Sri Lanka’s growth rate is now slowing down following the boomerang of the Central Bank’s decision to increase interest rates without safeguards giving way to a recession affecting business and banking activities,economic activists claimed.
Due to rising inflation and lower growth, the Sri Lankan economy is approaching stagflation. Growth expectations for the country have nosedived after the sovereign default with the economy projected to decline by -7.8 per cent in 2022 and -3.7 per cent in 2023.
The International Monetary Fund (IMF) this week forecasted a lower contraction of the Sri Lankan economy than the World Bank.
In its World Economic Outlook (WEO) released this week IMF estimated Lankan economy to contract by 8.7% this year and by 3% next year. However, the World Bank in its forecast released last week estimated a contraction of 9.2% this year and 4.2% in 2023.
Rapid rate hikes were the Central Bank’s response to high inflation that might have been fueled by the easier monetary policy adopted earlier.
There is no one-size-fits-all measure of how quick is too quick, and no way to know whether policymakers have made optimal tradeoffs between growth and inflation except in hindsight.
However Sri Lanka Central Bank Governor Nandalal Weerasinghe has warned that the local businesses will collapse if there was no control of inflation by increasing interest rates under the present circumstances.
The current tight monetary policy helps to control inflation which is the biggest enemy of every one as the skyrocketing of prices has become a major threat to business more than high interest rates, he added.
At the Central Bank monetary policy review media conference on Thursday 06, he noted that 95 per cent of costs of businesses depend on the fluctuation of inflation and not because of interest rates. High interest rate is also a finance cost for businesses but it may be 4-5 per cent and may even go up to 7-8 per cent but 95 per cent of their production costs are for raw materials, transport and wages etc.
Explaining the impact of inflation on businesses, he said that “if the Central Bank cuts the current interest rates by half, then the 5 per cent of finance costs could bring down by half. But the rest of the 95 per cent of production costs can double.
“If we cut rates, inflation can become 100 per cent. Then salaries will have to be raised, raw materials will go up, the exchange rate can further depreciate,” he said.
These production costs would increase as a result of high inflation, and if it continues with runaway inflation then the businesses would definitely collapse Weerasinghe claimed.
These costs will go up as a result of high inflation, he said adding the responsibility of the Central Bank as an independent monetary authority is to control inflation. The country’s economy is expected to shrink around 8 per cent of GDP this year as investment and consumption falls as efforts are being made to stabiliZe the economy.
Sri Lanka will have to manage imports with available inflows instead of seeking bridging finance, Central Bank Governor Weerasinghe said.
CB’s interest rate hike boomerangs resulting recession in Sri Lanka
Power cuts could be minimum if catchment areas meet continuous rain: Power and Energy Minister
If the catchment areas meet a continuous rainfall, the Ceylon Electricity Board (CEB) will be able to minimise the power cuts in the country, said Power and Energy Minister Kanchana Wijesekara.
In a tweet yesterday (14) the Minister noted that the CEB will reduce power cuts during the weekend due to the increase in hydro-generation and low energy demand, adding that despite the hope of rain being continuous to the catchment areas of the country, the CEB will manage the water resources available for future power generation.
MIAP
Landslide red notices issued to several districts!
Red notices of early warning of landslides have been issued to several district of the country from 04 pm yesterday (14) to 04 pm today (15), announced the National Building Research Organisation.
Accordingly, red notices have been issued with evacuation alerts to Bulathsinhala, Palindanuwara, Ingiriya and Walallawita of the Kalutara District, Ambagamuwa of the Nuwara Eliya District and Kalawana and Eheliyagoda of the Ratnapura District.
Meanwhile, level-two notices of early warning of landslides have been issued to several districts, i.e. Agalawatta, Matugama, Millaniya, Bandaragama, Horana and Dodangoda of the Kalutara District, Ruwanwella, Warakapola and Dehiowita of the Kegalle District, and Kuruwita, Pelmadulla, Ayagama, Kiriella, Nivithigala, Elapatha and Ratnapura of the Ratnapura District.
People living in Padukka and Seetawaka of the Colombo District, Baddegama of the Galle District, Madurawala, Panadura, Beruwala and Kalutara of the Kalutara District, and Yatiyanthota, Deraniyagala, Mawanella and Bulathkohupitiya of the Kegalle District have also been warned to stay vigilant about the occurrences of landslides.
MIAP
Government grapples to save US$10 billion SL economy contraction
The Government is grappling to save the country’s economy from a possible US$10 billion contraction amidst an impending recessionary period, according to econometric models and provisional data of the Finance Ministry.
Due to rising inflation and lower growth, the Sri Lankan economy is approaching stagflation. Growth expectations for the country have nosedived after the sovereign default with the economy projected to decline by -7.8 per cent in 2022 and -3.7 per cent in 2023.
The International Monetary Fund (IMF) this week forecasted a lower contraction of the Sri Lankan economy than the World Bank.
In its World Economic Outlook (WEO) released this week IMF estimated Lankan economy to contract by 8.7% this year and by 3% next year. However, the World Bank in its forecast released last week estimated a contraction of 9.2% this year and 4.2% in 2023.
The rising prices have compelled the Central Bank to increase the interest rates to face the country’s impending recession with 85 per cent probability, official sources revealed.
The World Bank estimated that over 500,000 people in Sri Lanka had fallen below the poverty line. The country was experiencing food, medicine and fuel shortages as well as daily blackouts and an economy in freefall, a senior Finance Ministry official divulged.
The Government’s move to increase taxes would intensify the rate of economic shrinking and places the whole economic system and other connected financial institutions including banks at a great risk, Head of the Department of Business Studies at the University of Sri Jayewardenepura Prof. Janak Kumarasinghe warned.
The shock caused by the increasing of interest rates up to over 25 per cent and taxes would exert an impact on business enterprises big or small as well as MSMES depriving them of obtaining loans from banks and financial institutions to tackle their liquidity issues, he pointed out.
While a fiscal stimulus package is not possible at present, the government has to meet the needs of the most vulnerable groups in providing emergency subsidies, as rising inflation and job losses have led to lower standards of living, State Minister of Finance Ranjith Siyambalapitiya disclosed.
Due to financial constraints, Sri Lanka will have to look for further bilateral and multilateral aid in securing funding for short-term, targeted “in-kind” transfers such as food stamps for the poorest of the poor.
It is also important to look at bridge financing arrangements to import essential commodities like fuel so that supply shortages reduce. This should help in keeping productivity intact and inflationary pressure in check, he added.
As of August 31, 2022, the total income of the country was recorded as Rs. 1.23 trillion, while the total expenditure of the country was Rs. 3.54 trillion, the minister said, adding that government revenue this year should reach Rs.2.47 trillion.
He also stressed that the relevant austerity procedures should not cause any additional pressure on the low-income families of the country.
According to the draft Appropriation Bill, the estimated total expenditure is Rs.7.92 trillion in the budget 2023 to be presented in Parliament under the theme of ‘making a transformative change via minimum inputs’ in line with the 2023-2025 medium-term fiscal policy framework
Water supply cut for 12 hrs in many places of Colombo
The water supply will be cut off for 12 hours in a number of places in Colombo, announced the National Water Supply and Drainage Board (NWSDB).
Accordingly, the water supply will be cut in Colombo 02 – 10 areas for 12 hours starting from 10 pm tonight (15).
The move is due to a repair at the General Colombo Water and Wastewater Management System, according to the NWSDB.
MIAP
Heavy showers above 100mm expected!
The low-level atmospheric disturbance still persists in the vicinity of the island and therefore, the cloudy sky is expected in most parts of the island, the Department of Meteorology said in a statement
Showers or thundershowers will occur at times in Western, Sabaragamuwa, Central and North-Western provinces and in Galle and Matara districts.
Heavy showers above 100 mm can be expected at some places in Western, Sabaragamuwa, and Centralprovinces and in Galle and Matara districts.
Showers or thundershowers will occur elsewhere over the Island during the afternoon or night. Fairly heavy showers above 75 mm can be expected at some places.
General public is kindly requested to take adequate precautions to minimize damages caused by temporary localized strong winds and lightning during thundershowers.
Marine Weather
| Condition of Rain: |
| Showers or thundershowers will occur at times in the sea areas off the coast extending from Puttalam to Matara via Colombo. Showers or thundershowers may occur at several places in the other sea areas around the island during the afternoon or night. |
| Winds: |
| Winds will be south-westerly and wind speed will be (25-35) kmph. Wind speed may increase up to (45-50) kmph at timesin the sea areas off the coast extending from Galle to Pottuvil via Matara and Hambantota. |
| State of Sea: |
| The sea areas off the coast extending from Galle to Pottuvil via Matara and Hambantota will be fairly rough at times. Temporarily strong gusty winds and very rough seas can be expected during thundershowers. |
President emphasises importance of ensuring food security in SL by cultivating all arable lands
President Ranil Wickremesinghe emphasised the importance of ensuring food security in the country by cultivating all arable agricultural lands.
These remarks were made by the President participating in a discussion held at the Eastern Province Governor’s office yesterday afternoon (14), with the farmers of Trincomalee District regarding the land issues faced by them.
During the meeting, it was discussed in detail regarding the handing over of lands to the farmers in the area, which were traditionally cultivated by them and compelled to abandon due to the war.
Emphasising the need to solve the problems of the farmers immediately, the President explained the need of preparing for the possible food crisis in 2023 by making the upcoming Yala and Maha seasons a success.
Also, the progress of implementation of the programme on food security and nutrition introduced recently under the direction of President Ranil Wickremesinghe in Trincomalee district was also reviewed.
Minister Nimal Siripala de Silva, State Minister Dilum Amunugama, Presidential Senior Adviser on National Security and Chief of Staff to the President Sagala Ratnayake, Secretary to the President Saman Ekanayake, Eastern Province Governor Mrs. Anuradha Yahampath and Trincomalee District Secretary, Provincial Chief Secretary, Governor’s Secretary and other government officials and heads of security forces of the province participated in this discussion.
PMD
Sri Lanka Original Narrative Summary: 15/10
- IMF states Sri Lanka will record the lowest growth rate among 30 Asian ‘Emerging Markets and Developing Economies’ in 2022: forecasts contraction by 8.7% in 2022: contraction of 3% in 2023: no forecast from 2024 to 2026: forecasts growth of 3.1% in 2027.
- IMF Chief Kristalina Georgieva says the IMF wants equal treatment to all creditors: says the Agency is also pressing for an effective debt resolution mechanism: seeks ways to expand donor coordination to middle-income countries like Sri Lanka.
- “Paris Club” reaches out to China and India to coordinate Sri Lanka’s debt talks: but, say they have still not received a reply from either country.
- UNP Chairman & MP Vajira Abeywardene says elections will be held only after national policy framework to stabilize the nation is formulated: rules out an election soon: also says it is essential to reduce number of local government members to 4000 from 8000, and abolish the preferential voting system.
- President’s Chief-of-Staff Sagala Ratnayake says discussions with regards the insurance claim for MV X-Press Pearl disaster amounting to millions of dollars have been successful.
- Specialist doctor complains to CID that Thilini Priyamali, who has allegedly misappropriated large sums of money, had “taken” Rs.750 mn from him: another multi millionaire woman also complains that Priyamali “took” Rs.45 mn from her.
- Central Bank T-Bond borrowings interest rates rise further to astronomical heights: 3-year Bonds @ 31.93% : 7 year Bonds @ 30.85% : analysts say this week’s auction alone cost the government an additional Rs.22.5 bn, when compared with rates prevailing at end-March 22.
- Bangladesh Bank Governor Abdur Rouf Talukder meets CB Governor Nandalal Weerasinghe in Washington: says Bangladesh is hoping Sri Lanka will repay USD 200 mn owed to Bangladesh by March 2023.
- Department for Registration of Persons increases fees for issuing National Identity Cards: first time NIC Rs. 200: duplicate copies Rs.1,000.
- State Finance Minister Ranjith Siyambalapitiya warns legal action against people who come from abroad wearing gold jewellery exceeding limits: says country loses about USD 30 mn monthly due to smuggling of gold.
Maxim launches first solo exhibition in a decade, at Miart Gallery, London, during Frieze Week
Fresh from sellout UK Tour with The Prodigy, the artist and musician held a VIP preview to his show ‘Infinite Drama’ exhibiting paintings, sculptures and a wall-size NFT Fresh from a sell-out UK tour, talented fine artist, musician and Prodigy frontman Maxim launched a retrospective of his art last night at Miart Gallery in Mayfair. The exhibition titled ‘Infinite Drama’ will run from 14th October to 7th November, during Frieze Week in London, and will take over two floors of Miart Gallery London, formerly a bank in Mayfair. WHO: Dynamo, Louis Starkey, Leo Crabtree, Robbie Furze, Dan Pearce, Robi Walters, Dan Kapp, Lady Victoria Hervey, Philip Sallon, Azzi Glasser, Andy Cole, Lloyd De Boltz, Cordelia Plunkett, Joshua Scacheri, Flora Fairburn, Stuart Watts, Jan YoungHusband, John Fairs, Mercy Cutler, Peter Ogunsalu, Basia Briggs, Tatum & Rocky Mazzilli, Tiger Savage WHAT: Cocktails by Beaufort Spirits, tunes spun by T-Rex, “ballerina in balaclava” dance performance by Helga Paris-Morales Getty images here Wide edit of pics from the night(photo credit Rahul Singh – Prodigy photographer) Installation pics here(photo credit IG @jutiarphoto / www.jutiarphotography.com) Maxim artworks here |
Sri Lanka private sector engages on measures to boost exports
Involvement of the public and private sector in the development of the country’s economy has been further strengthened to boost exports .
It is not possible to achieve any sector development by focusing interventions solely on the private or public sector. In fact, many of the challenges faced by the private sector can be overcome only in partnership with the public sector, official sources said.
Foreign Affairs Minister Ali Sabry recently met with private sector to discuss and to expound the opportunities and potential for exporters as well as the challenges that they confront in exporting goods and services of Sri Lanka, amongst others.
Foreign Secretary Ambassador Aruni Wijewardane and other senior officials participated in the discussion at the meeting with Minister Sabry.
Presidents, Secretaries General, senior officials and business leaders representing a large number of export oriented organisations and chambers of commerce attended the meeting.
This meeting with the private sector corporates and chambers was hosted by the Ministry of Foreign Affairs in order to obtain views, ideas and propositions on the most efficacious courses of action that the Ministry could assist and facilitate the business community to develop their business endeavors and boost exports.
Addressing the gathering, the Foreign Affairs Minister stated that the Ministry is committed to cooperate with the private sector, chambers and to support their business endeavors, thus accruing much needed economic advancement and provide assistance to the export sector of the country.
He assured that all Missions which are under the purview of the Ministry, would assist and facilitate the private and corporate sector in realizing their economic and trade objectives and continue to engage professionally with the private sector in connecting them to openings overseas.
Participating organisations and chambers who expressed their views added that the successful conclusion of free trade agreements (FTAs) with key countries should be considered as a priority of the Foreign Ministry at this juncture in order to aggrandize and boost exports.
They also expressed that the Government should adopt a well-structured mechanism to address issues arising from negative media coverage, thus enhancing the image and profile of the country.
The meeting was attended by over 20 leading chambers of commerce and export oriented organisations including the Ceylon Chamber of Commerce, National Chamber of Commerce, Federation of Chamber of Commerce and Industry, Sri Lanka Exporter’s Association, Tea Trader’s Association, Sri Lanka Apparel Exports Association and Joint Apparel Association Forum, amongst others.