Sri Lankan businesses are in a recovery path although it has to break barricades created by the government’s policy blunders and stupid decisions leading to keep the country without electricity for 13 hours making the economic machinery standstill.
The country’s business confidence which showed some recovery last month has been nullified due poor crisis management of the government and its failure to solve burning problems of the people.
It has even failed to provide basic needs like fuel for transport and electricity, gas for cooking and even food for the people to eat due to present rulers arrogance and policy blunders, economic analysts and civil society activists claimed.
The Colombo Stock Market Trading is now in shambles as a result of tense situation in the country with hundreds and thousands of young people took to the streets in Mirihana near the President’s residence demanding the government to step down. . .
The Colombo Stock Exchange (CSE) cut daily trading to two hours from the usual four-and-a-half because of the power cuts for the rest of this week at the request of brokers, the bourse said in a statement.
But shares slid after the market opened on Thursday and the CSE halted trading for 30 minutes – the third suspension in two days – after an index tracking leading companies dropped by more than 5%.
“Concerns on the macro side, together with news of shorter trading hours plus increased power cuts is driving negative sentiment,” said an analyst at a brokerage firm.
The CSE halted trading twice on Wednesday as worries deepened over the economy and the power cuts.
The crisis is a result of badly timed tax cuts and the impact of the coronavirus pandemic coupled with historically weak government finances, leading to foreign exchange reserves dropping by 70% in the last two years.
The devaluation of the Sri Lankan Rupee, the prospect of some form of debt restructuring and consequently, an easing of the economic restrictions have so far failed to stop Sri Lanka Inc’s move towards a grinding halt several eminent economists said.
However NielsenIQ Business Confidence Index (BCI) registered a notable gain of eight basis points in March – to 132.
This outcome represents an 11 month high and sees the index edge towards where it stood before last April’s third wave of the virus, following which Sri Lanka imposed lockdowns and ‘travel restrictions.’
The barometer of biz confidence is six notches higher than a year ago (as well as its all-time average of 126) and 22 points above its 12 month average of 110.
So for the fourth month in succession, the BCI has headed north – despite the perilous state of the economy, the protracted forex crisis, ongoing shortages of essentials and to cap it all, a power crisis that has left the island in the dark for several hours on end.
NielsenIQ’s Director – Consumer Insights Therica Miyanadeniya explains: “With the COVID-19 counts waning and fear surrounding the virus abating, business seems to have started to pick up – and there’s hope on the horizon once again.”
Despite the rise in inflation and shortage of essential goods, businesses are reporting an improvement in sales volumes over the last three to 12 months, and they’re “optimistic about a better tomorrow,” she adds.
The countless downside risks that hover over the economy and political landscape at this juncture continue to cast a shadow over the BCI’s resurgence in recent months – even though the business community seems to be taking a long-term view of what the future holds.
Worse still, the increasingly ferocious headwinds in the northern hemisphere, from the direction of war ravaged Ukraine, make for a doom and gloom scenario for the rest of the world.
So the most obvious near-term sensitivities at the time of going to press include the price of oil, the value of the Sri Lankan Rupee, ongoing power and forex crises, and the prospect of political upheaval.
Miyanadeniya meanwhile, also believes that with the “Sri Lankan Rupee being floated, brutal power cuts, rampant shortages of diesel and other necessities hindering businesses,” it will be very difficult for the index to continue to improve drastically.
