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Tuesday November 29th, 2022

Sri Lanka’s new trade policy has deadly Mercantilist myths: Bellwether

ECONOMYNEXT – Sri Lanka’s new trade policy published in the ministry of development strategies and international trade says a lot of home truths protectionism, but it also reinforces a dangerous Mercantilist myths that can hurt the poor and increase public discontent.

Such beliefs can undermine the entire reform strategy like it did in the 1980s.

An enduring myth in Sri Lanka has been that balance of payments crises are caused by trade deficits. This is one of the original classical Mercantilist myth dating back to the 17th century.

It is the very same myth that drives protectionism and allows politically connected producers and farming lobbies to exploit poor consumers with import taxes.

Current Account Fallacy

The New Trade Policy goes someway to debunk the classical Mercantilist myth but replaces it with a neo-Mercantilist one.

"The imposition of import controls does not reduce excess demand, which can be considered as the main cause of a current account deficit," it says.

"In addition, import restrictions can contribute to widening the trade deficit by discouraging exports (generally speaking import restrictions are a tax on exports)."

If excess demand is a reference to money printing by the central bank, it is true that balance of payments crisis (an outflow of foreign exchange greater than inflows) occurs when money is printed by the Central Bank.

However it is only partly true that current account deficits are caused by excess demand, though certainly an increase can happen when printed money turns into imports either through straight state spending or through bank credit.

Any country with a capital surplus can run a current account deficit when the proceeds of capital flows (foreign direct investment or foreign loans) are spent within an economy, generating imports.

When FDI comes it causes an import of material for factories, or buildings or machinery. If the government borrows abroad for roads in causes an import of cement or steel.

But that does not have an effect on the exchange rate, since any import is financed by a capital inflow. Countries like Sri Lanka also gets a lot of remittances officially and also unofficial channels, which when spent will contribute to a trade deficit.

On the other hand, a country like Germany, which has a surplus budget, or whose companies invest heavily in factories in East Asia or Eastern Europe can have a current account surplus.

Sri Lanka borrows heavily abroad generating a current account deficit, and it also has a persistent trade deficit because there is remittance inflow which creates income above Merchandise exports.

"Although this is not a large deficit by international standards, concerns about the current account deficit are justified because it has been a recurrent driver of macroeconomic imbalances and subsequent growth slowdowns in Sri Lanka," the trade policy also claims.

"The current account deficit remains persistent despite the large windfall from lower oil prices and Sri Lanka’s foreign currency reserves are barely adequate, standing currently at 3.8 months of imports."

There is no windfall from lower oil prices. When oil prices are cut, non-oil imports will go up as more money is left in the hands of people, just as oil price hikes, reduce non-oil imports.

This column warned that non-oil imports would go up as early as late 2014, when then President Mahinda Rajapaksa announced oil price cuts as part of election moves.

However oil price cuts will not cause BOP problems, unless the central also prints money.

An outflow of money through capital flight may also reduce the money available for imports, and a currency may fall even if the current account deficit narrows.

For example Sri Lanka’s current account deficit in 2014, was 1.99 billion US dollars, in 2015 it was 2.09 billion US dollars, and later revised down to 1.89 billion US dollars and in 2016 it was 1.9 billion US dollars also.

All this shows not only that losing sleep over current account deficits is a waste of time, but also the powerful grip of Mercantilism in most countries that have pegged exchange rates.

"Low Nominal Exchange Rate’ Myth

Then the trade policy goes on to state an outright lie.

"The Central Bank of Sri Lanka attempted in the past to keep the nominal exchange rate low (i.e strong)," the policy says.

"It led to large balance of payments deficits, loss of reserves, and borrowing at commercial interest rates that increased external debt."

For one thing the rupee fell from around 105 to 120 to the US dollar during the 2008/9 BOP crisis bu was allowed to strengthen when credit eased, and it also fell in 2012, but it was kept at the fallen level of 130 to the US dollar.

Admittedly however the depreciation was less than in the 1980s, strike driven turmoil years.

The central bank also did not lose reserves by trying to ‘keep the nominal exchange rate low’ (this is probably meant to say that the exchange rate is either fixed or strong), as it is claimed.

The central bank lost reserves by selling reserves, and printing money after the dollar sales to stop the interest rates from going up (sterilized forex sales). Put another way the CB kept interest rate low by printing money creating excess demand.

It recovered the reserves by sterilizing the purchases (selling down Treasury bills it bought to create the BOP crisis in the first place), as it is doing now.

The other claim made is that an exchange is ‘overvalued or undervalued’.

In fact the International Monetary Fund concluded that when this administration came to power, said the rupee was not noticeably ‘overvalued’ by several separate measures.

Claims of exchange rate ‘undervaluation’ especially in East Asia is a myth devised by US Mercantilists.

This column has previously shown that is a well-developed false doctrine, through which the Japanese and Chinese nominal exchange rates were forced to be appreciated, but which failed to narrow the deficits with the US.

US mercantilists are also using circular arguments to make their case.

One of the metric through which ‘undervaluation’ in East Asia also includes a current account surplus. If a country in East Asia runs a current account surplus, it is assumed that the currency is undervalued.

In reality however, an exchange rate moves based on the monetary policy that is adopted. There is no market determined exchange rate. There is an exchange rate that is determined by a particular monetary regime that is adopted.

The Deadliest Fallacy of them all

The deadliest fallacy in the New Trade Policy goes as follows.

"Also, when real exchange rates appreciates, it encourages more capital intensive production and discourages greater use of labour abundant resources," it says.

What labour abundant resources prey? And isn’t capital intensive production just what this country needs?

Sri Lanka is short of labour. The population is ageing. We are no Vietnam with a massive young population. The population in Sri Lanka is visibly old now.

The old argument for currency depreciation to boost exports was based on two arguments. The slave labour argument and the poverty argument.

The poverty argument simply says that a weaker exchange rate will reduce the incomes of domestic citizens and create a greater exportable surplus. This does not hold now because industrial goods exports which the elites want requires technological and marketing know how to produce and sell and Sri Lankan firms make protected expensive products.

The slave labour argument says that when the currency falls, wages will fall, and the producers will get more profits at the expense of labour and there will be more investment flowing into exports, and they may be also be able to cut some prices and win market share.

For one thing this strategy implies a subsidy to exports over all other sectors of the economy.

For another, it assumes that people will stay in one place and move like cattle to the factory floor for low salaries as the hard goods export-happy elites want.

Productivity and Real Wages

The claim that a strong exchange rate ‘encourages more capital intensive production’ is actually quite true.

Prime Minister Ranil Wickremesinghe has said that he wants to create high paying jobs.

The only way to increase labour productivity is to have more capital investment. If the currency is depreciated, salaries and capital (which can bring higher salaries later) will both be destroyed.

It is an undeniable fact that industrial export growth is linked to foreign direct investment. This is because foreign companies in competitive markets develop the latest designs, technology and efficient production techniques to keep customers happy and costs down.

All this move into a country, when FDI comes in and transforms a sector.

In many countries export firms pay the highest wages. Driven by FDI, they push productivity up and drags salaries of non-trade sectors also up.

This is a key reason for the inflation index even in a like Hong Kong (which is has a currency board with the US dollar) can grow faster than the US. Paradoxically, productivity growth in traded sectors can drive up salaries in non-trade sectors, and pushing price indice up.

For example labour demand and higher salaries in tourism, may drive up salaries in restaurants and retail sectors, causing some prepared foods (like hoppers or kothu rotti, or rice packets) to go up in price, until the way they are prepared changes (such as with mechanization).

To target a Real Effective Exchange Rate (as Sri Lanka is doing) in this context is suicidal.

Higher wages will only come to exports when and (if) new investments and factories are built. Existing firms will not want to raise wages too much. That is why these firms find it difficult to make new hires, while other sectors are paying higher wages.

Domestic sectors which have seen a lot of investment now pay higher wages. Recent gwoth in construction was driven by both private investments and state borrowings. But areas like IT and tourism driven by real private investment.

From construction to even road cleaning, capita investment is boosting labour productivity. Abans is using mechanized sweepers to clean roads.

An analysts by Harvard economist Ricardo Hausmann, who has been analysing Sri Lanka, domestic industries like construction, pays higher wages than export industries in Sri Lanka.

This is in sharp contrast to Panama where export industries and services pay higher wages, than non-traded sectors. Hausman’s choice of Panama is interesting. Panama is a country where the option to generate slave labour style exports by currency depreciation is not available to policy makers, because there is no central bank to bust the ‘Balboa’ which is mostly a coin.

Panama is a ‘dollarized’ country using dollars. Like a currency board, no depreciation is possible to combat perceived Mercantilist overvaluation in that country.

While many South American nations built Sri Lanka-style central banks, and deteriorated into revolutionary hell-holes Panama stood tall. When a country is dollarized or there is a currency board, a hard budget constraint is created to make deficit spending difficult.

Panama is also financial centre, like other countries that do not have soft pegs. Sri Lanka’s aspirations for a financial centre will also be doomed if it continues to have a soft-peg, which crawls incessantly downwards.

In a dollarized country, rulers cannot print money, borrow excessively and impose backdoor ‘hair cuts’ on public and private debt (bank deposits holders and pensioners) through currency depreciation on guise of boosting exports.

Any haircuts – like in Greece – will be transparent and visible.

If the elite policy makers destroys the currency, and expect exports to be boosted by unsound money amid labour shortages, they are sadly mistaken.

The ‘enslaved’ labour, denied a living wage, will not sit still as currency depreciators expect.

Monetarily enslaved labour is mobile

In Sri Lanka massive migrations of labour started to happen from the severe currency depreciation years of the 1980s and freedom was given for people to move out.

Even government servants went abroad. Highly qualified people migrated to international agencies and Western countries while labourers and housemaids went to the Middle East, Singapore and Maldives.

Middle level government workers like teachers went to the Maldives or the Middle East.

Maldives which is based on fishing and tourism has a much more stable exchange rate than Sri Lanka.

Even now many skilled workers in Sri Lanka are giving up jobs they already have and are moving to the Middle East, Maldives, Korea, Japan or even Malaysia legally and illegally.

They have aspirations which do not match with the elites’ view of herding them to the factory floor to earn wages whose purchasing power has been robbed by the central bank through currency deprecation.

If there was no eco-system of job agencies, friends and neighbours who have already made good going abroad for one or two years to come back with savings, the ‘enslaved labour’ and weak currency strategy may work.

But that is not the reality. The reality is people know how to go out of the country, job agencies are there, and there are a bunch of countries in the Middle East, Maldives and East Asia that are willing to accept them.

There are even people, like mechanics, working for US defence contractors in the Middle East.

At the moment, the prospects of getting jobs in the Middle East is dim due to low fuel prices. But people still have aspirations.

Each time the currency falls, the number of passports issued goes up steeply.

While association may not be causation, it is self-evident that attractiveness of foreign jobs go up after currency depreciation, while domestic inflation makes lives difficult as real wages are destroyed.

New passport issues grew relatively anaemically from 507,949 to 523,000 in 2011 with the exchange rate stable. Only in the latter part of 2011 did the rupee start to weaken with a cycle of money printing and currency defence.

In 2012, the rupee was floated.

The currency fell to 127 to the US dollar by year end. Passport issues jumped to 570,000 by the end of the year. Middle Eastern passports jumped to 230,000 from 196,000.

By 2015 when this administration came new passport issues to the Middle East fell to 176,000 a year, though the total to all countries rose.

The rupee stared to weaken only in the second half of the year. By end 2016 the rupee had collapsed to 150 rupees. Middle Eastern passport issues rose to 200,311 despite a downturn and all countries rose to a record 422,394.

Total issues passport issues soared to an all-time high of 658,000, from 491,000 a year earlier.

While the reasons for the record passport issues need deeper study, anecdotal evidence suggests that at least a part of those who bought the passports were foreign job seekers.

The pressure on the working class from currency depreciation is unlikely to make for a contented workforce or electorate.

This column is based on ‘The Price Signal by Bellwetherpublished in the October 2017 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.

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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.

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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)

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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)

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