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ECONOMYNEXT – Sri Lanka’s Prime Minister Mahinda Rajapaksa asked people to be patient as forex shortages from un-anchored monetary policy (flexible inflation targeting) wracked the island, pushing up prices and the value of the rupee down.

“We ask all to be patient and be determined,” Rajapaksa said in a national broadcast.

“Dear sons and daughters all of us love this country,” he said speaking directly to the mostly young protestors who were asking President Gotabaya Rajapaksa and the family to go home.

However in the same breath, Rajapaksa tried to draw parallels with the young protestors and armed militants who emerged from around 1970 in both the North and South and worsened during 1980s. Protestors had blamed the Rajapaksa family and also the other 225 legislators who had played politics.

“If it means rejecting democracy, history shows the danger,” Rajapaksa said in a warning to the protestors. “When parliament was bombed and parliament was rejected, we saw young people’s blood on the streets.”

Prime Minister Rajapaksa also tried to put the blame on protestors for forex shortages saying that they were hindering tourists.

“Every second that you protest on the streets, the chances our country has to earn dollars is lost,” Rajapaksa said.

Sri Lanka’s politicians as well as economists have a habit of blaming the lack of inflows (tourism now, exports earlier) for creating external trouble, after pushing up government spending and printing money to keep rates down using a soft-pegged central bank.

Sri Lanka has had foreign exchange shortages from around 1950, shortly after an unstable intermediate regime central bank with money printing powers were set up by a US money doctor amid machinations of the State Department to break a very stable sterling area, according to critics.

Sri Lanka’s economists have been practicing inflationist-devaluationism in a single minded Mercantilist zero-sum goal of picking the pockets of the working class to fatten export companies for 72 years, by denying monetary stability (low inflation) to a nation and fomenting social unrest.

After the end of a 30-year civil war monetary policy turned viciously loose and three currency crises were triggered over the past 7 years under flexible inflation targeting (running a domestic anchor with a reserve collecting peg).

Flexible inflation targeting had made it impossible for two administrations to govern the country or have free trade.

Sri Lanka printed about two trillion rupees under flexible inflation targeting over the past two years tearing the balance of payments apart, creating power cuts, energy and medicine shortages and bringing the country to the brink of default.

“Even though we got over the Coronavirus pandemic the country is falling into a deep trench,” Rajapaksa said as protest continued in the capital and elsewhere

“We did not make highways for your to wait in queues,” he said. “We did not make port for yor to pay demurrage. We did not do corona three vaccines for you to get tear gassed. We will make all efforts to get over the crisis.”

Sri Lanka’s newly appointed central bank Governor Nandalal Weerasinghe had taken decisive steps to reduce monetary printing by raising rates, though a surrender rule that slams the rupee down is still in place.

Shortly before Rajapaksa began his speech, Sri Lanka’s one year Treasuries yield hit 23.6 percent, above the 12 month inflation of 18.7 percent. (Colombo/Apr11/2022)

JAT had been in business for 25 years when Nishal Ferdinando was appointed Chief Executive in 2017. Even by then, the company was market leader in wood coatings and paint brushes. Growing a business that already dominates a narrow vertical can be challenging when growth in the construction business isn’t greater than economic growth.

However, Ferdinando has led the team at JAT with a new vision to expand its product range, grow overseas and reposition the business. JAT Holdings went public in 2021 and since then, has doubled down on a strategy that responds to challenges in the Sri Lankan market, and exploits global opportunities.

JAT went public in 2021. How has the company performed since going public?

We decided to go public in late 2020. There were many apprehensions about the pandemic related lockdowns then; and if it was the right time to go for an IPO.

After a risk assessment, we decided to stay the course. However, two weeks before the IPO’s planned opening there was another pandemic related lockdown. We took a calculated risk and banked on some of the major investors here along with some foreign investors. That period was certainly challenging. It was a successful IPO and we were oversubscribed.

There were several undertakings we gave and forecasts we made as part of the IPO. One is about company performance. We had forecast revenue and a bottom line of a certain level. Those were two major financial performance undertakings.

We were also going to use the funds to start manufacturing in Bangladesh and build a state-of-the-art R&D facility in Sri Lanka. Other undertakings were to start manufacturing in Africa in two years and invest in the WHITE by JAT decorative paints range. Those were the four major projects which we were going to undertake following the IPO. Our valuation was based on all of this. We had forecast a Rs1.2 billion bottom line, and a top line of around Rs8 billion in the financial year 2021/22.

However, so many things had changed, due mostly to the pandemic, since the IPO prospectus was issued. Despite all of that we are on course to achieve a bottom line of Rs1.2 billion or greater. We also expect to meet the top-line forecast.

Mind you, we had to deal with situations like import restrictions, lockdowns, and limited foreign exchange for inputs. Yet we have managed these challenges on our own. Manufacturing in Bangladesh was expected to commence in the first quarter of the financial year 2022/23, but we have started manufacturing there months earlier. Work on the R&D centre is progressing on schedule. Sales for the decorative paint brand ‘WHITE by JAT’ have also exceeded forecasts by around 30%.

As a company, we have striven to deliver on our promises without offering excuses to our shareholders. Naturally, we are grateful to the investors who believed in us.

How did you manage to meet or exceed targets, first amidst Covid and then the forex and economic crisis?

There are several reasons. One is our strong presence in Bangladesh, about 20% of our revenue now comes from Bangladesh. And unlike Sri Lanka, Bangladesh’s economy is doing exceptionally well. Through greater backward and vertical integration we are focusing resources for growth.

Around 25% of revenue is in foreign currency, and we are expecting to grow this in the next three years to a share of at least 50% of total revenue.

The conditions may be challenging in Sri Lanka. But we believe that if we do the basics, the fundamentals right, and dare to see opportunities in this environment, we can make the best out of a bad situation.

The current financial year has been the best ever yet in the history of the company. Our turnover in Sri Lanka will exceed Rs6 billion, which is almost a 40% increase from the previous year. We are able to grow and grab market share due to this financial stability. We had little debt even before the IPO and now we are taking advantage of our strong balance sheet.

To have half your revenue generated overseas in three years, your global business will have to grow at a much faster rate than the one in Sri Lanka. How do you plan to achieve this?

We have strategies for several different markets. We now manufacture our range of wood coating products in Bangladesh. In Bangladesh, we are number one in the industrial market, but we haven’t been able to penetrate the retail market due to the lower prices of our Chinese and Malaysian competitors. By manufacturing in Bangladesh and establishing our R&D centre, we anticipate cost reductions that will enable us to better compete in the Bangladeshi retail market.

The second opportunity is in Africa. We have the right to distribute the wood coating products, Sayerlack of SherwinWilliams Performance Coatings Group in 75% of African countries. We had a five-year plan for the African continent. Now, we are planning to enter all 75% of countries in Africa in three years or less. Some of our sales and technical guys here will be relocated there to expedite this expansion. We are also open to acquiring manufacturing companies in the region.

In India our presence is small. We are working on introducing our own brands to India, which is a very price-sensitive market. In our product development lifecycle, some of these projects were expected to take two to three years, but we have fast-tracked these to be completed within the year. We are hiring foreign scientists for our R&D centre, for faster product development for the overseas market.

Another idea is to list our manufacturing business in Bangladesh, a subsidiary of JAT, in three years.

Are you challenged by this forex crisis? I presume you import a lot of raw material?

We are certainly challenged, more so lately. We’ve always maintained stocks adequate for six to seven months at least at any given time. That has been a cushion to a certain extent. Now when we have input difficulties, due to the Forex crisis, we still have excess stocks. Second, our dollarized income cushions us for 25% of our imports.

Through these two strategies, plus due to our over 25-year long relationship with Sherwin Williams (owners of the Sayerlack brand) who have offered extended credit to us. All these reasons have helped mitigate the forex crisis but it’s still extremely challenging.

What is your strategy with the decorative paints brand, WHITE by JAT?

Sayerlack is a wood coating brand and it’s a growing market segment where our share is over 55% in Sri Lanka. WHITE by JAT is a strategy to move into emulsion paints. See, when my sales team go to the dealers, and the hardware shops, it’s the same shop that sells emulsion paint as well. So, I don’t need to recruit new salespeople to sell decorative paint.

Besides, we have the exclusive agency for Harris brushes, and have our own brand, Brush Master as well. In this segment too, we are the market leader.

We didn’t want to have a traditional decorative paint strategy because paint is a very competitive market, where big promotions and extended credit are common. There are eight players in Sri Lanka.

We have a unique strategy. In Sri Lanka, out of the total decorative market 80% is white. Out of that white paint sold, 80% is brilliant white, so if you take the total decorative market approximately 65% is brilliant white paint. We are only focusing on this. We had our R&D team develop the best quality, brilliant white paint and produce it at the best price. We focused on quality, paint coverage, and viscosity.

Besides, paint companies haven’t succeeded with an online strategy because most devices people use to get paint online don’t display colours accurately. This is the biggest barrier. However, if you’re only selling brilliant white paint you don’t face this challenge.

Online sales bypass the distributors’ related costs allowing us to give the price benefit to consumers. That was the thinking behind our, WHITE by JAT strategy.

When you do sell coloured paints, significant amounts of unsold paints are returned, because it’s difficult to predict how much of what colour will sell. So there’s a large stock that has to be maintained, plus the raw material for manufacturing coloured paints. We don’t have any of these costs.

The traction we have had with WHITE by JAT has been amazing. We want to establish dominance in the Sri Lankan market before taking the product overseas. So far our overseas strategy is predominantly the wood coating business.

Of your top line in Sri Lanka, what percentage is from WHITE by JAT brand?

Our topline in Sri Lanka is about Rs6.5 billion. Of that around Rs800 million is from an area we call projects, that’s the SEA German Kitchens, Herman Miller and other furnishing ranges.

Our coatings and brushes revenue here is Rs5.7 billion, and of that about Rs3.6 billion is Sayerlack, and Rs700 million is WHITE by JAT. WHITE by JAT is only a year-old brand. We also have another Rs700 million in from our local wood coatings brand. The rest are brushes and rollers.

How did this come about? When did you realize you can launch a decorative paint company with just one colour?

I did my Executive MBA at Harvard. We were discussing a case where a company entering an overseas market selected one segment, and in that segment, how they built an online strategy, eventually becoming one of the most dominant companies in the world.

Each time I did one of these case studies, I asked myself how this relates to what I’m doing in Sri Lanka. It’s then that I realized that brilliant white paint was 65% of the market. I started strategizing about the costs and how we can penetrate the market?

I figured out we could have an online strategy. No paint company has an online strategy. Now, if I could just sell white paint, my market is 65%. We figured we would sell this entirely online.

I finished the course in June 2020, and immediately went to the drawing board with this concept, and introduced the product in December of the same year.

How much of WHITE by JAT is sold online?

We launched with a purely online strategy. We advertised a 40% discount online. What happened was consumers saw this 40% discount, they asked our dealers for WHITE by JAT. In turn, shop owners were asking us for WHITE by JAT.

As a result, the product is now also sold at the retail level too. Online sales constitute about 30% and 70% is from retail. It was not supposed to happen this way.

What we feel is that three to five years from now, the world is going to switch to online sales even for paint. So this share will increase. Our online sales are growing at an annual 50% now.

Your decorative paint revenue is 700 million rupees. What is the total size of the market?        

We estimate the white paint market is Rs24 billion. Of that 65% is for brilliant white paint, which is about Rs15.6 billion or so. Look at it from a monthly perspective, and it’s a Rs1.3 billion market for brilliant white paint. We do roughly about Rs200 million in revenue, which means our market share is 15% of the brilliant white market.

We are forecasting to grow our market share to 22% this year, and eventually to 30%.

What can a company do differently, you think, in an economic and social climate like we are in?

Sri Lanka is going through some of the worst times we have seen in our lifetime. I think the private sector has a responsibility to stand up and help. As a leader and a Chief Executive, I believe we have a responsibility.

CEOs should look at how they can make an impact and assist staff plus other stakeholders. An important stakeholder in our business is the painter. We have introduced a scheme for them that sponsors them for a NAITA (National Apprentice and Industrial Training Authority) certificate course, a professional qualification in wood painting. With that certification, they will be better skilled and valued more. They can maybe even charge a higher rate for their work.

Most of our painters in Sri Lanka earn a daily wage. They are unable to even obtain a loan from a bank. We have now created a loyalty scheme for them, and we can tell a bank that they perform a certain amount of work with our products for a month, and that the person is also a qualified painter. We can make it easier for them to obtain bank credit through this scheme. They can obtain a personal loan or a business loan through this scheme.

Further, at JAT we have a scheme that pays out a loyalty to high users of our products. These are essentially the painters. With Sayerlack coating we issue a scratch card. Painters send us the scratch card number every month to collect a royalty. We have 400 staff on our payroll, but every month, we pay an extended painter network. Of the total estimated painters of around 110,000 in the country we pay about 5000 of them a loyalty.

What I’m suggesting is that corporations have to make a choice at this time, to balance profitability, with the well-being of their employees, and that of society. I think this is very important. CEOs can make a difference and I think we need to be of that mindset. We are leaders and we should set an example.

One of the biggest challenges for the country is that young people, with the present situation, want to migrate. We have to step up, develop something exciting, expand our businesses, go to overseas markets and only then can we retain the talent in this country. The benefits of actions like these will probably be seen in the next 10 to 15 years. I think our responsibility as CEOs and leaders is even greater at this juncture in the country than ever.

ECONOMYNEXT – Sri Lanka’s central bank’s net liabilities had reached 734 billion rupees (3.6 billion US dollars) by February 2022, when gross reserves were reported as 2,311 million US dollars in the same month as the agency borrowed dollars after running out of reserves.

The central bank has about 2.2 billion US dollars of swaps with the Reserve Bank of India, Bangladesh Bank, People’s Bank of China and domestic counterparties.

It also has a 1.3 billion US dollar loan from China. The central bank also has special drawing rights allocation, after its SDR holding was sold.

The central bank has also deferred cross-border payments to India under the Asian Clearing Union.

Quasi-Fiscal Losses

When the central bank has net liabilities it makes large so-called quasi fiscal losses.

In March when the currency fell to 299 to the US dollar from 201, the agency would make a loss of at least 257 billion rupees, even if net liabilities did not go up during the month. Data showed gross reserves had fallen by over 300 million dollars in March.

The central bank however owns over two trillion in Treasury bills and bonds, which would bring profits via interest earnings, though there would be some mark-to-market losses as well.

Such quasi-fiscal losses and dollar liabilities can wipe out a central bank if it did not get external help, such as from the International Monetary Fund, the currency can fall steeply and die unless the soft-pegged authorities had courage to float (overcome ‘fear of floating’).

Sri Lanka last week raised policy rate to 14.5 percent which can curtail domestic credit and help the currency peg.

Analysts have called for a surrender requirement to be removed to stop the rupee from dying a natural death.

Sri Lanka’s credit system became increasing unstable under ‘flexible inflation targeting’ when policy became unbound from rules.

Mercantilism

A ‘flexible exchange rate’ or soft-pegged central bank loses reserves when it prints money to finance the deficit or keep rates (inflationary policy) domestic credit and imports go up above foreign receipts, putting pressure on its currency peg.

When interventions are made to stop the peg from falling (reserves are given for imports to maintain the peg) foreign assets fall.

That reserves can be used for imports is a popular Mercantilist myth widely believed in Sri Lanka.

Reserves are past savings. When reserves are used for imports (and the intervention is sterilized with new money to keep the policy rate) the external current account deficit rises and the central bank’s and the national net liabilities go up.

If reserves are used to repay debt, both an asset and liabilities come down in proportion.

However when money is printed to keep rates down in inflationary policy and domestic credit and imports go up, the central bank is unable to re-build reserves (re-collect savings) that were used to repay debt, due to excessive domestic credit and consumption triggering a currency crisis and default.

State consumption also went up under ‘revenue based fiscal consolidation’, critics have said, as large volumes of taxes taken from the private sector were given to state workers and politically favoured lobby groups. (Colombo/Apr11/2022)

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.

RelatedSri Lanka is not Greece, it is a Latin America style soft-peg: Bellwether

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)