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IMF to begin talks with Lanka

Published

4 years ago

2022/03/20

ECONOMYNEXT – The International Monetary Fund intends to begin discussions with Sri Lanka on a program to support the country, spokesman Gerry Rice said as the island is facing steep currency depreciation and inflation after an unusual bout of money printing to keep interest rates low.

President Gotabaya Rajapaksa said in a national address Wednesday said that he had given the go ahead for an IMF program after meeting senior staff of the lender in Colombo.

“The authorities have also indicated that they are actively considering an IMF-supported program,” IMF spokesman Gerry Rice said.

“We will discuss with the authorities how best we can assist Sri Lanka going forward, including during the Minister of Finance’s visit in Washington in April.”

The IMF has already called for tighter monetary policy to stop liquidity injections which create forex shortages.

The IMF has analyzed Sri Lanka’s economy in a staff report which has been submitted to the board, following annual Article IV consultations. The full report has not been made public, but key conclusions, including that the debt is unsustainable is now known.

The report also warned that the economy could implode unless actions was taken to halt monetary instability, though analysts say the IMF does not make a habit of modelling disaster scenarios.

Rice said the IMF had highlighted “the urgent need of implementing a credible and coherent strategy to restore macroeconomic stability and debt sustainability, while protecting vulnerable groups through strengthened, well-targeted social safety nets.”

With the debt deemed unsustainable, re-structuring or re-profling will also be required.

Sri Lanka for sometime has not had a working exchange rate regime, with a peg having lost credibility and parallel exchange rates emerging due to money printing.

In a program a float of the currency to end dual anchor conflicts (reserves sales for imports and money printing to maintain the policy rate) is a prior action. Though the exchange rate has been allowed to fall, a clean float has not yet been established.

Analysts have said the central bank should to remove a surrender requirement that effectively imposes a strong side convertibility undertaking in the style of a peg and further weakens the rupee.

Further policy rate hikes are also needed to make the float work.

If a float is not established, economic problems that took place at 200 to the US dollar, will continue to take place at a weaker level. The currency can be appreciated if required after domestic credit slows (consumption and investments slows) and sterilizing inflows.

An IMF program typically involves a tight reserve money program to stop inflation and block the validation of domestic prices as the currency weakens.

Tax hikes and spending cuts will reduce the budget deficit and domestic credit, keeping down the corrective interest rate. Sri Lanka’s private citizens are net savers and are incapable of triggering currency pressure.

A foreign reserve target is also given and reserves for imports are generally discouraged (sometimes a so-called disorderly market conditions intervention is allowed which however can undermine the currency unless they are unsterilized).

Debt re-structuring will also reduce the corrective interest rate and the need to immediately deploy more savings for debt repayment and leave space for reasonable growth path.

India is giving a 500 million US dollar credit and a billion dollar credit for food and medicines which can be used to finance the deficit if they are not used for subsidies.

Medicine credits can be used for the health budget directly or cash collected from private sector importers can be used to finance other expenses such as the salary bill, analysts say.

Unemployed graduates had progressively bloated the public sector and have become a key consumer of the productive efforts of society.

Classical economists and analysts have called for reforms to the central bank to outlaw intermediate monetary regimes (flexible exchange rates/soft-pegs) and go for a single anchor regime made up of a fully reserve-backed hard peg or a clean floating regime with a low inflation-driven monetary base and no foreign reserves.

Such a regime will eliminate the need for IMF programs in the future. A hard peg with a low inflating reserve currency in particular will also serve as a hard budget constraint and help social unrest.

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Level III landslide early warnings issued to the Districts of Kandy, Kegalle, Kurunegala and Matale extended

Published

6 hours ago

2025/12/10

Priyan

The landslide early warning center of the National Building Research Organisation [NBRO] has extended the Level III RED landslide early warnings issued to the Districts of Kandy, Kegalle, Kurunegala and Matale until 1600hrs on 11th December 2025.

Accordingly,
The LEVEL III RED landslide warnings issued to the the Divisional Secretaries Divisions and surrounding areas of Kundasale, Pasbage Korale, Medadumbara, Ganga Ihala Korale, Hatharaliyadda, Pathadumbara, Doluwa, Panvila, Gangawata Korale, Ududumbara, Akurana, Yatinuwara, Harispattuwa, Deltota, Thumpane, Poojapitiya, Udapalatha, Udunuwara, Minipe and Pathahewaheta in the Kandy district, Aranayaka, Yatiyanthota, Rambukkana, Bulathkohupitiya and Mawanella in the Kegalle district, Mallawapitiya, Mawathagama and Rideegama in the Kurunegala district, and Rattota, Laggala Pallegama, Ukuwela, Matale, Wilgamuwa, Pallepola, Naula, Yatawatta and Ambanganga Korale in the Matale district have been extended.

LEVEL II AMBER landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Uva Paranagama, Hali_Ela, Meegahakivula, Badulla, Kandeketiya, Bandarawela, Soranathota, Ella, Haputhale, Lunugala, Welimada, Haldummulla and Passara in the Badulla district, Warakapola, Galigamuwa, Kegalle, Dehiowita, Ruwanwella and Deraniyagala in the Kegalle district, Polgahawela and Alawwa in the Kurunegala district, Kothmale East, Walapane, Thalawakele, Nuwara Eliya, Kothmale West, Nildandahinna, Mathurata, Ambagamuwa Korale, Hanguranketha and Norwood in the Nuwara Eliya district. and Kolonna, Godakawela and Kahawaththa in the Ratnapura district.

LEVEL I YELLOW landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Divulapitiya, Attanagalla and Mirigama in the Gampaha district, Narammala in the Kurunegala district, and Kiriella, Eheliyagoda, Balangoda, Kaltota, Openayake, Nivithigala, Imbulpe, Ayagama, Kuruwita, Kalawana, Elapatha, Pelmadulla and Ratnapura in the Ratnapura district.

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“We cannot allow flooding to become a part of the daily lives of the people in the Colombo District” – PM

Published

7 hours ago

2025/12/10

Priyan

Prime Minister Dr. Harini Amarasuriya stated that unauthorized constructions within the Colombo District, nor any form of residential developments that endanger the public carried out under the guise of development agenda will not be allowed.

The Prime Minister made these remarks while addressing the media at the conclusion of the Colombo District Disaster Management Committee meeting held on Tuesday [December 09] at the Colombo District Secretariat.

Addressing further, the Prime Minister stated:

“The Colombo District has become vulnerable to this extent due to the constructions carried out without any proper planning or understanding of regulations, along with personal and politically motivated decisions that have placed both the district and its people at risk.

Compared to the districts that suffered severe loss of life and property due to the recent cyclone, the damage to the Colombo District has been relatively lower. However, special intervention is being carried out together with the relevant institutions to manage the potential future flood risks in the district.

This matter was also given special attention during today’s District Disaster Management Committee meeting. We cannot allow the flooding to become a regular part of the lives of the people in Colombo. All relevant institutions will come together to put forward a common plan for flood control in the district.”

The Prime Minister further stated that discussions are already underway to provide sustainable solutions for the people living in high-risk areas within the Colombo District.

The discussion was attended by the Deputy Minister of Urban Development Eranga Gunasekara, Deputy Minister of Mass Media Kaushalya Ariyaratne, and Colombo District Members of Parliament Aruna Panagoda and Chandana Suriyarachchi.

[Prime Minister’s Media Division]

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Russia gifts 35 tonnes of Humanitarian Aid to Sri Lanka

Published

7 hours ago

2025/12/10

Priyan

The handover of 35 tonnes of Russian Humanitarian Aid to Sri Lanka, recently affected by the cyclone «Ditwah», took place at Katunayake today (10th December)

The shipment was welcomed at the Katunayake airport by Ambassador of Russia Levan Dzhagaryan, Minister of Ports and Civil Aviation Anura Karunathilaka and Deputy Minister of Defence, Major General Aruna Jayasekara (Retd).

Ambassador Levan Dzhagaryan: said “This delivery is a reflection of long-term friendly relations between Russia and Sri Lanka and reaffirms Moscow’s commitment to support countries in a difficult humanitarian situation.”

The supplies brought by the EMERCOM (Russian Ministry of Emergency Situations) aircraft comprised a movable 60 kW electric power station, Pumping equipment for water drainage, Summer tents (10-person capacity) and Food supplies (sugar, vegetable oil, rice)

The total cargo weight is 35 metric tonnes. The aid will be distributed among the most affected regions.