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Lanka busts US$664mn in ‘reserves for imports’ in two months
ECONOMYNEXT – Sri Lanka has spent 664 million US dollars in providing ‘reserves for imports’ in November and December 2021, as the central bank tried to implement a 200 to the US dollar peg while printing money to sterilize the same dollar sales at fixed interest rate of 6.0 percent.
The central bank bought 61.7 million US dollars from forex markets where compulsory surrender rules have been imposed, creating money, and spent 372.35 million US dollars for imports in November.
In December the central bank bought 71.16 million US dollars from banks and spent 424.7 million US dollars to enforce a peg at 200 and provide ‘reserves for imports’.
A pegged central bank which tries to implement a fixed interest rate has to print money to offset such interventions, injecting new rupee reserves to the banking system as dollar sales from reserves sucks out liquidity from the banking system reflecting the transfer of real wealth out of the country.
Such an ‘unsterilized sale’ will reduce the ability of banks to give new credit and shrink reserve money driving up rates and keeping the exchange rate fixed.
However a soft-pegged central bank re-injects the money into the banking system to ‘sterilize’ the intervention, perpetuating the currency crisis by keeping both interest rate and reserve money fixed.
Central bank data showed that 113 billion rupees had been printed in November.
Sri Lanka’s foreign reserves fell in November. In December reserves were boosted with a swap.
In a remarkable development, Mercantilists and some members of the business community last week called on the central bank to continue to sell reserves which will keep the exchange rate at 200 to the US dollar and default on debt.
The call for reserve sales to enforce the peg came after many businessmen had previously said the 200 to the US dollar peg was not realistic or not market determined.
Due to continued liquidity injections at 6.0 percent and earlier at around 5.2 percent by placing price controls on Treasury bill auctions the credibility of the 200 to the US dollar peg has been lost and people are willing to pay as much as 250 rupees to get the printed money out of the country leading to the emergency of parallel markets.
A float will end the ‘reserve sales’ for imports and consequently also end the need to sterilize the intervention, restore the interbank spot market and balance total inflows with outflows.
As long as reserve sales continue, the liquidity injections also continue (the central bank sells both dollars and rupees to the banking system simultaneously) preventing the credit system from adjusting to the reserve outflow.
However a float also leads to a fall of the currency to a lower level.
Analysts have said that the Mercantilist myth involving sterilized interventions were propagated by John Henry Williams an advocate of the the US dollars as ‘key currency’ in a post-World War II monetary system and others like Arthur Bloomfield, who found instances when gold standard central banks supposedly engaged in sterilized interventions and lived to tell the tale.
Such ideas were rejected in East Asian countries like Singapore, which do not have a fixed policy rate.
“..[W]e wanted to indicated to academics, both local and foreign; that what is fashionable in the West is not necessarily good for Singapore,” Singapore’s economic architect and former Finance Minister Goh Keng Swee said in a landmark speech.
“A perceptive mind is needed to distinguish the peripheral form the fundamental, transient fads from permanent values.”
The entire ‘Sterling Area’ of which Sri Lanka was a member until a US money doctor set up a sterilizing Latin America style central bank was based on this ‘permanent value’.
The US Fed in 1971 under then Chairman Arthur Burns broke a 300 year old gold standard, sterilizing interventions in 1971, after earlier printing money to target an output gap.
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Construction of Accident and Emergency unit at Mannar District General Hospital begins under President’s patronage
Construction work on the Accident and Emergency Unit at the Mannar District General Hospital commenced this morning (16) under the patronage of President Anura Kumara Dissanayake.
The Accident and Emergency Unit, which is being constructed at a cost of Rs. 600 million with a grant from the Government of India, will be equipped with all modern facilities and will further expand healthcare services for the people of Mannar. Construction is scheduled to be completed in the first quarter of 2028.
Upon completion of the project, the people of Mannar will be able to receive emergency trauma care and other specialised healthcare services without having to travel to Colombo or other major cities. At the same time, the Government has taken steps to provide the Mannar District General Hospital with the medical equipment and staff required to support these services.
President Anura Kumara Dissanayake, who attended the commencement of construction work on the Accident and Emergency Unit, also engaged in a cordial conversation with members of the hospital staff.
Addressing the ceremony held thereafter, Minister of Health and Mass Media Dr. Nalinda Jayatissa said that as the Mannar area, which is expected to make an important contribution to the national economy, develops, this project will help ensure quality healthcare services for its people. The Minister further emphasised that, in creating a “A Thriving Nation – A Beautiful Life”, the Government is committed to ensuring healthy and disease-free lives for all 21.7 million citizens of the country.
Further remarks by Minister of Health and Mass Media Dr. Nalinda Jayatissa
“The Mannar District is an area that is expected to make an important contribution to our national economy. A large number of local and foreign tourists will visit this area both now and in the future.
With the development of transport facilities, Mannar will experience further economic growth. In such a context, upgrading the services of the Mannar hospital will be important in ensuring quality healthcare services for the people of this area as well as those who visit the region.
Accordingly, construction of this Accident and Emergency Unit will be completed and the facility will be made available to the public in the first quarter of 2028. In addition, staff quarters for doctors at the Mannar District General Hospital are being constructed in a four-storey building at a cost of Rs. 243 million. These construction activities are also expected to be completed within one and a half years. Construction of the new Paediatric Unit, being built at a cost of Rs. 230 million, is also expected to commence within this year.
Similarly, the CT scanner that you have been continuously requesting will be provided to you by around February next year. It is worth approximately Rs. 250 million. While these building facilities are being developed, we will also provide the staff required by the hospital. You have also received intern medical officers for the first time in the history of this hospital. Several more intern medical officers will be assigned to you this October. At the same time, steps are currently being taken to address the shortage of specialist medical officers.
On 31 October, we will recruit 2,600 new nurses, and a portion of them will be assigned to this hospital. Personnel required for the allied health professions are also currently undergoing training. Once their training is completed, the services of several of them will be made available to this hospital. In addition, we will recruit 1,100 Public Health Midwives, a portion of whom will also be assigned to this area.
This Government is taking numerous measures to provide people with healthy lives. Through these initiatives, we hope to improve the health and quality of life of the people in this area.
More than Rs. 600 billion has been allocated to the Ministry of Health over the past two years, and the President continuously monitors all its projects. Going beyond that, I am deeply grateful to the President for joining us today.
We have received the support of the Government of India for this project. I extend my special appreciation to the Government of India, including the Prime Minister, and its people, as well as to the High Commissioner of India and his staff, who have been committed to coordinating these activities and ensuring the success of this project.
Among district hospitals, the Mannar hospital is one with very limited facilities. Despite these shortcomings, I appreciate the dedication of all members of the staff, including the doctors, who remain committed to providing the best possible service to the people. I also consider the President’s visit to be a recognition of your service.
Two years ago, on 21 September 2024, the people of this country gave a clear mandate to create a “A Thriving Nation – A Beautiful Life”. That mandate was further strengthened in November 2024. Under the mandate to create a “A Thriving Nation – A Beautiful Life”, we have been entrusted with the responsibility of ensuring healthy and disease-free lives for all citizens of this country.
Your area of residence, profession, wealth or ethnicity is of no relevance to us in this regard. The Government’s objective is to create a beautiful life through healthy and disease-free living for all 21.7 million citizens of Sri Lanka.”
High Commissioner of India Santosh Jha:
“The agreements for the emergency unit in Mannar and the medical ward complex in Mullaitivu were signed under President Dissanayake’s leadership. I am happy to see these commitments transitioning smoothly into swift implementation.
His Excellency the Prime Minister of India, Shri Narendra Modi, has said that the development assistance extended by India to Sri Lanka comes with a deep sense of responsibility, a duty that one naturally feels for one’s family member.
We remain firmly committed to working closely with the Government of Sri Lanka and the people of Sri Lanka for the well-being and prosperity of all communities across the island. As neighboring countries and close partners, we will continue to walk together this shared path toward lasting progress and development of our peoples.”
Secretary to the Ministry of Health and Mass Media Dr. Anil Jasinghe
“For several decades, injuries and accidents have been the leading cause of hospital admissions in Sri Lanka. As Mannar is geographically somewhat isolated, it is extremely important for the district to have access to quality, free healthcare services without delay.
The assignment of intern medical officers to this hospital commenced this year. Arrangements are also currently underway to purchase a CT scanner for the Mannar District General Hospital. The hospital is expected to receive improved radiology facilities by the end of this year or the beginning of next year.
I must say that, during my 36 years in public service, last year was the only period during which I did not face any financial difficulties in carrying out my duties. The prudent macroeconomic management of the current Government, including President Anura Kumara Dissanayake, has created the fiscal space required to develop the country’s health services.”
Mannar District Bishop Rt. Rev. Gnanapragasam Anthonipillai, Northern Province Governor Nagalingam Vethanayahan, Members of Parliament representing the Mannar District, Secretary to the Ministry of Defence, Air Vice Marshal Sampath Thuyacontha (Retd), Chiefs of the Defence Services, officials of the Ministry of Health, officials of the High Commission of India in Sri Lanka, Consul General of India in Jaffna Sai Murali S. and officials of the Indian Consulate in Jaffna, among others, attended the occasion.
[President’s Media Division]
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Special Cabinet Subcommittee and Officials’ Committee appointed to address El Niño Climate Impact meet
The Special Cabinet Subcommittee and Officials’ Committee appointed to take necessary measures to address the impact of the El Niño climate phenomenon met for the fifth time at the Presidential Secretariat on Monday (14) afternoon , under the chairmanship of Minister of Environment Dr Dhammika Patabendi.
As the El Niño climate impact is expected to transition from the current dry conditions to wetter weather over the next two months, the committees held an extensive discussion on measures to address the anticipated change in weather conditions.
The committees decided to raise public awareness on potential disasters, including floods and landslides that could occur due to increased rainfall. Attention was also given to conducting disaster preparedness drills to familiarise the public with the appropriate measures to be taken in the event of such emergencies.
It was instructed that initial preparedness drills be conducted in the districts of Kandy, Badulla, Matale and Nuwara Eliya, which are considered vulnerable to landslides and that the necessary measures be taken without delay.
The meeting also decided to implement a public awareness programme through electronic and print media. Discussions were also held on the importance of preparing the public in advance by establishing operational centres at Divisional Secretariat level.
In addition, the committees reviewed the progress of relief measures already being implemented for people affected by the prevailing El Niño conditions, as well as the progress of the planned measures ahead.
Minister of Housing, Construction and Water Supply Dr Susil Ranasinghe, Minister of Plantation and Community Infrastructure Samantha Vidyaratne, Secretary/Convener of the Special Cabinet Subcommittee, Chairman of the Officials’ Committee and Chief of Staff to the President Prabath Chandrakeerthi, Secretary to the Ministry of Agriculture, Livestock, Land and Irrigation D. P. Wickramasinghe, Director General of the Department of Meteorology A. L. K. Wijemanne, Director General of the Disaster Management Centre, Major General Sampath Kotuwegoda (retired), Director General of the National Building Research Organisation Dr Gamini Jayatissa, General Manager of the National Water Supply and Drainage Board Engineer T. Bharatheedasan and officials from the relevant institutions were also present at the meeting.
[President’s Media Division]
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Where is Gnanasara Thera?Police pass buck to court
by Norman Palihawadane
Bodu Bala Sena (BBS) General Secretary Ven. Galagoda Aththe Gnanasara Thera’s whereabouts have remained unknown since the Supreme Court, on Monday, annulled a presidential pardon granted to him in 2019.
Prison officers visited the Thera’s temple in Nawala, Rajagiriya, to take steps to return him to prison to serve the unexpired portion of his six-year sentence. However, monks at the temple had reportedly informed the officials that they were unaware of his whereabouts.
Police spokesman ASP F.U. Wootler said a separate court order was required for the police to trace the Thera, or assist in taking him into prison custody. No such order had been issued so far, he claimed.
Meanwhile, sources close to Gnanasara Thera said he was expected to attend a book launch in Colombo tomorrow (17),
The development follows the Supreme Court declaring the 2019 presidential pardon granted to Gnanasara Thera, by then President Maithripala Sirisena, null and void.
A three-member Supreme Court bench held that the pardon had been granted arbitrarily and violated public trust and principles of natural justice.
Gnanasara Thera had been serving a six-year prison sentence for contempt of court when the then President Sirisena granted him the pardon, in May, 2019. He had served only about nine months of the sentence at the time.
With the pardon annulled, the original sentence remains in force and the Thera is now required to serve the balance of his six-year term.
The Supreme Court ruling has raised questions over the procedure to be followed to return him to prison, with police and prison authorities yet to take custody of him.
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