Sri Lanka rupee/dollar swap discounts widen, LC opening further tightened

Swap discounts of the rupee has widened and banks had further tightened the opening of letters of credit amid forex shortages market participants said as overnight liquidity injections continued to rise and short term gilt yield corrections reversed.

In the forex market swap discounts had further widened with foreign banks reducing their activity, market participants said.

Spot/1 month was quoted around -70/-50 cents

Spot/3-months had widened to -300/-250 from around -190/-150 last week.

Spot/6-months had widened to -700/-600 cents fro around -350/-300 cents.

The controversy over People’s Bank being ‘blacklisted’ by China had also impacted perceptions of some counterparties, market participants said.

As forex availability tightened, banks had further tightened the opening of letters of credit, financial sources said.

Sri Lanka’s three month Treasuries yield which had begun to correct upwards after price controls were lifted fell in November amid liberal injection of money from the 6.0 overnight window.

Currency pegs break and forex shortages emerged due to open market operations of soft-pegged central banks and outright bond purchases to maintain unrealistic gilt yields.

Window borrowings reached 312 billion rupees on November 17 from 261 billion rupees on October 29.

The central bank had been mopping up some of the excess money injected from the window into short banks in a sterilization trap.

“When banks borrow printed money from the overnight window to buy Treasuries, forex shortages worsens and it is more difficult to maintain the peg at 203 to the US dollar,” EN’s economics columnist Bellwether says.

“The central bank will then have to sell more dollars and lose more reserves to maintain the peg.”

“When dollars are sold more liquidity is injected to stop the overnight rates from going up and tightening the system.”

The central bank was also intervening in forex markets to give dollars for essential imports such as fuel, which also results in more rupee injections to maintain the overnight rates, or there will be a reduction of money withdraw through repo auctions.

Some secondary market quotes for bonds of several maturities were seen on Wednesday though there was little trading.

On Thursday at close a 15/12/2023 bond was quoted at 8.55/75 percent, dealer said.

A 15/03/2024 bond was quoted at 9.15/30 percent.

A 15/09/2024 bond was quoted 9.35/50 percent.

A 15/12/2024 bond was quoted 9.45/55 percent.

A 15/01/2027 bond was quoted 10.80/95 percent.

A 01/09/2028 bond was quoted 11.30/50 percent.

A 15/03/2031 bond was quoted 11.80/95 percent.

“Currently We Have The Stupidest Cabinet In Post-independent Sri Lanka”: Ruling Party Ally Says

Communist Party stalwart and former MP D.E.W Gunasekera said the current Cabinet was the “stupidest” Cabinet of Ministers since Sri Lanka achieved independence.

Communist Party is a costituent party of the SLPP-led ruling coalition.

Gunasekera, in a YouTube interview, said that all but four or five members of the cabinet are absolutely stupid ministers who are not fit to hold their positions.

Gunasekera said when he once talked about the intelligence level of the current Cabinet ministers, he received a message from Minister Dinesh Gunawardena who said the comments might be too hard.

“But, I don’t want to sugarcoat anything. I made this remark after carefully analysing all Cabinets that were in power since 1977,” Gunasekera said.

Explosion reported at McDonald’s at Cinnamon Gardens building -Srilanka

An explosion has taken place at a building at Cinnamon Gardens on Reid Avenue, Colombo 7, Police Spokesman SSP Nihal Thalduwa said.

The explosion took place inside the hotel premises owned by McDonald’s, the fast food company, located on the ground floor of the old Race Course building.

It is suspected that the explosion might have been due to a gas leak and the Colombo Municipal Council Fire Brigade and the police took steps to bring the fire under control, the spokesman said .

Two persons who were at the parking near the building were injured in the incident.

The Government Analyst is to inspect the site to ascertain the cause of the explosion, he further said.

The final encounter of the Prime Minister Mahinda Rajapaksa Trophy Four-Nation Football Tournament was also played at the Racecourse Grounds in Reid Avenue last night

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Sri Lanka cannot continue to obtain loans as a country: Foreign Minister

Sri Lanka cannot continue to obtain loans as a country, says Foreign Minister Prof. G.L. Peiris.

Expressing his sentiments during a program carried out by the Ministry of Foreign affairs focusing on the economic revival in the country, the Minister of Foreign Affairs Professor G. L. Peiris said that International assistance will be obtained to build the country through a policy framework that is not limited to only one group in the future.

Speaking further, the Foreign Minister said that in order to build the country, Sri Lanka must focus on other ways to earn capital. Investments, trade, tourism and then the income brought by migrant workers are certain examples of the ways which the country can focus in order increase capital, he said.

Furthermore, the Foreign Minister said that Sri Lanka had opened its borders, and that tourists have already started coming in to the country, and cited the tourism situation in the country as an example of Sri Lanka being able to deal with the outer world.

” Even the UK prime minister has appointed an agent to focus on the trade deals with us. This is a great novel opportunity for us. Then on the tourism sector, we should focus in new tourism methods, for example, environment tourism. We can coordinate with our diplomatic missions and promote it,” the Minister said.

Additionally, he also said that Sri Lanka is also focusing on increasing the country’s scope, especially when it comes to migrant workers. The Minister also spoke of the earlier situation when Korea announced that they will only allow migrant workers who had been working at the country for a long period of time to come back and work in Korea.

Further noting the high profile delegation from the European Union visiting Sri Lanka to discuss on the GSP+ issue, the Minister said that Sri Lanka was able to show the EU the country’s stance and enunciate to them on the mechanism the Government has implemented to rectify any misunderstandings.

” When it comes to our foreign policy, we are on the stance that we must have equal diplomatic relationships with every country in the world. We must have a good diplomatic relationship with India. We must not forget China as well, they helped us a lot in developing our infrastructure. 65% of our exports are being sent to the Western World, which means our ties with USA and Europe are vital as well. All our diplomatic missions are now focused on Economic Diplomacy, that aspect will be their priority,” Prof. G.L. Peiris added.

Sri Lanka’s charismatic leader Mahinda Rajapaksa turns 76

Being a good leader and maintaining that high quality for half a century is no mean achievement. One must possess effective leadership qualities that helps one achieve higher goals and objectives. This is true of the nonviolent resistance and persistence of Mahatma Gandhi and the magnanimous vision of Nelson Mandela. Our leaders, their policies and their acts are creating history for generations to come.

In his 76 years of life, Sri Lankan Prime Minister Mahinda Rajapaksa has established himself as a national leader and an international statesman of considerable stature. During his 51 year-long political career, he has represented the spirit of an era, the pulse of the nation and the warp and woof of the social, cultural and political fabric of Sri Lanka.

He is known as the ultimate survivor, a political enigma, an ardent nationalist, a champion of the people, protector of the nation, trusted custodian of Buddhism and the guardian of religious freedom of all communities, a human rights activist, and last but not the least, an untiring street-fighter. These are few sobriquets of Mahinda Rajapaksa, who celebrates his 76th birthday on Thursday.

Political career

Mahinda Rajapaksa began his checkered political career on May 27, 1970 as the youngest Parliamentarian. He reached his zenith when he guided the Lankan Armed Forces to end the 30-year-long fight against the brutal terrorist organization, the Liberation Tigers of Tamil Eelam (LTTE) in 2009 as the President and Supreme Commander of Armed Forces of Sri Lanka.

He entered Parliament at the young age of 24 and served in many capacities over many years. He held several ministries ranging from Labour to Fisheries becoming Prime Minister in 2004. He was elected The fifth Executive President of Sri Lanka in the following year.

Although Rajapaksa was born into a land-holding elite family, he was always very close to the common people irrespective of their creed, caste, religion or social status. His uncle, D. M. Rajapaksa, known as the ‘Lion of Ruhuna’ was a popular political leader of the area. After his demise, Mahinda’s father, D. A. Rajapaksa, served as a member of the Sri Lankan Parliament, holding the Beliatta seat from 1947 to 1965. In 1970, Mahinda became Sri Lanka’s youngest-ever Member of Parliament when he was elected to the seat that his father had vacated just five years earlier. Young parliamentarian Mahinda studied law after completion of school studies and received a law degree from Colombo Law College in 1974.

Mahinda’s exceptional characteristic has been the ability to face defeats. After losing his seat in parliament in 1977, he focused on his law career until reentering Parliament in 1989, this time representing the Hambantota district. He was reelected and continued as a Parliamentarian until 2005.

A popular center-left politician, Mahinda was at the forefront as a defender of human rights during the state suppression of a youth rebellion in 1987-90, when Sri Lanka was recognized as one of the world’s most dangerous countries for the supporters of youth rebellions. His fight for the rights of the suppressed people stood him in good stead in his political journey throughout.

In the January 2010 presidential election, he got reelected easily, winning 58 percent of the vote. Rajapaksa’s second term saw sustained economic growth. He continued to enjoy the strong support of the large Sinhalese majority in the country. However, his relations with Western countries were strained over Sri Lanka’s refusal to bow down to their call for international investigations of the military’s treatment of Tamils in the last phase of the conflict.

Addressing the United Nations General assembly he said, “Sri Lanka’s Government, at all times responsive to the priorities reflected in domestic public opinion, is engaged in all measures required for meaningful progress in these fields. A significant event in this regard is the opportunity which the people of the Northern Province enjoyed at the elections, to elect their representatives in the Provincial Council. It is a matter of legitimate satisfaction to me that this was made possible after the lapse of almost a quarter of a century. There can be no doubt regarding the crucial importance of this measure in the context of political empowerment and reconciliation. It is clearly the responsibility of the international community to assist with these efforts and to ensure their success for the benefit of all the people of Sri Lanka.”

Without mincing his words, President Mahinda Rajapaksa pointed out that in spite of the visible progress made, and consistent engagement with UN mechanisms, many countries are surprised at the disproportionate emphasis on Sri Lanka, and the unequal treatment through the multilateral framework. The basis for this relentless pursuit was questioned.

“It is my conviction that the UN system should be astute to ensure the consistency of standards applied so that there is no room for suspicion of manipulation of the UN System by interested parties to fulfill their agendas,” he said.

Mahinda Rajapaksa worships the soil of Sri Lanka after winning the war against the LTTE
READ: Steps underway to avert rise in COVID cases due to protest in Colombo: Health Ministry

Charismatic leader

The emphasis put by Mahinda Rajapaksa as the President of the country in 2012 is equally relevant today. The UN has consistently ensured cooperation between States, and provided a universal platform for discussions on a range of issues, contentious or otherwise. “It is imperative that we jealously protect and abide by the principle of equal treatment of countries, which has been the very basis of this global organization. Be it economic or political issues, equality must form the bedrock of all international interactions,” he said.

The crusade commenced by Mahinda Rajapaksa and the policies outlined by him will continue to guide the nation for years to come. The people’s mandate given at the Presidential Election in November 2019 to his brother Gotabaya Rajapaksa, was another fitting tribute to Mahinda, a leader who has carved a niche for himself in the history of our nation.

Today, as Prime Minister in the government of President Gotabaya Rajapaksa, Mahinda will no doubt carry forward his mission of ensuring equality and prosperity for all the peoples of Sri Lanka.

Emphasizing this, Mahinda Rajapaksa, in a recent speech, stressed his commitment to work with determination and patience to ‘safeguard the Motherland we have built, and take it further to the heights of world-winning achievements’.

“Our future responsibility is to safeguard all those achievements and proceed with the tasks of nation building,” said Mahinda Rajapaksa, the charismatic leader with an ever-growing political appeal.

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72 virgins was the reward for Zahran’s act of Jihad: Prof. Rohan Gunaratna

Zahran Hashim’s ideology was that one of the rewards awaiting those who perform Jihad was 72 virgins in heaven, said Director General of the Institute of National Security Studies Prof. Rohan Gunaratna.

He made this revelation during a televised interview recently.

“Zahran Hashim believed that those who performed Islamic Jihad were entitled to 72 virgins in heaven. He firmly believed that by his attack, he would be able to meet his God in heaven, and would receive pardon for all his wrong doings. This ideology also claimed that 70 members of his family will be entitled to see heaven when they die,” he said.

Gunaratna added that this ideology was taught to the other suicide bombers, who also firmly believed and accepted this ideology.

“The other suicide bombers believed that they would also be doing the right thing by performing Jihad as per Zahran’s teachings,” he added.

Meanwhile, in the video that was recently released, Hashim claimed that the funds used to carry out the attacks were “halal”, Gunaratna explained, and that funding was not provided by non-Muslims or any Government.

“The source of finance for Zahran is from the two sons of the richest spice trader in Sri Lanka. All the ongoing international investigations on the source of funding also show that it came from a company owned by the spice trader’s sons,” Gunaratna mentioned.

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Confectionery exporters look to relocate overseas

With the high cost of manufacturing, supply constraints and no policy direction from Budget 2022, the $ 150-200 million-worth confectionery exporters are looking to move their production to more favourable overseas locations.

Despite having orders, confectionery exporters are finding it extremely difficult to match prices quoted by buyers and be competitive in the international market.

“We agree on orders for two years. Although we have several contracts we cannot be competitive, as raw material prices have gone up by 10-20% just within the past six months. We cannot even renegotiate our prices because there are many players who can supply cheaper. Our export orders are in jeopardy,” Lanka Confectionery Manufacturers Association (LCMA) President S.D. Suriyakumar told the Daily FT.

He noted that the companies would have at least survived with the price increases had there been no shortage of raw material supply and proper policy to encourage exporters more effectively.

“Inputs that have come to the port are delayed with banks not releasing foreign exchange. The process to release goods takes 15-20 days from the port and we have to pay demurrage on top of the delay by banks. The businesses have to bear all the additional cost. We have been supportive to the Government given the pandemic, but it seems the authorities have taken us for granted,” Suriyakumar opined.

He said Budget 2022 was the last hope the industry had but the sector and its contribution to the national economy were ignored, hence disappointing.

At present, companies are exploring opportunities to either get into manufacturing agreements with overseas companies (outsource manufacturing) or set up factories in Southeast Asian countries where policies are more conducive to do business compared to Sri Lanka, he said.

“Prices have gone up in those markets as well, but compared to Sri Lanka they are much less and there is policy consistency and a considerable amount of raw material to manufacture without major price and supply constraints compared to Sri Lanka,” he pointed out.

Confectionery exporters are exploring opportunities in Malaysia, Thailand, Indonesia, Vietnam and Bangladesh.

Suriyakumar also said the exporters in general had been struggling for the past one-and-a-half years to find containers to ship their goods to relevant markets on time.

“We had many discussions with higher authorities of the Government, but to date no tangible solution has been implemented to support exporters – the only significant foreign exchange earners of the economy,” he claimed.

The LCMA President asserted that member companies had invested over Rs. 10 billion to bring in the technology and machinery to produce world-class confectionery products locally, apart from incurring cost on promotion activities to bring the ‘Made in Sri Lanka’ brands to the shelves of the leading supermarkets in European and African countries.

“At the early stage of our export industry, our products were only sold in areas where ethnic groups were residing, but now our products are in leading supermarkets such as Tesco, Lulu and Walmart, to name a few. We export to over 50 countries at present,” he said.

Suriyakumar cautioned that if export companies were to move out of Sri Lanka to other regional countries, it would immediately put 550,000 people out of employment. “There are over 50,000 direct employees and 500,000 people engaged in the confectionery industry. If the larger companies stop plants in Sri Lanka, it will directly impact their livelihood and the economy too will suffer with no foreign exchange inflow,” he warned.

He claimed that the business situation in Sri Lanka was clearly not very conducive for any investor, adding that the economy would further suffer if no proactive measures were taken to protect the few remaining export industries.

“Several confectionery manufactures will stop certain production lines sooner or later considering the high cost and shortage of raw material. This will also reflect in short stocks in the market, closure of factories, slash in employment and allowances and ultimately increase poverty among the society,” he cautioned.

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ACMC Has No Deal With Govt – Bathiudeen

Leader of the All Ceylon Makkal Congress (ACMC) SJB Parliamentarian Rishad Bathiudeen,who is accused of having an underhand deal with the Government, said he would decide whether his party would support Budget 2022 or not after the party’s Central Committee meets on Sunday (21).

He was speaking at the opening of the children’s playground at the Nirulla Muslim School in Akurana yesterday (18).

Speculation about Bathiudeen having a secret deal with the Rajapaksa Government surfaced with his release from remand prison and his absence in recent protests organised by the SJB. “Our party is not satisfied with this Budget.

But we have not yet decided whether to support the Budget or not. That decision will be taken next Sunday. Our party did not participate in the recent protests by the SJB because we have not yet formed an alliance with Sajith Premadasa. However, we work together as the Opposition. I praised Prime Minister Mahinda Rajapaksa in Parliament recently, and some people have assumed that we have a deal with the Government. We have no such deal with the Government,” the ACMC Leader said. During the nine years that Mahinda Rajapaksa was President, I worked with that Government. At that time President Rajapaksa and I did a lot of work to develop the North and the East as well as the country.

He has proved to be a good leader who worked for the country. But the present Government has not done anything in the past two years. The only thing that has happened is the economy has collapsed and the country is going backwards,” he added. “It is true that several members of our party supported the Government on the 20th Amendment to the Constitution. But this is not the view of our party.

This is the just personal opinion of MPs. Today,some Ministers take to the streets and criticise the Government to the public and the Media but never say a word against the Government in Parliament. We say criticising the Government on the roads should be really done in Parliament. People have now identified the double standards,” he said.

“Anyone one who wants peace, unity and brotherhood in this country would accept giving the leadership of the Presidential Task Force on ‘One Country, One Law’ to Ven. Gnanasara Thera. My view is the same,” Bathiudeen added. “I have something to say to the people of this country. I was imprisoned twice for my innocence.

I was once imprisoned for giving the right to vote to the hundreds of thousands of Muslims who lost their voting rights. The second time I was imprisoned for aiding and abetting terrorism. These are absurd and baseless allegations. I tell the people of this country that the truth will one day prevail,” he said.

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Court order preventing payment for Chinese fertilizer shipment further extended

The Colombo Commercial High Court today (Nov. 19) extended the interim order issued against the Chinese company that shipped fertilizer containing harmful bacteria to Sri Lanka, its local agent and the People’s Bank.

Accordingly, the relevant court order, which prevents the payment to the Chinese firm on Letter of Credit, was extended until November 30.

During a previous proceeding, Additional Solicitor General Susantha Balapatabendi, who appeared on behalf of the CFC, told the court that China-based Qingdao Seawin Biotech Group Co., Ltd. had shipped a fertilizer consignment, which is a partial shipment worth more than a billion rupees that was procured through a tender process initiated by the Agriculture Ministry.

Although the said Chinese firm was required to ship sterile organic fertilizer under the tender contract, it had admitted in its shipping advice that the consignment may contain microorganisms, he had further told the court.

The National Plant Quarantine Services (NPQS), which tested the sample sent to them, had confirmed the presence of organisms, including certain types of harmful bacteria, the Additional Solicitor General had said, adding that, in this context, the Chinese firm in question has failed to complete the accepted terms of the tender.

As per the terms of the contracts, the payment for the controversial organic fertilizer shipment was slated to be made through a Letter of Credit established via the People’s Bank.

However, in September, the NPQS, which tested the fertilizer samples sent by the Qingdao Seawin Biotech Group Co., Ltd., revealed the detection of the microorganism called ‘Erwinia’. Several days later, Sri Lanka decided to suspend the importation of organic fertilizer from Seawin Biotech.

The Chinese firm retaliated, saying that the NPQS took only three days to draw a suspicious conclusion although it takes more than 6 days to identify Erwinia as per the ISPM27 rule in IPPC (International Plant Protection Convention).

The “unscientific detection method and conclusion of NPQ in Sri Lanka” are not in compliance with international animal and plant quarantine convention, Seawin Biotech claimed further and urged that Swiss SGS group, a top third-party testing organization, should re-test whether the samples contain Erwinia.

But Agriculture Minister Mahindananda Aluthgamage later insisted that the ship carrying the fertilizer consignment containing harmful bacteria will not be allowed into Sri Lanka. He also noted that the samples from this fertilizer shipment will not be re-tested, nor will any payment be made to the Chinese firm in question.

Later, the CFC secured two enjoining orders from the Colombo Commercial High Court against the Seawin Biotech, its local agent and the state-run People’s Bank, preventing the payment to the Chinese firm on Letter of Credit. The first court order against the Chinese firm in question was secured on October 23, blocking the People’s Bank from making any payment under a Letter of Credit opened in favour of the Chinese company.

On October 29, the Economic and Commercial Office of the Chinese Embassy in Colombo blacklisted the People’s Bank, citing its failure to make the payment in compliance with the Letter of Credit and the contracts. In a statement, the Chinese Embassy stressed the People’s Bank of Sri Lanka has recently witnessed vicious event of Letter of Credit default, causing huge losses to the Chinese enterprises in international trade with Sri Lanka.

However, the People’s Bank, in response to the Chinese Embassy’s move, said the payment for the organic fertilizer consignment shipped by Qingdao Seawin Biotech Group Co. Ltd. was halted due to an interim injunction issued by the court.

In the meantime, the Qingdao Seawin Biotech sent a letter of demand on Monday (November 08), seeking USD 8 million in damages from the Additional Director of the National Plant Quarantine Services (NPQS) of Sri Lanka. The Chinese firm sent the letter of demand to Dr. W.A.R.T. Wickramaarachchi, Additional Director of the National Plant Quarantine Service of the Department of Agriculture.

President Gotabaya completes two years as Head of State

Today (18) marks two years since President Gotabaya Rajapaksa was elected to office.

Gotabaya Rajapaksa was elected as the 7th Executive President of the Democratic Socialist Republic of Sri Lanka following the Presidential Election held on 16th November 2019.

President Rajapaksa took his oath of office within the sacred precincts of the historic Ruvanvaliseya Stupa in Anuradhapura on 18th November 2019.

“I am well aware that I am not only the President of those who voted for me but also the President of those who used their vote against me. I know well that I am bound to serve all Sri Lankan citizens irrespective of their ethnicity or religion,” the President pledged in his inaugural speech two years ago.

“Though I was aware that I could win the presidential election with only the support of the Sinhalese community, I requested the Tamil and Muslim communities to be a part of my victory. However, their response did not meet my expectations. As the new president of this country, I request everyone to unite as Sri Lankans. Now, we all have the responsibility of taking our country forward as one nation. Your mandate has elected me as the president of this country, to implement the proposals we presented through the people-centered policy manifesto, ” he said.

” We will follow a neutral foreign policy with every country. We have no reason to get involved in the battles between other countries. We request all nations to respect our nation’s sovereignty. the government should always set an example for society. Professionalism and efficiency should be the cornerstone of government administration. Meritocracy and technocracy should be promoted at all times. Corruption will never be tolerated under my administration. I am the executive president of this country. I am not going to hesitate to exercise my executive powers to ensure prosperity in Sri Lanka. I love my country, and I am proud of my country. I have a vision for my country. I request all patriots to join hands to make this country a prosperous nation for our future generations.” he further stated.

Incidentally, today also marks the birthday of the Prime Minister Mahinda Rajapaksa, to whom the President wished on social media.