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Friday June 9th, 2023

Sri Lanka’s new central bank chief slams ‘neo-liberalism’

ECONOMYNEXT – Sri Lanka’s appointed central bank governor W D Lakshman said he wanted find alternatives to ‘neo-liberal’ policies that the island is said to follow, as there was a prevalence of poverty, under-employment and employment despite multiple state programs to change.

“Decision makers in different sectors of the economy are confronted with challenge of searching and identifying alternative policy sets of greater efficacy than the neoliberal policy set we have been working on so far,” Lakshaman told reporters after his first monetary policy meeting.

“I hope to be able to make my contribution in this search for alternatives.”

In Sri Lanka, policies followed by the United National Party under Ranil Wickremesinghe at one time were labeled neo-liberal by opposition activists such as Wimal Weerawansa who also wrote a book, Ratata Uwamana Wama.

Neo-liberalism also referred to policies devised in the 1980s developed by Western advocates as a push back against Keynesian style interventionism that became popular in the West and developing countries backed by unstable currencies.

Both UK and US currencies and Bretton Woods system itself collapsed in the late 1969 and 1970s, leading to stagflation in the West and the complete closure of Sri Lanka’s entire economy in the decade.

The UK also expropriated with leftist in power after World War II, and illiberal rulers in newly independent nations followed suit, expropriating both local and foreign investors, reversing freehold land and creating state Mercantilist monopolies in the style of the Dutch and Britsh East India companies, critics say.

Though Sri Lanka opened the economy in 1980s, there was no monetary stability, leading high inflation and depreciation.

The Keynesian interventionist policies were not adopted by Germany, Japan, Hong Kong or Singapore or Malaysia who opted for classical liberal style sound money as a foundation for policy.

Countries in Latin American in particular which had some of the worst soft-pegged central banks in the world – set up at the behest of US in some cases – also faced debt and currency crises.

Argentina whose GDP was a little behind the US and sometimes exceeded it began to decline rapidly after the BCRA was set up in 1935 and is an example to the world of bad central banking and debt/currency crises.

This led to a set of policies called the Washington consensus, involving free trade, smaller deficits, cutting state spending, lower marginal tax rates, respecting property rights, promoting foreign direct investment, but also more flexible exchange rates.

The semi-floating exchange rates however failed to provide monetary stability in many countries, dragging down entire policy frameworks including in Sri Lanka in the 1980s.

‘Neo-liberalism’ may however have more or less elements depending on who defines it.

“Questions are being raised extensively about the validity and relevance of Washington Consensus on neo-liberal type of policies to achieve the desired goals of inclusive, sustainable and shared development,” Governor Lakshman said.

“This questioning may also apply to central banking nowadays.”

Washington consensus was a term coined by British Economist John Williamson, and is also broadly called neo-liberal by some.

Many of the best performing countries in East Asia also followed policies of free trade, foreign direct investment, backed by hard money central banks with strong pegs or currency boards.

East Asian nations were among the first in the world to draw large volumes of foreign direct investments and benefitted from the wave of trade liberalization advocated by liberal policy makers, building so-called global value chains by exporting to the Western nations which had cut import duties.

Later countries like Vietnam also adopted similar policies, freeing trade – with no domestic crony private sector to oppose it – scrapping price controls and duties on especially on agriculture and fixing its central bank, drawing in FDI and now engaging in mass privatization.

Governor Lakshman said Sri Lanka had depended too much on debt and there was not enough foreign direct investment.

Analysts however had pointed out that Sri Lanka’s last UNP administration followed broadly illiberal policies of monetary instability, including currency depreciation to help export special interests at the expense of society, price controls, retrospective taxes, no privatization, pushing up state salaries, licensing and re-regulation.

The mis-mash of consfused policies had been dubbed ‘neo-illiberal’ by some.

You may also read:

Sri Lanka heading for Sozialpolitik not a social market economy : Bellwether

What went wrong; Sri Lanka’s illiberal economics and unsound money: Bellwether

Sri Lanka to ban grain imports in neo-illiberal high

The current administration has however cut taxes saying too many taxes were stifling the private sector, cut the marginal personal income tax rate to 18 percent, so that it works like a flat tax demanded by hard-right libertarians and also promised to de-regulate.

High rates of income tax destroy capital, investments and future jobs. (Colombo/Dec27/2019  – Update II)

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  1. Nick Hart says:

    Hmm. Head-in-the-clouds government policies will never work unless they are vigorously and fairly applied at ground level by the appropriate authorities.

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  1. Nick Hart says:

    Hmm. Head-in-the-clouds government policies will never work unless they are vigorously and fairly applied at ground level by the appropriate authorities.

Sri Lanka’s police, health workers mostly violate rights of LGBTQ community – report

ECONOMYNEXT – Sri Lanka’s law implementing police officials and health workers among the top in violating the rights of lesbian, gay, bisexual, transgender, and queer (LGBTQ), according to a study, citing the complaints at the local Human Rights Commission and police.

A study conducted by Bridge to Equality, a civil rights group concerned over LGBTQ in Sri Lanka, shows that 160 rights violation cases reported to the police out of a total 235  during the 18 month period through March 31, 2023, are involved with police and health sector workers.

The data showed that police have been the perpetrators in 96 rights violation cases, while 64 cases are involved with health workers including medical officers.

“The analysis shows that some LGBTQ persons are reluctant to go to the authorities (such as the Human Rights Commission of Sri Lanka or the Police) due to the existing penal laws and various social stigmas that continues to exist in the society,” the Bridge to Equality said in the conclusion of the report based on the 235 complaints.

“These stigmas may include inaccurate perceptions that LGBTQ persons are psychologically unwell or that it is a trend or ‘lifestyle’ that conflicts with the Sri Lankan culture.”

The human rights violations have been involved with article 12 of the constitution which is involved with equality before the law and protection from discrimination, followed by article 11 which is linked to protection from torture and cruel, inhumane and degrading punishment.

The LGBTQ community also faces unlawful arrest, the report said.

Sri Lanka’s Penal Code, which states that “carnal intercourse against the order of nature” is a criminal offence” makes gayism  and lesbianism against the country’s law.

Meanwhile, the transgender community has been targeted by another section of the Penal Code which criminalises “pretending to be some other person.”

Civil groups such as the Human Rights Watch and iProbono have said that individuals in the LGBTQ+ community have been subjected to forced anal and vaginal exams as well as being subjected to homophobic slurs from hospital staff.

The Health Ministry admitted that its workers have been violating the rights of LGBTQ.

“The LGBTQ+ community has been subjected to physical, verbal and sexual harassment by those in the medical field,” Anwar Hamdani, Director of Tertiary Care Services at the Ministry of Health, told EconomyNext.

Police Spokesman Nihal Thalduwa said only transgender people are legalized in Sri Lanka.

“Others are not legally accepted in the country. That’s how the police get included in this. Take lesbian as an example. There can be some who like it. However, even if there are people who are in favour of that, if some people complain about it, since it is not legally accepted then the police will have to take actions against it,” Thalduwa told EconomyNext.

“Since it is illegal, police will have to act on the existing law.  Police do not have anything against it if that is legal. Maybe because of that there may be a perception saying the police are harassing them. But it is not like the police are going after individuals and harassing them.”

“However, when it comes to transgender issues the Police commissioner has issued circulars asking all police officers to take necessary precautions to not to harm the individuals privacy.”

While the repeal of the Penal Code that criminalizes gayism and lesbianism is currently in the process of being debated in parliament, convictions against those in the community are being carried out by the police.

“Other than a transition between genders, LGBTQ+ activity is unlawful in the country,” Thalduwa said.

“Therefore, those who are against the LGBTQ+ community look to the police to curb these activities. Because of its unlawful nature, convictions are being carried out.” (Colombo/June 08/2023)


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Sri Lanka rupee close at 294.50/295.50 to dollar, bond yields up

ECONOMYNEXT – Sri Lanka spot US dollar closed weaker at 294.50/295.50 rupees and the bonds were up on Thursday, dealers said.

The Spot US dollar closed at 291.00/292.00 rupees rupees on Wednesday.

A bond maturing on 15.09.2027 closed at 23.40/60 percent up from 23.10/40 percent a day earlier, dealers said.

A bond maturing on 01.05.2025 closed at 26.75/27.00. percent, up from 26.25/60 percent on Wednesday.

(Colombo/ June 08/2023)

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Sri Lanka’s shares close higher on favorable macroeconomic prospects

ECONOMYNEXT – Sri Lanka’s shares closed higher on Thursday, as investor sentiments picked up on lowered inflation and policy rate cuts, after two consecutive losses in previous sessions due to selling interest and profit taking, an analyst said.

The main All Share Price Index was up 0.52 percent or 45.28 points to 8,767.34, this is the highest the index has been since May 18, while the most liquid index S&P SL20 was up 0.65 percent or 16.05 points to 2,479.87.

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 57 million rupees and received a net foreign outflow of 282 million rupees.

The market generated a revenue of 853 million rupees, this is the highest the turnover has been since June 01, 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 gainers during trade were Commercial Bank, Hatton National Bank and Cargills. (Colombo/June06/2023)

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