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Tuesday May 21st, 2024

SriLankan Airlines makes Rs79bn profit after rate mis-targeting ends

ECONOMYNEXT – State-run SriLankan Airlines has reported a 79 billion rupee profit in the first eight months of 2023, official data showed, with exchange gains adding to the bottom line as the central bank stopped mis-targeting rates.

SriLankan and other state enterprises like the Ceylon Electricity Board and Ceylon Petroleum Corporation that have large dollar borrowings, which trigger book losses when the central bank cuts rates with inflationary open market operations and depreciates the currency.

In addition, costs also zoom up as the currency depreciates, driving operational losses if sales are denominated in domestic currency, driving operational losses.

Though some of the profits came from exchange gains, revenues grew 27 percent to 238.9 billion rupees, while expenditure grew at a slower rate of 7.9 percent to 207.5 billion rupees, giving an operating profit of 31.4 billion rupees, against a loss of 4.4 billion rupees last year, Finance Ministry report showed.

SriLankan Airlines had lost 74.6 billion rupees last year amid an economic crisis. In 2022 ex-Colombo ticket prices zoomed amid fuel shortages, and has been gradually coming down.

In 2023 after rate-mistargeting ended and deflationary open market operations began, the currency appreciated to around 330 to the US dollar from 360 after collapsing from 200 to 360 the year before.

SriLanka’s currency has depreciated from 4.70 to 330 to the US dollar after a central bank was set up abolishing a currency board, driving trade controls and exchange controls and later social unrest and out migration.

From the 1980s Sri Lanka started to run un-anchored monetary policy after the International Monetary Funds ‘Second Amemdment’ of articles left the central bank without a working monetary anchor.

Since then various ad hoc regimes which defy laws of nature described by classical economists have been operated as the country lacked a doctrine of sound money.

The country defaulted in 2022 after printing money for growth (potential output targeting) and flexible inflation targeting, the latest ad hoc monetary regime that is peddled to countries by Western Mercantiliss and around found in most of the countriues that are defaulting.

Sri Lanka’s SOEs collectively suffered the biggest loss in their history last year after a float of the currency after rate-mistargeting failed due to a surrender rule amid inflationary open market operations to enforce a bureaucratically decided policy rate.

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Sri Lanka top five SOEs lose Rs931bn amid monetary instability

Sri Lanka, world’s poor suffers from Fed’s accidental discovery: Bellwether

G-sec backed open market operations (which allowed inflationists to blame deficits for monetary instability) was accidentally invented by the Federal Reserve.

The bureaucratic policy rate was formalized by the Federal Reserve on April 13, 1923, which later triggered the great depression and academic inflationism in the form of Keynesianism (Cambridge economics) as a knee jerk reaction and the revival of John Law policies as ‘macro-economic policy’ under various labels including potential output targeting, critics say.

Under an IMF backed monetary law, potential output targeting (printing money for growth) is now part of the island’s monetary law. (Colombo/Nov17/2023 – Corrected profits are for the first 8 months not 9)

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Sri Lanka declares May 21 as National Mourning day over Iranian President’s death

ECONOMYNEXT – Sri Lanka declared a national mourning day on Tuesday, May 21 in view of expressing its solidarity with Iran after sudden death of Iran President Ebrahim Raisi following a helicopter crash.

President Raisi and eight others including Iranian Foreign Minister Hossein Amir Abdollahian were killed in the crash when the helicopter had a “hard landing” reportedly due to adverse weather conditions with heavy fog. However, President’s two convoy helicopters reached the destination safely.

“The Sri Lankan government has declared a national mourning day on tomorrow (May 21) on behalf of the sudden death of Iranian president Mr. Ebrahim Raisi,” the Department of Government Information said in a statement.

It also urged all the state institutions have to hoist the national flag half mast.

Raisi was in Sri Lanka on April 24 to launch the Uma Oya dam on a one-day official visit amid tight security. His helicopter crashed when he was returning to Iran after launching a dam in the Azerbaijan border.

President Raisi is seen as a hardliner and a potential successor to Supreme Leader Ayatollah Ali Khamenei.

Earlier this month, Sri Lanka’s Foreign Minister Ali Sabry said the island nation will deal with Iran for investments and trade without being caught into the United States-led sanctions.

Sri Lanka was unable to receive $450 million from Iran for a recently opened Uma Oya multipurpose project started before the sanctions.

Sri Lanka now exports tea to Iran for no dollar payment. Instead, Sri Lanka tea producers are paid by the state-owned Ceylon Petroleum Corporation (CPC) in rupees for the pending crude oil import payments for Iran.

President Ranil Wickremesinghe expressed his condolences on the tragic incident.

“Sri Lanka is deeply shocked and saddened by the tragic death of President Ebrahim Raisi, Foreign Minister Amir Abdollahian and other senior Irani official,” he said in his official X-platform.

“I express my deepest sympathies and sincere condolences to the bereaved families, the government and the people of Iran.”

Raisi, a Muslim jurist, served as the eighth president of Iran from 2021 until his death. (Colombo/May 20/2024)

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Sri Lanka helps launch Global Blended Finance Alliance

ECONOMYNEXT – Sri Lanka has joined a group of nations led by Indonesia which aims to mobilise capital to achieve carbon neutrality, Minister of Water Supply and Estate Infrastructure Jeevan Thondaman said.

The Global Blended Finance Alliance mooted by Indonesia in 2018, was formally launched at the World Water Forum in Bali today.

Among the other founding members are Fiji, France, UAE, Kenya, Luxembourg and Canada.

“Through our collective efforts, the Global Blended Finance Alliance aims to mobilise both public and private capital to help nations achieve carbon neutrality and the SDGs,” Thondaman said on social media platform X (twitter).

“The world has a USD 2.5 trillion funding gap to achieve the Sustainable Development Goals (SDGs) by 2030,” he said.

Blended finance is the strategic use of development finance, such as public and/or philanthropic funds, for the mobilisation of additional commercial finance towards sustainable development in developing countries. (Colombo/May20/2024)

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Sri Lanka rupee closes slightly stronger at 299.60/75 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee appreciated slightly to close at 299.60/75 to the US dollar on Friday, from 299.70/80 the previous week, dealers said. Bond yields were up.

A bond maturing on 15.12.2026 closed up at 10.15/35 percent from 10.05/15 percent.

A bond maturing on 15.09.2027 closed up at 10.45/55 percent from 10.25/40 percent.

A bond maturing on 01.07.2028 closed at 10.80/90 percent.

A bond maturing on 15.01.2030 closed at 11.70/80 percent.

A bond maturing on 01.10.2032 closed up at 11.90/12.05 percent from 11.85/12.00 percent. (Colombo/May20/2024)

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