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Thursday June 8th, 2023

Sri Lanka’s major opposition parties refuse to work with new PM Ranil Wickremesinghe

ECONOMYNEXT – Several major opposition parties and independent factions within the former ruling coalition on Friday (13) expressed opposition to the appointment of Ranil Wickremesinghe as  Sri Lanka’s 26th prime minister and said they will not accept any positions in the new government to be headed by him.

The main opposition, the Samagi Jana Balavegaya, which missed the bus to the premiership on Thursday (12) said Wickremesinghe’s appointment does not reflect the people’s mandate, given the United National Party (UNP)’s humiliating defeat at the 2020 parliamentary polls.

The Sri Lanka Freedom Party (SLFP), which quit the ruling coalition earlier, said it has refused offers to join the new government. SLFP chairman and former President Maithripala Sirisena rejected invitations to take up ministerial portfolios.

A group of former government MPs who have been functioning independently in parliament also said they will not be joining a Rajapaksa-Wickrmesinghe government. The MPs include former ministers Wimal Weerawansa and Udaya Gammanpila were removed by President Rajapaksa from the cabinet. Speaking to reporters on Friday, the MPs reiterated their call for an all-party government, which would require Wickremesinghe to step down.

Leader of the opposition Janatha Vimukthi Peramuna (JVP)-led National People’s Power (NPP) Anura Kumara Dissanayake also told reporters on Friday that his party will not accept any portfolio in a WIckremesinghe government.

Opposition Tamil National Alliance (TNA) parliamentarian M A Sumanthiran tweeted on Friday that the appointment of the new prime minister is not a democratic step but the TNA will support all positive steps taken towards economic recovery.

India’s The Hindu quoted him as saying the previous day: “The President has completely lost legitimacy, people want him to go home, and the Parliament will soon vote on a motion expressing displeasure over him. Mr. Wickremesinghe had no legitimacy in the current Parliament right from the beginning. He did not even win in his constituency.”

General Secretary of the Ceylon Workers’ Congress (CWC) Jeevan Thondaman tweeted that Wickremesinghe would have his party’s fullest cooperation.

Leader of the All Ceylon Makkal Congress Rishad Bathuideen has yet to make a public statement on his party’s stance, while Sri Lanka Muslim Congress (SLMC) leader Rauf Hakeem has been critical of Wickremesinghe’s appointment and is unlikely to join a government under him.

SJB parliamentarian Rajitha Senaratne told reporters on Friday that the new prime minister is a failure just like President Gotabaya Rajapksa.

Wickremesinghe does not have 113MPs to back him, said Senaratne.

“Just like Sir (nickname for the president) failed, so has Ranil,” he said, adding that anti-government protestors gathered outside the presidential secretariat are now calling him Ranil Rajapaksa.

Senaratne claimed the prime minister is serving the interests of the Rajapaksas over those of the people.

The MP explained the SJB’s delay in taking the president up on his offer as an unwillingness to carelessly form a government. Any government taking up the job would have to have a plan in place to resolve the issues of queues and shortages, he said. Thursday morning, the MP said, SJB representatives had spoken to economists and to diplomats to see if securing aid was possible, after which the party had arrived at its decision. (Colombo/May13/2022)

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Sri Lanka’s shares slip on profit taking and selling pressure

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

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Sri Lanka Treasuries yields plunge, 12-month down 318bp

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

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Sri Lanka forex reserves rise US$722mn in May 2023

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed as deflationary policy and weak credit reduced ‘above the line’ outflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.


No pre-determined level to stop Sri Lanka rupee appreciation: CB Governor

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.


Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)

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