Category: News

The sharpest depreciation of the rupee following the free float of the currency ignited across the board prices hike with cost likely to soar further if Ceylon Petroleum Corporation revises upwards its pricing whilst the Central Bank said spikes are temporary and its recent moves will usher longer-term benefits and stability.

Of the announced hikes, most centred around food on the basis that producers will incur higher prices on account of imported flour and other ingredients would be costlier following the near 30% depreciation of the rupee.

Forex markets and the private sector saw continued uncertainty as at interbank level the US Dollar was quoted at between Rs. 260 and Rs. 280. Dealers said the highest-level transactions were done at Rs. 265. However CBSL continued to quote Telegraphic Transfer rates at Rs. 249.96 (buying) and Rs. 259.99 (Selling).

Prima said that One kilogram of Wheat Flour was increased by a price between Rs. 35 to Rs. 45 whilst the other producer Serendib increased it by Rs. 35.

The All Ceylon Bakery Owners’ Association said the price of a loaf of bread has been increased by between Rs. 20-30 and a loaf would cost between Rs. 110 and Rs. 130. The price of a sweet bun has been increased by Rs. 10.

The All Ceylon Restaurant Owners’ Association said the price of a rice packet has been increased by Rs. 20; Kottu by Rs. 10 and Short Eats by Rs. 5.

Separately the Civil Aviation Authority said the price of airline tickets has increased by 27%

The Ceylon Cellular Vendors Association said due to the increase of the dollar, the price of phones and accessories will be increased by 30%.

The hikes are coming as inflation hit a record 16.8% in January with food prices up 25%.

Prices are likely to go up further as State-owned Ceylon Petroleum Corporation (CPC) under growing pressure to adjust its prices upward following global spikes. Lanka IOC revised its prices citing devaluation as well as rise in global prices. It increased diesel by Rs. 75 per litre and petrol by Rs. 50 per litre. Though losing Rs. 1,201 per litre of diesel, the CPC has avoided increases despite LIOC implementing two revisions within a month.

Even without CPC hike, three-wheelers drivers are demanding that the base fare for the first kilometre must be Rs. 80 up from Rs. 60 implemented in early this year.

Under flak from the Opposition and economists for sheer mismanagement and late decisions, Central Bank Governor Nivard Cabraal took to video and CBSL Facebook to reassure markets and the public.

“We are aware of the implications of these moves. It will be short term and greater stability will ensure long-term benefits to all,” he said.

Cabraal said that recent policy rates hike and allowing flexibility of the exchange rate (depreciation) were made in ensuring economic and financial system stability which are core responsibility of the CBSL. “These decisions are not avoidable,” he said in discharging CBSL’s duties.

Stressing that a flexible exchange regime will boost foreign exchange inflows thereby help stabilise the economy, Governor however stressed that “CBSL stands ready to meet any challenges post devaluation.”

Difficult and challenging times. Maintaining macroeconomic stability is an arduous task. CBSL initiated a host of measures amidst the COVID pandemic to cushion the impact. He said that the Russia-Ukraine war posed the biggest setback globally. In that context CBSL had to opt for new tools to ensure macroeconomic stability. They included hiking interest rates and introducing flexibility for the exchange rate.

CBSL Head of Economic Research Anil Perera said a managed exchange rate since the pandemic helped the country to mitigate the impact of global and local shocks to the economy. However support extended to the economy and the public by way CBSL actions needed to be relaxed to ensure greater stability and sustainability.

He said that reforms were required especially since the outbreak of the Russia-Ukraine war and resultant spike in oil prices. He said depreciation will cause short term challenges such as rise in prices but expected stability in the currency will help.

“Foreign inflows will increase and exchange rate flexibility will boost exports whilst discouraging imports,” Perera said, adding that the CBSL will closely monitor the behaviour of forex markets and take appropriate action to ensure further stability if necessary.

On 11 March, the High Commissioner of India to Sri Lanka, Gopal Baglay attended the signing ceremony of the Joint Venture & Shareholders’ Agreement (JVSHA) for the Trincomalee Power Company Limited (TPCL) which is a joint venture between NTPC Limited from India and the Ceylon Electricity Board (CEB) for developing a 100 MW Solar Power Plant at Sampur in Sri Lanka.

The signing ceremony took place at the Ministry of Finance of Sri Lanka in presence of the Minister of Finance, Basil Rajapaksa; Minister of Power, Hon. (Mrs.) Pavithradevi Wanniarachchi; State Minister of Aviation and Development of Export Zones, D.V. Chanaka; and State Minister of Solar, Wind and Hydro Power Generation Projects Development, Duminda Dissanayake. The signatories to this tripartite document included Narinder Mohan Gupta, Head of International Business Development, NTPC; M.M.C. Ferdinando, Chairman of the CEB; and N.S. Ilangakoon, Vice-chairman (CEB) and Chairman TPCL.

may be recalled that during the visit of Minister of Finance of Sri Lanka, Hon. Basil Rajapaksa, to India last year, both sides had resolved to enhance investments from India in various sectors in Sri Lanka that would contribute to growth and expand employment. The Sampur Solar Power Project is an important step in this direction.

Signing of this JVSHA demonstrates yet again, India’s ability to respond to Sri Lanka’s priorities in a comprehensive and mutually beneficial manner. We will continue to encourage and facilitate the expedited and effective implementation of this project.

India is committed to expanding the role of renewable energy and helping build cleaner, greener and climate-resilient societies. At the international level India has provided institutional solutions such as the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure for Climate Adaptation. Our cooperation with Sri Lanka in this domain will only become stronger with the implementation of the US$ 100 million Line of Credit offered by India to Sri Lanka for the development of solar power projects in Sri Lanka. Similarly, there is significant interest in the private sector on both sides for cooperation in renewable energy which is likely to increase in the coming years.

In continuation of Indian Navy’s endeavor to build ‘Bridges of Friendship’, with the Sri Lankan navy, four ships of the Western Fleet of Indian Navy under the charge of Flag Officer Commanding Western Fleet (FOCWF), Rear Admiral Sameer Saxena, visited Sri Lanka from 09-12 March.

The indigenous guided missile frigate BRAHMAPUTRA along with frigate TALWAR entered Hambantota port while the advanced indigenous destroyer INS CHENNAI and frigate TEG entered Colombo harbor.

The ships were warmly welcomed in both these places by the Sri Lanka Navy in accordance with naval traditions.

The High Commissioner of India , Gopal Baglay hosted a reception onboard INS Chennai on 10 March 2022. Foreign Minister Prof G.L Peiris represented H.E Gotabaya Rajapaksa, President and Defence Minister of Sri Lanka, at the event. Parliament Speaker Mahinda Yapa Abeyawardena also graced the occasion.

Welcoming the guests, High Commissioner Gopal Baglay highlighted the importance of oceans and how they bind the two countries to achieve common prosperity, security and also health in the present scenario. He reiterated the commitment of the Government of India to stand shoulder to shoulder with Sri Lanka in addressing these common challenges. He also highlighted that Colombo Security Conclave is a significant initiative in this field and cooperation through the forum needs to be developed further.

In his remarks, FOCWF highlighted the historic bonds of friendship between the two navies and emphasized the need for cooperative efforts to ensure Security and Growth for All in the Region (SAGAR).

Lankan Foreign Minister Prof G.L Peiris lauded Prime Minister Narendra Modi’s ‘Neighborhood First’ policy. He appreciated the fact that the Finance Minister of India had assured priority to Sri Lanka in the sphere of economic cooperation. Prof. Peiris also called for deeper people to people ties, development of ports and harbors, cooperation in oil and gas, tourism and increased investments from India. He further emphasized that the future of the world lies in Indo- Pacific and BIMSTEC region and thus, through platforms like IORA and Indian Ocean Conference, Sri Lanka will strive to establish a ‘Rule Based Order’ for continued peace in the region. He also welcomed more such visits by the Indian Navy in future.

On 10-11 March, FOCWF made courtesy calls on the Foreign Secretary, Chief of Defense Staff & Commander of Sri Lanka Army and Commander of Sri Lanka Navy. Further, the visiting ships carried out various mutually beneficial training activities with the Sri Lanka Navy and other social engagements.

The visit of the Western Fleet to Sri Lanka strengthens the close bonds of friendship between the two navies and helped achieve greater interoperability through the conduct of various activities in harbor and at sea as part of Maritime Partnership Exercise including Flying Operations, replenishment approaches and tactical manoeuvres.

Amidst rising reports that a national government was being discussed between the Rajapaksa brothers and UNP Leader Ranil Wickremesinghe which would see President Gotabaya Rajapaksa as head of state and Wickremesinghe as the new Prime Minister, Prime Minister Mahinda Rajapaksa yesterday firmly denied these reports saying such a matter was not discussed with the UNP.

In a meeting with some senior journalists at Temple Trees, Prime Minister Rajapaksa said that while Wickremesinghe and he were very good friends, their policies and political ideologies were different hence they could not work together in a joint government. Rajapaksa who was however of praise for Wickremesinghe also said that a national government, amidst the present crises, was not being discussed with any political parties and the government would resolve all the issues soon.

The Daily Mirror learns that proposals and recommendations by all political parties to address the present issues, will be discussed at an All Party Conference chaired by President Gotabaya Rajapaksa and Mahinda Rajapaksa, when they meet on March 23 at 10 pm.

All political party members have been told to attend the conference, where several issues will be discussed. Meanwhile. when questioned as to why he made a statement last week stating that the fuel shortage was artificially created, Prime Minister Rajapaksa said that at a time when former minister Udaya Gammanpila had made a public statement saying there was fuel to last only 4 days in the country, the Prime Minister had immediately telephoned the Chairman of the Ceylon Petroleum Corporation who informed him that ships with fuel had already docked at the Colombo Port.

The CPC Chairman had also informed the Prime Minister that they had the necessary funds to purchase the fuel and it was surprising that Gammanpila had made such a statement. However Gammanpila’s statement had caused panic among the public and excess buying which led to an immediate shortage at the fuel stations. He said this could have been avoided.

The Prime Minister further at the meeting yesterday said that the forex crisis was being looked into and soon the power and fuel crisis would also be resolved.

The Central Bank of Sri Lanka announced that the selling price of one US dollar Thursday is close to 260 rupees and buying rate is Rs. 250 per US Dollar.

Following the Central Bank’s decision to free float the value of the rupee against US Dollar, the buying and selling prices of the US dollar against the rupee are rising rapidly. Accordingly the buying price of a dollar today is 249 rupees 96 cents and the selling price is 259 rupees 99 cents.

Several of Sri Lanka’s leading commercial banks today have set a selling price of 260 rupees for a US dollar and 250 rupees for buying a dollar.

However, the Central Bank recently allowing greater flexibility in the exchange rate said expected that forex transactions would take place at levels which are not more than Rs. 230 per US dollar.