News
Monetary Board increases interest rates drastically to tackle runaway inflation; highest levels in 21 years
The Monetary Board on Wednesday (06) increased the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points to 14.50 per cent and 15.50 per cent, respectively.That had been done to tackle rising domestic inflation, the Central Bank of Sri Lanka (CBSL) said, explaining the reasons for the Monetary Board decision, adding that these rates are at the highest in 21 years.
he Bank said it had noted a higher-than-expected increase of headline inflation recently.The high inflation is expected to remain in the period ahead, thus the Monetary Board was of the view that a further monetary policy tightening would be necessary to contain any build-up of adverse inflation expectations.The CBSL said that the policy adjustments would help Sri Lanka stabilise its inflation to between 4 and 6 percent in the medium term.
The Bank said that they considered the impact of tighter monetary conditions on overall economic activity, including the micro, small, and medium scale businesses, and the financial sector performance, among others, against far reaching adverse consequences of any escalation of price pressures across all sectors of the economy in the near term.
The Bank raised rates by 700 basis points in April but made no further moves at its previous policy meeting in May.
Excerpts of the CBSL statement: “Central banks have become increasingly hawkish across the globe Central banks from around the world continue to tighten their monetary policies to counter sustained inflationary pressures, exacerbated by high petroleum and food prices arising from geopolitical tensions, and destabilising inflation expectations.
“Nevertheless, the outlook for the global economy has deteriorated recently amidst the global spread of inflation, substantial interest rate hikes, and escalation of geopolitical tensions. The unfolding of these events could have large negative spillover effects on emerging markets and developing economies in the period ahead.
“Domestic economic activity is expected to record a notable downturn in the near term As per the GDP estimates published by the Department of Census and Statistics (DCS), the Sri Lankan economy is estimated to have recorded a contraction of 1.6 per cent, year-on-year, in the first quarter of 2022. Domestic economic activity during the second quarter of 2022 is expected to have been severely affected by the continued supply side disruptions, primarily due to the shortages of power and energy.
“Amidst adverse developments on the domestic front, geopolitical tensions in Eastern Europe that have affected global commodity markets and supply chains could pose further risks to domestic economic growth in the near term.
“The trade deficit narrowed significantly in May 2022 over the corresponding period of last year, largely supported by the policy measures that were aimed at discouraging non urgent imports, alongside the constrained foreign exchange liquidity in the domestic foreign exchange market.
“Foreign exchange inflows in the form of workers’ remittances and tourism earnings remain lower than expected, impacted by unfavourable conditions both domestically and globally. The exchange rate, which underwent a severe bout of depreciation in March 2022, remains broadly stable with the introduction of market guidance from mid-May 2022.
“Gross official reserves, as at end June 2022, are estimated at US dollars 1.9 billion, including the swap facility from the People’s Bank of China equivalent to around US dollars 1.5 billion, which is subject to conditionalities on usability. Significant progress has been made with respect to negotiations with the International Monetary Fund (IMF) towards reaching a staff-level agreement on the Extended Fund Facility (EFF) arrangement in the near term, while negotiations with several bilateral and multilateral partners are ongoing to secure bridging financing. Moreover, expeditious arrangements are being made with regard to the external debt restructuring process.
“Ensuring external sector stability and overall macroeconomic stability requires commitment from all stakeholders of the economy, given the unprecedented balance of payments pressures and severe stresses experienced at present across all sectors of the economy.
The measures introduced by the Central Bank to ensure domestic monetary stability and external stability of the Sri Lanka rupee, need to be supported by coherent and consistent actions on the part of the Government, state-owned enterprises, private sector corporates, and banking and non-banking financial institutions, among others. Such co-ordinated response to crisis management would ensure public support and eventually help bring about normalcy to economic activity in the period ahead.”
News
Fuel crunch looms
Govt. tells fuel distributors to maintain stocks to ensure uninterrupted supplies
by Saman Indrajith and Norman Palihawadane
The government had instructed private fuel distributors to maintain minimum stocks and ensure uninterrupted supplies to the market, Energy Minister Anura Karunathilaka told Parliament yesterday (06).
Karunathilaka said the Ministry of Energy Secretary had notified the relevant companies of the requirement, following a reduction in supplies by some private distributors, amid higher international fuel prices.
The Minister said private companies had informed the government that they were facing losses because international prices had risen while fuel was being sold, locally, at prevailing prices. As a result, some companies had reduced the volumes released to the market.
The reduced supplies had increased the burden on the Ceylon Petroleum Corporation (CPC), whose share of the diesel market had risen from about 54% to 82%, the Minister said.
“The CPC currently holds an 82% share of the market,” he said, adding that it had increased its supplies, compared with February, to compensate for the reduction by private distributors.
Karunathilaka said the government could not, under the existing agreements with private companies, specify the quantities they should supply to individual filling stations. However, it could require them to maintain minimum stocks in the country.
The Minister said the Energy Ministry had already instructed companies that had failed to maintain the required stocks to take steps to prevent supply disruptions.
The Minister attributed the queues reported at some filling stations to reduced supplies from private distributors, as well as normal variations in fuel distribution. He also said demand for CPC fuel had increased because private companies generally did not provide fuel to dealers on credit, while the CPC offered a three-day credit facility.
“We expect that, as the Ceylon Petroleum Corporation takes on this additional burden, the problem will ease to some extent by Wednesday or Thursday,” Karunathilaka said.
He said instructions had also been issued to increase supplies to CPC filling stations. A special discussion on the issue is scheduled for today (07), with officials of the Energy Ministry and CPC expected to participate,
along with President Anura Kumara Dissanayake.
Meanwhile, Petroleum Dealers’ Association officials have called for an early solution to the supply issue. Association Chairman D.V. Shantha Silva said queues had been reported at many filling stations, mainly those operated by private distributors.
He said the situation was not due to an overall shortage of fuel, but was linked to reduced orders by Lanka IOC, Sinopec and R.M. Parks amid concerns over losses incurred on fuel sales.
The Ceylon Petroleum Private Tanker Owners Association has urged motorists to refrain from panic buying, saying there was no nationwide disruption to fuel supplies.
The government earlier increased fuel prices and introduced a per-litre diesel subsidy following concerns raised by distributors over rising international prices.
News
Gnansara Thera to be assigned to prison printing section: Officials
by Norman Palihawadane
Bodu Bala Sena General Secretary Ven. Galagodaatte Gnanasara Thera, who has been ordered by the court to serve the remainder of his prison sentence, is to be assigned to the prison ‘printing work party’, prison officials said yesterday.
The monk was produced before the Colombo High Court yesterday by prison officials in connection with a warrant issued by the court.
He appeared before the court in civilian attire.
Prison sources said arrangements were being finalised for his detention and that he would subsequently be assigned to the printing work party.
The Thera initially objected when prison officials instructed him to change from his robes into the attire worn by convicted prisoners.
He later agreed to wear the prescribed prison clothes, sources said.
The Supreme Court, in September, annulled the presidential pardon granted to Gnanasara Thera in 2019. He had been serving a six-year prison sentence imposed following his conviction for contempt of court but had served only about nine months when then President Maithripala Sirisena granted him a presidential pardon in May 2019.
Following the Supreme Court ruling, the Thera was required to serve the remainder of his sentence. He was subsequently reported missing, prompting the Court of Appeal to issue an open warrant for his arrest.
The Court of Appeal on Monday ordered the authorities to enforce the remainder of his prison sentence.
News
Speaker rejects Ajith Perera’s privilege complaint
Speaker Dr. Jagath Wickramaratne yesterday ruled that a privilege complaint submitted by SJB Kalutara District MP Ajith P. Perera did not constitute a prima facie breach of parliamentary privilege.
The ruling was made in response to a notice of privilege submitted by Perera on October 02.
Perera alleged that his parliamentary privileges had been breached over the failure to take formal action or reach a final decision on a written request submitted on August 03 by 18 Opposition MPs seeking the appointment of a Special Select Committee to investigate delays in the judicial system and prison overcrowding.
He had also requested that the matter be referred to the Committee on Ethics and Privileges for investigation and recommendations.
In his ruling, Speaker Wickramaratne said the Speaker, as the Presiding Authority and guardian of the powers, rights and privileges of Parliament, could not be subjected to a privilege complaint or disciplinary inquiry by a committee subordinate to the Chair in respect of actions taken in an official capacity.
He said that, under the Standing Orders, the Speaker was required to independently determine whether a prima facie case of breach of privilege existed.
Referring a complaint against the Speaker to a committee functioning under the Speaker’s authority would, therefore, create a procedural contradiction, he said.
Accordingly, the Speaker ruled that Perera’s notice did not constitute a prima facie breach of parliamentary privilege and disallowed the request to refer the matter to the Committee on Ethics and Privileges.
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