News

Lanka busts US$664mn in ‘reserves for imports’ in two months

Published

3 years ago

2022/01/23

ECONOMYNEXT – Sri Lanka has spent 664 million US dollars in providing ‘reserves for imports’ in November and December 2021, as the central bank tried to implement a 200 to the US dollar peg while printing money to sterilize the same dollar sales at fixed interest rate of 6.0 percent.

The central bank bought 61.7 million US dollars from forex markets where compulsory surrender rules have been imposed, creating money, and spent 372.35 million US dollars for imports in November.

In December the central bank bought 71.16 million US dollars from banks and spent 424.7 million US dollars to enforce a peg at 200 and provide ‘reserves for imports’.

A pegged central bank which tries to implement a fixed interest rate has to print money to offset such interventions, injecting new rupee reserves to the banking system as dollar sales from reserves sucks out liquidity from the banking system reflecting the transfer of real wealth out of the country.

Such an ‘unsterilized sale’ will reduce the ability of banks to give new credit and shrink reserve money driving up rates and keeping the exchange rate fixed.

However a soft-pegged central bank re-injects the money into the banking system to ‘sterilize’ the intervention, perpetuating the currency crisis by keeping both interest rate and reserve money fixed.

Central bank data showed that 113 billion rupees had been printed in November.

Sri Lanka’s foreign reserves fell in November. In December reserves were boosted with a swap.

In a remarkable development, Mercantilists and some members of the business community last week called on the central bank to continue to sell reserves which will keep the exchange rate at 200 to the US dollar and default on debt.

The call for reserve sales to enforce the peg came after many businessmen had previously said the 200 to the US dollar peg was not realistic or not market determined.

Due to continued liquidity injections at 6.0 percent and earlier at around 5.2 percent by placing price controls on Treasury bill auctions the credibility of the 200 to the US dollar peg has been lost and people are willing to pay as much as 250 rupees to get the printed money out of the country leading to the emergency of parallel markets.

A float will end the ‘reserve sales’ for imports and consequently also end the need to sterilize the intervention, restore the interbank spot market and balance total inflows with outflows.

As long as reserve sales continue, the liquidity injections also continue (the central bank sells both dollars and rupees to the banking system simultaneously) preventing the credit system from adjusting to the reserve outflow.

However a float also leads to a fall of the currency to a lower level.

Analysts have said that the Mercantilist myth involving sterilized interventions were propagated by John Henry Williams an advocate of the the US dollars as ‘key currency’ in a post-World War II monetary system and others like Arthur Bloomfield, who found instances when gold standard central banks supposedly engaged in sterilized interventions and lived to tell the tale.

Such ideas were rejected in East Asian countries like Singapore, which do not have a fixed policy rate.

“..[W]e wanted to indicated to academics, both local and foreign; that what is fashionable in the West is not necessarily good for Singapore,” Singapore’s economic architect and former Finance Minister Goh Keng Swee said in a landmark speech.

“A perceptive mind is needed to distinguish the peripheral form the fundamental, transient fads from permanent values.”

The entire ‘Sterling Area’ of which Sri Lanka was a member until a US money doctor set up a sterilizing Latin America style central bank was based on this ‘permanent value’.

The US Fed in 1971 under then Chairman Arthur Burns broke a 300 year old gold standard, sterilizing interventions in 1971, after earlier printing money to target an output gap.

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Government is taking necessary action to enhance the facilities and professional standard within the healthcare sector – PM

Published

11 mins ago

2025/05/24

Priyan

Prime Minister Dr. Harini Amarasuriya stated that the government is taking necessary action to enhance the facilities and professional standard within the healthcare sector, and that expecting a compassionate discharge of duties from the nurses and midwives.

Prime Minister made these remarks while addressing a ceremony held today (24) at Temple Trees to deliver letters of appointment to 3,147 nurses in the health sector.

Addressing the event, the Prime Minister stated:

“I extend my best wishes to all those who embark on a new journey in life joining the public service as nurses today. Among the many professions in the world, you are entering one of the most significant and most respected.

Nursing is more than a job; it is a humanitarian service essential to the public. In times of vulnerability, people look to you for safety and care.

Beyond medicine, you hold a powerful impact on healing people with your smile, way of speaking, compassion, and the manner in which you care.

You provide your service with great dedication, involving both physical and mental commitment. Often, you do not have the chance to sit or even sleep adequately. These sacrifices affect your personal life including the family affairs, relationships with relatives and friends. We understand that these sacrifices affect not only you but your loved ones as well.

I take this opportunity to thank you for your service, which you continue to offer with such commitment.

Following the policy of our government, ’A Prosperous Country, a Beautiful Life’, our primary goal is to bring this vision to all citizens. A beautiful life begins with healthy citizens, not only physically but mentally as well. To ensure this, the government is committed to strengthening the healthcare sector and providing the necessary facilities and training to professionals.

There is a high demand for nurses both locally and internationally. We are working to provide appropriate salaries, necessary promotions, and training opportunities to support your professional growth. It is also essential to create a safe and positive working environment, for both physical and mental well-being of the employees. I am confident that the respective Minister and the Ministry will continue to intervene to ensure that these needs are met.

The nursing profession is mostly comprised of women. In our society, a woman is often expected to carry many responsibilities in form of a wife, a mother, and being a nurse does not exempt you from these duties. As a government, we are sensitive to such areas of the profession, and it is also our responsibility to create an environment where you can live a fulfilling personal life.

The event was attended by Minister of Health and Mass Media, Dr. Nalinda Jayatissa, Secretary to the Ministry of Health, Specialist Dr. Anil Jasinghe, along with Additional Secretaries, officials, and staff of the Ministry of Health.

[Prime Minister’s Media Division]

News

Prime Minister meets with U.S. Ambassador and USAID delegation to discuss future of development cooperation

Published

6 hours ago

2025/05/24

Priyan

Prime Minister Dr. Harini Amarasuriya, met Ms. Julie J. Chung, U.S. Ambassador to Sri Lanka, and Ms. Maureen Hsia, Acting Mission Director and Programme Office Director for USAID Sri Lanka and Maldives at the Parliament recently. The meeting focused on the evolving framework of U.S. foreign assistance to Sri Lanka and potential avenues for sustained cooperation.

The US delegation briefed the Prime Minister on the recent three-month moratorium imposed on all foreign assistance by the United States, pending a comprehensive review by the U.S. Department of the Treasury. Discussions centered on the implications of this decision, particularly its potential impact on key development initiatives such as the women’s shelter project, and broader humanitarian concerns if current support mechanisms are disrupted.

Both parties acknowledged the critical role of the United States as a global leader in development and emphasized the importance of continuing bilateral collaboration. The Prime Minister welcomed the United States’ commitment to identifying alternative modalities to ensure uninterrupted support for Sri Lanka’s development priorities. In addition, the meeting addressed tariff negotiations, recognizing their relevance in bolstering economic resilience and supporting the country’s long-term growth trajectory.

Also in attendance were Ms. Angelina Hermon, Acting Director of the Office of Governance and Vulnerable Populations, and Ms. Nirmi Vitharana, Project Management Specialist from the Office of Economic Growth. Representing the Government of Sri Lanka were Pradeep Saputhanthri, Secretary to the Prime Minister; Ms. Sagarika Bogahawatta, Additional Secretary to the Prime Minister; and Ms. Pramuditha Munasinghe, Director of the North America Division at the Ministry of Foreign Affairs.

[Prime Minister’s Media Division]

Business

President briefs Sri Lankan delegation leaving for tariff related discussions in Washington

Published

7 hours ago

2025/05/24

Priyan

A Sri Lankan delegation is set to participate in discussions in Washington, D.C., focusing on tariff-related matters, following an invitation extended by the Office of the United States Trade Representative (USTR). This is the second in-person meeting aimed at ongoing efforts to strengthen bilateral trade relations between the two nations.

This initiative builds on several prior virtual interactions held between the USTR and Sri Lankan officials, and underscores a commitment to deepening economic ties. The upcoming talks are anticipated to explore avenues for enhancing trade cooperation and securing favourable outcomes for Sri Lanka, in light of current economic priorities.

Ahead of the visit, a high-level meeting was convened today under the leadership of President Anura Kumara Disanayake to ensure the country’s interests are well represented. The discussion focused on aligning the delegation’s approach with Sri Lanka’s broader economic strategy, ensuring the best possible outcomes from the upcoming discussions.

Key participants at the meeting included Deputy Minister of Finance and Planning Dr. Harshana Suriyapperuma; Secretary to the Ministry of Trade, Commerce, Food Security and Cooperative Development, K.A. Vimalenthirarajah; Duminda Hulangamuwa, Senior Economic Advisor to the President; Governor of the Central Bank Dr. Nandalal Weerasinghe; Secretary to the Ministry of Finance, Planning and Economic Development K.M.M. Siriwardana; Nirmal Vigneshwaran, representing the Attorney General’s Department; and Dharshana Perera from the Ministry of Foreign Affairs.

Details of the discussions in Washington are expected to be made available following the conclusion of the meetings.

[PMD]