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Tuesday November 29th, 2022

Undergrad protesters surround Sri Lanka PM’s residence; demand resignation

Protestors at Galle Face demanding that President Rajapaksa step down

ECONOMYNEXT – Thousands of Sri Lanka’s state university students surrounded the Wijearama Mawatha residence of Prime Minister Mahinda Rajapaksa Sunday (24) afternoon demanding the resignation of his brother President Gotabaya Rajapaksa and his government.

The Inter University Students’ Federation (IUSF) had also organised a massive protest march towards the presidential secretariat in Colombo Sunday morning against the government’s handling of what has become Sri Lanka’s worst economic crisis ever.

IUSF members in their thousands were greeted by police barricades at entry points to the Galle Face Green where ordinary citizens with no political party affiliation have been demanding the president’s resignation for 15 days running.

Oppostion leader Sajith Premadasa Sunday afternoon called for the removal of the barricades.

A court order issued by the Colombo additional magistrate barring the entry of groups led by 16 student union leaders were also put up on display by police to deter protesting students.

Bar Association of Sri Lanka (BASL) President Saliya Pieris condemned the police barricades including those fitted with spikes. Peiris called on the government, the police, and the armed forces to act with restraint and to ensure safety of protestors and the public t guarantee their right to dissent peacefully.

Public protests against President Rajapaksa, Prime Minister Rajapaksa and the ruling Sri Lanka Podujana Peramuna (SLPP)-led government have been growing, with various quarters including opposition lawmakers, academics, civil society activists, artists, musicians and activists demanding that they step down.

Some key government members themselves have asked that Prime Minister Rajapaksa and the cabinet of ministers be replaced with an interim government representing all parties in parliament, though they have stopped short of asking the president to follow suit. (Colombo/Apr24/2022)


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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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Sri Lanka new CB law to cabinet soon as IMF prior action

ECONOMYNEXT – Sri Lanka’s new central bank law will be submitted to the cabinet as a prior action of International Monetary Fund with clauses to improve governance and legalize ‘flexible’ inflation targeting, Central Bank Governor Nandalal Weerasinghe said.

Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

“The central bank’s ability to finance the budget deficit will be taken out. Thirdly the flexible inflation targeting regime will be recognized in the law as the framework.”

The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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