lanka
The British intrigue in the Kingdom of Ceylon
ජනාධිපති රනිල් වික්රමසිංහ පළමු පාර්ලිමේන්තු සැසිවාරය විවෘත කරමින් සිදුකළ සම්පුර්ණ ප්රකාශය
Sri Lanka will have to stand on its own feet: PM
ECONOMYNEXT – Sri Lanka will have to stand on its own feet Prime Minister Ranil Wickremesinghe as the country ran out of fuel due to forex shortages coming from a soft-peg destabilized by money printed mis-target interest rates.
“We have to come out of this situation,” Prime Minister Wickremesinghe said in a video statement. “But we have to come out by our own efforts.
“Others have no obligation to rescue us. If get up on our own efforts we can go further. But we cannot go on the current system.”
Sri Lanka now has a large public sector and a soft-pegged central bank which prints money to mis-target interest rates, triggering monetary instability and currency depreciation.
“There is a view among some that that they not getting the value for their dollars,” Wickrmesinghe said.
“That is why some remmittances are coming through Undiyal system. Some others are keeping their money abroad without sending.
Such phenomena is known as a loss of credibility of a pegged exchange rate.
When the credibility of the peg is lost, the currency has to be floated and interventions to maintain a a peg abandoned (a suspension of convertibility) and money printing halted.
To stabilize the exchange rate the domestic economy has to be smashed by killing private credit through high rates and monetary financing of the budget has to be halted through tax hikes and sales of Treasury bills to real buyers and not the central bank.
An International Monetary Fund program usually does that. Sri Lanka has gone to the IMF 17 times since a non-credible peg was set up in 1950.
Sri Lanka set up a non-credible with money printing powers in the style of Argentina’s central bank in 1950, abolishing a currency board or credible peg which had kept the economy stable through a Great Depression and two world wars.
The Great Depression was a crisis in the Gold Standard ares triggered mostly by the US Fed.
Wickremesinghe said Sri Lanka is facing the worst crisis in modern times.
Sri Lanka has faced big crisis in 1869 over the collapse of the coffee industry.
“At the time the crisis was limited to Colombo, Kandy and Galle and most people were in rural areas,” Wickremesinghe said.
Sri Lanka also faced a big crisis in 1884 when also commodity prices collapsed. There was a banking crisis in the silver area at the time and a Eastern and Oriental Bank, which was among several banks that were issuing money in the country closed their doors.
The banks had loans in silver (rupees) and borrowings in sterling (gold) amid bad loans in troubled coffee plantations.
Colonial authorities set up the currency board at the time as a separate agency with the Ceylon Rupee having fallen to as much as 50 percent. (Colombo/June30/2022)
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ඉතිහාසය හෙවත් ලක්දිව්වාසී ජනයා පිළිබඳ වූ පුරාණ කාලයෙහි කතාදිය
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Sri Lanka stocks suffer worst loss since October 2020 as margin...
ECONOMYNEXT – Sri Lanka’s stock index plunged 4.47 percent on Monday (21) to its lowest since October 2020 as margin calls on declining shares and economic woes visibly kicked in the form of power cuts and fuel shortage weighed on investor sentiment, brokers said.
The main All Share Price Index (ASPI), closed 542 points lower at 11,591.37 points, its lowest since October 05, 2021.
The index has lost 5.9 percent so far this year and 10.2 percent so far for the month despite listed companies posting better than expected earnings in the December quarter.
“We usually see sales at month ends, but it has worsened with the reports of power cuts and fuel shortages as the people feel the brunt of the economic crisis in the country,” a top analyst said.
“I expect the trend to continue till the month-end. I don’t think there will be a recovery any time soon and if the power cuts aggravate definitely it will worsen.”
Another analyst said the margin calls have forced investors to sell their shares to recover credit for stock purchase.
Sri Lanka announced a maximum three hour power cut as the country’s forex shortage has led to fuel scarcity due to lack of dollars to import fuel.
SL20 of the more liquid index closed 5.02 percent or 207.88 points weaker at 3,932.78. The fall of this index prompted the market to temporarily halt trading as the plunge was over 5 percent.
Analysts had predicted a downtrend in the market due to the uncertainties in the market and the economy. The market lost 2.6 percent last week.
The day’s turnover was 4.2 billion rupees, lower than this year’s average turnover of 6.8 billion rupees.
The market has been in a declining trend due to the ongoing forex crisis most companies are going through, despite many companies posting better-than-expected earnings in the December quarter.
The rupee exchange rate is fixed at around 200 rupees by the central bank, but it is now above 250 rupees per dollar in the grey market.
Foreign investors, who are highly worried about possible sharp depreciation or devaluation in the currency, bucked the trend and bought a net of 79.9 million rupees worth shares on Monday.
The foreign sales of shares so far this year have been 3.3 billion rupees. In 2021, the Sri Lanka stock market suffered a net foreign outflow of 50 billion rupees.
Analysts had predicted that the economic concerns would drag the market from time to time until the government finds a sustainable solution for the country’s looming debt crisis.
LOLC Holdings, Expolanka and Royal Ceramic dragged the market down on Monday.
LOLC Holdings fell 9.41 percent to close at 1,025.00 rupees a share, while Expolanka, the market heavyweight that has export and freight businesses plunged 8.49 percent to 288.00 rupees a share.
Royal Ceramic lost 7.96 percent to 61.30 rupees a share. (Colombo/Feb21/2022)