The Department of Motor Traffic (DMT) in Sri Lanka has initiated a project to introduce digital or smart driving licenses, which will replace the existing semiconductor chips with QR codes, according to media reports. Nishantha Anuruddha Weerasinghe, the Commissioner General of DMT, announced that the project received Cabinet approval in October.
The printing of these new smart driving licenses began on October 16, after the printing and issuing of licenses was transferred from the Sri Lanka Army back to the DMT.
The decision to replace semiconductor chips with QR codes was made due to challenges in importing chip reading units, caused by economic constraints. To support the QR codes, a separate mobile application has been introduced, which will be operated exclusively by the DMT office and the Police Department.
Weerasinghe also noted that the smart driving licenses will incorporate a demerit points system for tracking traffic offenses, enhancing the management of road safety and driver behavior.
Colombo (LNW): The Chinese funded two Colombo housing schemes for low income earners. have faced a stumbling block due to land ownership dispute between the Colombo Municipality and the Urban Development Authority (UDA), Minister Prasanna Ranatunge disclosed.
He directed the officials of the two institutions to enter into an agreement on this matter and sign an MOU to commence the construction work of the two housing projects as soon as possible.
The relevant two blocks of lands in Colombo have been taken over by the UDA in 2019 in accordance with Clause 30 of the urban development authority act.
The acquisition of the two lands is now embroiled in a legal tussle between the CMC and UDA following a court case filed by the Colombo Municipality challenging the land ownership.
The Court has ordered to settle the land dispute amicably by the two state entities vai consultations compromise and consensus. The Chinese government has also informed the Sri Lankan authorities to settle the matter without any internal disagreement.
The Ministry of Urban Development and Housing, says the construction work of 1996 housing units with the assistance of the Chinese government for low-income earners, creative artists and journalists will be signed after the settling of the land dispute.
Minister of Urban Development and Housing Prasanna Ranatunga says that 108 housing units of those 1996 units will be allocated to the creative artists and journalists of Sri Lanka.
Those housing schemes will be built in the Palathuru Watta area of Kottawa. According to the Minister, 1888 housing units will be allocated for low income earners in Colombo.
The housing schemes for low income earners will be delayed due to the tug of war between the CMC and the UDA, he said.
The Chinese government will provide financial assistance of 552 million yuan (US$ 76 million) to Sri Lanka for this housing project.
The government of Sri Lanka bears the tax money spent for this project, the cost of land acquisition, the cost of land development, the cost of design work and preparing the basic price list, the cost of tender work and the cost of sewage facilities.
Urban Development and Housing Minister Mr. Prasanna Ranatunga says that through this project, a permanent solution will be found for the settlement problem of the residents of settlements with less facilities.
According to media reports, the central bank (CB) has rejected all bids received at the T bond auction held on 30 October. Therefore, this short article is to raise concerns whether the rejection of all bids is a new sign of the failure of present T bond issuance system.
Present T bond issuance system
Present system was introduced in the middle of 2017 by discontinuing the full auction system followed since the beginning of March 2015. Accordingly, the new the system is a so-called hybrid system containing the auction window and post-auction placement window as follows.
Auction window – competitive bids received in the electronic auction system where accepted bids carry multi-prices/yields on each fixed coupon bond offered to the auction.
Post-auction non-competitive placement window – Bids are received through e-mail from primary dealers whereas the auction weighted average yield is offered for all accepted bids on each bond announced for placements immediately after the release of auction results.
The system was launched as a strategy to ensure that total funding requirement at each auction is raised with the support of contingency funding from the placement window while reducing the pressure on yields. However, funds have been raised in excess of the auctioned amount from some auctions.
The system prior to March 2015 was a non-transparent, 80%-90% private placement-dominant-system used by the CB to drive its monetary policy on market interest rates through debt management instruments without any regard to market-based debt management principles. The Monetary Board in its Annual Report 2016 attributed to the rise in interest rates due to the pure auction system as highlighted below, despite the fact that the Monetary Board raised policy interest rates by 1% in 2016 and by 0.25% in March 2017 and SRR by 1.5% in January 2016 and underlying market forces.
The impact of replacing the mixed system of auctions and direct placements to raise funds for the government with a purely auction based system where direct placements of Treasury bills were made only with the Central Bank, also contributed to the increase in interest rates on government securities.
Speculative increases in yield rates within the purely auction based system in issuing government securities may also have impacted the monetary policy transmission to some extent.
Further, no action is reported to have been taken in respect of significant irregularities found in the system as recommended by public investigations.
Results of last T bond auction held on 30 October 2023
Auction results published by the CB for the last auction are as follows.
The CB does not reveal reasons for rejection of all bids received at the auction or bid details. However, the general understanding for the rejection is all bid yields being higher than the market yields believed by the CB as being fair in its opinion. As stated in the Tender Board mandates, this opinion is largely influenced by the monetary policy requirements on controlling market interest rates. Therefore, only the God knows the CB’s view of fair market yield rates.
Why all bids would have been rejected?
Two bonds offered were reissuances of existing bonds to raise new funds as there were no bonds maturing on the settlement date 01 November 2023. If this had been an auction for rollover of maturing bonds, bid yields would not have risen so high because investors would roll over of maturing proceeds without involving in additional costs.
For example, T bond auction held on 25 September was successful as it was a rollover in respect of bonds matured with a face value around Rs. 223.2 bn plus coupon on 01 October. Therefore, the CB could raise Rs. 220 bn from the auction and Rs. 16.7 bn from the placement window at the weighted average yield around 15%.
The two bonds offered at the last auction are medium-term bonds that are subject concern over debt unsustainability as proclaimed by the CB. Further, bond restructuring policy itself raises concerns over a possible default, given the current fiscal outlook. The CB also conducted a similar auction for new funds on 12 October and raised Rs. 25.5 bn (25 bn auction and Rs. 2.5 bn placements) at yield rates around 15.2% and 13.6% as shown in the Table below. Therefore, investors may not have been willing to provide new funds at further lowering interest yield rates as expected by the CB at the last auction.
Another T bond maturity of face value Rs. 180.6 bn is due on 15 this month. The bid yields, if accepted at the last auctions, would have a significant influence in the next auction yields due in two weeks for the above bond repayment. The average yield quotes of primary dealers for the purchase of same two bonds offered at the last auction were 14.10% and 13.46%, respectively, in the secondary market 27 October (business day prior to the auction date) as reported by the CB. However, bid yields at the last auction would have been much higher than the secondary market yields. Therefore, the CB would have rejected all bids at the auction with the intension to prevent the yield rate pressures on the next T bond auction for rollover of a huge sum as the Treasury does not have funds to repay the maturing bond.
The CB is now following a lower interest rate policy as seen from policy interest rates and T bill weekly auctions conducted by the CB (see the Chart below). Therefore, the CB may have had a highly arbitrary/bureaucratic bias towards lower yields through auctions of government securities, instead of the standard conduct of its open market operations through printing of money to control market interest rates. Therefore, this total bid rejection is tantamount to the conventional attempt of the CB to conduct the monetary policy through fiscal instruments.
Concluding Remarks
As highlighted above, it is clear that the CB has rejected all bids at the last auction to prevent the rise in market yields and interest rates in the foreseeable future.
However, what ever reasons are behind the auction decision, the rejection of all bids is evidence for the failure of the present hybrid fund raising system (i.e. auction window plus contingency funding/placement window).
Despite the hybrid system implemented by the CB as a major instrument of the public debt management since the middle of 2017, the government now confronts unsustainability in both T bonds and public debt stocks. As a result, debt restructuring is in a painful process to prevent a major default.
However, such bureaucratic modes of auction bid rejection show chronic liquidity conditions in the government securities and credit markets in the near future that might even trigger systemic risks given the inter-connectedness between the fiscal front and the rest of the economy through the monetary and financial system.
Therefore, it is the public responsibility of the government to ensure that the government securities market operate through transparent and fair forces independently from the monetary policy priorities, given the present bankruptcy of the fiscal front and its adverse impact on the general public as witnessed by the present economic crisis as well as the monetary policy autonomy assured by the brand new CB legislation certified on 14 September 2023. Otherwise, debt restructuring and IMF debt targets without the support of debt market principles will only be another bureaucratic actions.
(This article is released in the interest of participating in the professional dialogue to find out solutions to present economic crisis confronted by the general public consequent to the global Corona pandemic, subsequent economic disruptions and shocks both local and global and policy failures.)
P Samarasiri
Former Deputy Governor, Central Bank of Sri Lanka
(Former Director of Bank Supervision, Assistant Governor, Secretary to the Monetary Board and Compliance Officer of the Central Bank, Former Chairman of the Sri Lanka Accounting and Auditing Standards Board and Credit Information Bureau, Former Chairman and Vice Chairman of the Institute of Bankers of Sri Lanka, Former Member of the Securities and Exchange Commission and Insurance Regulatory Commission and the Author of 12 Economics and Banking Books and a large number of articles published.
The author holds BA Hons in Economics from University of Colombo, MA in Economics from University of Kansas, USA, and international training exposures in economic management and financial system regulation)
On November 1, the Sri Lankan Rupee maintained its stability against the US Dollar at commercial banks in Sri Lanka, compared to the rates observed on the previous day.
Here are the exchange rates at some of the prominent banks:
Peoples Bank: The buying rate for the US Dollar increased from Rs. 320.91 to Rs. 321.15, while the selling rate rose from Rs. 332.67 to Rs. 332.92.
Commercial Bank: The buying and selling rates of the US Dollar remained unchanged at Rs. 321.15 and Rs. 331.50, respectively.
Sampath Bank: The buying and selling rates of the US Dollar remained steady at Rs. 322 and Rs. 332, respectively.
Sri Lanka Police are set to reintroduce bus priority lanes in Colombo starting from November 1. This pilot project will be implemented on various roads in the city and will run until November 14.
The bus priority lane will be in operation during the hours of 6 am to 9 am. It will span from the Savoy Cinema in Wellawatte to Fort along the Galle Road, as well as along Maradana Road from the Borella junction to Olcott Mawatha in Pettah.
Police have clarified that only CTB (Ceylon Transport Board), private buses, staff buses, and school transport buses will be allowed to utilize these designated bus lanes.
Indian Finance Minister Nirmala Sitharaman has arrived in Sri Lanka for a three-day official visit. During her visit, Minister Sitharaman is scheduled to partake in significant events and engage in bilateral discussions with Sri Lankan officials.
One of the highlights of her visit is the keynote address she will deliver as the Guest of Honour at the ‘NAAM 200’ event, organized by the Sri Lankan government to commemorate the 200th anniversary of the arrival of India-origin Tamils (IOTs) to Sri Lanka. The event will take place at the Sugathadasa Indoor Stadium in Colombo on November 2.
She will also provide the keynote address at the India Sri Lanka Business Summit, with the theme ‘Enhancing Connectivity: Partnering for Prosperity,’ jointly organized by the Confederation of Indian Industries (CII), the Indo-Lanka Chamber of Commerce & Industry, and the Ceylon Chamber of Commerce, to be held in Colombo on the same day.
As part of her visit, Minister Sitharaman will hold bilateral discussions with Sri Lankan President Ranil Wickremesinghe and Prime Minister Dinesh Gunawardena. She is set to witness the signing of a Memorandum of Understanding (MoU) for Solar Electrification of Religious Places in Sri Lanka, with India allocating INR 82.40 crores out of the Indian government’s grant assistance of INR 107.47 crores earmarked for the promotion of Buddhist ties.
The Finance Minister will also inaugurate State Bank of India (SBI) branches in Trincomalee and Jaffna on November 2 and 3, respectively.
During her visit to Sri Lanka, Minister Sitharaman will visit several cultural and religious sites, including the Sri Dalada Maligawa (The Temple of the Sacred Tooth Relic) in Kandy, Jaya Sri Maha Bodhi in Anuradhapura, Thirukoneswaram Temple in Trincomalee, and Nallur Kandaswamy Temple in Jaffna. She will also explore the Lanka IOC Oil Tank Farms, Jaffna Cultural Centre, and Jaffna Public Library.
The government of Sri Lanka has officially launched the bidding process for the divestiture of the debt-ridden national carrier, SriLankan Airlines. Minister of Ports, Shipping & Aviation, Nimal Siripala De Silva, announced that Invitations to Tenders (ITTs) have been published through local and foreign media as well as websites.
This divestiture is expected to follow a two-stage competitive bidding process, involving the Request for Qualification (RFQ) and the Request for Proposals for the Proposed Transaction (RFP). Minister De Silva clarified the government’s intent to retain a 51% stake in SriLankan Airlines while divesting the remaining 49%.
Addressing previous reports suggesting a complete sale of the national carrier by the end of 2024, Minister De Silva denied such claims during an appearance on Ada Derana’s “State of the Nation” program. He emphasized that establishing a joint venture is the strategy to address SriLankan Airlines’ debt, which currently amounts to USD 1.2 billion.
Founded in 1979, SriLankan Airlines operated with a fleet of 24 Airbus A320 and A330 aircraft, serving a route network spanning 126 destinations in 61 countries.
CPC says Fuel prices have been revised from today: Petrol 92 down by Rs.9 per litre to Rs.356: Petrol 95 up by Rs.3 to Rs.423: Auto Diesel up by Rs.5 to Rs.356: Super Diesel up by Rs.10 to Rs.431: Kerosene up by Rs.7 to Rs.249: LIOC to also match the revised prices of the CPC.
Cabinet Spokesman Minister Bandula Gunawardana says the Cabinet has approved the increase of the Value Added Tax to 18% from 1st January’24 onwards
Former IMF staffer and President’s Debt Advisor Dr Sharmini Coorey says the IMF should be “a lot tougher” on SL’s structural reforms: also says the IMF must protect debtor countries “more strongly”: laments the IMF took 6 months after finalizing the Programme with SL to disburse the funds, and that such delay was “very painful for SL”.
A US-backed Think-tank alleges the Govt’s transparency & accountability have taken a turn for the worse over the past year: says the country will be setting itself up for failure if it doesn’t address these issues.
Court of Appeal in a split decision of a 3-Judge Bench dismisses the Writ petition that was filed seeking an order abolishing the Parliamentary seat of State Minister Diana Gamage.
The 5-member Experts’ Committee of Judicial Medical Officers submits its report on the post-mortems of Dinesh Schafter to Colombo Additional Magistrate’s Court: Court to announce its decision today.
Dept of Census & Statistics says the rate of Inflation measured by CCPI on a YoY basis increased to 1.5% in October’23 from 1.3% in September’23; Food inflation unchanged at -5.2% in October’23 as in September’23; Non food inflation increased to 4.9% in October’23 from 4.7% in September’23.
Representatives from WB, ADB, IMF, AIIB, IFCA, MIGA, JICA, USAID, EU, & UN meet with President, PM & Govt Officials to discuss the Govt’s reform programmes: discussion aimed at moving from crisis to recovery & sustainable growth.
Cabinet grants approval for the proposal to revise the Electricity Tariff every 3 months: Minister of Power and Energy Kanchana Wijesekera says the next electricity tariff revision will be done on 1st April’24.
Govt invites bids for the sale of state-run carrier SriLankan Airlines in keeping with its commitments to obtain the USD 2.9 bn loan facility from the IMF over 4 years.
The owner of the company accused of importing substandard immunoglobulin vials has been apprehended by the Criminal Investigations Department (CID). This comes as part of a broader investigation into the alleged importation of substandard medicines, with serious implications for high-ranking government officials in Sri Lanka.
On a recent Monday, the Maligakanda Magistrate’s Court took action by imposing overseas travel bans on three individuals involved in the case. The bans were ordered after the CID presented a motion, expressing concerns that the suspects were planning to leave the country. Those affected by the travel bans include the company’s owner, known as ‘Aruna Deepthi’ but officially registered as Sugath Janaka Fernando, as well as Dr. Vijith Gunasekara, the Chief Executive Officer of the National Medicines Regulatory Authority (NMRA), and Dr. Kapila Wickramanayake, the Director of the Supplies Division within the Ministry of Health.
The case revolves around allegations of utilizing forged documents to import a batch of human intravenous immunoglobulin (IVIG) from India, which was in violation of established procedures. The NMRA suspended the usage of this imported IVIG after it failed quality tests. The product, purportedly manufactured by Livealth Biopharma Pvt Ltd. in India, was imported by a local medicine supplier named Isolez Biotech Pharma AG (Pvt) Ltd. The illicit importation of 22,500 vials of IVIG has reportedly resulted in a misappropriation of funds amounting to Rs. 130 million.
The suspicions came to light following reports of allergic reactions observed in patients who had received the drug at the Colombo National Hospital and the Matale District Hospital on August 22 and September 16, respectively. Meanwhile, a sub-committee appointed by the Committee on Public Accounts (COPA) has instructed the University of Moratuwa to conduct a comprehensive study of the Ministry of Health’s information management system and submit a report, adding another layer of scrutiny to the ongoing investigation.
In October 2023, the inflation rate in Sri Lanka increased to 1.5%, up from 1.3% in September of the same year. This data was released by the Department of Census and Statistics along with the Colombo Consumer Price Index report for October 2023. Notably, food inflation remained at -5.2%, indicating stability in food prices during this period.
