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ECONOMYNEXT – Two Sri Lankans died in fuel queues over the weekend, police media said on Monday (11), bringing the death toll in fuel queues to seven since March 31.

Both death had occurred due to heart attack after being waiting in the queues for a long time.

“The two deaths earlier were due to heart attacks. They were on medications,” Police Spokesman Nihal Thalduwa told Economy Next.

A 47-year old private bus driver from Gonawila died on Saturday (09) while waiting in the fuel queue. Eyewitnesses had said that the man collapsed on the street.

The second death took place on Sunday (10) morning and a 52-year old tourist guide of Kochchikade died. Police media stated that the man had filled his tank and gone about 10 meters before he was found dead in his vehicle.

Of the previous five deaths, four were of senior citizens who died of natural causes, the fifth, a 29-year old man was stabbed to death following an argument while waiting in a fuel queue.

People standing in fuel queues, cans in hand, has been a common sight in recent weeks as Sri Lanka’s fuel shortages worsen amid a worsening forex crisis.

People have been seen collecting extra fuel in fear of future shortages.

Authorities say panic buying is making the problem worse when fuel is available and a continuous supply is to be ensured through a 500 million US dollar Indian credit line.

Severe shortage of foreign currency has reduced the fuel import and that in fact had led to shortage and extended power cuts as high as 13 hours in a day.

Sri Lanka is facing multiple crisis simultaneously – power cuts, shortages of essentials, and a sharp depreciation of the rupee following the float.

Thousands of Sri Lankans have taken to the streets to protest the Government’s mishandling of the economy, organized via social media. Hundreds of protesters have occupied a protesting site next to President Gotabaya Rajapaksa’s office for the third day on Monday. (Colombo/April 11/2022)

ECONOMYNEXT – Hundreds of Sri Lankan protesters occupied near the president’s office for the second night on Sunday as President Gotabaya Rajapaksa defied calls to resign amid an increasing public protest after his policy mismanagement resulting in the country’s worst economic crisis since the independence in 1948.

Protesters shouted slogans against Gotabaya Rajapaksa and his family members as many protesters held placards written as ”Give us out stolen money back”.

The key protest near president’s office opposite to Chinese-built Port City came after police used tear gas and water cannons to disburse protesters in a March 31 demonstration near President Rajapaksa’s private residence.

Security in Colombo was tightened and official residences of President Rajapaksa and his brother, Prime Minister Mahinda Rajapaksa, were cordoned off with multiple barriers.

Many people in their personal vehicle came to the protest site and expressed their solidarity while voluntarily donating food and water for the protesters.

They also had placards saying “This is our country, not your ATM”, “Country is for sale, Gota fail”, “Give us our stolen money back”, “If you steal our dreams, we won’t let you sleep”, and “Audit all politicians immediately”.

The protest entered into the second day of the long new year holiday. Millions of Sri Lankan Sinhala and Tamil people will celebrate the traditional new year on Wednesday and Thursday and government offices will reopen on April 18.

Many protesters told Economy Next that they expect to continue the protests throughout the holidays, “until Rajapaksa resigns”.

Some protesters waved black flags with white letters saying “Go Home Gota”, the campaign theme of the protesters who have gathered via social media.

New protesters were seen joining the group, while some others voluntarily supplied food and water for the crowd.

Similar protests demanding President Rajapaksa’s resignation  also took place in many places of the country while Sri Lankan expatriates in Australia, the United States, Canada, Italy, and Japan also held similar protests asking Rajapaksa to resign.

Sri Lanka’s Catholic community observed silent protest after the mass on Palm Sunday, the first day of Easter.

The Catholics carried placards saying “It started with a crisis and will end with a crisis”, referring to the Easter Sunday attack in 2019 in which Islamist militants’ suicide attacks killed 269 people mainly Christians. The attack helped Rajapaksa to ensure the victory in the presidential poll.

It was the first time people rose against the Rajapaksa dynasty which has dominated Sri Lankan politics in the last 18 years.

People across the country suffered due to President Rajapaksa’s economic mismanagement and resulted in a drop in crop harvest which threatens a looming food shortage and depletion of foreign reserves.Severe shortage of dollars has resulted in lower imports of cooking gas, fuel, milk powder, and medicinal drugs.

It also led to extended power cuts as the country failed to import required fuel in the face of severe dollar shortage. 

Rajapaksa’s overnight ban on agro chemicals hit the agriculture sector and farmers have said they are angry because the president never consulted them or apologized for his wrong policy.

Meanwhile sources close to President Rajapaksa said he is likely to appoint a cabinet with young legislators from his party with a face lift after he has got confirmation that he has the backing of at least 117 ruling Sri Lanka Podujana Peramuna (SLPP) legislators in the 225-member parliament.

Political analysts say anything below the resignation of President Rajapaksa or removing all his powers will not ease the protests.

Meanwhile, some supporters of President Rajapaksa’s party staged protests in three areas of the country demanding the president not to resign. (Colombo/April 10/2022) 

COLOMBO (News 1st); As of now, Sri Lanka is in an economic turmoil, and the sky-rocketing cost of goods has left people helpless. Why has Sri Lanka found itself in this situation? Those in power have often blamed the COVID-19 pandemic for the crisis in the country. However, the claim is questionable, as Sri Lanka’s South Asian Economic Mismanagement and the real victims

ECONOMYNEXT – The International Monetary Fund is ‘very concerned’ about Sri Lanka’s economic crisis and has started technical level talks with central bank and finance ministry teams, the lenders mission chief for the island Masahiro Nozaki said.

“We at the IMF are very concerned about the current economic crisis in Sri Lanka and hardships suffered by the people, especially the poor and vulnerable,” Nozaki said.

“We are monitoring the political and economic developments very closely.”

Sri Lanka’s rupee is dire straits due to money printed to keep rates low under ‘flexible inflation targeting’ which critics say is a non-regime with anchor conflicts that had led to currency crises in rapid succession over the past seven years.

Analysts had warned for several years that if ‘flexible inflation targeting’ and ‘flexible exchange rate is continued, Sri Lanka could end up with steep currency depreciation, default, inflation, power cuts and fuel shortages and the rupee could die in market dollarization.

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What Sri Lanka’s IMF program should look like

The IMF has already started technical level talks with Sri Lanka officials.

“We received a request for an IMF-supported program from the authorities, and have started technical-level engagement with teams at the Ministry of Finance and the central bank,” Nozaki said.

“We commit to assisting Sri Lanka consistent with our policies, and will engage in discussions on a possible program with senior policymakers in the coming days and weeks.”

Sri Lanka’s Finance Minister Ali Sabry told parliament that about 3.0 billion US dollars could be expected from the International Monetary Fund under a three year facility.

About 3.0 billion works out to about 535 percent of Sri Lanka’s 790 million US dollar quota under exceptional access minus the outstanding 1200 million dollar loan from a previous program.

Sri Lanka’s newly appointed Central Bank Governor Nandalal Weerasinghe raised policy rates 700 basis points to limit money printing and control runaway inflation after an attempted float failed due to low policy rates and a surrender requirement.

The surrender requirement still remains in place and will chip away at any attempt to establish a consistent float, critics have warned.

The rate hike is an attempt to save the rupee, and its attendant rupee banking system. Taxes will also have to be raised to save the bloated public sector and prevent money from being printed to pay its salaries.

In April about 120 billion rupees was printed to pay salaries and advances.

ECONOMYNEXT – Thousands of Sri Lankans gathered near the presidential secretariat in Colombo on Saturday demanding President Gotabaya Rajapaksa to resign after his failure to supply essentials and economic mismanagement.

Protesters including university undergraduates and Buddhist monks walked on the road in front of Sri Lanka’s historic Galle Face Green and chanted slogans against the president.

Many of them carried placards saying “Go Home Gota”, while some carried national flags.

All the protesters from time to time shouted “Gota, go home”, referring to their demand.

The Saturday protest came after President Rajapaksa refused to step down despite increasing pressure on him to resign following his failure in managing the economic crisis.

“People should stand up for their rights. People should dictate terms for these dictators,” Nayana Rozario, a woman who carried a placard demanding the repeal of 20th amendment said.

Another protester thanked Rajapaksa for bringing all the communities together in fighting against him.

“For the first time in my life time, Sinhalese, Muslims, and Tamils -all joined together to fight against Rajapaksa because we have had enough of corruptions and incompetencies in this country,” said Lakshman, a protester holding a placard saying “Go Home Gota”

Ruling Sri Lanka Podujana Peramuna (SLPP) sources say the protests are organized by the opposition parties using urban youth for political reasons and they expect the protests to die down with the time.

Isolated protests started early in March mainly in Colombo intensified after a March 31 protest near Rajapaksa’s private residence in Mirihana turned into violent before the arrest of 53 people.

Later Rajapaksa declared State of Emergency and then imposed curfew on Sunday (03) when people had planned island wide protests demanding Rajapaksa resignation. The government also banned social media on Sunday.

The road in front of the presidential secretariat was closed as the protest intensified. Some protesters climbed on to the barricades blocking the presidential secretariat entrance and shouted.

It was the first time people had risen against Rajapaksa family  which has dominated Sri Lankan politics in the last two decades.

President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa are hailed for the 2009 military defeat of Tamil Tiger separatists who carved out for an independent administration in the island nation’s North and East.

Millions of Sri Lankans, mainly majority Sinhala Buddhists revered Rajapaksa for liberating the country from a 26-year terrorist war. They even voted for them despite many corruption allegations and misappropriation of funds.

People across the country, however, suffered due to President economic mismanagement under President Rajapaksa. That resulted in a drop in crop harvest which threatens a looming food shortage now and depletion of foreign reserves.

Severe shortage of dollars has resulted in lower imports of cooking gas, fuel, milk powder, and medicinal drugs. It also led to extended power cuts as the country failed to import required fuel for power generation in the face of severe dollar shortage.

A 60 percent rupee depreciation within a month also has hurt the people as the move had led prices of goods and services across the board expensive. (Colombo/April 09/2022)

ECONOMYNEXT – Sri Lanka’s stocks fell 1.4 percent on Friday (08) to an eight-month low led by banks as rising market interest rates and an economic turmoil that has now turned into a political crisis weighed on the investor appetite, brokers said.

After the market closed, the central bank raised the key monetary policy rates by more-than-expected 700 basis points in what the new governor Nandalal Weerasinghe said was the “highest and tightest monetary policy” ever by the central bank.

The main All Share Price Index (ASPI) ended 1.39 percent or 114.45 points at 8,135.25, its lowest since August 17, 2021.

“Although the market was volatile, there wasn’t a large selling pressure with the appointment of the new governor and (IMF) negotiation committee is have a positive bearing on the market,” a top market analyst said.

“However, most investors are on a wait and see approach while the retail concentration seems to be on the dollar income companies.”

He added that as positive news circulates there is a pause in the all-out selling mentality and that would stay if the news continues to be positive.

S&P SL20 of the most liquid stocks fell 1.67 percent or 44.47 points lower to 2,623.90 points.

The political crisis amid continuous public protests over President Gotabaya Rajapaksa government’s economic mismanagement dented the sentiment.

The day’s turnover was 1.25 billion rupees, nearly a quarter of this year’s average daily turnover of 4.7 billion rupees.

Sri Lanka’s rupee has fallen nearly 60 percent since it was allowed flexibility on March 07.

The market has lost 8.6 percent so far in April after plunging 23 percent in March and 11 percent in the previous month. Overall the market has lost 33.5 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year.

Foreign investors bucked the trend and bought a net 30 million rupees worth of shares. However, the market has witnessed a total foreign outflow of 1.46 billion rupees so far this year.

Commercial Bank, Sampath Bank and Hatton National Bank dragged the index down on Friday amid speculations that the overall banking sector is facing default risks on their dollar swaps.

Shares in Commercial Bank slipped 4.2 percent to close at 57.30 rupees a share, Sampath fell 2.7 percent to close at 39.60 rupees a share while HNB slipped 3.35 percent to close at 95.40 rupees a share. (Colombo/April 8/2022)

ECONOMYNEXT –Sri Lanka ruling party MP Ali Sabry, who on Monday (04) was sworn in as Finance Minister only to resign the next day amid an intensifying political crisis, told parliament on Friday (08) that he still holds the portfolio as President Gotabaya Rajapaksa has declined to accept his resignation.

Sri Lanka is expected to begin talks with the International Monetary Fund (IMF) next week as the island nation sinks deeper into an economic meltdown which has now precipitated a worsening political crisis.

Thousands of protesters are up in arms against President Rajapaksa’s failure to address the economic crisis brought about by a severe dollar shortage as long queues for essentials such as fuel, cooking gas, and milk powder continue to line the streets along with the placard-carrying protestors.

Extended power cuts due to lack of fuel imports and around 60 percent depreciation in the rupee have brought people to the streets. At least one protest turned violent on March 31, right outside the president’s private residence.

Sabry was appointed as finance minister on Monday, a day after the entire cabinet was asked to resign by President Rajapaksa after public pressure mounted for him to step down.

However, Sabry resigned on Tuesday (05) claiming that he was even ready to vacate his parliamentary seat to allow a person outside the legislature to be appointed to handle the economy.

Speaking in parliament during a debate over the IMF Article VI report on Sri Lanka, the opposition in what capacity he was speaking about the report.

“I speak today as finance minister. The president chose me for the post because of the requests at that time. But later I thought this should be given to a more capable person,” he told parliament.

“The international community including the European Union say the current instability is harmful for the country’s future. We offered this post to the others, but nobody came forward. So on behalf of the country, I accepted this.”

He said a “hard default” was unimaginable and it will be hard to digest.

Kanchana Wijesekera, a ruling Sri Lanka Podujana Peramuna (SLPP) MP said President Rajapaksa has not accepted Ali Sabry’s resignation letter.

Sabry was President Rajapaksa’s lawyer in a number of misappropriation cases.  (Colombo/Apr08/2022)

ECONOMYNEXT – Sri Lanka’s opposition legislators criticized President Gotanaya Rakapaksa to his face in the parliament on Thursday (07) over the current economic crisis that has now turned into a political crisis.

Rajapaksa attended the parliament on Thursday as per a constitutional request amid tight security in Colombo and continued protests across the country.

“Now you (the speaker) said, that there will be a food shortage. The reason for that was the decision of the executive president to stop chemical fertilizers. Due to that the yield dropped by 50 percent,” Opposition legislator Lakshman Kirielle told the parliament.

“In our constitution under the 27th ordinance, food, shelter, cloths and etc are there. If the president is failing to protect these things mentioned in the constitution means he is deviating the constitution.”

Rajapaksa banned agro-chemicals in April last year due to depleting foreign reserves without giving any alternatives to farmers before attempted to promote organic fertilizer, which the government could not supply on time.

The harvest reduced to less than 50 percent due to fertilizer shortage and the country is facing a looming food shortage, forcing the government import stable food rice from India, China, and Myanmar.

Soon after the landslide victory in August 2020 general election, Rajapaksa changed the constitution to increase his powers while eliminating all independent commissions.

“The President is the reason for a weak parliament. Now he comes to us asking for solutions,” Kirielle said.

“Now let’s say we come up with solutions. But the parliament doesn’t have the powers to implement them. President have the power and he can either implement or discard them.”

“If you want a solution the constitution must be changed and we have to re look at the executive presidency.”

Protests across the country continued on Thursday as well and people demanded the resignation of Rajapaksa.

Tax Cut Triggered Crisis 

Sri Lanka’s latest crisis started with Rajapaksa slashing the value added tax to 8 percent from 15 percent in December 2019. The move resulted the state losing nearly 600 billion rupees or 30 percent of the tax revenue annually.

Then the central bank printed excess money to keep the interest rates at record low artificially to boost the pandemic hit economic growth.

Simultaneously the central bank also pegged the rupee exchange rate around 200 rupees per US dollar which resulted in a booming black market and the country’s remittances plummeting by 60 percent on year.

The central bank restricted imports, but the policy never worked under a cheaper borrowing regime and led to loss of foreign currency and depletion of reserves.

Later, the government started to limit the import of essentials due to the severe shortage of dollars.

Anura Kumara Dissanayaka, the leader of the Marxist Janatha Vimukthi Peramuna (JVP) said the government failed to provide a solution for the people who demanded answers for the consequences of the economic crisis – shortages of essentials.

Dissanayaka said the government ministers continuously lied to the public, the president refused to take the responsibility of the crisis, while former Finance Minister Basil Rajapaksa asked the public not to look far on crucial matters.

“On April 01, you thought the situation could be controlled by imposing the emergency law. But after two or three days the president withdrew it.”

“And on 3rd they imposed a curfew because of rumors about protests. Were you able to find solutions?. No,” Dissanayaka asked Rajapaksa.

“The public movement is now revolving around two factors. One is that this president is not suitable for the position. We must admit it.”

“As the opposition it can be our opinion from day one. But it is no longer the opinion of the opposition. Now it is a central point of this movement.”

“This president is one of the reasons for this issue to be more complicated and he has not shown the capability to solve this.  Therefore no solution will be given under him and any solution given under him will not be accepted.” (Colombo/April 08/2022)

ECONOMYNEXT – Sri Lanka’s stocks plunged nearly 4 percent on Thursday (07) to an eight-month low as rising market interest rates and an economic crisis that has now turned into a political crisis weighed on the investor appetite, brokers said.

The main All Share Price Index (ASPI) ended 3.86 percent or 331.23 points at 8,249.70.

Market analysts have said that investors are extremely concerned therefore they are not holding on to shares for long and that sentiments have hit rock bottom.

A speculation of at least 300 basis point policy rate hike on Friday (08) also led to market fall as many investors are expected to switch to fixed assets a day after the 364-day T-bill rates jumped to over 15 percent.

Sri Lanka’s entire cabinet resigned late on Sunday due to mounting pressure from the public protests over President Gotabaya Rajapaksa’s government failing to address an economic crisis as the people suffered due to shortages of milk powder, fuel, and gas.

People also had to suffer from extended power cuts due to a severe shortage of dollars to import diesel for power generation.

SL20 of the most liquid stocks fell 4.39 percent or 122.81 points lower to 2,674.71 points.

Questions still remain as to how the country is going to face the mounting debt while the rupee continues to depreciate, dealers say.

The day’s turnover was 1.4 billion rupees, more than a third of this year’s average daily turnover of 4.7 billion rupees.

Analysts said investors are trying to shift their savings to hedge against the rupee fall and inflation, which is at a record high and more than 5 percent higher than one-year Treasury bill yield. Brokers said investors opt for stocks to hedge against inflation.

Sri Lanka’s rupee has fallen nearly 60 percent since it was allowed flexibility on March 07.

The market has lost 7.3 percent so far in April after plunging 23 percent in March and 11 percent in the previous month. Overall the market has lost 32 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year.

Foreign investors bucked the trend and bought a net 59.4 million rupees worth of shares. However, the market has witnessed a total foreign outflow of 1.49 billion rupees so far this year.

Expolanka, LOLC Holdinngs and Browns Investment, dragged the index down on Thursday.

Shares in Expolanka slipped 9.7 percent to close at 150.75 rupees a share, LOLC Holdings down 12.5 percent to close at 398.75 rupees a share while Browns Investment slipped 14.3 percent to close at 6.00 rupees a share. (Colombo/April 07/2022)

ECONOMYNEXT – An ally of Sri Lankan President Gotabaya Rajapaksa on Thursday admitted that the government should have sought International Monetary Fund (IMF) help to face economic crisis, float the rupee systematically, and  started debt restructuring.

The economic crisis due to shortage of US dollars, cooking gas, fuel, and milk powder amid extended power cuts has now turned into a fully blown political crisis with intensifying street protests by people mainly the youth demanding for the resignation of Rajapaksa.

President Rajapaksa attended the parliament in line with the constitutional requirement amid tight security with roads leading to the parliament closed while protests by the public continued across the country.

“I was within and outside the cabinet telling that we should have gone to the IMF a year ago,” Ali Sabry, former justice minister told the parliament.

“The rupee should have been floated in systematic manner and not like this. We should have started a debt restructuring. You all told the same thing and we also have told the same thing.”

Sabry did not reveal the Sri Lanka Podujana Peramuna (SLPP) members who opposed seeking IMF assistance, floating rupee, and debt restructuring.

“But now we must see how we can overcome the issue with the resources at hand and if we don’t there will be serious turbulence within the parliament and out of the parliament, on the road and not against only the government politicians but for all 225,” Sabry said.

Frustrated with economic mismanagementa and wrong police decisions, people have been protesting with a theme “Go Home Gota”, across the country demanding the president to resign,

The central bank allowed flexibility in the exchange rate on March 7 and the rupee has fallen around 60 percent since then. That has led to steep price increase in essential price and people have complained about high cost of living.

Protesters have been demanding all Rajapaksa’s to resign from the office and investigate them for looted money. Sri Lanka’s cabinet before the resignation on Sunday (03) included five Rajapaksas.

Ali Sabry said the protesters have been demanding to do something outside the constitution.

“It will be even more drastic. The constitution will be broken. We saw in Syria, in Libya, in Afghanistan, in Yemen and now seeing in Iraq,” Sabry said.

“Iraq in the last month, from oil alone got $12.1 billion in income for one month in February and still they can’t run, because structures have collapsed. So we need to understand and it’s a heavy bound issue.” (Colombo/April/2022)