundits have quipped that Anwar’s journey this week was one of “prison to palace”, forgetting that he earned that particular honor on 16 May 2018, when he was released from prison and had to deal with the dizzying experience of being driven directly to the palace for an audience with then Yang di-Pertuan Agong Muhammad V. He has been dubbed Malaysia’s “Nelson Mandela” as both men were imprisoned for their politics and came to power soon after. But such reductions do little service to Anwar, whose time in prison, as horrific as it was, is not what defines him or best qualifies him to govern Malaysia in such perilous times.

Prime Minister Anwar was born Malay and has always been a devout Muslim. Unlike the African Mandela in white apartheid South Africa, Anwar was born to power. And he was not directly elected to his office by a clear majority as Mandela was, but instead, Anwar was appointed Prime Minister after no one won a majority. He is not Malaysia’s Mandela, or Malaysia’s Barack Obama. But history has examples more fitting of Anwar’s pedigree, principles and intellect.

There was another politician once, who, like Anwar, had the privilege of sailing into politics through an established political party. That politician too, like Anwar, was from the majority community, but over time grew to vocally oppose discriminatory policies and helped form a new political party. That politician too, like Anwar, was an accomplished orator and compelling communicator. And he did not directly win nomination for the American presidency in May 1860. Instead, he was selected following much debate after no candidate secured a clear majority. And just like Anwar will have to do in the coming days, President Abraham Lincoln had to assemble a broad coalition, a team of rivals, to get his country through the most perilous of times.

Prime Minister Anwar shares other qualities with America’s most revered President. Lincoln too was known for having little patience for pettiness, and to extend a hand of friendship to sworn rivals. The American President’s devotion to his children was also legendary. Anwar rarely responds to questions about his ordeal in prison without sharing his anguish that his five daughters and only son had to endure in watching their father suffer and be persecuted.

Having either taught or studied at schools of the calibre of Oxford, Georgetown and Johns Hopkins, an astute student of history such as Prime Minister Anwar has no doubt already drawn some of these parallels and knows how to take the right pages out of Lincoln’s book to thread the political needle and form a stable government. As a battle-tested politician, there is little doubt that if any Malaysian can rise to the challenge and hold together a team of rivals, it is Anwar Ibrahim.

For Anwar to truly succeed, he will have to transform Malaysian politics and bring about the paradigm shift in Malaysia’s political culture that his supporters have rallied behind for so long. Anwar may be the first Malaysian Prime Minister since independence who does not plan to leave behind a legacy for his children of titles, property, monuments or fortunes.

Anwar’s own oldest daughter, Nurul Izzah Anwar, in her congratulatory message to her father, said that the legacy she expects to be left for the next generation is not a material one, but one of “ideals, principles and values that cannot be bought or sold.” Over the last 24-years, Anwar, his family, his party, and their supporters have braved unimaginable odds to take this simple message to Malaysians.

Whatever policy compromises Anwar may have to make to assemble a stable coalition government, he, like Lincoln, will be defined by whether he is able to remain true to his core principles while governing effectively. After so many years of struggle, so many years of trying to awaken Malaysians to the future that could await them if they unleashed the potential of all Malaysians and empowered grassroots industries and businesses to thrive, Anwar will finally get a chance to show them through deeds instead of words.

Continue Reading

Sri Lanka contemplating law to limit grace period offered to state university students

File photo of IUSF protest

ECONOMYNEXT —  Sri Lanka plans to introduce legislation limiting the grace period offered to undergraduate students at state universities to complete their degree to no more than one and a half years, an official said as student unions cried foul.

State Minister of Higher Education Suren Raghavan told reporters on Monday November 28 that said discussions will be held with university students and student leaders in this regard, even as the Inter University Student Federation (IUSF) expressed vehement opposition to the move.

“Some students who were selected to the degree programme, are doing anything but the degree,” the state minister said.

If the proposal becomes law, students following three-year and four-year undergraduate programmes at state universities will be able to take only up to four-and-a-half and six-and-a-half years respectively to finish their studies.

Raghavan said the grace period is generally offered to students who need more time to complete their degree due to health reasons, problems at home or social issues in the country at large.

“We will discuss this with students and student leaders. I think the time given is sufficient,” he said.

IUSF Acting Convenor Terance Rodrigo was quoted by a daily English-langauge newspaper as saying that the student body is holding internal discussions on their position on the government decision but it is already of the view that the move is an attempt to stifle the political activism of student unions.

The IUSF played a leading role in Sri Lanka’s youth-led Aragalaya protests that ousted ex President Gotabaya Rajapaksa over his and his government’s handling of the worst currency crisis in decades.

IUSF convenor Wasantha Mudalige is currently in detention after being arrested under provisions in the controversial Prevention of Terrorism Act (PTA). Mudalige has been an undergraduate student for nearly a decade, with his politics and student activism purportedly getting in the way of his education.

Incumbent President Ranil Wickremesinghe, who has been criticised by human rights defenders and opposition lawmakers for an alleged crackdown on the Aragalaya protests, insinuated in a speech in parliament last week that Mudalige is no university student as he has still hasn’t finished his studies.

Wickremesinghe is not alone in this sentiment, however. Critics of the IUSF and even some sympathisers have spoken critically of what they call Mudalige’s “state-funded overstay”. Others, however, have defended him and other student leaders as those doing important and necessary work by fighting in the trenches to protect and uphold the people’s rights. (Colombo/Nov28/2022)

Continue Reading

Sri Lanka shares end at two-week high; turnover highest since Oct 13

ECONOMYNEXT – Sri Lanka shares closed at a two-week high and the market generated the highest turnover over six-weeks on Monday on speculation interest rates fall in line with the inflation and Expolanka’s expansion plans, brokers said.

The market witnessed a turnover of 2.4 billion rupees, slighty less than this year’s daily average turnover of 2.9 billion rupees. This is the highest turnover generated since October 13.

“Bourse commenced the week on a positive note and continued to see strength for the second consecutive day as investors speculate interest rates to continue to fall in line with inflation in the upcoming months,” First Capital Market Research said in it’s daily note.

“Moreover, bullish sentiment continued on EXPO since last week following the announcement of a possible acquisition of logistic companies.”

Central bank governor said the market rates should eventually ease despite the fears of a domestic debt restructuring as inflation falls, increased liquidity in dollar markets, and the inter-bank liquidity improves.

The main All Share Price Index (ASPI) closed 1.99 percent or 161.88 points higher at 8,309.94, highest index gain in since November 14.

Previously analysts said the market is moving in a bull-trap with short-lived buying and selling sentiments because investors are not confident in market sustainability.

In the past sessions, the index continued to fall on the speculation of a local debt restructuring although no proper decision has been taken so far.

State Minister for Finance Shehan Semasinghe told parliament during the budget debate on Wednesday that Sri Lanka will continue to pay its domestic loans and no local debt restructuring has been discussed.

The budget saw policies that will increase the cost of doing business across the board, but relieve the government from depending on excess money printing, analysts say.

The market saw a foreign outflow of 146,403 rupees, bucking an inflow trend in the last eight straight sessions.

The total net foreign inflow stood at 18.29 billion rupees so far for this year.

The more liquid index S&P SL20 closed 2.94 percent or 74.58 points higher at 2,612.76.

The ASPI has fallen 3.3 percent so far in November after losing 13.4 percent in October.

It has lost 32 percent year-to-date after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.

Expolanka pushed the index up to close at 11.6 percent to 182.3 rupees.

Other top gainers were Browns Investment gained 19.6 percent to close at 6.10 rupees and LOLC gained 8.2 percent to close at 368.3 rupees.(Colombo/Nov28/2022)

Continue Reading