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CB optimistic about controlling runaway inflation

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By Shyam Nuwan Ganewatta

Governor of the Central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe yesterday (19) said there was some political and social stability in the country and it would help the CBSL achieve some success in its endeavours.

Dr. Weerasinghe said so responding to a question posed by a journalist about the Governor’s earlier claim that he would resign from his post if political stability could not be restored within two weeks.

“Now, we have a Prime Minister. We have a cabinet. The Parliament is in session. We expect that a Finance Minister will be appointed soon. There is no violence now. Peaceful protests and demonstrations do not affect political and social stability. I think the country is on the right track. Most MPs have expressed a desire to work together. I think things will become more stable soon,” he said.

Inflation in Sri Lanka would decrease in the coming months due to the corrective policy measures of the Central Bank and the expected improvements in both domestic and global supply conditions, the Central Bank has said in a press release (19).

Inflation is projected to escalate in the near term on account of domestic supply shortages, increased global commodity prices, the effects of the large depreciation of the Sri Lanka rupee against the US dollar thus far during the year, along with the impact of aggregate demand pressures.

“However, this will change in the coming months and the bank expects that the recent tightening of monetary conditions and the strengthening of monetary policy communication will help anchor inflation expectations of the public in the period ahead.

“The Central Bank expects to minimize excessive volatility in the domestic foreign exchange market through tightening of the monetary policy stance, restrictions on imports on open account terms, and the reduction in the proportion of mandatory foreign exchange sales by the banks to the Central Bank.

“The Central Bank expects an increase in workers’ remittances due to the notable reduction in the gap between the official exchange rate and the rate offered by the grey market and the continued increase in migration of workers.

“The near term outlook of the tourism sector is likely to remain unfavourable due to both global and domestic factors.

“Meanwhile, gross official reserves as of end April 2022 were provisionally estimated at US dollars 1.8 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.”

The Central Bank and the government have commenced technical level discussions with the International Monetary Fund aimed at working towards a programme to address the macroeconomic challenges faced by the economy while expeditious arrangements are being made to commence the external debt restructuring process.

“Negotiations have already begun with bilateral and multilateral partners to obtain bridging finance in order to secure foreign exchange required to finance imports of essential goods and strengthen the social safety net programmes.

“Economic activity is expected to be affected considerably by the ongoing supply shortages, energy related issues and social tensions, as reflected by several leading indicators. Demand management policies of the Central Bank and anticipated fiscal consolidation measures are also expected to keep aggregate demand subdued during the year.

“Global economic growth is also expected to moderate in response to the tightening of monetary policy by the central banks globally to counter inflationary pressures along with the spillover effects of the geopolitical tensions in Eastern Europe.

“After carefully considering the current and expected macroeconomic developments both globally and domestically, the Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 18 May 2022, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at the current levels of 13.50 per cent and 14.50 per cent, respectively.

“The Board was of the view that the policy measures that have already been implemented by the Central Bank would continue to be further transmitted to the financial markets, while some signs of tighter monetary policy are already being observed in real economic activity. The Central Bank would continue to monitor domestic and global macroeconomic and financial market developments and stand ready to take appropriate measures proactively to help reinforce greater macroeconomic stability in the economy in the period ahead.”

“In order to prevent further deterioration of economic conditions and complement the efforts of the Central Bank implemented thus far, urgent measures are required to restore greater political stability through consensus governance and social harmony.

“In addition, swift policy actions are required to strengthen the fiscal performance that would help avoid excessive reliance on monetary financing and maintain fiscal sustainability over the medium term. Furthermore, expeditious and transparent revision of tariffs in the energy sector remains a priority in order to strengthen the financial position of energy-related state owned business enterprises, while improving the efficiency of social welfare programmes to support the vulnerable groups of the society impacted by the unprecedented economic circumstances.”



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BASL urges President to de-escalate tensions in different parts of country

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The Bar Association of Sri Lanka has called upon President Gotabaya Rajapaksa to instruct the Defence Secretary, the Commanders of the Tri Forces and the Inspector General of Police to ensure that there is an immediate de-escalation of tensions in different parts of the country – especially at fuel stations – understanding the difficulties faced by the public.”

 “Whilst keeping in mind that the police and armed forces are acting under very trying circumstances, nevertheless it is necessary to give strict instructions to the police and the forces to desist from violence in dealing with the public and to act with utmost restraint”, the BASL has said in a media statement.

 “We also call upon you to ensure that steps are taken under the law to deal with errant officers who have subjected civilians to such violence.”

The BASL is of the view that it is not appropriate for service personnel to be deployed in the present manner in matters which essentially should be managed by the Sri Lanka Police.

 The armed forces should also not be used to disturb or hinder peaceful protests as was seen last week in Galle.

Full text of the BASL letter to the President:

The Bar Association of Sri Lanka (BASL) expresses its gravest concerns at the current situation at fuel stations throughout the country and the reports of several incidents of conflicts between civilians and members of the police force and the armed forces at fuel stations. There has been video footage of civilians being assaulted by personnel of the armed forces and the police, the latest being of a civilian being kicked by an Army officer at a fuel station. There have also been situations of the police and Army opening fire into the air to contain the crowd.

Your Excellency is no doubt aware that thousands of desperate civilians are waiting in queues at hundreds of fuel stations in the country. The queues are kilometres long. The tension at the fuel stations have arisen from this desperation for which there is no immediate solution in sight.

The BASL wishes to warn Your Excellency of the imminent dangers this situation could give rise to. The present unrest could result in a conflagration between civilians and members of the armed forces or the police. Some years ago, confrontations between members of the public and the armed forces resulted in the deaths of civilians. Such incidents between the members of the armed forces or the police and the civilians will discredit Sri Lanka’s armed forces and the police.

We call upon Your Excellency to take all necessary steps to give instructions to the Defence Secretary, the Commanders of the Tri Forces and the Inspector General of Police to ensure that there is an immediate de-escalation of the situation in different parts of the country – especially at fuel stations – understanding the difficulties faced by public. Whilst keeping in mind that the police and armed forces are acting under very trying circumstances, nevertheless it is necessary to give strict instructions to the police and the forces to desist from violence in dealing with the public and to act with utmost restraint. We also call upon you to ensure that steps be taken under the law to deal with errant officers who have subjected civilians to such violence.

The Sri Lanka Army and other service personnel must be deployed only in very limited circumstances as contemplated in the Criminal Procedure Code. The BASL is of the view that it is not appropriate for service personnel to be deployed in the present manner in matters which essentially should be managed by the Sri Lanka Police. The Armed Forces should also not be used to disturb or hinder peaceful protests as was seen last week in Galle.

We trust that this will receive the immediate attention of the Government as to do otherwise may otherwise result in unprecedented turmoil and harm.

The BASL believes that the ultimate solution to the situation at fuel stations is to be transparent with the public and to ensure an equitable and effective system of fuel distribution throughout the country.

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SC orders AG to submit report on fuel purchases and distribution

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By A.J.A. Abeynayake

A three-member Supreme Court bench consisting of Justices Vijith Malalgoda, Mahinda Samayawardena and Arjuna Obeysekera yesterday ordered the Attorney General to submit a report on fuel purchases, the distribution thereof and the sectors to be provided with fuel on a priority basis.

The Supreme Court made the order after considering two fundamental rights petitions presented by the Bar Association of Sri Lanka.

The BASL has requested the Supreme Court to direct the Cabinet of Ministers to consult all stakeholders and independent experts to formulate and implement the necessary policies, and to provide concessions in relation to the prices of essential goods and services to the people including LP gas, fuel, electricity, milk powder, medicines and food.

The petitions were filed by the President of the BASL Saliya Pieris PC, Deputy President Anura Meddegoda PC, former Secretary Rajeev Amarasuriya, Treasurer Rajindh Perera and the Assistant Secretary Pasindu Silva.

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A/L may be delayed by one month

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Education Minister Sushil Premajayantha told Parliament yesterday that although it had been scheduled to hold the G.C.E. A/L Examination 2022 in November this year, it could be further delayed by another month.

Responding to a question by MP Shantha Bandara, the Minister said: “The examination should be held at least after three months of releasing the results of the previous A/L exam because the students who need to sit it again should have enough time to prepare,” the Minister said.

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