Author: TELO Admin

Sri Lanka has imposed new restrictions and guidelines as measures to prevent the spread of the COVID-19 virus within the country.

The measures include closing gyms, spas, children’s parks, swimming pools, and indoor sports halls with immediate effect.

In addition to this, musical events, beach parties, and carnivals have also been banned.

These new restrictions and guidelines will come into effect immediately and last until August 31.

According to the revised guidelines, the shopping malls will remain closed while only one person per household is permitted to go outside unless engaged in essential services.

The public transport is only allowed to transport seated passengers of the bus/train within the provincial limits.

Private sector offices can be operated with a minimum number of staff required while heads can summon employees outside the province.

Besides, the schools, preschools, universities, tuition classes will remain closed while weddings are also not allowed.

Spas are not permitted while children’s parks, carnivals, musical shows and beach parties are also not allowed under the revised guidelines.

However, restaurants can be operated with 50 percent of seating capacity while hotels, rest houses and guest houses are allowed to operate with 25 percent of capacity.

Reverend Father Cyril Gamini Fernando has stated that justice is yet to be served with regard to the Easter Sunday terror attacks of 2019, and that the Vatican is looking into the matter.

“We still do not see the truth about this being revealed. So we are being forced to seek international assistance. We believe that His Holiness and the Vatican’s Commission on Justice and Peace are looking into this,” he said.

He also mentioned that the information revealed by former Attorney General Dappula de Livera on the same must be divulged to the public immediately.

“We hope that the government will continue to implement these investigations, lawsuits, and further investigations, as well as the recommendations of the Presidential Commission on the Easter Attack. It is also important to uncover the conspiracy revealed by former Attorney General Dappula de Livera,” the Reverend Father stated.

The central bank of Bangladesh (BB) will lend $50 million to under-pressure Sri Lanka this week as part of Bangladesh’s efforts to support the Island nation suffering from a foreign exchange crisis, The Daily Star reported.

The credit under the first-ever loan to any country from Bangladesh will be given under the currency swap agreement inked by the BB and the Central Bank of Sri Lanka (CBSL) on August 3.

As per the deal, the BB will provide a total of $250 million to help prop up the island nation’s fast-depleting foreign reserves and ease pressure on its exchange rate.

The financing will be given in three phases. The first tranche of the loan will be given this week, according to a top official of the central bank.

The remaining two tranches will involve $100 million each.

Seeking anonymity, the BB official said the central bank would give the first tranche for three months.

If the CBSL fails to repay the loan within the deadline, it will get three more months to repay. If it fails to pay back again, it will be given three more months.

The CBSL will return the amount in three months at the interest rate of the London Interbank Offered Rate (Libor) plus 2 per cent. If it can’t honor the deadline, the interest rate will not change.

But if the tenure goes up to six months, the interest rate will be Libor plus 2.5 per cent.

The Libor is the global reference rate for unsecured short-term borrowing in the interbank market and acts as a benchmark for short-term interest rates.

This week, the three-month Libor is 0.14 per cent and the six-month Libor is 0.18 per cent.

If the CBSL fails to return the money, the Sri Lankan government will pay back the loan as per the state guarantee attached in the agreement, the BB official said, adding the outstanding balance limit will never exceed $200 million. He said Bangladesh was not extending the loan for any commercial purpose.

“It is being given to help a friendly SAARC member country which is in trouble. Bangladesh is, however, following the international best practices and maintaining due diligence.”

The decision for the currency swap agreement was set in motion during Sri Lankan Prime Minister Mahinda Rajapaksa’s visit to Bangladesh in March.

As per the deal, the CBSL will hand over an equivalent amount of its currency, which depreciated 6.8 percent against the US dollar this year.

Yesterday, the US dollar traded at 199.52 Sri Lankan rupees.

The BB will open an account with a bank in the South Asian country to keep the sum, which will be around 49.5 billion Lankan rupees, a BB official said earlier. The amount would be used for import payments.

Bangladesh’s import bill with Sri Lanka is $50-55 million a year.

The swap agreement is a good deal for the BB, which has a record $45.9 billion in its coffers as of August 3.

Under the agreement, Sri Lanka will pay more than double Bangladesh gets from all of its investments.

The injection of the American greenback from Bangladesh would be a great relief for Sri Lanka, which has $3.7 billion of foreign debt maturing this year.

It had $2.4 billion in foreign currency reserves at the end of July, down from $4 billion in April.

In 2020, Sri Lanka’s economy contracted 3.6 per cent because of the financial fallout from the coronavirus pandemic.

The country’s $4.5-billion tourism industry, one of its major foreign currency earners, was hit particularly hard, while its exports were down by about 17 per cent last year.

Because of the foreign exchange crisis, the Sri Lankan government imposed an indefinite import ban in March last year to save hard currency, according to the financial newspaper Nikkei Asia.

Sri Lanka rupee’s non-credible peg to the US dollar which was kept to around 203 in the breach with the moral suasion has broken to 211-215 levels with most banks giving up on the earlier, rate, market participants said.

Most domestic banks have started to sell dollars around 211 to the US dollar to importers while foreign banks are selling around 215, market participants said.

On Tuesday Commercial Bank was quoting a rate of 206.50/211.00 for Telegraphic Transfers, Hatton National Bank 206/211, Seylan Bank 204/211.

State-run Bank of Ceylon was still quoting 198.50/203 on their website with a proviso that deals above 7,500 would have to get a quote from the dealing room.

Sri Lanka’s rupee peg is non-credible (or soft) due to liquidity injections and the lack of floating overnight rate to keep the exchange rate fixed (credible peg).

Sri Lanka has been printing large volumes of money to pay state worker salaries and keep interest rates low and turn government debt into reserve money (bank notes or liquidity) at weekly bill and bond auctions which then hit the forex markets.

Two weeks ago a failed bond auction injected 53 billion rupees into money markets only part of was taken out before it disappeared as outflows mostly through government debt.

Unlike in mid 2020, when private credit collapsed, with stronger economic activity and growing private credit, printed money hits the forex market faster as cascading credit takes place.

Weak confidence had also led to capital flight from stock markets where foreign investors benefited from rising stock prices due to liquidity injections and higher profits reported by so-called ‘crony’ import substitution firms before costs and weak demand caught up with them.

Analysts had called for curbs on the domestic operations of the central bank as policy became increasingly activist since 2011 with discretionary policy involving ‘flexible’ exchange rate and ‘flexible’ inflation targeting.

Sri Lanka needs monetary discipline to avoid further downgrades: Bellwether

Bank Treasurers had warned authorities at a meeting on Wednesday that the non-credible peg at 203, which was kept through a moral suasion and informal agreement was not tenable.

Due to bar on outright interbank trading there is no price transparency for the dollar rupee rate in the spot or forward market, leading to banks charging and paying various rates to exporters and importers based on bargaining power.

Another meeting with authorities is due shortly, market participants said.

Sri Lanka’s has fallen victim to Keynesian stimulus, discretionary monetary policy and undermining of Treasuries auctions since the end of the war, critics have said.

The China Development Bank and Sri Lankan Government entered into an agreement of RMB 2 Billion (approx LKR 61.5 Billion) Term Facility on Tuesday (17).

The Chinese Embassy in Sri Lanka Tweeted that this agreement was signed upon a request from Sri Lanka to support its #COVID-19 response, economic revival, financial stability and livelihood betterment.