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‘Flexible exchange rate’ negates vehicle import relaxation

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3 years ago

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ECONOMYNEXT –Sri Lanka cannot relax an import ban on vehicles, State Minister of Finance Ranjith Siyambalapitiya said, after the rupee fell steeply from around 191 to 220 level due to the operation of an inconsistent peg with one sided buying.

The flexible exchange rate, concocted by Western mercantilists and peddled to countries without a doctrinal foundation in sound money, which is neither a clean float nor hard peg, critics have said.Under IMF programs in particular, central banks which had busted up reserves by mis-targeting rates are encouraged to buy dollars (creating new money) but not to sell.

As a result, there is no mechanism to match timing differences between inflows and domestic credit, other than the net open position of banks.Third world monetarily unstable central banks also limit NOPs.In this instance the rupee was appreciating steeply in the days before, amid generally good monetary policy by the central bank in the past two months, which discourages plus positions.

If the central bank does not sell back some of the dollars it bought, liquidity is not tightened; there could be a short-term mismatch, or an exchange policy error. In May the central bank had bought 662.5 million US dollars.Under the flexible exchange rate, interventions are delayed, triggering a sudden shift from a peg to a floating regime until the market is in full panic mode with importers scrambling to cover, which is defined as ‘excessive volatility’.

There was a 70 to 80 million US dollar oil bill and the central bank had bought dollars, Siyambalapitiya said.As the rupee weakened other parties had also bought dollars, fearing a further weakening.  This is normal, he claimed.

“If an allocation for oil for 70-80 million dollars created affected the value of the rupee in this manner, items like vehicles, which require more dollars, have to be considered very carefully,” Siyambalapitya said in the statement.

“Therefore, we cannot give permission to import cars now.”

The central bank eventually intervened in the market and several banks gave the dollars to the bank concerned to cover the import bill.Critics say the ad hoc flexible exchange rate, coupled with flexible inflation targeting is perhaps one of the deadliest monetary regimes ever devised.

Under the regime, interest rates are cut as soon as inflation comes down from the previous crises.Inflation nears zero about 12 to 18 months after rates are hiked to correct reserve losses, just as domestic credit starts to pick up.

Analysts have warned that an IMF, net international reserve target (requiring pegging and exchange policy) and a monetary policy consultation clause (which require floating and monetary policy only) are in fundamental conflict.

When rates are cut, and if they are enforced with overnight or term reverse repo injections, the currency slides again, and monetary policy errors are compensated with depreciation, resulting in public discontent, mass rejection of free markets, a failed reform agenda, and the ouster of (usually) reformist leaders.

While short term exchange policy errors can be corrected with interventions, monetary policy errors cannot be corrected by interventions which are sterilized with new money to maintain the fixed policy rate, analysts say.In the case of a country that restructured debt, the money and exchange policy conflicts may lead to a second default.

A ‘flexible exchange rate episode in March 2020 led to a loss of market access, earlier they have led to downgrades.In order to continue mis-targeting rates and avoid correcting them, economic bureaucrats persuade politicians to impose exchange and import controls, analysts say. The current Import and Export Control Law was brought in 1969 in the wake of two back to back IMF programs.


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Indonesian Navy Sailing Ship KRI BIMA SUCI – 945 concludes official goodwill visit to Sri Lanka

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10 hours ago

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2026/04/19

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The Indonesian Navy Sailing Ship KRI BIMA SUCI – 945 departed the island on 18 Apr 2026, marking the successful completion of her official goodwill visit.

The ship was accorded a formal farewell by the Sri Lanka Navy in accordance with naval traditions at the Port of Colombo.

The visit also served as a valuable educational platform, as officer under-trainees and other personnel of the Sri Lanka Navy had the opportunity to conduct an observational
tour of the sailing vessel. This exchange of knowledge was complemented by a series of events designed to foster professional and social bonds.

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Heat Index at Caution Level in the Northern, North-central, North-western, Western, Sabaragamuwa, Eastern and Southern provinces and in Monaragala district

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16 hours ago

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2026/04/19

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Warm Weather Advisory
Issued by the Natural Hazards Early Warning Centre
Issued at 3.30 p.m. on 18 April 2026, valid for 19 April 2026

The Heat index, the temperature felt on human body is likely to increase up to ‘Caution level’ at some places in the Northern, North-central, North-western, Western, Sabaragamuwa, Eastern
and Southern provinces and in Monaragala district.

The Heat Index Forecast is calculated by using relative humidity and maximum temperature and this is the condition that is felt on your body. This is not the forecast of maximum temperature. It is generated by the Department of Meteorology for the next day period and prepared by using global numerical weather prediction model data.


Effect of the heat index on human body is mentioned in the above table and it is prepared on the advice of the Ministry of Health and Indigenous Medical Services.

ACTION REQUIRED
Job sites: Stay hydrated and takes breaks in the shade as often as possible.
Indoors: Check up on the elderly and the sick.
Vehicles: Never leave children unattended.
Outdoors: Limit strenuous outdoor activities, find shade and stay hydrated.
Dress: Wear lightweight and white or light-colored clothing.

Note:
In addition, please refer to advisories issued by the Disaster Preparedness & Response Division, Ministry of Health in this regard as well. For further clarifications please contact 011-7446491.

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‘Agents of the devil’ seeking to block Easter probe, Cardinal warns

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16 hours ago

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2026/04/19

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Warning that “agents of the devil who wish to hide the truth behind a wall of political posturing” were attempting to obstruct investigations into the Easter Sunday terror attacks, the Catholic Church has called for intensified public support and prayer to ensure justice for victims.

In a message issued ahead of the seventh anniversary of the April 21, 2019 bombings, Colombo Archbishop Cardinal Malcolm Ranjith said there were ongoing efforts by various forces to derail credible inquiries into the coordinated attacks that claimed 278 lives and left nearly 500 injured.

The statement noted that many of those killed had been attending Easter Sunday Mass when suicide bombers struck churches, including St. Anthony’s Shrine, Kochchikade, St. Sebastian’s Church, Katuwapitiya, and Zion Church, Batticaloa, causing widespread devastation and long-term suffering among survivors.

Seven years on, the Caridnal said, critical questions remain unanswered, including who masterminded the attacks, their motives, and why places of worship were targeted on Christianity’s most sacred day.

Full text of Cardinal Malcolm Ranjith’s message: On 21st April 2026, the Church in Sri Lanka will be commemorating the 7th Anniversary of the Easter Sunday bomb blasts, which killed 278 of our fellow human beings and brethren in the faith in the most brutal fashion. Most of these people had come to our Churches for Easter Sunday Masses and prayer services. Many families were rendered destitute. Nearly 500 people were injured and some of them carry life long disabilities, suffering from the after effects of these blasts. St. Anthony’s Church Kochchikade and St. Sebastian’s Church Katuwapitiya of the Catholic community and the Zion Church in Batticaloa were, quasi totally destroyed. The economy of the country suffered immensely with untold problems affecting many families, ever since then. However much we try to console the families of these victims, it is something that we humans are unable to achieve as only the Lord can truly console them.

Besides, we still do not know who murdered these people and caused so much of suffering to many others, and why and for what purpose they chose our Churches on a day that was most sacred to us to organize these attacks. After repeated pleas by the Catholic Church, now at last, the incumbent government and the security establishment, seem to be holding a credible inquiry into this episode of mass murder in order to find out who was really behind it.

And there are many forces actively seeking to obstruct these inquiries and divert the direction of the inquiry in an aimless fashion in order to hide the truth behind these attacks. They are nothing but the agents of the devil who wish to hide the truth behind a wall of political posturing. We need to storm Heaven and ask the Lord to strengthen the hands of the investigators to find out what really happened and who was behind this mass murder as well as why it was done to innocent people who had nothing to do with politics.

Hence, I call upon all of you to kindly storm Heaven with your prayers calling upon the Lord to help us find out what really happened that most tragic day. And so, I am declaring Sunday, the 19th of April 2026, as a special day of prayer for this purpose. I shall be most grateful to every one of you, beloved brethren, if you could recite special prayers in all the parishes of the Archdiocese at Sunday Mass on that day and offer prayers at home too for the success of these investigations. The special prayer for truth and justice for the victims of the bomb attacks, already approved by the Catholic Bishops’ Conference, could also be recited. I call upon all our Catholic devotees to join us in this effort.

Let us stand together firmly behind the efforts to find out the truth. Let us not be deceived by attempts of different people to hide the truth or divert attention in all kinds of directions in order to confuse the public.

May the Blessed Mother, our Lady of Lanka, intercede for us in this most important matter.

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