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Private creditor debt restructuring to be completed by March

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Dr. P. K. G. Harischandra

From June to November 2023, the Central Bank had reduced the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by about 6.5 percent, Assistant Governor of the Central Bank of Sri Lanka, Dr. P. K. G. Harischandra said.

That move had been made in response to the successful management of inflation, prompting the Central Bank to ease its previously tight monetary policy.

“Simultaneously, there was a gradual decrease in interest rates; however, this decline occurred at a measured pace. The transmission of policy rate adjustments to the money market is not instantaneous, requiring a certain period for full effect. During the Monetary Policy Board meeting conducted on January 22, 2024, the Central Bank of Sri Lanka opted to maintain the existing policy interest rates. This decision was based on the belief that additional time was needed for the money market to fully incorporate the earlier 6.5 percent reduction in interest rates, thus influencing a more comprehensive adjustment.,” he said.

Harischandra mentioned a decline in both lending rates and interest rates associated with Treasury bills. The Assistant Governor further indicated that forthcoming adjustments would involve a reduction in both lending rates and deposit interest rates.

“In December 2023, the inflation rate stood at approximately four percent. Interest rates for deposits persist in the range of nine to 10 percent, providing depositors with continued value for their savings. With the ongoing economic recovery, there is an opportunity to bolster it by lowering lending rates. This, in turn, would facilitate more accessible borrowing and encourage increased investment. Notably, the fourth quarter of 2023 marked a positive turn, breaking a streak of six consecutive quarters of negative growth, signaling encouraging economic progress.,” he said.

Harischandra emphasized the necessity of reducing lending rates to sustain the current positive economic momentum. He noted that the Central Bank of Sri Lanka aims to keep inflation at approximately five percent, enabling interest rates to range between eight and 10 percent. This strategy aims to provide depositors with the benefit of seeing an appreciation in their funds, while simultaneously offering entrepreneurs the opportunity to borrow at more affordable rates.

Harischandra said in late 2022, inflation was at 70 percent. In January 2024, inflation will be around seven percent because of the hike in the Value Added Tax (VAT). Inflation can happen because of supply-side and demand-side pressures.

“There is no inflationary pressure stemming from demand because the purchasing power of the population remains low. Over the course of 2022 and 2023, the prices of goods experienced a considerable increase of about 70 percent. While the value of the rupee saw a substantial 45 percent decline in 2022, it only appreciated by 12 percent in 2023. Currently, exchange rates are stable, and there is no inflationary pressure arising from that aspect. Additionally, with the price of crude oil staying below 80 dollars per barrel, we are confident that even if inflation reaches seven percent in January, it will likely be a temporary spike,” he said.

The Assistant Governor noted that an inflation rate of approximately five percent is considered typical in emerging markets and is viewed as an indicator of economic well-being. Nevertheless, the growth of purchasing power among the populace will require some time.

He further said, “a considerable number of individuals are opting to leave the country, prompting many companies to increase salaries. This adjustment has become necessary to retain the essential labour force for their operations. However, it’s important to clarify that these salary hikes may not be deemed sufficient.”

Harischandra said they had restructured domestic debt. International debt comes in two categories, i.e., international sovereign bonds and bilateral debt. Significant progress has been made in restructuring bilateral debt..

“Paris Club, China and India have agreed to help us. We now have to deal with the international sovereign bonds. We are working with the IMF and debt advisors. Furthermore, we hope to come to preliminary agreements by the end of this quarter,” he said.



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Judicial vacancies: President keeps country guessing

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President

The NPP government has not taken a final decision regarding filling of the vacancies in the judiciary.

A group of Opposition MPs, led by SJB leader Sajith Premadasa, on 12 June, requested Speaker Dr. Jagath Wickremeratne to take up the issue of judicial vacancies with President Dissanayake. Opposition sources said that there were four vacancies, each in the Court of Appeal and the Supreme Court, and the inordinate delay had adversely affected the judiciary.

Government sources indicated that there was no change in the status quo as regards filling of vacancies. Referring to the government proposal to extend the retirement age of judges, authoritative sources said that no final decision had been taken yet.

SJB lawmaker Dayasiri Jayasekera told The Island that they would raise the issue in Parliament this week.

He said that the deliberate delay in making appointments to superior courts and the move to extend the retirement age couldn’t be taken separately.

The MP noted that the Bar Association of Sri Lanka, the Lawyers’ Collective, the Colombo High Court Lawyers’ Association, Colombo Magistrate’s Court Lawyers’ Association and the Bar Association of Badulla had opposed the government move.

There hadn’t been any public statements in support of the government move, MP Jayasekera said, urging the government to end uncertainty in the judiciary.

by Shamindra Ferdinando

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Sajith calls on Opposition parties to rally around SJB

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Sajith

SJB leader Sajith Premadasa has invited the UNP and other political parties to join his party. Premadasa, who is also the leader of the Opposition, has emphasised that the UNP and the SJB could reach a consensus on policies but his party wouldn’t, under any circumstances, accept whatever formula to share positions. Premadasa said so, speaking to the media over the weekend, after meeting the Mahanayaka Thera of the Malwatta Chapter of the Siyam Nikaya Most Venerable Thibbatuwawe Sri Siddhartha Sumangala Thera.

A statement issued by the Opposition Leader’s Office quoted MP Premadasa as having extended an invitation to all political parties to give up extremist policies and join the SJB.

The SJB leader alleged that the NPP government feared facing elections and that was the reason for the inordinate delay in holding Provincial Council polls. PC polls were last held in 2012, 2013 and 2014, on a staggered basis. Premadasa said that if PC polls were held his party would definitely win the majority of PCs.Premadasa also urged the government to reduce electricity tariffs and fuel prices.

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Ex-EC Chief slams govt. over PC polls delay

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Deshapriya

Former Chairman of the Election Commission, Mahinda Deshapriya, on Saturday, strongly criticised the continued postponement of local government elections, declaring that every day without elections constitutes a violation of both the Constitution and democratic principles.

Speaking during an interview with journalist Bhanuka Rajapaksa, on Hiru TV, on Saturday, Deshapriya described the current administration of local government institutions by unelected officials as fundamentally undemocratic and contrary to the spirit of representative governance.

Deshapriya said local authorities, across the country, are presently being managed by secretaries and bureaucrats rather than elected representatives, depriving citizens of their democratic right to be governed by individuals, chosen through the electoral process.

“If the Constitution recognises and provides for local government institutions, then it is the responsibility of the State to ensure that elections are held and that these bodies are administered by representatives, elected by the people,” he said.

Deshapriya rejected attempts to justify the prolonged delay, arguing that responsibility for the situation rests with the government.

He noted that while various political parties have publicly stated their readiness to face elections, the ruling administration possesses the authority to resolve any issues relating to the electoral system.

The former Election Commission chief pointed out that the government enjoyed a two-thirds majority in Parliament, enabling it to enact any legislative amendments required to facilitate the conduct of elections. Instead, he said, successive committees and review processes had been used to postpone a final decision.

He also referred to efforts by opposition legislators who have moved motions seeking to address concerns relating to the electoral framework and expedite the holding of local government polls.

Deshapriya warned that any attempt to appoint a fresh delimitation committee could further delay the electoral process, making it unlikely that local government elections would be held within the current year.

He also dismissed claims that financial constraints have prevented the conduct of elections. Expressing surprise at such assertions, he questioned how funding shortages could be cited as a reason for postponement while expenditure continues in other sectors.

According to Deshapriya, the existence of laws establishing local government institutions imposes an obligation on the State to ensure that those institutions are populated through democratic means.

“The legal framework exists. If elected representatives are not appointed through elections and institutions continue to function under unelected administrators, that is a failure of the State,” he said.

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