Mr. Nimal Amarasiri, a candidate in a local government election, was killed after a tear gas attack on 26th February while participating in a protest against the attempt to postpone the local government elections. There was no justifiable grounds at all for the use of teargas against these protesters, who were merely exercising their rights as citizens of Sri Lanka. The use of teargas under these circumstances was unnecessary and illegal. The possibility of causing serious harm, including the possibility of death, should have being envisaged by those who gave the orders for the use of teargas as well as those officers who carried out the orders. As the act itself is illegal and irresponsible, those who cause such acts should bear the responsibility for the consequences, which in this case was the causing of a death. Causing such a death amounts to arbitrary depravation of life.
The situation is all the more serious because the subject of the protests was about the threat of the denial of their sovereign rights to have elections, which is one of the most fundamental rights within a democracy. The denial of right to have elections at prescribed periods is an attack on the very notion of citizenship. Thus when the people were engage in peaceful attempt to ensure that there is no threat to the democratic way life, the duty of the police and the security forces was to protect the protesters. Instead, by attacking the people who come forward, their government contradicts the most basic notion of governance and the protection that should be given under of the rule of law.
When the government attacks the rule of law, the government loses its legitimacy to rule over the people, who have a sovereign right to live under a democratic form of government and have rejected any wish to live under a dictatorship.
The president of Sri Lanka bears direct responsibility due to his provocative behavior in attacking the election commission and its announced intention to hold the election on the 9th of March. The speech made by the president in the parliament attacking the election commission was both provocative and completely misleading. Keeping peace is the primary obligation of the head of the state. This implies that the head of state should not use his office to subvert basic democratic rights such as right of people to vote for their representatives at both national and local levels.
It is the duty of the government as a whole to do all that is within its power to maintain peace. Any provocative behavior will not only disturb all aspects of national life but will also lead to deaths, such as the death of Nimal Amarasiri.
Sri Lanka has seen enough bloodshed in the recent decades. Unfortunately, first acts of provocation come from those who represent the state itself. It is essential that this habit of the state provoking violence should come to an immediate stop.
To justify such provocative behavior on the basis that it is necessary for resolving economic problems is merely a pretext for achieving other illegitimate political purposes.
The people are suffering due to lack of affordable food and other necessities, unbearable taxes and exorbitant electricity bills and the like, which have never happened to this level before. Deaths arising from such deprivations are happening every day. No more deaths need to be added under the pretext of controlling demonstrations.
All citizens, political parties, civil society and professional organizations should standup to defend the basic right to life, which is the great umbrella around which the life of the nation rests.
In a recent judgment, Mohammed Rashid Fathima Sharmila v K. W. G Nishantha and others, the Supreme Court observed that extrajudicial killings at a police station amounted to the violation of the right to life.
The following observations of Justice Aluwihare PC. J. are pertinent. He commented on “the utterly unprofessional approach to their duty by personnel who man it and as a consequence people are increasingly losing trust in the police. It had lost credibility it ought to enjoy as a law enforcement agency”.
The recent media is full of news hailing the independence or autonomy given to the Central Bank by the new bill. Some state that this independence now will drive the economy out of the present economic crisis. They believe the crisis as a result of the political intervention in the Central Bank to print the money for funding the budget deficit as the present monetary law (MLA) has barred the Central Bank independence. Although money printing is a subject of macroeconomics, world over it is mostly spoken by politicians, some of whom even do not know the definition and economic role of money. Most do not know principles behind central banking.
The present Central Bank Governor immediately after assuming duties on 8 April 2022 victoriously commented that high inflation at that time was a result of printing about Rs. 200 bn under refinance credit against his view and he would independently and professionally cut down money printing and control inflation. He never talked about lapses in MLA restricting his independence from the government.
However, money printing to fund the government through Treasury bills has risen by sugar high Rs. 765.5 bn (net basis) so far in 10 months and inflation escalated to red hot from 18.7% in March 2022 to 69.8% in September and 50.6% in February 2023 (on new base of 2021). Now, the media claims that the MLA has unreasonably caused this Governor also to loose the independence and professionalism and to print money to fund the government while seeing inflation skyrocketing faster than before. As such, the MLA is the scapegoat for ills.
The independence implied by the most media favoring the Central Bank is the freedom or privacy given to the Central Bank bureaucracy to manage the bank and print money in the way they think fit. The media tends to think that the Central Bank is the monetary government in the country outside the elected government and that this bureaucracy possesses the perfect foresight of the economy and, therefore, everything they do is divine-correct.
Therefore, this article is released to present the true story behind Central Bank independence proposed in the new bill.
General meaning of Central Bank independence
The Central Bank independence generally means the ability of the Central Bank to conduct the monetary policy without influence of or bias over the fiscal policy. This implies avoidance of temptation to decide interest rates, money printing and bank credit creation favourable to fiscal deficit financing as well as avoidance of operational conflicts that support the fiscal policy and fiscal related functions.
Accordingly, I found several provisions in the bill that can be used to gage the policy-making independence of the proposed Central Bank. I find that those provisions are in grave conflicts and confusions that do not help establish so called independence or autonomy as hailed by the media.
Therefore, this article is to highlight some of those provisions to enable the reader to understand the true nature of the Central Bank independence sought in the bill and public issues and concerns arising from such provisions. Accordingly, 13 selected areas in the new bill are briefly presented below.
My conclusion is: the new Central Bank independence is only the removal of the Secretary, Ministry of Finance, from the Central Bank Board and restriction on credit to the government on a hidden motive of money printing to promote risky credit operations of a wide range of financial institutions under the monetary policy.
13 major areas connected with Central Bank independence
1. Independence of the Governing Board
New bill section 8 – Removal of the Secretary to the Ministry of Finance
This is seen as the major provision for ensuring the independence because the Secretary is widely considered as the conduit for the government’s influence. As the government is above the Central Bank, the absence of the Secretary being a principal officer in the government may cause a loss of macroeconomic policy support to the Central Bank, especially as Treasury circulars constitutionally can supersede the decisions of the Governing Board on Central Bank’s internal operations.
In the MLA, the Secretary as a member of the Monetary Board is the principal instrument used lawfully for the co-operation between the government and Central Bank. John Exter wrote that this co-operation would depend more upon the men occupying the key positions at particular times than upon any legal formula, no matter how carefully or elaborately it might be worked out. Therefore, a sufficient time has to pass to see the outcome of the independence gained by removing the Secretary from the Board of the Central Bank.
New bill section 125 – Present Monetary Board members to continue
This provides for the continuation of current members appointed by the President to the Monetary Board under the MLA as the members of the Governing Board until the expiration of their present term. This is bad governance in the independence.
First, these members are the politically appointed persons to the present non-independent Monetary Board as claimed.
Second, the new Central Bank as an independent Central Bank requires newly appointed independent members to ensure that the new Board is also brand new independent.
Third, the new Board will have three additional members with special expertise appointed under the independence principle and, therefore, will have a conflict between the old members and new members.
Therefore, a merely hat-change of the present four Board members is not in good governance of the new Central Bank.
As such, this provision is not only in conflict of interest but also fraudulent in nature seeking undue pubic advantages to present members. If this is brand new independent Central Bank, we must get a brand new board as it is the board that has to drive the new Central Bank independently in letter and spirit while assuming the responsibilities of its public outcome.
The reference given in this section to the Secretary to the Treasury is baseless as the Secretary to the Ministry of Finance is the term used in the relevant MLA provision.
2. Prohibition of lending to the state
New bill section 86 (1) – The Central Bank shall not, directly or indirectly, grant credits to the Government or any public authority owned by the Government or to any other public entity. This also includes purchase of securities in the primary market. However, the Governing Board can determine on grant of credit to state owned banks and financial institutions.
New bill section 86 (4) – The Central Bank may purchase government securities in the secondary market without circumventing the prohibition laid down in the above subsection. This is a meaningless provision because indirect credit can cover purchase of credit/government securities in the secondary market as indirect credit is not defined in the bill. In fact, purchase of government securities, whether in primary market or secondary market, is a form of credit to the government.
These provisions raise grave public concerns, some of which are noted below.
First, in that context, the new Central Bank as provided for in the section 31 has to depend on private credit and securities for open market operations as the use of government related securities is a conflict with the independence. In that event, the Central Bank will have to accept risky private stocks and debentures as OMO instruments whereas the money printing and country’s monetary conditions will be dependent on risky and volatile stock market.
Second, the new Central Bank gets an open space to use its monetary policy to develop risk-taking private financial markets, especially securities of companies friendly to high ranking officials of the Central Bank.
Third, as the country’s private bond/debenture market is mainly the bank debentures issued for capital adequacy purposes, the new Central Bank dealing in bank debentures for OMO purposes is not only taking credit risks of its regulated banks but also a conflict of interest by the Central Bank becoming a Tier II capital holder of regulated banks.
Fourth, central banks globally are legally prevented from the excessive use of private securities in OMO and monetary policy, given their excessive risks and conflicts of interest. Central banks in the US, UK and EU which are treated as most independent central banks largely use government related securities for OMO and credit operations. For example, 93.5% of the Fed balance sheet is the OMO portfolio of government securities ranging from short term to long term (more than 10 years of maturity). Nearly, 98.5% of monetary policy assets purchase program in the Bank of England is government securities whereas it is 79.5% in the European Central Bank. The MLA provides for trade of only government securities for OMO. Central banks including Sri Lankan Central Bank use interest rates of government securities as benchmarks to regulate market interest rates for monetary policy purposes. As such, government securities are used in the monetary policy because of the long-term public trust in government debt as against private debt even if the stock of government debt is excessive or defaulted at times. For example, government securities market in Sri Lanka is active at present, despite speculations over restructuring of domestic debt with a haircut.
Fifth, the restriction/prohibition on grant of credit to state sector will not only destabilize the financial system but also cause the new Central Bank to go bankrupt in the event of private securities market crashes or downturns. Globally, central banks not only keep away from stick markets but keep banks also at arms’ length of stock markets due to high risk profile.
Sixth, the discrimination on grant of credit between private institutions and the government/state is a constitutional violation, given state credit falls under public finance controlled by the Parliament and all enactments of laws including the proposed Central Bank bill fall within Chapter VI of the Constitution.
Seventh, the state central banking across the world is built on money printing primarily through credit to government in the secondary market where such moneys created in the monetary system are distributed across the economy through fiscal policy. Therefore, the new Central Bank challenge this model by resorting to risky money printing through private credit. Therefore, the fiscal activity in financial markets to fund the budget independently from the monetary policy will hinder functioning of financial markets and stability.
3. Continuation of provisional advances and primary purchase of Treasury bills
These two are cited as two major conduits of the loss of independence on the ground that the Central Bank is compelled to print money to fund the budget deficit.
However, the new bill also provides for continuation of grant of new advances and purchase of new Treasury bills for another period of six months (sections 126 and 127) subject to certain limits, i.e., in the case of provisional advances, total advances up to 10% of the government revenue of first four months of the last year and, in the case of Treasury bills, total outstanding up to one-third of Treasury bill borrowing limit approved by the Parliament.
Further, section 128 provides for continued holding of outstanding advances and Treasury bills and conversion of same over a period of ten years into negotiable debt instruments at market interest rates. These new debt instruments are to be sold under OMO monetary policy and no timeline is stipulated in the bill.
Therefore, the new bill does not relieve the Central Bank from issues relating to independence connected with existing credit to government, especially on conversion of the outstanding credit and relevant market interest rates at the time of conversion over ten year-period.
Therefore, such outstanding credit will exist in the Central Bank balance sheet during an indefinite period in future.
It should be noted that MLA provisions (sections 89 and 112) on provisional advances and purchase of Treasury bills are very restrictive and highly disciplined where only the Central Bank has grossly violated relevant provisions in extending credit to the government.
4. Seeking fiscal support for Lender of Last Resort (LOLR)
The section 36(6) of the new bill relates to grant of liquidity support in exceptional circumstances to financial institutions at stability risks for a maximum period of 180 days. The Central Bank requires an unconditional and irrevocable guarantee of the government for any losses incurred by the Central Bank from such loans for the sake of public interest. This raises many public concerns over the purpose of the new Central Bank.
First, this is the conventional LOLR facility of central banks implemented to avoid financial crises. It is the stability and public interest duty of independent central banks. Therefore, seeking government guarantees or fiscal policy support for the LOLR causes both independence and pubic accountability on the financial system stability which is the second object of the new Central Bank.
Second, the liquidity or funding required in such financial crisis times will be huge and, therefore, government guarantees would add to fiscal deficits and price instability in the future.
Third, the LOLR is conventionally offered to banks to ensure the banking system stability being the core of maintaining the financial stability. However, this new LOLR is expanded to cover a wide range of risk-taking non-banking institutions or shadow banks (ranging from finance companies to money brokers) which are not regulated at the same extent of banking institutions. This causes huge moral hazard problem across the financial system. In fact, after 2007/09 financial crisis, the US government removed the authority given to the Fed to grant emergency loans to systemically important businesses during crises because of risks and abuses.
Fourth, if the government is not willing to provide guarantees, financial system will crash as the new Central Bank does not have LOLR powers that now are available in the section 86 of the MLA. This happened to the Bank of England in 2007 (consequent to reform implemented in 1997) at the onset of the global financial crisis in September 2007. In that event, the Central Bank will tell the public that it does not have such emergency lending powers and blame the government for the financial instability.
5. Credit operations with credit institutions (licensed commercial banks)
The section 87 of the new bill provides for the Central Bank to undertake credit operations with licensed commercial banks as an agent of the government, provided that the government provides funding or secures such loans. Terms and conditions on loans will be decided by the government. The nature of credit granted under this provision appears to be development related credit up to a maturity of 15 years. This raises two major concerns over the purpose of the new Central Bank.
First, credit distribution to suit the economy and sectors is the responsibility of monetary policy of central banks world over. However, the new bill passes it to the fiscal policy. Therefore, the government has to borrow from the market for on-lending to priority sectors.
Second, if the government wants to undertake the credit delivery role, it can do it through state banks as being done now without any direct liabilities. Therefore, the government does not need the new Central Bank as the agent for this purpose.
Third, this provision causes a conflict of interest to the Central Bank in two ways. First, the Central Bank becomes a fiscal agent of the government. Second, such credit operations carried on behalf of the government can hinder or conflict with monetary policy targets related to credit or monetary expansion as credit terms and quantity are decided by the government.
6. Continuation of fiscal agent, banker and financial adviser to the government
The section 81 provides for the continuation of above services which are the major conduits for issues relating to the loss of independence. As a banker and fiscal agent, the Central Bank has to pay the checks drawn by the government even when the government is in short of funds at the Treasury account with the Central Bank and, therefore, the grant of overdraft by the Central Bank to the government is inevitable to prevent the default of the government.
In view of the current literature of these services, it is surprising the the new bill also provides for them. In fact, the government does not need them. It has state banks for banking and fiscal agent services. The proposed debt office also can provide services of fiscal agent and financial adviser. In relation to debt restructuring, the government has obtained services of financial advisors from outside even though the Central Bank is the financial adviser.
Despite all these banking and fiscal services provided by the Central Bank for the past 72 years, the government has had to default and faced financial bankruptcy leading the a historic economic crisis in the country.
7. Council for the Coordination of Fiscal, Monetary and Financial Stability Policies of the Central Bank
The Section 83 provides for the non-executive council chaired by the Central Bank Governor. Such committees and discussions are the avenues for problems relating the independence. If the Central Bank wants independence to conduct the monetary policy, it is advisable the it stays away from such policy discussions with the government because such committees have no purpose other than influencing the Central Bank.
8. Cooperation with the Government
The section 84 provides for cooperation with the government and public authorities and exchange views on policies. Such cooperation is the conduit for implementing policies in line with the government’s views. Accordingly, government influence has been formalized in the bill by way of cooperation. The MLA does not have such a general cooperation clause.
9. Public funds to cover risks and bankruptcy of the Central Bank
As per section 4 of the new bill, the government is the sole owner of the Central Bank and is required to provide capital in amounts as determined by the Central Bank Board out of the consolidated fund.
The section 97 of the new bill recognizes the possibility of bankruptcy of the Central Bank, i.e., the value of assets below monetary liabilities and paid-up capital, and requires the government to finance the deficit. Adoption of international accounting standards with fair valuations applied for financial businesses and dealing with private securities in the monetary policy are the sources of such bankruptcy risks.
It is unethical to expect the government to provide capital through the fiscal policy to cover up the risks of private credit securities trades (inclusive of possible securities fraud) of the independent Central Bank used for monetary policy when the Central Bank is prevented from the trade of government securities. In the event, the government rejects requests for such capital infusions and commences forensic audits on such bankruptcy, the Central Bank will internationally loose its credibility. Therefore, the independent Central Bank must be required in law to stay solvent at all times without any dependence on public funds to cover losses because the new Central Bank is managed by independent professionals and experts.
As the Central Bank is a state institution established under the Constitution, the autonomy is questioned on the ground who protects the public funds relating to capital of the new Central Bank. Further, the authority given only to the Central Bank to print money also relates to public funds. Therefore, it is necessary to invoke criminal clauses to cover monetary policy operations and non-compliances with objects. Otherwise, the Central Bank will pay games on public powers of the autonomy on money printing.
10. Removal of the Governor, Members of the Governing Board and Deputy Governors
Provisions in the section 19 allow such removals based on qualitative reasons. Therefore, state authorities can interpret such reasons suitably to remove those who contradict or do not support the government policies and views. Further, Attorney General also is a part of this removal process in respect of Governing Board Members.
Therefore, the autonomy or independence is only a concept on paper which does not have any practical purpose or validity.
11. Monetary policy framework agreement
In terms of section 26, Minister’s agreement on monetary policy framework with regard to inflation target and other parameters is required. The Minister also can revise it in intervals he prefers.
Therefore, if the the Minister is smarter, her will sign off the agreement only if the monetary policy is consistent with his macroeconomic policy framework. If the government has a smart Finance Minister conversant in macroeconomic policy gimmicks, he will effectively run the monetary policy too with the credible threat of removal provisions stated above.
Therefore, the Central Bank has lawfully lost the autonomy mentioned in the new bill.
12. Exempted from taxes
The section 115 provides for exemption of income tax, custom duties and stamp duties. If the Central Bank is an independent institution who can print money for its business operations, there is no rationale for granting such fiscal policy support to enable the Central Bank to report profit.
As the Central Bank is to operate on private credit, such tax exemptions will be subsidies to the private businesses. Therefore, the exemption is against the present fiscal policy priorities advocated by the Central Bank itself in association with the IMF.
13. External influence and instructions
Under section 5 of the bill, nobody can influence anybody in the Central Bank. However, same section provides for all in the Central Bank to seek or take instructions from any person and seeking professional or expert advice in the exercise, performance and discharge of the powers, duties and functions under the Act.
This provision lawfully allows Central Banks officials to take advice and instructions from anybody state or private. If the President or the Minister or the Secretary to the Treasury has academic qualifications or practical exposure in economics, banking and finance subjects, anybody in the Central Bank can approach them and take policy instructions as outside parties are not prescribed.
If some opposition political leaders criticize specific policies of the Central Bank and arrange public protests in front of the Central Bank, relevant officials of the Central Bank have no barriers to revise the policies.
Therefore, this provision itself not only removes the independence and but also shows possible incompetency of the Central Bank officials to carry out their public duties as they are authorized to seek or take advice or instructions from outsiders.
It is difficult to understand why such instructions or advice are permitted because the Central Bank has the authority to collect relevant information required for policymaking.
In that context, this provision is nothing but and independence joke.
Concluding Remarks
Above comments show that the only independence awarded by the new bill to the Central Bank is to remove the Secretary to the Ministry of Finance from the Central Bank Board and to willfully restrict and discriminate its credit to the state. Therefore, the new Central Bank appears to be an anti-government state bank funded by the government to promote private sector risk-taking at a cost to the public. The repercussions would no doubt destabilize the Central Bank as well as the financial system fairly soon after the enactment.
The opening of the Central Bank to all categories of financial institutions covering banks and non-banking institutions from finance companies to money brokers and all types of private securities for credit and OMO under the monetary policy is a grave risk to the monetary and financial system in special and macroeconomy in general. This is against international best practices of central banking.
There is a greater possibility of the use of monetary policy credit instruments even to destabilize the elected governments if the Governor or some members of the Governing Board or Monetary Policy Board being politically exposed persons are persons against the incumbent government.
It is possible that the opposition will use the new Central Bank as the conduit to overthrow the government and then change the Act promptly under the new government so that the influence or intervention of the Central Bank in the new government would not exist. In fact, John Exter in his report predicted this type of legal amendment in future if the Central Bank does not cooperate with the incumbent government. It is no secret that all apposition leaders target the Central Bank in their constant attempts to destabilize the incumbent government. The money printing charge is a regular event. If high ranking persons in the Central Bank also support the opposition openly or covertly, the government would be in trouble, given the monetary and regulatory powers vested in the Central Bank.
The architects of the new bill are under the impression that persons appointed to the Central Bank are super-human with perfect foresight and divine character and, therefore, the new Central Bank will be the only perfect public institution that can maintain domestic price stability with an inflation target and financial system stability. Therefore, the proposed bill appears to be a new divine model of central banking to the world at present when all central banks in the world are heavily criticized for grave economic imbalances shown by four decades high inflationary pressures and supply side impediments and contractions whereas some countries like Sri Lanka have gone into bankruptcy consequent to policy mistakes and mismanagement of central banks.
Therefore, the public is advised to ensure that the new Central Bank will be a public friendly Central Bank and not a bureaucracy friendly Central Bank under the mask of so called autonomy or independence which is a conspiracy against the elected governments.
In my last article released on 26 February, I showed how the new bill disrupts the country’s sovereign monetary unit and the monetary system that have existed for the past 72 years driving the improvement in the economic welfare of the general public by facilitating the production, savings, investment, income and employment until onset of the present economic crisis.
(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 10 Economics and Banking Books and a large number of articles publish.
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)
Under the guidance of the International Trade Office, the Sri Lankan Government has decided to accelerate the finalization of a proposed Preferential Trade Agreement (PTA), as approved by the Cabinet of Ministers at a meeting on Monday. President Ranil Wickremesinghe had submitted a proposal to this effect. The Cabinet Co-Spokesman and Minister, Bandula Gunawardena, stated at a media briefing that the Sri Lankan Government is optimistic that the PTA will stimulate trade between Sri Lanka and Bangladesh, which has been low despite special provisions under accords. Once finalized, Bangladesh will become the third South Asian country with which Sri Lanka has a free or preferential trade arrangement, after India and Pakistan, and both previous FTAs have had a positive impact on bilateral trade.
The PTA is expected to build stronger relationships with key trade stakeholders at the regional level, remove market trade barriers, and create market access opportunities for Sri Lankan exporters, in addition to attracting investment and further enhancing economic cooperation to address existing problems related to domestic supply. The Cabinet of Ministers approved the decision to commence discussions towards finalizing the PTA with Bangladesh on 14 June 2021, after the two countries agreed to strengthen their economic relationship through a free trade pact during Prime Minister Mahinda Rajapaksa’s State visit to Dhaka in March 2021.
Sri Lanka and Bangladesh are both stakeholder member countries of the SAARC Preferential Trading Arrangement (SAPTA), South Asian Free Trade Area (SAFTA), Global System of Trade Preference (GSTP), Asia-Pacific Trade Agreement (APTA), and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
On Monday(27), the Cabinet of Ministers approved a proposal to present the draft regulations of the Sri Lanka Export Development Act No. 40 of 1979 to the Parliament.
This decision was taken in response to the impact of rupee depreciation, global market costs, insurance, and shipping charges, leading to the revision of the CESS tax on specific units of selected goods under 677 combined classification codes (HS Codes).
As per an Extraordinary Gazette notification published on November 14, 2022, such regulations must be sent to Parliament for approval within four months of their publication, according to Cabinet Co-Spokesman and Minister Bandula Gunawardena’s statement during the post-Cabinet meeting media briefing.
The proposal was submitted by President Ranil Wickremesinghe, who was then serving as the Investment Promotion Minister.
To accelerate the inquiry into goods seized by Sri Lanka Customs, the government has appointed a ministerial committee consisting of five members. This decision was made after President Ranil Wickremesinghe acknowledged the lengthy investigation process carried out by the Customs officials.
According to Cabinet Co-Spokesman Minister Bandula Gunawardena, the delay in the process causes the detained goods to deteriorate, resulting in no value addition to the economy.
Therefore, the committee will scrutinize all related matters, suggest revisions to the Customs Ordinance if necessary, and present their recommendations to the Cabinet of Ministers. The five-member committee comprises Ports, Shipping, and Aviation Minister Nimal Siripala de Silva, Plantation and Industries Minister Dr. Ramesh Pathirana, Investment Promotion State Minister Dilum Amunugama, and Finance State Ministers Ranjith Siyambalapitiya and Shehan Semasinghe.
The Cabinet of Ministers approved the proposal submitted by Nimal Siripala de Silva in its meeting on Monday.
The government is to allow private parties to supply A1 jet fuel for planes servicing at the country’s airports without any shortages.
The Minister of Ports, Navigation and Aviation Nimal Siripala de Silva has pointed out the need for a program to provide aircraft fuel without any hindrance to the planes servicing Sri Lanka.
The Minister has advised the officials that if the Petroleum Corporation is unable to supply the necessary fuel for the planes arriving and departing the country, the import of the fuel should be given to a private sector party.
It was recently revealed that the number of aircraft arriving in Sri Lanka has decreased significantly due to the difficulty in obtaining aircraft fuel at the airport.
A special discussion was held recently under the chairmanship of the minister with the relevant institutions about the measures to be taken to immediately change this situation and stabilize the aviation sector
Sri Lanka’s Cabinet of Ministers approved the proposal presented by the Minister of Power and Energy to award an opportunity to other parties who are capable of supplying jet A-1 fuel to the country.The Jet A-1 Aviation Fuel is currently supplied by the Sri Lanka Petroleum Corporation.
Due to the foreign exchange crisis that the country is currently facing, the operations of Sapugaskanda Oil Refinery, where Jet A-1 fuel is produced, were disrupted and the import of Jet A-1 fuel has also become a challenge for Ceylon Petroleum Corporation.
Due to this, the supply of Jet A-1 fuel required for the cargo and passenger flights arriving at the airport was facing a crisis situation, and the focus on alternative measures to supply the required Jet A-1 fuel for those aircraft was considered.
It has been accepted that it is appropriate to give the opportunity to supply Jet-A fuel to Sri Lanka under the maximum supply limits to the parties who supply Jet A-1 aviation fuel to the other countries so as not to hinder the supply of fuel produced at Sapugaskanda Refinery of Ceylon Petroleum Corporation.
As such, the Cabinet of Ministers approved the proposal presented by the Minister of Power and Energy to give that opportunity to other parties who are capable of supplying jet A-1 fuel to the country.
Representatives of all airlines in Sri Lanka, Civil Aviation Authority officials and Ceylon Petroleum Corporation (CPC) officials o participated in the discussion chaired by Minister Nimal Siripla de Silva to procureA1 jet fuel from private firms.
The airlines that have joined this discussion have indicated that more flights will take place through Katunayake Airport especially in the coming months when the tourist season starts. They have also pointed out that continuous fueling of aircraft is essential.
Paying more attention to the matters presented, the Minister emphasized that if the CPC is unable to meet this requirement, private sector parties should be allowed to bring jet fuel to Sri Lanka.
Several companies representing the aviation industry stated that they are ready to bring and distribute jet fuel to Sri Lanka at their own expense if the Petroleum Corporation and the Ministry of Petroleum provide the necessary permission and facilities.
The Minister instructed the officials that the CPC should promptly carry out the necessary activities to facilitate the storage of more aviation fuel, and taking into consideration the future needs, take steps to create the necessary fuel storage at the airport as well as outside it.
Sri Lanka is determined to go ahead with nuclear power technology with Russian assistance to unwind from the continued power outages and spend quality lives and operate businesses unhindered.
Nuclear power generation in the island nation was discussed since 1980s under auspices of the atomic energy authority headed by Granville Dharmawardena but it was not materialized due to protest of some narrow minded Scientists and CEB engineers with vested interests.
Numerous variables have been taken into account and been carefully considered in order to develop Sri Lanka on par with other South Asian countries and to make it a safer and greener home for future generations
Russia is currently No. 1 in the world for the most concurrent nuclear reactor construction projects, where three units in Russia and 34 units abroad are in various phases of implementation.
Further, being the closest SAARC countries to Sri Lanka, India and Bangladesh have also installed nuclear power plants; two in India and one Bangladesh with the help of Russian Technology to support their power systems.
Electricity generation by nuclear power is less expensive and more environmentally friendly than any other energy sources like oil, coal, and gas, with the exception of the initial construction cost.
One of the other advantages of nuclear power is that, unlike traditional power sources, which can fluctuate over time, there is little possibility of cost inflation. This could have a significant positive impact on Sri Lanka’s current situation and lessen the strain on the country’s finances
The Cabinet approved signing the international conventions relating to generating electricity using nuclear power as it was a reliable, low-carbon base load source of electricity to complement renewable energy sources in the future, Sri Lanka Atomic Energy Board (SLARB) Chairman Professor S.R. D. Rosa said.
He noted that the country is supposed to have barge-mounted small modular reactors (SMRs) that have a power capacity of up to 100 MW per unit.
Sri Lanka Cabinet of ministers has given the permission to apply for membership in two International Conventions for Nuclear damage, as the island nation explores possibilities of using nuclear power for Energy generation.
Sri Lanka prepared and submitted a self-evaluation report and supporting documents covering all infrastructure issues to the International Atomic Energy Agency (IAEA) last year.
After reviewing, IAEA said Sri Lanka needs to further develop its pre-feasibility study on introducing a nuclear power programme.
“The team also noted that Sri Lanka’s Nuclear Energy Programme Implementing Organization should prepare recommendations for the Government to make an informed decision on the nuclear power programme” IAEA said.
The deficit in the merchandise trade account narrowed to US $410 million in January 2023, from $857 million recorded in January 2022 due to a larger decline in imports, compared to the decline in exports.
However, the merchandise trade deficit in January 2023 widened, compared to the deficit of $ 358 million recorded in December 2022.
Earnings from merchandise exports declined by 11.3 per cent in January 2023, over January 2022, to $ 978 million, continuing the moderation observed since September 2022, though at a slower pace than expected.
This decline was observed across all main categories, and the compression of industrial exports was noticeable, Central Bank disclosed in its external sector performance report. .
Earnings from the exports of industrial goods declined in January 2023, compared to January 2022, with the greatest share for the overall decrease being contributed by garments resulting from lower demand in most of the major markets (the USA, the EU and the UK).
Meanwhile, earnings from the exports of petroleum products declined due to the decline in volumes of bunker and aviation fuel exports despite higher bunker prices.
Further, the declining trend of exports of rubber products (mainly, household rubber gloves) continued, although earnings from gems, diamonds, and jewellery; and machinery and mechanical appliances (mainly, electronic equipment) increased.
Earnings from the export of agricultural goods declined in January 2023, compared to a year ago, driven by lower export volumes of fibers and desiccated coconut, categorized under coconut related products. However, earnings from tea exports improved with the higher average export prices of tea amidst low volumes.
Volumes of almost all agricultural exports remained at subdued levels in general with the lagged impact of unavailability of adequate fertilizer during 2021/2022.
Earnings from mineral exports declined in January 2023, compared to January 2022 mainly due to the decline in exports of quartz and natural graphite powder.
Expenditure on merchandise imports remained at subdued levels in January 2023, Central Bank said adding that expenditure on imports declined by 29.2 per cent (y-o-y) to $1,388 million in January 2023, compared $1,959 million recorded in January 2022 and $1,426 million in December 2022.
The decline in expenditure in all sectors contributed to this decline although the decline in intermediate goods contributed the most.Consumer goods:
Expenditure on the importation of consumer goods declined in January 2023,compared to January 2022, due to the decline in both food and non-food consumer goods.
Decline in import expenditure on non-food consumer goods was mainly driven by the reduction in the import of medical and pharmaceuticals (due to the base effect of higher expenditure on COVID vaccines in January 2022).
Expenditure on food and beverages also declined due to lower cereals and milling industry products (mainly, rice), compared to that of January 2022.
Expenditure on the importation of intermediate goods declined in January 2023, compared to a year ago, driven by lower imports of textiles and textile articles (primarily, fabrics) indicating lower garments exports in the period ahead.
In contrast, expenditure on fuel, the largest import component under this category, increased due to higher volumes of crude oil and coal imports, although expenditure on refined petroleum declined(due to lower volumes), compared to January 2022.
Sri Lanka is set to expedite the finalization of the proposed Preferential Trade Agreement (PTA) with Bangladesh under the guidance of the International Trade Office.
The proposal to this effect submitted by President Ranil Wickremesinghe was approved by the Cabinet of Ministers at its meeting on Monday.
Although trade between Sri Lanka and Bangladesh was low despite special provisions under accords the Government is confident that the PTA would be a catalyst to enhance commerce volume, official sources said.
Once finalised, Bangladesh will be the third South Asian country with which Sri Lanka has a free or preferential trade arrangement after India and Pakistan. Both FTAs have helped to enhance bilateral trade.
It is expected to strengthen relationships with key trade stakeholders at the regional level to develop market access opportunities for Sri Lankan exporters by removing market trade barriers and to achieve the objectives of attracting investment as well as to further enhance economic cooperation as a remedy for the existing problems related to domestic supply.
The current trade deals between the two countries are still partially restrictive. Both countries keep a sensitive list of products that are not eligible for tariff cuts.
Sri Lanka maintains a list of 925 products sanctioned by SAFTA (South Asian Free Trade Area) while Bangladesh keeps 993 products.
Sri Lanka’s sensitive list covers USD 6.2 million or 23.8% of imports from Bangladesh. The sensitive list of Bangladesh covers USD 77.6 million or 62% of imports from Sri Lanka. Thus, the elimination of sensitive lists may benefit Sri Lanka more.
On 14 June 2021, the Cabinet of Ministers approved the decision to commence discussions towards finalizing a PTA with Bangladesh, following the two countries agreeing to strengthen their economic relationship via a free trade pact during Prime Minister Mahinda Rajapaksa’s State visit to Dhaka in March 2021.
Both Sri Lanka and Bangladesh act as stakeholder member countries of the SAARC Preferential Trading Arrangement (SAPTA), South Asian Free Trade Area (SAFTA), Global System of trade Preference (GSTP), Asia-Pacific Trade Agreement (APTA) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
The ongoing Bangladesh-Sri Lanka discussions on a preferential trade agreement (PTA) will benefit from knowing the potential gains from reducing bilateral trade costs. In addition, knowledge of products with a higher potential for export gains will help optimise the economic benefits from a trade deal.
If tariffs on the sensitive lists are eliminated, there will be modest export gains for Bangladesh and Sri Lanka in absolute terms.
Sri Lanka will gain USD 24.7 to 49.7 million of exports to Bangladesh, while Bangladesh will gain USD 2.1 to 4.5 million of exports to Sri Lanka.
Potential export gains are given in a range due to assumptions on elasticity values used in the partial equilibrium model. Elimination of sensitive lists will generate a higher tariff revenue loss to Bangladesh, ranging between USD 13.5 million to USD 19.1 million. By contrast, Sri Lanka’s revenue loss will be slight at USD 1.4 million to USD 1.9 million.
Banks will be operating today to provide the best possible service to the public.
People’s Bank and Bank of Ceylon Chairmen emphasized
The Chairmen of the People’s Bank and the Bank of Ceylon both emphasized that their respective banks are ready to serve their customers today (01).
They expressed their confidence that it is the responsibility of all public servants to support the government’s program to build the country’s economy, and that bank employees will do the same.
These issues were revealed at a meeting held at the Presidential Secretariat yesterday (28) regarding matters in the banking industry.
The discussion was attended by the heads of state banks and trade union representatives, as well as the Senior Advisor to the President on National Security and Chief of the President’s Staff, Sagala Ratnayake, and the President’s Secretary, Saman Ekanayake.
There was extensive discussion about how to keep the banking operations running so that government programs are not disrupted and customers are not inconvenienced.
Mr. Sagala Ratnayake pointed out that it is not a good situation for the country to send the message to the international community that the banking system is inactive at a time when the government has taken extensive measures to create financial stability in the country.
Although it is a common tradition to issue circulars containing arrangements such as handing over the keys on the day of the strike, handing over the keys to safes containing gold, etc., when bank employees take union action, this has not occurred in relation to the joint bank union action scheduled to take place tomorrow. This was revealed during the discussion.
Accordingly, the Chairmen and the main management of the Banks agreed that the steps will be taken soon.
Ronald Perera, Chairman of the Bank of Ceylon, added that the banking system’s support is required for the government’s economic development program, and he urges all bank employees not to neglect their responsibilities to the country.
Sujeewa Rajapaksa, Chairman of the People’s Bank, stated that steps have been taken and are currently being discussed to address issues with current tax collection.
He also stated that it is everyone’s responsibility to help improve the country’s future by cooperating with understanding at this time when the entire country is experiencing economic difficulties.
Commenting further Chairman of the Bank of Ceylon Ronald C. Perera said
This country is now in a very difficult economic situation. In this situation, several trade unions have announced a strike tomorrow. As Chairman of the Bank of Ceylon, I request that our employees return to work tomorrow because the Bank of Ceylon provides excellent service to its customers. If the bank is closed for even one day, the entire country will suffer greatly.
Furthermore, trade unions demand that the government should make decisions on tax collection and tax rate reductions. As a result, we have discussed this matter with the government. These issues, we believe, will be resolved in the near future. I strongly urge the employees to report for duty on behalf of the bank and its customers.
People’s Bank Chairman Sujeewa Rajapaksa further said
Several trade unions have organized a strike for tomorrow. As Chairman of the People’s Bank, I request that you report to work as People’s Bank employees. People’s Bank makes a significant contribution to the economy of this country. We serve a large number of people and customers, as well as economic operators. As a result, we ask that you report to duty as usual and complete the necessary tasks to keep the service running. At this time, we ask that you refrain from acting in a way that will harm the government, country, or economy.
President’s Economic Senior Advisor Dr R H S Samaratunga and Director General of Trade Unions Saman Rathnapriya were also present at the discussion.
