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Discipline and commitment needed to take charge of country’s future: President

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Discipline and commitment needed to take charge of country’s future: President

Colombo (LNW): Discipline and commitment are needed to take charge of a country’s future, says the President while addressing the NCC Colour Presentation Ceremony.

President Ranil Wickremesinghe emphasized that discipline and commitment are required in order to take charge of a country’s future, and plans will be implemented from next year to take Sri Lanka to a new dimension through a disciplined society.

The President stated that, while the people are currently experiencing economic difficulties, this should only be expected for a short time period, and that he will work to improve the country’s economy before year end.

President Ranil Wickremesinghe stated this while participating in the ceremony held today (19) at Rantambe National Cadet Training Centre for the awarding of the President’s Colours and Corps Colours to the National Cadet Corps.

President Ranil Wickremesinghe presented the President’s and Corps Colours to the National Cadet Corps, which has a 142-year history.

Following the presentation of the President’s and Corps colours, the President also joined in observing the Cadet Corps parade.

The President stated that a strong economy and a new society should be created in the country, and he expects the Cadet Corps to provide disciplined leadership for the new society that will be created for the country’s youth.

President Ranil Wickremesinghe further said:

Today is a special day for you. We recognize the national value of the National Cadet Corps. The President’s Colours and the Corps Colours were awarded to the National Cadet Corps in recognition of this achievement. This is a very old force. The Royal College established a cadet unit when the Sri Lankan Infantry was formed.

The Cadet Corps that began since then, has a 142-year history. The military officers who emerged from it took part in the First World War. Officers from this Cadet Corps served in the subsequent World War II as well as the country’s internal wars. Also, the members of the Cadet Corps have also made significant contributions to the armed forces. We are here today to show our appreciation on behalf of those activities.

The Cadet Corps evolved from the Ceylon Infantry to the Ceylon Defence Force and then to the Sri Lanka Army. As the then Minister of Education, I proposed to Parliament to name this force as the National Cadet Corps. And today I have the honour of presenting the President’s and Corps Colours to the National Cadet Corps.

The people needed for the country’s future are trained by this Cadet Corps. In addition to the Cadet Corps who joined the army, there are many people who have served in various sectors but are not in the army. Our Prime Minister, Mr. Dinesh Gunawardena, is the most prominent member of that group. I recall him attending those trainings in the evenings during the school days.

Today, as we confer this presidential colour on you, it is our duty to express our appreciation to those who founded this Cadet Corps, as well as those who contributed to its success, and to the entire Cadet Corps.

Today the Cadet Corps operates in many schools. I expressed the Defence State Minister and the Secretary of the Defence Ministry, that Cadet Corps should be established in every Central College. We must continue to develop this further. I believe that this will produce the disciplined citizens that this country needs.

It is also the government’s responsibility to ensure that the students in this Cadet Corps have a bright future. While the Minister of State is here, I suggest that the children in the cadet groups should be given a quota for training in government institutions. We must secure their future. We should be dedicated to provide training for you who move forward with discipline.

Also we have focused on your future. I am well aware of the difficulties that you, your parents, and the people of the country are currently facing. Economically, we all have to bear a heavy burden. We have no other option. People are experiencing difficulties today, but this should be expected to last only a short period of time. This situation will not only change before the end of the year, but we will also need to build a new economy.

We must build both a strong economy and a new society for the benefit of the country’s youth. To build such a new social system, a disciplined leadership is required. I am hopeful that the Cadet Corps will provide the required leadership.

To take on the future requires discipline and commitment. It should be noted that we are committed to developing this cadet force with qualified personnel and improving everyone’s future.

I offer my best wishes to everyone receiving the President’s and Corps colours on this occasion of the National Cadet Corps, which has served this country for 142 years.

State Minster of Defence Premitha Bandara Tennakoon, Governor of Central Province Lalith U. Gamage, Senior Advisor to the President on National Security and Chief of Staff of the President Sagala Ratnayake, Defence Secretary Kamal Gunaratne (Retd), Secretary of the Ministry of Education Nihal Ranasinghe, Chief of Defence Staff General Shavendra Silva, Army Commander Lieutenant General Vikum Liyanage, Navy Commander Vice Admiral Priyantha Perera, Director National Cadet Corps Brigadier Sudantha Fonseka and other officials witnessed the ceremonial event.

Critical petition on LG Polls to be taken up at SC today

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Critical petition on LG Polls to be taken up at SC today

By: Isuru Parakrama

Colombo (LNW): The writ petition filed by Retd. Col. W.M.R. Wijesundara demanding the postponement of the holding of the Local Government Election in response to the ‘current economic crisis’ is to be taken up before the Supreme Court today (20).

The petition was taken up on February 10 and any further consideration of it was dragged in till February 23, 2023, but based on a motion filed by the petitioner requesting the hearing of the petition be held before the designated date, it will be taken up before the Bench comprising Justices S. Thureirajah and Shiran Gunaratne today.

Showers to occur in a number of provinces: Met Dept

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Showers to occur in a number of provinces: Met Dept

By: Isuru Parakrama

Colombo (LNW): Several spells of showers will occur in Eastern and Uva provinces and in Polonnaruwa and Matale districts, and showers or thundershowers will occur at several places in Western, Sabaragamuwa, Southern and North-Western provinces and in Kandy and Nuwara-Eliya districts during the afternoon or night, announced the Department of Meteorology in a statement today (20).

Fairly heavy showers above 50mm are likely at some places in Western, Sabaragamuwa and Southern provinces and in Ampara district.

General public is kindly requested to take adequate precautions to minimise damages caused by temporary localised strong winds and lightning during thundershowers.

Marine Weather:

Condition of Rain:
Several spells of showers will occur in the sea area off the coast extending from Hambanthota to Trincomalee via Batticaloa. Showers or thundershowers will occur at a few places over the other sea areas around the Island during the evening or night.
Winds:
Winds will be north-easterly and wind speed will be (20-30) kmph. Wind speed may increase up to 40 kmph at times in the sea areas off the coast extending from Mannar to Colombo via Puttalam and from Hambantota to Pottuvil.
State of Sea:
The sea areas off the coast extending from Mannar to Colombo via Puttalam and from Hambantota to Pottuvil will be fairly rough at times. Temporarily strong gusty winds and very rough seas can be expected during thundershowers.

President meets youth group to discuss Government’s Policy Statement and future plans

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President meets youth group to discuss Government’s Policy Statement and future plans

Colombo (LNW): On February 16th, President Ranil Wickremesinghe met with a group of youth to discuss his policy statement and the government’s plans for the country’s future. The group of young people expressed their views on the government’s policies in a newspaper article and the President had invited them over for a follow-up discussion along with the two young journalists, Anoushka Jayasuriya and Shannon Salgadoe who had written the article. During the discussion, they had expressed what they expect from the government, and discussed a range of issues with the President.

One of the major topics discussed was the shortcomings in the education sector, with the youth group highlighting the need for proper mental health education at the school level and a proper education mechanism for the inclusion of the differently-abled. They asked, “Will your government get some real mental health education in Sri Lanka, in schools especially?”

The President agreed that attention paid to mental health in schools was insufficient and acknowledged that much needs to be done with regard to those with mental health issues and those who are differently-abled. He noted, however, that one of the main issues facing the country is the lack of trained personnel in this field.

The youth group also brought up the issue of taxes, adding that while taxes are not a novel concept in many other countries, it is not so in Sri Lanka.

The President explained that the government budget can be examined by the Parliament to ensure they are adhering to it. He noted that there are many committees to examine the budget, such as the Committee on Public Enterprises, Committee on Public Accounts, and Public Finance Committee. He added that they are also bringing in the Parliamentary Budget Office Bill to strengthen the process further.

They questioned, “Transparency is a big question with the new taxes. People are feeling it because suddenly they are forced to pay a huge portion of their salary.”

“The transparency is there because in a big budget we have line items. If you read it, you can never say what it is. It’s in any budget, it’s the parliament that ensures the money is spent wisely, and it takes 2 to 3 years. So the parliament must exercise the powers now. Last time, I think the Opposition didn’t fill their quota of Chairman in the oversight committees. So all that went by board, even this time for selection, they hadn’t come to Parliament to the selection committee. But I think the remaining people just got some opposition names into it. So that is where the transparency comes in and nowhere else. You can ask them as to why you spend and all,” the President explained.

The President also discussed the country’s economic situation and the challenges the government faces, noting that Sri Lanka was in an abnormal economic situation and had to restructure debts to get out of it. He added that the government had to cut down on some expenditure and find money in other areas, such as raising the electricity tariff. The President acknowledged that it is not an easy job, but someone has to do it.

“Sri Lanka was in a very abnormal economic situation, and we had to get out of it. But to get out of it, we have to restructure debts. To restructure the debts we had to cut down our expenditure or find money for it. In some areas we have cut down, but for other areas, we have to find money. Like yesterday we had to raise the electricity tariff, but then there is a Rs. 230 billion loss. So if you don’t raise it, you won’t have power. We are all paying for the past sins. This is how we get out of it fast and this is what we have to do. I don’t think there’s any other way out.

It’s not a job, that anyone would like to do, but someone has to do it.”

The youth group also raised the issue of individual accountability and suggested that parliamentarians should have some degree of education. The President agreed but noted that it will take some time for this to happen. He explained that many younger people either have a degree or business experience and it is up to the voters to choose the type of member they want to elect.

“When the individual accountability is concerned, the members of Parliament, well you have a system where you can give a preference. If you don’t want any of them, you vote for the party and you can choose whom you want. However, it’s a very expensive procedure. So I want to appoint Committee to look into how we can have a better system of elections without spending all the money that we spend.

In a parliamentary election, the bulk of the money is spent by the individual candidates, not by the parties.”

The youth also asked the President “Why does everyone shout in parliament? Do you think they shout to avoid responding to questions posed to them?”

In response, the President said that it is done to get media attention and is not appropriate. He noted that he has seen similar behaviour in other countries and that it is not unique to Sri Lanka.

“That is bad. Now it’s done to get media attention. There are people when they argue, may shout at each other. But, not like this, they just keep shouting. Now, it’s bad and setting a bad example to the country. There is a price. When we look at the UK, it is not so. There are times when people cheer but this is just being done. I think we have to bring some control over it,” he added.

Overall, the meeting was an opportunity for the President to hear the views of the youth and discuss the government’s plans for the future. The youth group expressed their concerns and ideas, and the President listened and responded to their questions and comments.

‘Janaraja Perahara’ parades the streets of Kandy after 34 years

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‘Janaraja Perahara’ parades the streets of Kandy after 34 years

Kandy (LNW): The historic Temple of the Tooth Relic in Kandy, which had not hosted the Janaraja Perahara for 34 years, held the procession on February 19th at 6:45 PM. The event was organised to coincide with the 75th Independence Anniversary Celebrations and was attended by President Ranil Wickremesinghe and Prime Minister Dinesh Gunawardhena.

The procession commenced at the Magul Maduwa premises and followed a route that included Dalada Veediya, Yatinuvara Veediya, Kanda Veediya, Raja Veediya, and ended at the temple. The procession included cultural performances, such as dancing troops and caparisoned elephants, which added glitz and color to the event. A large crowd had gathered to watch the Janaraja Perahara procession.

Speaker Mahinda Yapa Abeywardana, Ministers Nimal Siripala de Silva, Dr. Bandula Gunawardana, Vidura Wickramanayaka, Keheliya Rambukwella, Mahinda Amaraweera, Dr. Wijayadasa Rajapaksa, Ali Sabri, Manusha Nanayakkara, Thondaman, State Ministers Dilum Amunugama, Anuradha Jayaratne, Chief of Staff and Senior Advisor to the President on National Security Mr Sagala Ratnayake, Secretary to the President Saman Ekanayake, Defence Secretary General Kamal Gunaratne (Retired), Chief of Defence Staff General Shavendra Silva, Army Commander Lt. Gen. Vikum Liyanage and many diplomats gathered to watch the event.

Sri Lanka Original Narrative Summary: 20/02

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Sri Lanka Original Narrative Summary: 20/02
  1. Bar Association says all those responsible for interfering with the electoral process must be dealt with in accordance with the law: insists all elections are a vital part of the democratic process and must not be hindered.
  2. SriLankan Airlines Chairman Ashok Pathirage assures the Airline is committed to reaching an amicable settlement with all bondholders despite the default of its coupon payment on 25 Dec’22 on the USD175mn bond: insists the creditors have no reason to fear since the Bond is Govt-guaranteed.
  3. German MP Dr Peter Ramsauer, who is presently in Sri Lanka says Germany is seeking Sri Lanka’s support for a resolution at the UN against Russia: says he raised the issue with President Ranil Wickremesinghe.
  4. Opposition and SJB Leader Sajith Premadasa says the JVP’s official website has stated that all private properties in the country will be confiscated and brought under the Govt in a future JVP rule.
  5. Sri Lanka Medical Association and the Expert Committee on Tobacco, Alcohol and Illicit Drugs warn against the Govt move to legalise cannabis: asks the Govt “to be extremely cautious when considering any form of legalising cannabis .. for doubtful ‘economic’ benefits”.
  6. Ports Minister Nimal Siripala De Silva says the Govt will allocate nearly USD132mn for massive development projects in all Ports in the country: also says those investments would be made through revenue generated from Port operations.
  7. Lanka Coal Company General Manager Namal Hewage says payments have been settled for 13 shipments of coal imported to Sri Lanka: assures plans are afoot to bring down a total of 36 coal shipments this year: asserts the LCC is in possession of adequate stocks to ensure an uninterrupted supply of electricity.
  8. Another Japanese company Taisei Corporation decides to pull out as “Sri Lanka’s economic crisis makes doing business difficult”: in March 2020, Taisei won a contract worth JY 62bn (USD 462mn) for the construction of the 2nd phase of the BIA expansion: previously, Mitsubishi Corporation had also stated that it will exit Sri Lanka by March 2023.
  9. German Ambassador Holger Seubert says German companies operating in Sri Lanka have warned they would be compelled to withdraw from the country if the import ban continues.
  10. Kandy SC beat CR & FC by 29-10 to become Sri Lanka’s Rugby League Champions.

Israel agrees to recruit 2000 female Caregivers from Sri Lanka this year

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Israel agrees to recruit 2000 female Caregivers from Sri Lanka this year


A special delegation from Israel visiting Sri Lanka has assured the Minister of Labour and Foreign Employment Manusha Nanayakkara, that their country will offer 2000 job opportunities for female caregivers from Sri Lanka, this year.
The delegation comprising Shiely Raisin Sason, director of Israel’s Population and Migration Institute and members Zindani Mary, Yaccow Kabilau, Margarita Gaorodnitsky among others met Minister Manusha Nanayakkara today. The minister during the meeting requested from the delegation to provide more job opportunities to caregivers from Sri Lanka and in response the delegation assured the Minister that their country will recruit 2000 female caregivers from Sri Lanka this year.

The delegation pointed out that according to the existing culture in Israel, women have more opportunities for patient care, and the number of opportunities for male caregivers is very limited, and accordingly, the delegation also requested the Minister to give priority to females when providing training in the caregiver sector in the future.

The delegation also pointed out the importance of accelerating the recruitment process for caregiver jobs. Accordingly, the Minister assured the delegation that only those who meet the relevant qualifications will be recruited for training. Here, the Israeli delegation informed the minister that Sri Lankan workers with English language proficiency, who have received professional training, will always get the opportunity for Israeli employment opportunities.

The delegation said their country is ready to give opportunities up to 8000 qualified workers on an annual basis.

Both parties pointed out the importance of recruiting workers through a transparent process. The minister pointed out that some private recruiters are acting like a mafia in the process of recruiting caregivers to work in Israel. The minister also clarified the facts about the allegations against some Sri Lankans in Israel regarding the recruitment process. The Minister also mentioned that there are allegations that some people are taking money for providing Israeli jobs.
The Minister also presented to the Israeli representatives the requests to open up the opportunities to hire caregivers for jobs in Israel by the private sector as well. Responding the delegation said that the process of recruiting caregivers should be carried out only with the intervention of the Foreign Employment Bureau.

The delegation from the Population and Migration Institution of Israel requested that any information regarding people who are taking money to provide caregiver jobs in Israel should be given to them to take necessary action. They also assured that the security and confidentiality of the persons giving such information will be fully protected. The delegation also assured that maximum action will be taken according to Israeli law against people who take money through the recruitment process.

The minister also mentioned that the safety of workers who leave for work abroad is always a high priority and added that there have been no allegations of harassment of workers who have left for work in Israel. The minister expressed his thanks to Israel in that regard.

In this discussion, the minister also asked the Israeli delegation that since there are many trained professionals in the country for jobs in the agricultural sector, it would be better if they were given an opportunity for that as well. Here, the Israeli delegation stated that they are not able to open jobs in the agricultural sector at this time, and that necessary steps will be taken in the future.

Sri Lanka participates in the Milano BIT 2023, International Tourism Exchange

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Sri Lanka participates in the Milano BIT 2023, International Tourism Exchange

On an invitation extended by the Expo 2030 Roma Committee Director General Giuseppe Scognamiglio offering fully hosted participation, Sri Lanka took part at Milano BIT 2023, International Tourism Exchange which was held at the Allianz MiCo, Milan Convention Centre from 12 to 14 February 2023 facilitated by Sri Lanka Tourism Promotion Bureau and Sri Lanka Consulate General in Milan, Italy.

According to Italian local media, the public turnout at BIT 2023 reached pre-pandemic levels with a younger and more selected target audience and over a thousand exhibitors from 45 countries and 500 high profile buyers participating in the BIT International Tourism Exchange, the largest tourism trade fair in Milan and Northern Italy. A significant number of the public as well as tour operators, travel agents, travel journalists, social media activists and travel bloggers visited the Sri Lanka stall during the three days of the event.

Sri Lankan tour operators, travel agents and destination management companies had the opportunity to network and interact with the travel industry partners from Italy and around the world at Milano BIT 2023.

Minister of Tourism and Lands Harin Fernando participated in the ribbon cutting at the opening ceremony of the BIT 2023 on 12 February 2023, along with the Italian Minister of Tourism Daniela Santanchè. The Sri Lanka stall at the exhibition was ceremoniously opened with a colourful traditional dance performance by the Pradeep Wickramasinghe dance troupe in Milan. The minister was welcomed at the Sri Lanka stall by Consul General Dilani Weerakoon and the stall was declared open by lighting the traditional oil lamp.

Minister Fernando also attended the Ministerial Roundtable on Tourism, People and Territories: 2030 and Beyond, Tourism Industry and Sustainable Development Goals held on the opening day of BIT 2023. Tourism ministers and representatives from more than 20 non-European countries attended the roundtable for a discussion on the tourism industry and objectives for sustainable development for the next decade, chaired by the Italian Minister of Tourism.

During the Milano BIT International Tourism Exchange, Minister Harin Fernando and the delegates met with the representatives of Neos and ITA airlines in Italy to negotiate initiating direct flights to Sri Lanka.  Minister Fernando and Chairman of the Sri Lanka Convention Bureau Thisum Jayasuriya also had a meeting with the General Manager and Director General of ASTOI, Association of Tour Operators in Italy. ASTOI represents over 90% of the Italian tour operator market and plays a leading role in liaising with international organisations, media and with all other important players of the tourism sector.

Consulate General of Sri Lanka

Milan

19 February 2023

High Commission of Sri Lanka in London commemorates the 75th Anniversary of Independence with a series of events

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High Commission of Sri Lanka in London commemorates the 75th Anniversary of Independence with a series of events

The High Commission of Sri Lanka in London organised a series of events to commemorate the 75th Anniversary of Independence. The year 2023 also marks the 75th anniversary of the establishment of diplomatic relations between Sri Lanka and the UK.

On 02 February 2023 High Commissioner Saroja Sirisena in partnership with David Rose, British businessman who has an over four-decade long association with Sri Lanka, hosted a luncheon at the Dorchester Hotel with the former Prime Minister of UK, David Cameron as the Guest of Honour. The other guests included Lord Davies of Abersoch CBE, UK Prime Minister’s Trade Envoy for Sri Lanka; Lord Marland, Chairman Commonwealth Enterprise and Investment Council (CWEIC) and The Rt Hon Nigel Adams MP. Captains of British industry in partnership with Sri Lanka and President of Sri Lanka-UK Chamber of Commerce were also amongst the invitees. Addressing the gathering,  former Prime Minister Cameron referred to Sri Lanka’s resilient spirit and potential to emerge out of adversity with the support of the friends in the international community. High Commissioner Saroja Sirisena in her remarks requested the guests to continue the trust the UK has placed in Sri Lanka as a resilient destination for business.

On 03 February 2023, Westminster Abbey, the coronation church of 39 British Monarchs since 1066, held the traditional Evensong in honour of Sri Lanka’s 75th Anniversary of Independence. During the service, blessings were bestowed on Sri Lanka, its leaders and people for peace, stability and prosperity. The Right Reverend Anthony Ball, Canon in Residence, gave the first lesson whilst the second lesson, the sixteenth verse of the twenty-eighth chapter of gospel according to Matthew was delivered by High Commissioner Saroja Sirisena. Sri Lanka’s national flag was kept aloft the Westminster Abbey in honour of the Evensong. The staff of the High Commission and representatives of the British Sri Lankan community attended the service.

With the generous sponsorship of BoardPac Ltd & De La Rue, Lion Beer, Elephant House beverages, Munchee Biscuits, Basilur Tea, Baraka, Silver Mill, Wichy Plantation, Jenvas Ltd, Palmyra Development Board, Traccular, Information and Communication Technology Agency (ICTA) and SriLankan Airlines, the High Commission organised two events on 04 February and 08 February 2023 in the Chancery premises to commemorate the 75th Anniversary of Sri Lanka’s independence.

The proceedings of the 04 February programme commenced with the singing of the national anthem by children of the members of the Council of Muslim Organisations UK (COSMOS). Multifaith religious observances were performed by the respective religious leaders based in the UK. The national day messages of President Ranil Wickremesinghe, Prime Minister Dinesh Gunawardena and Foreign Minister Ali Sabry were read by the diplomatic officers of the Mission. The children of Muthuhara Rupavahini UK added colour to the event with two Sinhala songs. Two Bharatanatyam items were performed by students of Kalasagara UK. British Sri Lankans of all facets of Sri Lanka’s cultural mosaic participated at this event. Addressing the gathering, High Commissioner Saroja Sirisena invited the Sri Lankan community in the UK to contribute towards the development of the motherland in a manner that is mutually beneficial; to visit Sri Lanka, buy Sri Lankan export products & consider investing in the country that had provided the foundation for their success in the UK. The highlight of the programme was the SriLankan Airlines raffle draw. The lucky winner took away two return air tickets to Colombo. Upon conclusion of the official ceremony, the guests were treated to Sri Lankan food and beverage. A cross-section of the British Sri Lankan community including representatives of Sri Lankan Associations based in the UK attended the event.

Speaker of the House of Commons The Right Sir Lindsay Hoyle MP, was the Chief Guest at the reception organised by the High Commission on 08 February 2023. Members of the Houses of Parliament, Marshal of the Diplomatic Corps,  Heads of Missions and members of the Diplomatic community, representatives of the British business community and friends and well-wishers were amongst the invitees to celebrate this special occasion.

The guests were treated to Sri Lankan cuisine and beverages, Ceylon ‘yara’ tea and Sri Lankan palmyrah products. The guests were also entertained by artists of Sri Lankan heritage who are cast members of West End theatre productions of ‘Hamilton’, ‘Juliet’ ‘Amelie’ and ‘Life of Pi’ Roshani Abbey and Nuwan Hugh Perera.  The highlight of the evening was the SriLankan Airlines raffle draw and the winner, Lord J.D. Waverley took away two return tickets to Colombo.

The events were used as platforms to promote Sri Lankan products, food and beverages as well as Sri Lanka as a tourism destination.

In addition to the events organised by the High Commission, a Ceylon Cinnamon promotion event was held the Art Gallery, London organised by the Friends of Sri Lanka Association with High Commissioner Saroja Sirisena, as the Chief Guest at the event. British nationals, representatives of the British Sri Lankan community, tea trade and travel and tourism sector participated in the event. The Sri Lankan Association of Bedford also organised Independence Day Commemoration on 04 February with the participation of the Mayor of Bedford.

High Commission of Sri Lanka

London

19 February 2023

Why the CB Governor will fail to deliver on his promises?

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Why the CB Governor will fail to deliver on his promises?

The objective of this short article is to present key reasons why the CB Governor will miserably fail in stabilizing the economy and getting the inflation down to a single digit by the end of this year as he promises.

Background of inflation control by the CB/Central Banks

  • The CB like many other central banks believe that inflation inflation is a monetary phenomenon as a result of excess money stock causing excess demand for goods and services beyond the supply.
  • Therefore, the strait forward answer that central banks have is to keep the monetary policy tightened in order to decelerate the monetary growth which will then decelerate the demand. They believe that this will drive inflation towards the target used for the conduct of the monetary policy. The inflation target in Sri Lanka is 4%-6% YoY as compared to 2% in developed countries.
  • The present monetary policy is based on targeting the inter-bank overnight interest rates through central bank policy interest rates. Policy interest rates are the interest rates used by central banks for their overnight deposit and lending operations with banks and other permitted securities dealers. The CB’s policy rates at present are the are standing deposit facility rate (SDFR) and the standing lending facility rate (SLFR) applied for overnight deposit and lending operations with commercial banks and primary dealers in government securities. 
  • As central banks are prepared to lend and take deposits at these rates without any limits possible due to their money printing power, inter-bank overnight interest rates will remain within the policy interest rates corridor. Therefore, policy interest rates are a form of price controls in the overnight money market supported by money printing.
  • Therefore, the key monetary policy decision taken by central banks from time to time is the determination of policy interest rates, i.e., hike or cut or hold at current level. In the case of hike or cut, by how much is the unjustified decision.
  • Accordingly, in times of inflation rising continuously above the target, central banks keep hiking policy rates gradually until inflation is firmly back on the path to the target. At present, almost all central banks (except central banks in China and Japan) are on this game from the beginning of last year.

The CB’s rate hikes in the current cycle

The CB commenced hiking policy rates in mid-August 2021 well before inflation started rising above the target. Accordingly, present policy rates corridor is 14.5%-15.5% elevated from 4.5%-5.5% in mid-August 2021 after five rate hikes with a total of 10% so far whereas the behaviour of inflation is not justified with policy rates (see the table and two charts below).

The present CB Governor accelerated the rate hikes by a record 8% expecting to be a world hero of inflation control in a crisis-hit economy. As a result, all interest rates rose to sugar high levels followed by the rapid rise of government securities yield rates to 30%-33% (see the chart below), despite the significant magnitude of money printing used to suppress the yield rates.

Even a layman will understand the catastrophe that the economy will suffer at such high levels of interest rates at the time it is hit by a historic economic crisis.

How rate hikes are expected to bring down inflation

Rate hikes are expected to slower the demand for goods and services and thereby reduce inflation through five major channels.

  • First, interest rates throughout the economy will rise fairly quickly. Inter-bank interest rates and government securities yields will rise immediately and other interest rates will follow suit shortly.
  • Second, as the cost of borrowing and capital is now higher, consumption and investment financed by credit will decline because modern monetary economies run on credit. This is the first round of deceleration in demand. This will effect primarily through the private sector as the government spending generally does not respond to changes in interest rates.
  • Third, the second round of deceleration in demand comes through the contraction of production activities and employment. The reduction in private consumption and investments will contract production activities which will raise unemployment of factors. As a result, factor incomes, i.e., wages, rent, interest and profit, will decline. The decline in factor income leads to deceleration in demand. This happens primarily in the informal sector of the economy.
  • Fourth, hike in interest rates will reduce the value of financial assets and wealth which is a factor contributing to consumption and investment of the private sector. Therefore, the depressed value of wealth also will reduce the demand, primarily through reduced credit on lower value of wealth/assets under collateral and reduced capital gains. This is also another source of deceleration in demand.
  • Fifth, higher interest rates are expected to attract foreign capital in economies with open capital account if interest rates rise faster than those in countries competing for foreign capital. The new inflow of foreign capital will appreciate the local currency. The currency appreciation will raise the foreign currency price of exports and reduce the local price of imports. As a result, net exports (exports less imports) is expected to decline (depending on export and import elasticities), causing a decline in the demand. This is another source of deceleration in demand. In addition, the reduction in local currency cost and prices of imports also will directly reduce domestic prices and inflation.

Accordingly, the deceleration or reduction in the demand for goods and services will bring the demand to a greater balance with the supply, given externally. As a result, the narrower gap between the demand and supply will reduce the general price level and inflation. This is known as the transmission of the monetary policy.

This is what the monetary theory predicts as to how inflation will come down in response to policy interest rates hikes.

However, macroeconomic outcomes in reality are different from the theory. Further, side effects in the event interest rates rise stubbornly high could be catastrophic depending on their impact on the public trust in banking and finance. For example, unduly high interest rates can even cause banking and financial crises through various sources.

Can Sri Lanka expect above channels of monetary policy transmission?

Those channels cannot be expected because current inflationary pressures in Sri Lanka are not demand-driven. High inflation is a result of depressed supply side and cost-push amid the global corona pandemic, collapse of the import sector due to the CB’s failure to maintain a foreign currency reserve for BOP purposes, excessive devaluation of the rupee by the CB (i.e., nearly 85% rise in the exchange rate), default of foreign debt, significant rise in globally energy prices and grave political and economic instability.

Therefore, policy interest rate even at 100% cannot resolve the supply side and cost push factor behind high inflationary pressures.

  • First, high interest rates in fact will aggravate them through the increased cost of production and contraction of the economy via first three channels.
  • Second, asset channel is very poor in Sri Lanka as compared to advanced market economies due to primitive capital market.
  • Third, exchange rate channel is not available as the country is in default of foreign debt and exchange rate is administratively fixed at the over-value. Therefore, neither capital inflow nor currency appreciation can be expected even if interest rates are at 100%.
  • Fourth, policy interest rates corridor is no more relevant for the policy transmission as the CB has imposed limits or rationing on its overnight standing deposit and lending operations with effect from 16 January 2023. As a result, money market volatility and manipulations seen at present have potentials of even hitting systemic risks in the current context.
  • Fifth, the CB Governor has been running after the IMF for a loan of US$ 2.9 bn and debt restructuring for nearly one year so far. If he can stabilize the economy (greater balance between the demand and supply) and bring down inflation to a single digit by the end of this year through policy interest rates, the rationale for going after the IMF and debt restructuring, which are fiscal instruments, is questionable.

Fundamental problems in the monetary policy model

The present monetary policy model is implemented on unestablished concepts and bureaucratic discretion and, therefore, lacks the public accountability.

  • The extent and duration of the policy transmission are not known and not empirically tested. Therefore, brave talks on transmission time of 12-18 months from each interest rate decision are just bluffs.
  • The extent and frequency of changes in policy rates effected to hit the inflation target have no basis. Therefore, like in other central banks, the CB changes interest rates in different magnitudes at different intervals while sitting down and looking at inflation data.
  • Rate decisions are taken by looking at the inflation rate estimated as the annual percentage change of the Consumer Price Index (CPI). This is only a statistical inflation rate driven by the base effect. Therefore, inflation tends to ease after some points even when the CPI and cost of living continue to rise or remain at elevated levels. The central banks boast on the prudence of monetary policy actions as soon as the disinflation begins due to the base effect, despite elevated price pressures broad-based across all sectors or markets of the economy.
  • Interest rate is a key activity driver in modern monetary economies. It is a risk-based driver of distribution of productive resources and income. Therefore, policy interest rates and statistical inflation are unrelated variables to base the inflation targeting monetary policy. 
  • Prices of goods and services and thereby inflation are a result of the interactions between commodity markets and factor markets. The inflation as defined in the monetary policy and economics is the change in the general price level due to imbalances between the demand for and supply of goods and services. Therefore, the use of CPI inflation and inflation analysis presented from price changes in the CPI basket is a flawed practice followed in monetary policy decisions.
  • In modern open economies with electronic money and information technology, demand side and supply sides are inter-connected real time and, therefore, demand cannot be separated for the control of inflation as conceptualized in the monetary policy. In fact, supply chains inclusive of marketing drive the demand where both supply side and demand side are real time responsive to interest rates. In fact, it is the contraction of the supply side that has to reduce the demand in the second round in response to high interest rates. Therefore, the assumption of externally given supply side used in the monetary policy for the control of demand side through credit independently from the supply side is highly irrelevant and outdated.
  • Although central banks state that interest rates/monetary policies get transmitted through interest rate sensitive demand sectors, they do not have any idea of what those sectors or impacts are. Instead, they analyze changes in the prices captured in the CPI to find out how inflation has changed. This is a highly unacceptable, micro analysis for a macroeconomic policy such as monetary policy.
  • The CB’s claim that high interest rates are required to control imports through costly credit due to foreign reserve problem is baseless. Import control is a fiscal measure. The use of policy interest rates for such cross purposes violates the present monetary policy model whereas the CB has direct measures to control imports.

Concluding Remarks

Several public concerns can be raised as below on present monetary policies of central banks.

  • The present model of central banks as independent monetary authorities is outdated as their operations reflect extreme communism as well as extreme capitalism. Central banks are highly communist organizations as monetary side of the economy is centrally planned by few central bank bureaucrats. They are highly capitalists as they expect the market mechanism to drive prices, redistribution of resources and growth in response to centrally planned interest rates and money printing. Therefore, such dubious organizations run by few individuals pose a threat to modern democracy and economic freedom.
  • The present model of policy interest rates-based monetary policy is highly irrelevant for economies confronted with currency and debt crises as the market mechanism is not available to transmit the monetary policy across the demand side of the economy as expected in monetary textbooks. Therefore, Sri Lanka cannot expect any stabilization through the present monetary policy.
  • Devastating impacts of policy mistakes on generations and unaccountability despite continuing policy mistakes cannot be tolerated. The present interest rate policy of the CB has pushed the crisis-hit economy to bankruptcy, but political leaders who do not understand such facts treat the CB Governor as the divine landed to save the country from the economic crisis.
  • Inability to assess the policy performance and effectiveness in modern market economies is a serious flaw. Therefore, underlying monetary concepts are practiced in line with closed, tribal economies with primitive currency .
  • Inconsistency of policy statements, rhetoric, media interviews and forecasts which are made based on policy complacency results in the loss of policy credibility.
  • The policy is expected to stabilize the economy, i.e., getting the demand to a greater balance with the supply, in old macroeconomic management models and, therefore, the policy is highly irrelevant for modern economies. When this is questioned, central banks state that only the interest rate instrument is available for them to stabilize the economy. If so, central banks fall far below the expectations built in relevant public mandates.

Therefore, it is high time for professionals and political leaders to debate on the relevance and usefulness of the present monetary policy models to the general public and to effect a model refix, accordingly, rather than calling for full independence offered to central banks for the control of the monetary side of the general public as central bank bureaucrats wish.

Otherwise, it will not take a long time for the state central banks to be extinct and for governments to loose the control over the economy. It is in this context that a new school of modern monetary theory has emerged to advise the policymakers because central bank officials are neither rocket scientists nor divine creatures.

(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)

Economy Forward: https://economyforward.blogspot.com/2023/02/why-cb-governor-will-fail-to-deliver-on.html

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