Tuesday, July 23, 2024

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SL floats the rupee to please India before Finance Minister’s New Delhi visit           

In an effort to mend fences with the Indian Government and seek financial assistance including US$1 billion loan facility  Finance Minister Basil  Rajapaksa will be visiting India during the second half of this month  after postponing it in two previous occasions, official sources confirmed. 

 New Delhi Authorities has not delayed the necessary arrangements for the SLFinance minister’s visit until the fulfillment of some of their conditions grant financial assistance to the island nation.

Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva noted that the Central Bank has taken  this decision hurriedly to float the rupee two days after Governor Ajith Nivard Cabraal’s claim of the current level of rupee to the dollar is appropriate and there will not be a rupee float.

Mr Cabraal stated on Friday 05 that the Monetary Board has not taken a decision on the flexible exchange rate and therefore it will remain as it is he said

Dr. Harsha de Silva claimed that the country’s rupee had been devalued hurriedly, heeding to a demand made by Indian External Affairs Minister Dr. S. Jaishankar  during his telephone conversation with the Sri Lankan Finance Minister.

This was a fulfillment of one of the conditions put forward by India to provide $ 1billion loan facility and facilitate Minister Basil Rajapaksa’s official tour of India this month, he added.     

According to de Silva, Sri Lanka’s debt service needed for the next six weeks is $ 1.44 billion, which includes payments in relation to development, sovereign bonds, and other obligations which include $ 200 million development bonds and several other obligations.

The CBSL had reportedly sold $ 372.35 million in November to defend the rupee – a record high in recent years – reflecting the seriousness of the foreign currency liquidity crisis Sri Lanka is currently in.

According to the latest data, the CBSL had sold $ 372.35 million in foreign exchange and bought $ 61.71 million from the domestic foreign exchange market in November, staying as a net seller of foreign exchange for the second consecutive month.

In October, after months of being a net absorber or buyer of foreign currency from the market, the CBSL had turned to a net seller of $ 72.32 million worth of foreign currency.

Sri Lanka’s rupee had been under heavy pressure since this June, when the expected inflows to the reserves started to minimise.

The Indian External Affairs Minister Dr. S. Jaishankar has assured that India will continue to support Sri Lanka in all possible ways.

In a tweet, the Indian High Commission in Sri Lanka said the Indian External Affairs Minister had a productive and cordial telephone conversation with Sri Lanka’s Finance Minister Basil Rajapaksa on Monday (7) evening.

It added that both sides agreed to a mutually convenient date in the second half of March for Basil Rajapaksa’s visit to India.

The Indian conditions for the granting of this loan package included several maritime security agreements that will strengthen India’s strategic interests, particularly around the eastern Trincomalee harbour. 

These include Donier surveillance aircraft for the Sri Lanka Air Force, a ship repair dock for the Sri Lanka Navy in Trincomalee and posting of a Sri Lankan Navy officer at the Intelligence Fusion Centre, a Bahrain-based intelligence sharing office which is a US Navy initiative to combat international terrorism, the narcotics trade and ensure safe maritime passage for commercial vessels in the region.

One of the key pressure-points from the Indian Government is to start a renewable energy (solar power) project in and around Sampur near Trincomalee..

The reopening of the Palay airport for commercial operations and several cultural projects in the Jaffna peninsula are also among items on the list already made public.

The Indian Government also wants to enter into the renewable energy field in the Delft islet after it scuttled a Chinese company securing the project following an Asian Development Bank ((ADB) tender procedure.

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