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Central Bank expects economy to contract in second half of 2022 as well
The Sri Lankan economy is expected to contract in the second half of 2022 as well, the Central Bank of Sri Lanka (CBSL) has said in a statement.
“As per the GDP estimates published by the Department of Census and Statistics (DCS), the real economy is estimated to have contracted by 4.8 per cent in the first half of 2022, on a year-on- year basis,” the CBSL said.
The country is continuing to be impacted by tighter monetary and fiscal conditions, continuation of supply-side constraints and uncertainty surrounding the business environment amidst shortages of foreign exchange in the domestic foreign exchange market, CBSL said.
“However, a recovery in economic activity is expected in 2023 with the envisaged improvements in the supply-side, along with the timely implementation of the required reforms,” the CBSL said.
Given the current economic situation, the CBSL decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) at their current levels of 14.50 per cent and 15.50 per cent, respectively.
CBSL announced on Thursday that they arrived at this decision after considering the latest macroeconomic conditions, expected developments and macroeconomic projections.CBSL said that they noted the present tight monetary conditions, the reducing pace of inflation, and both domestic and global factors have helped the country stabilize.
The current fiscal policies are complementing the monetary policy and are helping to mitigate any build-up of aggregate demand pressures, the Bank said.CBSL expects the country’s headline inflation to drop to 4 to 6 per cent over the medium term. The CBSL added that market interest rates are continuously adjusting upwards reflecting the tight liquidity conditions in the domestic money market and the further monetary policy tightening measures introduced thus far.
“With relatively high deposit interest rates offered by licensed banks, a return of currency in circulation to the banking system is also observed. In August 2022, outstanding credit extended to the private sector by commercial banks contracted for the third consecutive month in absolute terms, reflecting the impact of increased effective market lending interest rates, a moderation of economic activity, and measures to curtail non-urgent imports,” CBSL said.
Meanwhile, the current declining trend in the year-on-year growth of credit to the private sector is expected to continue during the remainder of the year, while a similar trend is expected in the growth of broad money (M2b) supply as well. Meanwhile, the need for further monetary financing is expected to reduce gradually, supported by the envisaged fiscal consolidation measures and planned reforms of major state owned business enterprises.
CBSL added that the headline inflation, based on the Colombo Consumer Price Index (CCPI), increased in September 2022, driven mainly by the recent revision of electricity and water tariffs and the increase in Value Added Tax (VAT).
“However, headline inflation is expected to follow a disinflation path in the period ahead. Subdued aggregate demand pressures resulting from tight monetary and fiscal conditions, expected improvements in domestic supply conditions, normalisation in global food and other commodity prices, and the timely pass through of such reductions to domestic prices, along with the favourable statistical base effect, will be instrumental in bringing down inflation over the medium term,” it said.
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Sun directly overhead Pomparippu, Anuradhapura, Mihinthale, Galenbindunuwewa, Agbopura and Serunuwara about 12:11 noon today (11)
On the apparent northward relative motion of the sun, it is going to be directly over the latitudes of Sri Lanka from 05th to 15th of April in this year.
The nearest areas of Sri Lanka over which the sun is overhead today (11th) are Pomparippu, Anuradhapura, Mihinthale, Galenbindunuwewa, Agbopura and Serunuwara about 12:11 noon.
News
Opposition NCM against Energy Minister defeated
A no-confidence motion brought by the Opposition against Energy Minister Kumara Jayakody was defeated in Parliament yesterday by a majority of 104 votes.At the end of the debate, 49 members voted in favour of the motion, while 153 voted against it.
The motion, submitted to the Speaker on 19 March, was signed by Opposition Leader Sajith Premadasa, SJB MPs, and other Opposition members.
It accused Minister Jayakody of failing to ensure the procurement of adequate and quality coal for the Lakvijaya Coal Power Plant in Norochcholai, alleging that such negligence amounted to a breach of ministerial responsibility over a critical national energy asset.
The motion also cited ongoing legal proceedings against the Minister, noting that he has been indicted by the Commission to Investigate Allegations of Bribery or Corruption and produced before the Colombo High Court under Section 70 of the Bribery Act, in connection with alleged acts of corruption during his tenure as Procurement Manager of the Ceylon Fertiliser Company Limited.
The motion read: Vote of No Confidence against Kumara Jayakody, Minister of Energy,— Whereas the Provision in Section 6 of the Part III of the Code of Conduct for Members of Parliament which states that: “The Members shall on all occasions act in accordance with the public trust entrusted with them and shall always behave with probity and integrity, including the use by them of any public resources.” has been violated; And whereas the following rules of conduct set out in Section 9 of the Part V of the Code of Conduct for Members of Parliament have prima facie been breached, namely:- “(a) to be conscience; (c) to act so as to merit the trust and respect of the people; (e) to hold themselves accountable for the conduct and duties for which they are responsible;” And whereas it is observed that the Minister has failed, in his capacity as a Minister of the Cabinet of Ministers, to discharge the fundamental duties incumbent upon him in accordance with Article 28 of the Constitution;
And whereas it is established that the Minister of Energy has failed to discharge his primary duty of ensuring the procurement of adequate and good quality coal for the Norochcholai Lakvijaya Coal Power Plant;
And whereas such gross negligence in overseeing a critical national energy asset constitutes a fundamental breach of ministerial responsibility;
And whereas the Minister of Energy has failed to carry out the subjects and functions vested in him by the Notification of Gazette Extraordinary No. 2412/08 of 25th November 2024 of the Democratic Socialist Republic of Sri Lanka, including taking necessary steps to reduce the losses at the institutional management level and technical damages that occur to the electricity generation and distribution system and reduction of costs for generating electricity and removal of uncertainties during generation;
And whereas the Commission to Investigate Allegations of Bribery or Corruption has filed formal indictments before the Colombo High Court against the incumbent Minister of Energy under Section 70 of the Bribery Act (Chapter 26) for the offence of “corruption” in connection with acts of corruption allegedly committed while he was serving as the Procurement Manager of the Lanka Fertilizer Company;
And whereas, in light of the foregoing, the Minister of Energy has irretrievably forfeited the confidence of Parliament and the people of Sri Lanka by causing losses to public finances, endangering national energy security, corruptly mishandling the procurement process, being subjected to active judicial proceedings for the offence of “corruption”, and betraying the Government’s own “anti-corruption mandate”, and his continued tenure as the Minister of Energy is contrary to the public interest, the rule of law, and the principles of good governance;
That this Parliament resolves that it has no confidence in the competence of Kumara Jayakody, Minister of Energy to function as a Minister of the Cabinet of Ministers any longer.”
by Saman Indrajith
News
Chinese Ambassador assures Lanka China will not allow a fuel crisis to develop here
Chinese Ambassador to Sri Lanka Qi Zhenhong yesterday assured that China would not allow a fuel crisis to arise in Sri Lanka, under any circumstances, reaffirming Beijing’s continued support to the country.
The Ambassador made these remarks addressing the media after attending a dry ration distribution programme for 350 low-income families at Sri Chandananda Buddhist College, at Asgiriya, in Kandy.
Highlighting the longstanding ties between the two countries, Ambassador Qi said China has consistently stood by Sri Lanka and remains ready to extend assistance whenever required.
Amid concerns over global energy disruptions, stemming from the ongoing Middle East conflict, he noted that several countries are already facing difficulties, but stressed that China is prepared to support Sri Lanka at any time.
He said that any potential fuel shortage in Sri Lanka could be managed with the involvement of China’s Sinopec.
Reiterating Beijing’s commitment to Sri Lanka’s economic recovery and development, the Envoy also expressed hope that the current ceasefire in the Middle East would hold, while assuring that China stands ready to respond to any future developments and assist Sri Lanka as needed.
By SK Samaranayake
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