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Wednesday December 7th, 2022

Venezuela printed money like Sri Lanka driving women into prostitution: Kabir

ECONOMYNEXT – Venezuela printed money like Sri Lanka under populist policies of Hugo Chavez and the country’s women turned to prostitution and millions fled the country, opposition legislator Kabir Hashim said.

“Sri Lanka is now in the position of where Venezuela was several years ago,” Hashim told parliament.

“Hugo Chavez did populist politics and bankrupted the country. Experts have pointed out that printing money and spending beyond income and the loss of reserves.

“Venezuela did everything that Sri Lanka did. As a result 6 million became refugees. They went to other countries like people take passports and go abroad.

“These fleeing women turned to prostitution to feed their families. I am telling the government Sri Lanka is at a dangerous position.”

Latin America has among the world’s worst central bank’s build by US money doctors from the Federal Reserve modeelled Argentina’s central bank.

“Starting in the mid-1940s, the Treasury and subsequently the United States Federal Reserve organized a series of missions (to Paraguay (1943-44), Dominican Republic (1945) and Venezuela (1948)), headed for the most part by Robert Triffin (1911-1993),” according writes Esteban Pérez Caldentey and Matías Vernengo in The central banking system and monetary policy in the centre and the periphery: Prebisch as a central banker and ‘money doctor’.

“Triffin invited Raúl Prebisch to collaborate on these missions and highlighted his influence on proposals for reform of the banking system in those countries.”

Sri Lanka’s central bank was also set up by a Fed expert on the model of Argentina’s central bank with extensive sterilization powers (to use foreign reserves for imports and print money to keep rates down effectively re-financing the private sector) triggering currency crises easily as domestic private or state credit picked up.

“This law (Monetary Law Act) has been drawn up under American tutelage and along the lines of lines that have been the subject of experiment in some Latin American countries some eight years past,” a classical economist wrote in The Banker magazine of August 1950, adding prophetically.

“The step from an ‘automatic’ currency system (such as that which Ceylon inherited with its old Colonial Currency Board) to an ultra-modern currency system is necessarily fraught great dangers and there may be some who will regret that Ceylon has decided to run such risks at this time.”

Sri Lanka is now planning to enact and even more discretionary law incorporating flexible inflation targeting perhaps the most deadly impossible trinity monetary regime peddled to hapless third world nations with reserve collecting central banks but without a doctrinal foundation in sound money, critics say.

Argentina’s last default took place while ‘flexible’ inflation targeting.

Collapsing currencies and high nominal interest rates that come from countries with frequent currency crisis makes budgets unmanageable while growth falls and out-migration is triggered. The currency collapses makes it difficult for people to live and they ask for subsidies.

Countries that went in the opposite direction in East Asia and in the Gulf and maintained currency stability and made it impossible for economists to print money have instead prospered and attracted foreign guest workers. Iran, another country ‘helped’ by US money doctors collapsed.

Sri Lanka also attracted large scale foreign investment (into plantations, finance, energy among other areas) during its currency board era and drawing in-migration. Many of the FDI was later expropriated (like in Venezuela) as leftist leaders like Chavez was elected along with their advisors.

One of the problems in Venezuela was a surrender rule that forced its (repeatedly expropriated) state oil corporation PDVSA to sell dollars to the central bank creating money, and pushing the currency down.

Sri Lanka also imposed a surrender rule in the 2020/22 crisis, leading to a swift collapse of the currency as a float was attempted. (Sri Lanka bank dollar surrender rule hiked to 25-pct).

Like in Sri Lanka’s Ceylon Petroleum Corporation, PDVSA firm was forced to borrow dollars, as forex shortages came. It defaulted about 25 billion dollars to bondholders in the last currency collapse.

Venezuela however survived until the mid 1980s when it was encouraged to depreciate (flexible exchange rate or BBC policy) leaving the country without an effective anchor for monetary policy.

Several of the countries with Prebisch-Triffin central banks have now become dollarized, including El Salvador and Ecuador.

Sri Lanka’s main opposition Samagi Jana Balawegaya was against the budget 2023 because the government was setting a bad example with a 37 ministers and no action against corruption, Hashim said.

“Reform must begin at the top. The government should be shrunk” Hashim said.

“We are not against reforms. However the pain must be shared. The first reform must starte from the government, if you want people to accept the pain it must be shared equally.

“Otherwise it will create social upheaval. Thirty seven ministers is a bad example.”

There were also problems with politicization of welfare spending he said.

The budget also had not put forward measures on battling corruption.

“The issue of corruption has not been addressed,” he said. “That is a very important matter.” (Colombo/Nov22/2022)

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  1. veddah says:

    Neither Venezuela nor Sri Lanka is socialist. Sri Lanka is a pseudo democratic. Dictatorship

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  1. veddah says:

    Neither Venezuela nor Sri Lanka is socialist. Sri Lanka is a pseudo democratic. Dictatorship

Crisis-hit Sri Lanka sees recovery in cruise ship tourism from zero

ECONOMYNEXT – Seventeen cruise ships are scheduled to arrive in Sri Lanka next year with
Queen Mary 2, one of the largest and popular ships, Colombo’s harbor master said, as the island nation is looking for alternative avenues to boost its faltered tourism sector.

The rise is expected to bring thousands of high end tourists with higher spending capacity after two years. The island nation saw a record high 54 ships in 2019, rising from the previous year’s 42, Nimal Silva, Colombo Port Harbor Master said.

“The 2019 was one of the best years and in 2020 there were more than 60 scheduled vessels to
call but with COVID pandemic all hell broke loose,” Silva told EconomyNext.

Fourteen cruise ships are scheduled to call from January-May next year and another three are scheduled to arrive in Colombo in November, when the peak tourism season begins.

Cruise tourism cycle begins in Sri Lanka from October to May with a dip during the monsoon

Sri Lanka welcomed two cruise ships in November after almost two years.

Three ships are scheduled to arrive in December and Azamara Quest, carrying at least 722 tourists, arrived in Colombo on December 3 and is now heading to Hambantota.

On December 18, Le Champion carrying 264 will arrive in Colombo and depart to Mumbai and the third vessel, Silver Spirit will arrive in Colombo on December 23 carrying up to 648 passengers.

There are two scheduled in January, one in February, and four in March next year, according to the harbormaster.

“Next year more ships could schedule, so far these are the confirmed ones now,” he said.

This also generates income for the port and the prices are charged according to the size of the

Silva said the first medium sized-cruise vessel, 229 meters long, generated about 14,000 dollars
for docking in the port for a day.

He said Queen Mary 2, a 325 meter long ship and one of the largest cruise ships in the world, is also
scheduled to call at Colombo in February. It can carry up to 3200 passengers.

Silva said almost all the ships that were scheduled have arrived on the island and therefore, he is
confident all the ships including Queen Mary 2 will arrive in Sri Lanka.

“Only one ship has been canceled thus far. There are no last minute cancellations if there were some they would have informed us by now,” Silva said. (Colombo/Dec07/2022)

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Sri Lanka President says 2015-2019 policy struggle was ‘warfare’

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe said his attempts to reverse the inward-looking protectionist policies and fix state finances during his last term as Prime Minister was opposed both by politicians and business interests.

“In the 4.5 years as prime minister it was an effort to take this economy out in a different direction,” President Wickremesinghe told an economic forum organized by Sri Lanka’s Ceylon Chamber of Commerce.

“We were able to get a surplus in the primary budget. But it was warfare.

“Politicians wanted to protect their power, businessmen wanted to protect their profits and many others wanted to see what the country would provide them free of charge.”

Wickremesinghe was unable to bring private investment to the port under apparent internal political opposition. Relations with President Maithripala Sirisena also soured and he appointed his own economic advisors.

Meanwhile Wickremesinghe’s free trade agenda was hit by monetary instability as the central bank printed money under flexible inflation targeting and triggered forex shortages which were followed by trade controls.


Sri Lanka controls imports in ‘Nixon-shock’ move to protect soft-pegged rupee

Sri Lanka President calls to expand Nixon shock as rupee falls

Wickremesinghe’s ‘Yahapalana’ administration also went on a spending spree called ‘100-day program’ in 2015 triggering a currency crisis in 2015/2016 as the central bank printed money to suppress rates.

The central bank however had already started injecting liquidity and losing reserves (by terminating term repo deals) from the fourth quarter of 2014 as domestic credit recovered from a 2012 currency crisis before his administration came to power.

The rupee fell from 131 to 152 and stabilization policies led to an output shock. The International Monetary Fund then taught the agency which had already depreciated the currency from 4.70 to 152 to the dollars seeking bailouts 16 times, how to calculate an output target.

Under Finance Minister Mangala Samaraweera taxes were raised and budget were fixed in 2018 to bring deficits back to pre-2015 levels, though state spending went up from 17 to around 20 percent of GDP under the spendthrift ‘revenue based fiscal consolidation’ where cost cutting was dropped.

The central bank then printed money by purchasing bonds from banks to target the yield curve, jettisoning a bills only policy established by ex-Central Bank Governor A S Jayewardena, through term reverse repo and overnight injections taking the rupee from 151 to 162 to the US dollar.

The central bank also created money by entering into a swap with the Treasury in 2018, a type of strategy used by speculators to bring down East Asian pegs putting, further pressure on the currency from around July 2018 onwards.


What went wrong; Sri Lanka’s illiberal economics and unsound money : Bellwether

Stabilization policies then led to another output shock. As forex shortages came Sri Lanka resorted to heavy external borrowing as it was unable to settle maturing loans with domestic borrowings.

After two currency crises and output shocks, macro-economists of the new administration cut taxes saying there was a ‘persistent output gap’ and printed even more money for stimulus (close the output gap). (Colombo/Dec07/2022)

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China calls for joint effort to ease Sri Lanka’s debt burden, no mention of restructure

ECONOMYNEXT — A top Chinese official has expressed hope that countries and multilaterals like the International Monetary Fund (IMF) work with Beijing to play a constructive role in easing Sri Lanka’s debt burden, stopping short of an assurance on debt restructuring.

Chinese Foreign Ministry spokesperson Mao Ning was quoted by international media as saying on Monday December 05 that China attaches high importance to Sri Lanka’s difficulties and challenges.

She was responding to a question on media reports that an IMF team will be in China this week to discuss faster progress on debt restructuring for countries including Sri Lanka, which is negotiating for an IMF bailout.

“On Sri Lanka’s debt issue, I’d like to stress that we support the financial institutions in working out ways with Sri Lanka to properly solve the issue,” said Ning.

“We also hope relevant countries and international financial institutions will work with China and continue to play a constructive role in helping Sri Lanka overcome the current difficulties, ease its debt burden and realise sustainable development,” she added.

She said China has long-standing sound cooperation with the IMF and other international economic and financial institutions.

The spokesperson avoided any mention of debt restructuring, a prerequisite for the IMF extended fund facility (EFF).

Nearly a fifth of Sri Lanka’s public external debt is held by China, according to one calculation. The emerging superpower has been generous in Sri Lanka’s time of need, extending much needed assistance in the form of rice, medicine and other commodities.

The latest arrival in the Colombo port from China was 2 billion Sri Lankan rupees worth of essential medicines and medical supplies, delivered on Tuesday.

However, critics say China is doing everything but what Sri Lanka really needs: agreeing to restructure its outstanding debt.

At least one Sri Lankan opposition MP has demanded that China agree to a restructure.


Sri Lanka debt restructuring: opposition MP warns of “China go home” protests

Tamil National Alliance (TNA) legislator Shanakiyan Rasamanickam, who had been on the warpath with Beijing over an apparent lethargy in helping the crisis-hit island nation restructure its debt, recently warned of a “China, go home” protest campaign similar to the “Gota, go home” protests that unseated the country’s powerful former president in July.

The MP told parliament last Friday December 02 that Sri Lanka owes 7.4 billion dollars to China, a nearly 20-trillion dollar economy, and if the latter was was a true friend, it would agree to either write off this debt or at least help restructure it.

Colombo has been vague at best on the status of ongoing restructure talks with Sri Lanka’s creditors, and opposition lawmakers and others have expressed concern over what seems to be a worrying delay. Rasamanickam and others have claimed that China, Sri Lanka’s largest bilateral creditor, is the reason for the apparent standstill. (Colombo/Dec06/2022)

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