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Thursday June 1st, 2023

Sri Lanka’s worst economic crisis in known history just beginning: Parliament Speaker

ECONOMYNEXT – Sri Lanka is facing the worst economic crisis in know history but it is just the beginning, parliamentary speaker Mahinda Yapa Abeywardena said commencing a debate on current status of the nation.

“I would like to say that this is the beginning of the worst economic crisis in the known history of our country,” speaker Abeywardene said.

“I am saying this is the start because, as I understand it many economists are warning that it can become much worse.

“In addition to the gas and fuel shortage there are fears that a severe food crisis may emerge.

“Whether it happens like that or we can avert it to some extent will depend on how we act in the next week.”

Sri Lanka’s printed money for two years using an intermediate regime central bank which has triggered the worst forex crisis in its since it was set up in 1950.

Sri Lanka’s economists had used the central bank to print money, create currency crisis pursuing a ‘competitive exchange rate’ monetary debasement for 72 years busting the rupee from 4.77 to the rupee when it was set up to over 300 to the US dollar by 2022.

Economists in the country have so far resisted calls to tighten its laws so that open market operations are curtail so that forex shortages can external default.

However analysts say at time legislators can revamp the law to end the discretionary ‘flexible exchange rate’ or soft-peg and end currency crises.

The monetary meltdown and external default long predicted by analysts and economists as ‘stimulus’ policy became more activist has now turned into a political crisis. (Colombo/Apr06/2022)

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Sri Lanka cuts policy rates 250 basis points

ECONOMYNEXT – Sri Lanka cuts policy rates 250 basis points lowering the rate at which liquidity is injected to markets to 14.0 percent to from 16.50 percent, saying inflation was falling faster than expected.

“The Board arrived at this decision with a view to easing monetary conditions in line with the faster than expected slowing of inflation, gradual dissipation of inflationary pressures and further anchoring of inflation expectations,” the central bank said.

“The commencing of such monetary easing is expected to provide an impetus for the economy to rebound from the historic contraction of activity witnessed in 2022, while easing pressures in the financial markets.”

“Headline inflation (year-on-year), based on the Colombo Consumer Price Index (CCPI), continued the deceleration path, faster-than-projected earlier, supported by the lagged impact of tight monetary and fiscal policies, strengthening of the Sri Lanka rupee, reduction in fuel and gas prices, normalisation of food prices and the favourable impact of the statistical base effect.

“The full passthrough of the large appreciation of the exchange rate observed recently is yet to be
reflected in the price levels, and it would quicken the disinflation process, as the prices of
imported goods are expected to decline further in the period ahead.”

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Sri Lanka exports down in April, trade deficit up from March, rupee stronger

ECONOMYNEXT – Sri Lanka’s exports fell 12.6 percent from a year ago to 849 million US dollars in April 2023, amid weaker external demand, while imports were down 15.8 percent to 1,431 million Us dollars, central bank data showed.

Exports also fell 1,037 million dollars in March 2023, amid seasonal effects.

The trade deficit expanded to 583 million US dollars in April from 412 million US dollars in March 2023. Imports were at 1431 million US dollars in April from 1,450 million dollars in March.

Imports can pick as tourism, worker remittances and net inflows to government go up.

The rupee continued to appreciate.

“Exchange rate showed a notable appreciation during April 2023 with the continued improvement in liquidity in the domestic foreign exchange market, the discontinuation of the daily guidance on exchange rates,” the central bank said.

Up to April exports were down 9 percent to 3.8 billion rupees and imports were down 28 percent to 5.2 billion rupees and the trade deficit was 1.4 billion rupees.

Investment goods imports were down in April amid a contraction in credit.

“Almost all types of goods listed under the three main investment good categories, namely machinery and equipment, building material and transport equipment, recorded a decline,” the central bank said.

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Sri Lanka President discusses debt restructure, program progress with IMF

ECONOMYNEXT – Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

State Minister of Finance Shehan Semasinghe, Senior Advisor to the President on National Security and Chief of Presidential Staff Sagala Ratnayake was also in the meeting.

Secretary of the Ministry of Finance Mahinda Siriwardena, Central Bank Governor Nandalal Weerasinghe, Deputy Director of the International Monetary Fund Anne Marie Gulde, and Resident Representative IMF in Sri Lanka Sarwat Jahan, attended this event. (Colombo/June01/2023)

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