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Private creditor debt restructuring to be completed by March
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.
News
Patali alleges NPP conspiring to put off elections indefinitely
* Govt. lacks plan to meet IMF targets
By Shamindra Ferdinando
United Republican Front (URF) leader Patali Champika Ranawaka has alleged that the 22nd Amendment is aimed at enabling the National People’s Power (NPP) to perpetuate its rule without conducting elections.
The former Minister was addressing the media at the Flower Road Office of UNP leader Ranil Wickremesinghe on Tuesday (25). Alleging that the Pelawatte-based ‘red junta’ spearheaded the operation to enact the controversial 22nd Amendment, the ex-parliamentarian pointed out that neither President Anura Kumara Dissanayake nor Health and Media Minister Dr. Nalinda Jayathissa, who is also the Cabinet spokesman, never denied declarations made by various members of the NPP parliamentary group that elections wouldn’t be conducted for 10, 20 years.
The President and the Cabinet spokesman never clarified that such declarations were not the position of the government, Ranawaka said. The URF leader pointed out that some NPP/JVP members told those receiving appointments that they would also retire under the same administration.
Addressing the media after former External Affairs Minister Prof. G. L. Peiris, convenor of the Joint Opposition, said that the government recognised them as the real opposition. Referring to Dr. Jayathissa’s recent claim that they conspired at the residence of Prof. Peiris and challenged them to come on to the streets, ex-lawmaker Ranawaka thanked the Minister for the recognition at the expense of the Samagi Jana Balawegaya (SJB). The government accepted the challenge posed by them in spite of the main Opposition party, in Parliament, having 40 MPs, the URF Chief said, urging the government to reveal the identities of those who clandestinely led the ruling party.
The former MP said that the country was now aware of their conspiracies during the past six decades. Blaming the government for its inordinate delay in conducting the Provincial Council polls, and the failure to take tangible measures to do away with the executive presidency, as repeatedly promised in the run-up to the national elections in 2024, Ranawaka alleged that the government was busy conspiring to roll back the electoral map. He also alleged that President Dissanayake was leading the operation.
According to Ranawaka the government was keen to postpone elections indefinitely as its members feared to face the law under a different government.
Commenting on the economic situation, Ranawaka explained how under President Wickremesinghe tough measures were taken during the 2022 to 2024 period to stabilise the country with the backing of the International Monetary Fund (IMF). “However, the country cannot go on beyond 2027 under the current setup. In terms of the agreement with the IMF, the debt repayment was stopped. However, the country will have to start repayment in 2028,” the ex-MP said, pointing out the country’s reserves were down to USD 6.4 bn.
The ex-MP said the IMF expected Sri Lanka to maintain foreign reserves at USD 6.8 bn and to increase the reserves to USD 12 bn next year. In terms of the IMF’s recommendations, the foreign reserves have to be increased to USD 15 bn by 2028, Ranawaka said, recollecting how former President Ranil Wickremesinghe, at a recent book launch, explained the daunting challenges faced by the country on the economic front.
Ranawaka was referring to Wickremesinghe’s speech at the launch of former Minister Ranjith Siyambalapitiya’s book launch at the BMICH, where the former President warned of dire consequences if the government failed to adhere to the IMF formula.
The former Minister disputed the government’s much touted claim that corruption was dealt with. The person who caused an unprecedented gas crisis, in 2021, by promising to supply gas at a much lower price than what was paid by the then government at that time and ended up causing countrywide panic due to “accidental” blasts of domestic gas cylinders, received protection from this government.
The government conveniently refrained from initiating action against that person, Ranawaka said. Referring to the developments leading to President Gotabaya Rajapaksa’s government declaration of bankruptcy in April 2022, the ex-Minister claimed that the IMF, in a letter dated 7 March, 2022, alerted the Secretary to the President, the Finance Ministry and the Central Bank, of the impending economic collapse. The NPP government failed to take action against those responsible for creating the 2022 crisis, Ranawaka said.
News
August 15 Super Dvora tragedy: Search continues for missing officer’s body
Navy headquarters yesterday said it was continuing the search for Lt. Thilina Udayapriya, second-in-command of the Super Dvora Mark III Fast Attack Craft (FAC), which sank in the seas off Angulana, on 15 August, 2026. Of the 12-member crew, 11 were rescued but so far SLN efforts to locate the missing officer’s body had failed, sources said.
They said that the salvage operation of the sunken craft, taken delivery from Israel after the end of the war, is continuing amidst gruelling weather and rough sea conditions, and the sunken vessel is now off Bambalapitiya.
Sources said that the vessel collided with a sunken ship MV Thermopylae Sierra that sank in August 2012, during a monsoon storm. The ill-fated Super Dvora Mk III has gone over the ship wreck in spite of it being clearly demarcated in the nautical chart, aka hydrographic chart available to the ill-fated vessel’s crew. But authorities had failed to mark the site with a buoy to warn maritime traffic, in spite of public appeals. (SF)
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Tripartite MoU to expand free cardiothoracic surgeries at KDU Hospital
The Ministry of Defence, Ministry of Health and Mass Media, and the General Sir John Kotelawala Defence University (KDU), have signed a tripartite Memorandum of Understanding (MoU) to facilitate the expansion of free cardiothoracic surgery services by utilising the facilities of the General Sir John Kotelawala Defence University (KDU) Teaching Hospital.
The Defence Secretary Air Vice Marshal Sampath Thuyacontha (Retd), Secretary to the Ministry of Health and Mass Media Dr Anil Jasinghe, and Vice Chancellor of General Sir John Kotelawala Defence University Rear Admiral H. G. U. Dhammika Kumara, signed the agreement on behalf of their respective institutions.
The Defence MInistry said that the initiative, implemented in accordance with a Cabinet proposal submitted by the Minister of Health and Mass Media Dr Nalinda Jayatissa would reduce congestion and address the lengthy waiting list for cardiothoracic surgeries at the National Hospital of Sri Lanka (NHSL).
The Ministry stated: “Under the arrangement, specialist doctors and clinical staff of the Cardiothoracic Unit of the National Hospital will conduct free heart and thoracic surgeries and provide specialised treatment for patients at the KDU Teaching Hospital. KDU will provide the necessary infrastructure, medical facilities and specialised equipment, while the Ministry of Health and Mass Media will provide the required medicines, medical supplies and specialised medical care.”
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