Author: TELO Admin

Sri Lanka’s central bank credit (printed money) was a negative 8.7 billion rupees in September 2022 and private sector was also de-leveraging for the fourth straight month, official data shows.

Net Central Bank credit contracted 8.7 billion rupees to 3,302 billion rupees in September, down from 47.2 billion a month earlier.

Credit to government from the banking system was 53.3 billion rupees down from 163.7 billion rupees a month earlier.

Sri Lanka’s central bank has purchased some government securities from auctions outright in recent weeks but with high rates and private sector de-leveraging the money is not moving into the broader economy.

Private credit contracted by 37.3 billion rupees to 7,576.9 billion rupees in September, the fourth straight month of de-leveraging. Private credit contracte 58 billion rupees a month earlier. In June and July private credit contracted 40 billion rupees.

As a result money injected outright into the banking system, usually triggers a fall in overnight injections and not new credit which hit the balance of payments as import demand.

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Sri Lanka key current inflows exceed imports for fourth month in Sept

Sri Lanka’s central bank allowed market interest rates to move up with credit demand from around April 2022 to help the worst currency crisis created in the history of agency which was set up in 1950 in the style of a Latin America style intermediate regime with extensive sterilization powers in both directions.

A sterilizing central bank will usually print money to keep interest rates down, purchase maturing Treasury bills from past deficits injecting capital, and blame the budget deficit for its policy rate.

It will also buy Treasury securities from banks after intervening to maintain the peg, injecting what 19 century classical economists called ‘fictitious capital’ into the banking system to extend a credit cycle, build up imbalances and worsen a currency crisis by boosting bank credit without deposits.

Up to June the central bank also got Asian Clearing Union dollars from India to intervene and print money.

Latin America style central banks were set up especially to extend a credit cycle and resist a slowdown from the tightening of the anchor currency (the US Fed or the Gold area generally) by post 1931 macro-economists, creating unusually intense balance of payments crises. Such tightening is automatic in hard pegs.

A central bank is the only agency which can create high inflation or balance of payments deficits by suppressing rates through its policy rate and it is also the agency which can end them.

Sri Lanka in April allowed rates to go up to reduce credit, hiked taxes to reduce credit to government and also hiked utility rates to reduce credit to state enterprises.

State enterprise credit grew 3.2 billion rupees in September after falling 54 billion rupees in August.

Sri Lanka got into serial currency crises from 2015 by injecting liquidity into the banking system in the course of operating a ‘data driven’ flexible inflation targeting regime, a type of soft-peg with unusually aggressive open market operations to target an output gap (stimulus).

The regime has an inflation target as high as 6.0 percent, about twice the rate of other central bank allowing interest rates to be mi-targeted for a longer period. Policy errors are then compensated by currency collapses called a ‘flexible exchange rate’.

The country’s key Opposition parties have alleged that the National Delimitation Committee chaired by former Election Commission Chairman Mahinda Deshapriya is a ploy by the Government to postpone the Local Government (LG) elections, and urged Deshapriya to not be a “partner” to such a conspiracy, while Deshapriya responded by stating that he does not wish to comment on the matter, as it would be unethical to do so.

Samagi Jana Balawegaya (SJB) and Opposition Leader Sajith Premadasa alleged that the Government was devising various tactics to postpone the LG elections, which are expected to be held in March 2023, adding that the Delimitation Committee chaired by Deshapriya is one such tactic. He urged Deshapriya to not be the “mastermind” of the conspiracy to postpone the LG elections.

Speaking at a gathering, Premadasa said: “The Government is purposely and earnestly devising various methods and tactics to postpone the elections. All of a sudden, Prime Minister Dinesh Gunawardena appointed a Delimitation Committee and appointed Deshapriya as its Chairman. Instead of holding elections, they have created a Delimitation Committee, and have planned to reduce elected members to LG bodies by half and to introduce a new electoral system.

“The public is not asking for a new electoral system. They are asking for an election. We ask Deshapriya, don’t be a partner to the Sri Lanka Podujana Peramuna (SLPP) Government that is postponing elections. As we are aware, you say you are a follower of socialist principles. If you are a true socialist, you will not agree to postpone elections. We know that you will not postpone elections, but don’t become the mastermind of the conspiracy to postpone the elections.”

Also speaking at a gathering, Janatha Vimukthi Peramuna (JVP) General Secretary Tilvin Silva stated that he hopes that, as assured by Deshapriya previously, the LG elections will not be postponed.

“When they continuously engage in delimitation, the date for the elections will lapse and the elections will not be held. That’s what they are working on. But Deshapriya said that although they are working on the delimitation, they will not be postponing the elections. We think, considering he is the former Election Commission Chairman, that he will hold the elections in March. It’s alright to demarcate the wards, but don’t be prepared to postpone the elections, as, if so, we will have to return to the streets.”

Silva alleged that plans to postpone elections were conspired as the incumbent Government is aware that it would lose the elections if such were held.

“They are attempting to postpone the elections that are expected to be held in March, which were postponed by a year already. Why do they want to postpone it? That is because they know that if they do hold the elections, they will lose. How are they trying to postpone? By stating that they need a new electoral system, and the need to reduce the number of members, and the need to also demarcate wards for Local Authorities, according to a new electoral system. They are changing these wards. For this, they have appointed a Delimitation Committee Chaired by Deshapriya.”

Meanwhile, Freedom People’s Congress Member and Opposition MP Prof. G.L. Peiris questioned why the Government was insistent on delimitation, and charged that there was a hidden agenda underlying these sudden decisions. Speaking at a media briefing, Peiris urged Deshapriya to maintain his honour and to not be a “pawn” in the scheme to destroy democracy and postpone elections.

“Deshapriya has maintained a title of honour in this country. They are attempting to use him as a pawn to destroy democracy and delay elections. He has knowledge regarding delimitation, as he has been involved in this subject for a long time. We make a personal appeal to him: Don’t become someone else’s pawn and don’t grant your blessing or support to this scheme to postpone elections.”

He added: “They want to reduce the LG members from 8,000 to 4,000. Gunawardena chaired a committee that proposed to increase LG authorities’ membership to 8,000. Now, another committee is appointed to reverse what that committee did. Why do they want to reverse it now? It is very clear that there is a hidden agenda behind this. What’s the hidden agenda? To postpone elections. This Government will not even receive 20% of the public’s vote. That will be proven if this election is held.”

Speaking to the media, Sri Lanka Freedom Party General Secretary and MP Dayasiri Jayasekara also urged Deshapriya to not be involved in the “conspiracy” of postponing elections.

“The public has some confidence in Deshapriya. He is strongly against the postponement of elections. So, we respectfully ask him to not be involved in this undertaking, because this is clearly a conspiracy by this Government to postpone the LG elections. If they want to reduce the number of members, then what they need to do is to remove the 25% that were appointed in the end. This is not a big deal. Also, there is a delimitation programme and mechanism already in place. They can take one to one-and-a-half weeks to go through that and resolve the issues pertaining to delimitation. This is not an issue that they need to waste four to five months on.”

Meanwhile, when The Morning contacted Deshapriya yesterday (7) pertaining to the allegations levelled, he said: “I don’t want to comment on this, and it is unethical to comment on it. Even if I wasn’t appointed, someone else would be appointed to the committee.”

Premier Gunawardena, in his capacity as the Minister of Provincial Councils and Local Government, issued an extraordinary gazette appointing a five-member National Delimitation Committee for the demarcation of wards for Local Authorities. J.R.V. Dissanayake, W.M.M.R. Adikari, Dr. K. Thavalingam, and I.A. Hameed will serve as members of the committee along with Deshapriya, who is its Chairman. The National Delimitation Committee is effective from 1 November 2022 to 28 February 2023, as per the gazette notification.

Sri Lanka’s navy said Monday that about 300 suspected migrants have been rescued by Singapore authorities after their boat started sinking.

Navy spokesperson Indika de Silva said a Sri Lankan citizen in the boat contacted the navy on Monday and said they were in distress, and the Maritime Rescue Coordination Center in Colombo sought help from Singapore, Vietnam and the Philippines.

Singapore authorities later notified Sri Lanka that the people on board the boat had been rescued and were heading to Vietnam.

De Silva said the navy is only officially aware of the presence of one Sri Lankan on board the vessel and the identities of the others will be ascertained after they land in Vietnam.

Sri Lankans in the past sometimes undertook hazardous illegal boat journeys to escape a long civil war. Some Sri Lankans are now trying to escape an economic crisis by migrating illegally to other nations.

KOLKATA: The Indian Navy will not allow the Yuan Wang-6 to enter the country’s Exclusive Economic Zone (EEZ) that extends up to 200 nautical miles into the sea, reported multiple Indian media outlets.

Though it is known fact that the Yuan Wang-6 is a spy ship of the People’s Liberation Army Navy (PLAN), sent to the Indian Ocean Region to track India’s missile tests from the APJ Abdul Kalam Island off the Odisha coast, she is officially registered as a research and survey vessel.

While foreign vessels, including warships, can freely sail through the EEZ, Indian law forbids any survey, research or exploration there by a foreign nation without permission.

In 2019, the Indian Navy had forced the Chinese research vessel Shi Yan 1 out of India’s EEZ after it was found lurking near Port Blair.

The Shi Yan 1 is also considered a PLAN spy ship masquerading as a research vessel. That move by the Indian Navy had led to a diplomatic row with China but India had put her foot down.

According to sources, the Indian Navy will do the same this time round if the Yuan Wang-6 attempts to enter India’s EEZ. The destination of this vessel is not marked to any port but to ‘open sea’ and that is where she will have to remain, a senior official said.

“We are constantly monitoring her every movement. Our surface and sub-surface assets are tracking the Yuan Wang-6. So are our Unmanned Aerial Vehicles (UAVs) and long-range maritime surveillance aircraft. In fact, we are also in a position to find out what this ship is tracking. Though we can’t do anything till she is in the open seas, action can be taken once she attempts to enter our EEZ. Had she been a normal PLAN warship, we could have done nothing due to the international right to passage laws.

“However, a foreign survey and research vessel can’t be allowed to operate in our EEZ. She won’t be able to get close to our coastline. We know that Yuan Wang-6 has powerful equipment on board that can track from hundreds of nautical miles away, but there is nothing anybody can do so long as she is in international waters,” the official said.

India’s Territorial Waters extend to 12 nautical miles from the nearest low tide mark on shore.

No foreign warship or submarine can enter this zone without permission from the Government of India. Even if permission is granted, foreign submarines have to traverse these waters on the surface with their countries’ flags flying.

It is the same for warships. There are no restrictions on other foreign vessels. As the Yuan Wang-6 is not registered as a naval vessel, she may attempt to enter India’s Territorial Waters, if not prevented from entering the EEZ. This could land India on a sticky wicket.

“The only problem is if the Chinese vessel receives permission from any one of our maritime neighbours to enter their territorial waters. We share our maritime boundary with Bangladesh and Sri Lanka. Near these countries, we can’t enforce our EEZ laws as the sea is contiguous. That is why we have International Maritime Boundary Lines to demarcate territory. Now, if Bangladesh allows the Yuan Wang-6 to dock at Chittagong or Sri Lanka grants permission to her at Hambantota Port, she will be lying extremely close to our coastline and tracking everything,” another official said.

Sri Lanka is neck deep in debt and has been forced to lease away the Hambantota Port to China. In August this year, the Yuan Wang-5, another spy ship from China, docked at Hambantota despite India’s reservations.

But then, Sri Lankan authorities could do little, except defer the arrival of the ship for some time, as much of Hambantota Port is in Chinese hands.

President Ranil Wickremesinghe has met British Prime Minister Rishi Sunak, a short while ago, on the sidelines of COP27 in Egypt, according to the President’s Media Division.

President Wickramasinghe extended his warm greetings to the new British Prime Minister, Rishi Sunak, the PMD said.

The President left the island for Egypt on Monday (06) to attend the 2022 United Nations Climate Change Conference (COP 27) being held in Sharm el-Sheikh.

At COP 27, countries come together to take action towards achieving the world’s collective climate goals as agreed under the Paris Agreement and Convention. Building on the outcomes and momentum of COP 26 in Glasgow last year, nations are expected to demonstrate at COP 27 that they are in a new era of implementation by turning their commitments under the Paris Agreement into action.

Minister of Environment Naseer Ahamed, Senior Advisor to the President on Climate Change Ruwan Wijewardene, President’s International Affairs Director Dinouk Colambage and President’s Private Secretary Sandra Perera are accompanying the President.

Meanwhile, President Wickremeisnghe had also held bilateral meetings with President of the Republic of Slovenia, Borut Pahor, and Special Presidential Envoy for Climate & Environment and the head of the delegation from the Republic of Korea, Na Kyung-won, on the sidelines of COP27 today.