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Monday March 4th, 2024

Sri Lanka’s private buses en route to grinding halt as fuel crisis deepens

Sri Lanka’s private bus service will be unable to function at normal levels until a solution for the fuel crisis is proposed

ECONOMYNEXT – Sri Lanka’s private bus service will be unable to function at normal levels until a solution for the fuel crisis is proposed, Sri Lanka Private Bus Owners’ Association (SLPOA) Chairman Gemunu Wijeratne said.

“Even today fewer than 10 per cent of buses are running. Drivers are on strike because they have no fuel,” said Wijeratne, speaking to EconomyNext on Monday (27)

Sri Lanka is currently going through an indefinite interruption of fuel supply. Power and Energy Minister Kanchana Wijesekera has said foreign banks are refusing to confirm letters of credit issued by Sri Lanka state banks, and oil suppliers are also rejecting them due to the country’s inability to pay in dollars.

Foreign banks refuse to confirm Sri Lanka state bank letters of credit: Minister

Fuel prices were also raised on Sunday (26), and the island’s private bus owners have requested the annual price revision for bus fares to take place to cover costs due to the loss of income from the reduction of passengers due to the closure of schools and public offices.

Sri Lanka bus operators want tariff hike to account for central bank actions

Wijenayake said on Thursday (23) that 75 per cent of buses were in operation, and that 100 per cent operations would resume when schools and government offices were opened, but the fuel crisis has put a dent in those plans.

Sri Lanka has been depending on Indian credit lines for fuel, and Wijesekara stated that the state run Ceylon Petroleum Corporation (CPC) will need the help of the Treasury for repayments.

The fuel crisis has left Sri Lanka’s roads bare, with even the most populated roads looking like ghost towns. Drivers line up for days in fuel queues, and it has become common to see abandoned vehicles waiting in line for fuel that, according to authorities, is simply not available.

“Buses are almost empty in the afternoons, so drivers are waiting longer at stops,” said Wijenayake.

However, the lack of buses means peak hours are usually jam packed and uncomfortable for passengers.

“We don’t trust the government at all. We have been waiting here for three days, because even if they say that there is no fuel, we will get a message that there is,” said one irate driver waiting in line – a sentiment echoed by many drivers. (Colombo/Jun27/2022)

 

 

 

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Sri Lanka’s CEB reports Rs61bn profit for 2023 with Dec quarter gains

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Bord has reported a profit of 61.2 billion rupees for the year to December 2023, turning around from a loss of 298 billion last year, with all the profits coming in the last year amid heavy rain and price hike, interim accounts show.

The CEB reported profits of 77.9 billion rupees for the December quarter, compared to a loss of 182 billion rupees last year.

About 94 billion rupees in losses were forex losses, coming from the central bank, which printed money to suppress rates and triggered a steep currency collapse in a failed float with a surrender rule.

CEB revenues rose 55 percent to 156 billion rupees in the December quarter, cost of sales fell 45 percent to 78 billion rupees amid heavy rains, giving a gross profit of 78.2 billion rupees for the quarter.

In the year to December, CEB revenues were 606.6 billion rupees, up 96 percent from 308 billion rupees, while cost of sales rose from 444 billion rupees to 506 billion rupees. Gross profits were 99.6 billion rupees.

At group level, which includes LTL Holdings, profits were 75 billion rupees for the year, with income taxes of 6.3 billion rupees, provided.

CEB consolidated profits were 68.4 billion rupees, with other shareholders of subsidiaries accounting for 7.2 billion rupees.

Equity was 498 billion rupees at company level by December 31, with 126 billion rupee capital contribution as well as profits earned in the last quarter. (Colombo/Mar05/2024)

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Sri Lanka rupee opens at 308.20/50 to the US dollar

Sri Lanka stocks reversed its falling trend and gained for the first time in six sessions on Tuesday closed stronger on Tuesday (21).

ECONOMYNEXT – Sri Lanka’s rupee opened at 308.20/50 to the US dollar Monday, from 308.80/90 on Friday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.08.2026 was quoted stable at 10.90/11.00 percent.

A bond maturing on 15.09.2027 was quoted at 11.90/12.00 percent from 11.90/12.05 percent.

A bond maturing on 01.07.2028 was quoted at 12.20/30 percent from 12.15/35 percent.

The Colombo Stock Exchange opened up; The All Share was up 0.60 percent at 10,755, and the S&P SL20 was up 1.24 percent at 3,077. (Colombo/Mar4/2024)

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Sri Lanka central bank swaps top $3.2bn by December

ECONOMYNEXT – Sri Lanka’s central bank borrowed US dollars from various counterparties through swap transactions, which had topped 3.2 billion US dollars by December 2024, official data show.

The net short position, including swaps disclosed by the central bank, grew by over almost 1.28 billion US dollars from December 2022 to 3,280 million dollars.

The gross position grew from 2,263 million dollars to 3,280 million US dollars over the year.

The central bank supported some state banks with dollars to cover their dollar exposures, which had since been paid back.

By December reported gross reserves of the central bank was 4,491 million US dollars, against swaps of 3,280 billion US dollars.

Swaps of around 1500 related to the People Bank of China.

Swaps allow a central bank to increase gross reserves, without raising domestic interest rates.

Swaps with domestic counterparties lead to liquidity being injected into money markets, which can be mopped if domestic credit growth is moderate.

At the moment many private banks have large dollar positions invested outside the country, which cannot be used for transactions domestically because of a money monopoly given to macro-economists. (Sri Lanka repays debt or collects reserves of U$5bn via banking system since rate correction)

However unwinding swaps after private credit has picked, or engaging in swaps after private credit has picked up, may lead to money being injected to maintain the policy rate, leading to excess credit by banks and balance of payments deficits and or currency collapses, analysts say.

Central bank swaps in the third quarter of 2018 led to a collapse of the currency under the ‘exchange rate as the first line of defence’ policy peddled to Sri Lanka, critics have said earlier.

Domestic currency proceeds of swaps were the primary ammunition to bust East Asian currencies in 1997-98.

Any depreciation after the swap proceeds have been used for imports (effectively mis-targeting rates) a central bank will run a forex loss.

The PBOC however had put a rule, preventing the use of the swap after gross reserves fell below 3 – months of imports, preventing Sri Lanka from getting into further trouble through the use of official reserves for private imports.

Sri Lanka’s central bank also used borrowings from the Reserve Bank of India, via the Asian Clearing Union to run BOP deficits.

Losses from exposed dollar positions of central banks which have gained ‘independence’ from fiscal rules and parliaments and engaged in macro-economic policy, including the Fed, have led to taxpayers bearing the losses in the end.

Swaps were invented by the Fed in the early 1960s, as it deployed macro-economic policy (printed money for growth) threatening its gold reserves and the Bretton Woods system.

Sri Lanka has other borrowings also, including from the IMF, which has made net foreign assets of the central bank negative. (Colombo/Mar05/2024)

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