Re: Thread for News on CSE and SL Economy

[The Invisible]

Sri Lanka cuts policy rates as rupee falls to new low

ECONOMYNEXT – Sri Lanka has cut its policy corridor by 25 basis points taking the rate at which liquidity is injected to 7.0 percent and the rate at which excess liquidity is taken out to 6.00 percent as the rupee fell to new historic low.

“This decision will complement the measures taken thus far to ease market conditions, and enable the domestic financial market to provide further relief to businesses and individuals affected by the outbreak of the COVID-19 pandemic and restrictions placed to contain its spread within the country,” the central bank said in a statement late Friday

A scheduled monetary policy review will not take place on April 09, 2020 as previously scheduled.

“However, the Monetary Board may review the monetary policy stance of the Central Bank and make necessary changes as and when required in consideration of economic and market developments.”

The central bank has made several helicopter drop style injections to money markets, despite having a soft-peg raising fears for monetary stability and the exchange rate at a time when the country is fighting to battle the spread of Coronavirus.

Another 50 billion rupee bailout facility has been arranged with central bank liquidity for Coronavirus hit businesses.

The rupee fell below 196 to the US dollar in the one week forward market Friday, while the one year rate fell further, taking the implied spot rate even lower, dealers said.

The government has said more imports would be controlled and asked people to grow vegetables. In Sri Lanka there is a belief that monetary instability is linked to trade and not liquidity injections.
(Colombo/Apr04/2020)

[The Invisible]

Sri Lanka tightens capital controls after liquidity injections amid Coronavirus

ECONOMYNEXT – Sri Lanka has tightened controls on foreign exchange outflows for three months as the rupee slid in the wake of rate cuts and ‘helicopter drop’ style liquidity injections made to keep rates down as the country is trying to fight off an Coronavirus outbreak.

Sri Lanka has suspended all remittances by from business foreign currency accounts or personal foreign currency accounts are suspended for three months, Finance Minister Mahinda Rajapaksa said in an order issued through a gazette notice.

Sri Lanka has also suspended a general permission given for residents to invest a limited sum of money abroad though outward investment accounts.

However any foreign investment made through a foreign loan or investments made to comply with a foreign regulator would be permitted.

The larger amounts could also be sent out for regulatory purposes with the specific approval of the central bank.

Sri Lanka has made unprecedented liquidity injections in March and is continuing in April. The rupee has fallen from 182 to the US dollar close to 200 rupees

Sri Lanka has also halted imports of some goods and people have been advised to grow vegetables ahead of more controls.

The full statement is reproduced below:

BY virtue of the powers vested in me under Section 22 of the Foreign Exchange Act, No. 12 of 2017, I, Mahinda Rajapaksa, Minister of Finance, Economic and Policy Development do by this Order,

i. suspend making payments through Outward Investment Accounts for the purpose of making investments in overseas by persons resident in Sri Lanka under general permission granted in the Schedule I of the Foreign Exchange (Capital Transactions in Foreign Exchange carried on by Authorized Dealers) Regulations No. 1 of 2017 published in the Extraordinary Gazette Notification No. 2045/56 dated November 17, 2017, excluding :

a. investments to be financed out of a foreign currency loan obtained by the investor from a person resident outside Sri Lanka under the provisions of the Foreign Exchange Act, or

b. investments to be made to fulfill the regulatory requirement in that country provided that, the Head of Department of Foreign Exchange is satisfied with the fulfilment of such requirement;

 
ii. suspend any outward remittances other than the remittances on current transactions through Business Foreign Currency Accounts or Personal Foreign Currency Accounts held by persons resident in Sri Lanka;

iii. suspend the repatriation of funds under the migration allowance through Capital Transactions Rupee Accounts by the emigrants who have already claimed migration allowance under the general permission stated in the Schedule IV of the Foreign Exchange (Capital Transactions in Foreign Exchange carried on by Authorized Dealers) Regulations No. 1 of 2017 published in the Extraordinary Gazette Notification No. 2045/56 dated November 17, 2017;

iv. limit the eligible migration allowance for the emigrants who are claiming the migration allowance for the first time up to a maximum of USD 30,000 ;

v. the Monetary Board shall have the authority to grant permission in terms of the Section 7(10) of the Foreign Exchange Act for the investments on case by case basis which exceeds the limits specified in the general permission granted in the Schedule I of the Foreign Exchange (Capital Transactions in Foreign Exchange carried on by Authorized Dealers) Regulations No. 1 of 2017 published in the Extraordinary Gazette Notification No. 2045/56 dated November 17, 2017 provided that,

a. the proposed investment is to be financed out of a foreign currency loan obtained by the investor from a person resident outside Sri Lanka under the provisions of the Foreign Exchange Act, or
b. b. the proposed investment is to be made to fulfill the regulatory requirement in that country

This order valied for a period of three months from April 2, 2020.

MAHINDA RAJAPAKSA,
Minister of Finance, Economic and Policy Development.
Colombo,

[The Invisible]

Sri Lanka forex reserves down to Rs7.5bn in March amid liquidity injections

ECONOMYNEXT – Sri Lanka’s forex reserves were down by 412.5 million US dollars to 7,525 million by end March 2020 from 7,938.24 million US dollars in February central bank data showed, as liquidity injections continued in to money markets.

Sri Lanka’s forex reserves are made up of the central bank’s monetary reserves which are collected by mopping up inflows (destroying liquidity) and Treasury reserves built up by borrowings.

Central bank reserves may be compromised if they are tied to swaps (forward cross currency deals which the central bank is contracted to pay out dollars in the future, sometimes at a rate more favourable to the counterparty).

The Bank of Thailand was counterparty to speculators who got liquidity to bust the peg, data released after the East Asian crisis showed.

Sri Lanka’s central bank has injected large volumes of liquidity to the banking system, over and above the cash required

Mercantilists had also claimed that the currency came under pressure from rupee bond sales by foreign investors not over-issue of rupees.

However rupee bond holders became an issue only in the 2008/2009 currency crisis, when the rupee was already at 110 to the US dollars down from 4.70 to the US dollar to join the Bretton-Woods system and exchange and trade controls came soon after.

Ironically before the soft-peg was set up Colombo was a regional financial centre supplying capital to countries like Malaysia under the silver-linked (Indian Rupee) currency board that operated from 1885 to 1950.

Analysts expected the rupee to come under pressure in May as credit recovered, due to unsterilized excess liquidity from April and a possible rate cut as credit demand recovered as had happened in 2018 when the rates were cut in April when the economy recovered.

Analysts had warned that rate cuts and liquidity injections may lead to downgrades and severe deterioration of the external sector.

Liquidity injections forces the peg to be defended, to stop the peg from breaking. Mopping up liquidity on the other had allows forex reserves to built up.

However rates were cut from January 30. Large liquidity injections were made from late February and then in March despite a Coronavirus crisis unsettling market participants. (Colombo/Apr10/2020)

[The Invisible]

Sri Lanka economy may shrink 3.0-pct in 2020: WB

ECONOMYNEXT – Sri Lanka’s economy may contract as much as 3.0 percent in 2020, the World Bank has said as a Coronavirus crisis hit exports, domestic demand and the external sector has also weakened under monetary stimulus.

Most of Lanka’s economic activities have been brought to a standstill from March as the crisis first hit tourism, exports through supply chain disruptions and curfews brought all domestic economic activities to a standstill.

“For Sri Lanka a recession is anticipated, with annual growth estimated between -3.0 and -0.5 percent,” the World Bank said a report on South Asia.

Sri Lanka’s central bank Governor W D Lakshman told a local television channel that the economy would contract in the June quarter.

Sri Lanka was expecting to grow about 3.5 percent in 2020 as the country recovered from the effect of a currency crisis in 2018 brought triggered by liquidity injections to enforce rate cuts.

Sri Lanka’s apparel exports are expected to fall by 1.5 billion dollars in the June quarter industry officials told EconomyNext. Overall exports are expected to fall by a third.

Domestic consumption except for basic foods and medicines has been halted under Sri Lanka’s lockdown.

The World Bank said in for every million dollars of demand forgone in services 170 people would be unemployed in Sri Lanka.

“This means that if consumption were to drop to the levels envisaged under the baseline scenario range (anywhere between 2 to 4 months), overall employment will decline by between 2.4 percent and 9 percent of total employment in those sectors of Sri Lanka,” the report said.

Sri Lanka however is making plans to re-open the economy progressively from late April or early May if new infections go down.

The strategy adopted by Sri Lanka Vietnam and Korea where the infections spread more than the other countries, involving aggressive contact tracing is ill understood by outsiders.

Sri Lanka’s budget was already under pressure before the crisis by a fiscal ‘stimulus’ involving a steep value added tax cut in January which had spooked rating agencies and investors.

Sri Lanka was expected run a a deficit of over 7 percent of gross domestic due to the ‘stimulus’.

The World Bank said Bangladesh Pakistan and Sri Lanka are expected to see deficits rise to between 7 and 10 percent of GDP.

The projections do not take into effect any fallout from a currency slide and effects on external payments.

Sri Lanka’s external sector is again under pressure due monetary stimulus with a soft-pegged exchange rate. Sri Lanka’s rupee has fallen from 182 to the US dollar to around 195 after a some losses were recouped amid intervention. (Colombo/April13/2020)

https://economynext.com/sri-lanka-economy-may-shrink-3-0-pct-in-2020-wb-65531/

[The Invisible]

Sri Lanka 2020 GDP to contract 0.5-pct IMF says amid Coronavirus hit

ECONOMYNEXT – The International Monetary Fund has said Sri Lanka’s gross domestic product would contract 0.5 percent n 2020, down 4.0 percent from an earlier growth projection of 3.5 percent as the country grapples with Coronavirus and the currency has been hit by monetary stimulus.

The IMF is forecasting zero growth for Asia overall in 2020, which has not happened for 60 years.

India is still projected to grow at 1.9 percent and China 1.2 percent. Emerging Asia will still grow at 1.0 percent. World output was expected to shrink 3.0 percent in 2020.

Most countries have put full lockdown except for countries like Vietnam and Korea which are contact tracing aggressively but are on partial lockdowns.

Sri Lanka is also contact tracing aggressively, having started early, which some observers believe is ahead of Korea and may be behind Vietnam whpse

But the country has also put tight lock-down style curfews to plug any ‘leaks’ in contact tracing and the lack of random community testing to find asymptomatic cases.

Public services and health sector is intact with only 233 confirmed cases and perhaps two clusters for which index cases from abroad has not been found.

But the curfews have hit the real economy and the currency is under pressure from liquidity injections.

“The first priority is to support and protect the health sector to contain the virus and introduce measures that slow contagion,” Changyong Rhee, IMF’s Director of the Asia and Pacific Department told reporters at a briefing on the economic outlook for Asia Pacific countries.

“Targeted support to hardest-hit households and firms is needed. This is a real economic shock unlike the Global Financial Crisis. Protect people, jobs and industries directly, not just through financial institutions.”

Unlike free floating exchange rates, countries with soft-pegs (central banks that collect forex reserves but also buy government bonds to inject liquidity and lower interest rates out of sync with the balance of payments and domestic credit trends) that try monetary stimulus can be hit by external meltdowns with fleeing investors, downgrades and in cases default, analysts have warned.

Such contradictory monetary arrangements which necessarily result in frequent balance of payments troubles are also referred to as ‘non-internationalized’ currencies.

“If the situation deteriorates, many emerging economies may to be forced to adopt a “whatever it takes” approach, despite their budget constraints and non-internationalized currencies,” Rhee said

“In many cases, they will face policy trade-offs. For example, central bankers are considering buying government bonds in the primary market to support critical financial lifelines to smaller firms and households to avoid mass layoffs and defaults.

“An alternative to direct monetization could be to use the central bank’s balance sheet more flexibly and aggressively to support bank lending to small and medium-sized enterprises through risk-sharing with the government

Sri Lanka however has already monetized debt, cut reserve ratios and also injected excess liquidity oversupplying cash to the credit system, which has also seen large cash drawdown amid lockdown style curfews.

In the pst balance of payments trouble in years without any external problems including April and July 2019 and the first quarter of 2015, and 2011.

Rhee said countries that face external trouble after monetary stimulus may use capital controls temporarily provided a clear exit path is shown.

Sri Lanka has already slapped exchange controls for three months and import controls.

The monetary troubles have come on top of an an earlier ‘stimulus’ through unexpected tax cut had already damaged Sri Lanka’s budgets and spooked rating agencies.

In the past rating agencies have downgraded Sri Lanka not on deficits, but on monetary instability and reserve losses triggered by liquidity injections, analysts have pointed out. (Colombo/Apr16/2020)

[The Invisible]

Sri Lanka cuts bank rate 500bp to 10-pct, to be linked to ceiling policy rate

ECONOMYNEXT – Sri Lanka has cut the bank rate, the final lender of last resort facility available to banks that face runs, to 10 percent from 15 percent, to bring it line with current policy rates, the central bank said.

Sri Lanka’s central bank last cut the bank rate to 15 percent from 18 percent in 2003.


The central bank said in the future the bank rate will move in line with the policy rate and be 300 basis points above the standing lending facility rate, which is the ceiling rate.

In the 1980s and early 1990 Sri Lanka used to monetize debt at high level and inflation and currency depreciation was steep, triggering high interest rates.

Greater monetary stability was seen from around 2000 to 2011. Monetary stability weakened from around 2012 and has deteriorated sharply from 2015 analysts say.

(Colombo/Arp16/2020)

[The Invisible]

Moody’s puts Sri Lanka rating on watch for possible downgrade

ECONOMYNEXT – Sri Lanka’s B2 rating has been placed rating watch by Moody’s a rating agency for possible downgrade sayig the rupee and tax revenues have fallen, but the agency would watch for three months or more how the country will manage the shock from Coronavirus.

“The decision to place Sri Lanka’s ratings on review for downgrade is prompted by Moody’s assessment that the acute tightening in global financing conditions, fall in export revenue, and sharp slowdown in GDP,” the agency said.

“For Sri Lanka, the current shock transmits mainly through capital outflows, a marked local currency
depreciation, wider risk premia and a sharp drop in GDP growth that raise the sovereign’s debt burden,
liquidity pressures and cost of external debt servicing,”

“This shock occurs at a time when Sri Lanka’s credit profile is highly vulnerable given low reserve coverage of large forthcoming external debt payments and very weak debt affordability.”

Moody’s also said the rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, and falling asset prices are creating a severe and extensive credit shock across many sectors, regions and markets.

The combined credit effects of these developments are unprecedented,” the rating agency said.

“Moody’s regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety.”

Sri Lanka however has contained the Coronavirus outbreak from third countries up to April, after successfully nipping in the bud a Wave I from China.

However Sri Lanka has a soft-pegged regime which analysts warned would get the country in trouble in unless past pratices and liquidity injections were abandoned.

Moody’s however said it would watch the situation for three months or more.

“The review period, which may extend beyond the usual three-month horizon, will allow Moody’s to assess the capacity of the government to secure financing at manageable costs and in a way that does not further weaken the country’s external position and threaten macroeconomic stability,” the agency said.

“The review will also assess the likelihood of the government being able to stabilize its debt burden and restore better debt affordability once the most acute phase of the shock has passed.”

[The Invisible]

Sri Lanka’s Colombo stock exchange to open trading on April 22

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange said trading which had been stopped during a Coronavirus curfew would resume on April 22 Wednesday with restricted hours.

Trading will take place from 1100 am to 1300 hours.

The pre-open session would be from 1030 to 1100 hours.

Sri Lanka’s bank and bond markets were open during April but stock markets were closed.

Some foreign investors were unhappy that that the market was closed and they had no liquidity, brokers with international clients said.

The difference between holding unlisted stocks and buying publicly traded stocks is that there is exit and price discovery, market participants said.

Sri Lanka’s health service and military intelligence had been engaged in a world class contact tracing exercise to keep down Coronavirus infections but economic policy had generally not been up to par critics say. (Colombo/Apr20/2020)

Now what? Will they go ahead with this decision or keep CSE closed due to the extension of curfew?

[LSETech Contributor]

Market will not recommencing on 22/04/2020 as per the latest update
https://www.cse.lk/home/market

Sri Lanka’s Colombo stock exchange to open trading on April 22

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange said trading which had been stopped during a Coronavirus curfew would resume on April 22 Wednesday with restricted hours.

Trading will take place from 1100 am to 1300 hours.

The pre-open session would be from 1030 to 1100 hours.

Sri Lanka’s bank and bond markets were open during April but stock markets were closed.

Some foreign investors were unhappy that that the market was closed and they had no liquidity, brokers with international clients said.

The difference between holding unlisted stocks and buying publicly traded stocks is that there is exit and price discovery, market participants said.

Sri Lanka’s health service and military intelligence had been engaged in a world class contact tracing exercise to keep down Coronavirus infections but economic policy had generally not been up to par critics say. (Colombo/Apr20/2020)

Now what? Will they go ahead with this decision or keep CSE closed due to the extension of curfew?

[කිත්සිරි ද සිල්වාTop contributor]

First, they will kill the sentiment and then they will decide to open.  
( S&P 500 Index 2,838.83 −35.73 (1.24%) Apr 20, 09:59 EDT ).

Market will not recommencing on 22/04/2020 as per the latest update
https://www.cse.lk/home/market

Sri Lanka’s Colombo stock exchange to open trading on April 22

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange said trading which had been stopped during a Coronavirus curfew would resume on April 22 Wednesday with restricted hours.

Trading will take place from 1100 am to 1300 hours.

The pre-open session would be from 1030 to 1100 hours.

Sri Lanka’s bank and bond markets were open during April but stock markets were closed.

Some foreign investors were unhappy that that the market was closed and they had no liquidity, brokers with international clients said.

The difference between holding unlisted stocks and buying publicly traded stocks is that there is exit and price discovery, market participants said.

Sri Lanka’s health service and military intelligence had been engaged in a world class contact tracing exercise to keep down Coronavirus infections but economic policy had generally not been up to par critics say. (Colombo/Apr20/2020)

Now what? Will they go ahead with this decision or keep CSE closed due to the extension of curfew?

[The Invisible]

Sri Lanka faces currency pressure, low reserves, deficits, debt as Coronavirus hits: Moody’s

ECONOMYNEXT – Sri Lanka’s government finances which had started to deteriorate before a Coronavirus pandemic, had been compounded with currency pressure and low forex reserves, Moody’s a rating agency said.

“Sri Lanka’s fiscal position was already deteriorating before the ongoing domestic and external shocks,” Moody’s Investors Service, which had put the island’s ‘B2’ rating on watch for downgrade said.

“We expect the shocks to further weigh on Sri Lanka’s fragile fiscal position, as indicated by widening budget deficits, a growing debt burden and weakening debt affordability.”

Rating agencies had already sounded warning when value added taxes were slashed in January 2020 in a ‘stimulus’ to get higher economic activity instead of waiting for the economy to recover on its own from a currency crisis in 2018.

Sri Lanka cut rates on January 30, and then started to inject cash from February to undermine a soft-peg with the US dollar and make it more difficult to repay foreign debt by creating a ‘foreign currency shortage’ with excess rupees, analysts had pointed out.

In the past rating agencies had downgraded when money was printed to generate foreign shortage and reserve falls, rather than simple expansion in the deficit.

In 2018, though the deficit did not increase, the currency and forex reserves were hit on liquidity injections

“Sri Lanka (B2 review for downgrade) is facing simultaneous domestic and external shocks amid the global coronavirus outbreak,” Moody’s said.

“Capital outflows, marked local currency depreciation, wider risk premia and a further decline in real GDP growth will raise Sri Lanka’s debt burden, liquidity constraints and the cost of external debt servicing.

“This comes at a time when Sri Lanka’s credit profile is highly vulnerable given low reserve coverage of large forthcoming external debt service payments and very weak debt affordability.”

A currency fall would also worsen the debt while slowing growth.

Moody’s said they expected deficits to range around 8 percent of gross domestic product in the near as revenues fell and spending rose.

“Given wider fiscal deficits, we expect Sri Lanka’s debt burden to rise to nearly 100 percent of GDP, weakening Sri Lanka’s already fragile fiscal position,” Moody’s said.

In 2020 and 2021, Sri Lanka has to settle a foreign debt of around 4.5 billion US dollars.

For 2020, Sri Lanka has got 500 million US dollars from China, 300 million US dollars from ADB, and from AIIB and AFD in France.
A swap from India for 400 million US dollars, an IMF program of around 800 million dollars (if a full quota size is given), and another 1.5 billion US dollar equivalent swap from China was on the cards. (Colombo/Apr29/2020-sb)

[The Invisible]

Sri Lanka stock market to have 3 circuit breakers, market to close at 10-pct fall

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange will have three circuit breakers during a sharp falls in the market and stop trading for the rest of the day when it falls 10 percent, the island’s Securities and Exchange Commission said.

The first 30 minute trading halt (circuit breaker) will kick it when the S&P SL20 index falls 5 percent and the second will kick it if the market falls by another 2.5 percent to 7.5 pecent.

If the index falls by another 2.5 percent to 10 percent, trading will end and the market will be closed for the day.

Sri Lanka’s stock market has been closed for most of April amid a Coronavirus curfew and sharp falls, while bond markets are open.

The century old tea brokers also went online during the crisis.

The full statement from the SEC is reproduced below:

DIRECTIVE ISSUED UNDER AND IN TERMS OF SECTION 13 (C) OF THE SECURITIES AND EXCHANGE COMMISSION OF SRI LANKA ACT NO.36 OF 1987 (AS AMENDED)
INDEX BASED CIRCUIT BREAKERS

The Securities and Exchange Commission of Sri Lanka having taken in to consideration the prevailing market conditions has deemed it necessary to amend the current methodology pertaining to Index-Based Circuit Breakers by introducing a Three Tiered Circuit Breaker structure which is to be attached to the S&P SL20 Index.

Accordingly, a Three Tiered Circuit Breaker structure is hereby introduced in order to strengthen the capital market and ensure that precautionary measures are in place to eradicate distortion in the S&P SL20 Index by providing a layered approach as enumerated below;

Three Tiered Circuit Breaker Structure

i. First Circuit Breaker –After commencement of trading of the Colombo Stock Exchange (CSE) for the day, a Market Halt to be imposed for 30 minutes in the event the S&P SL20 index drops by 5%.

ii. Second Circuit Breaker – Having re-commenced trading after the cooling off period of 30 minutes following the S&P SL20 drop of 5%, if the S&P SL20 index drops again by another 2.5%, a Market Halt to be imposed for another 30 minutes.

iii. Third Circuit Breaker – Upon re-commencing trading subsequent to cooling off period of 30 minutes following the S&P SL20 drop of 2.5% (altogether S&P SL20 has dropped by 7.5%) if the S&P SL20 index drops by a further 2.5% (S&P SL20 index has fallen altogether by 10% for the day), trading will be halted and the market shall be closed for the day.

The CSE is hereby directed to implement the aforementioned Three Tiered Circuit Breaker structure.

The aforesaid circuit breaker mechanism shall take effect from the date the market re-opens and shall remain in force until further notice notwithstanding anything to the contrary contained in the ATS or the CDS Rules of the CSE or any decision of the Board of Directors of the CSE that may have been taken in respect of market wide circuit breakers.

The CSE is further directed to inform all broker members and participants of the CDS forthwith of this directive. (Colombo/May01/2020)

[The Invisible]

Sri Lanka economy to contract 1.0-pct in 2020, banks to under pressure from Coronavirus: Fitch

ECONOMYNEXT – Sri Lanka’s gross domestic product is expected to contract by one percent in 2020 and the operating environment for banks in the country has worsened amid the effects of a Coroanvirus crisis, Fitch, a rating agency said.

“Fitch expects Sri Lanka’s economy to contract by 1.0 percent in 2020, from 2.3 percent growth in 2019, due to the impact of the coronavirus pandemic,” the rating agency said.

“The regulator has granted a spate of concessions for businesses and individuals affected by the pandemic, including for the banking sector, which is acting as the intermediary for the relief measures

“We expect banks’ financial profiles to come under stress from the increased challenges in the operating environment, and their key credit metrics are likely to be weaker than our previous expectations, notwithstanding regulatory actions.

Banks could face higher than expected loan losses and may also face funding pressures from abroad.

“There is potential for capital impairment should the downturn from the pandemic prove significantly worse than we expect,” Fitch said.

“We believe the banks’ funding and liquidity profiles could come under pressure if access to foreign-currency funding becomes more challenging given the deterioration in the sovereign credit profile, or if there is a flight to quality, which could affect banks with weaker domestic franchises.”

The full statement is reproduced below:

Coronavirus Pandemic Pressures Sri Lankan Banks’ Ratings

Tue 05 May, 2020 – 23:38 ET
Fitch Ratings-Colombo-05 May 2020: Fitch Ratings has downgraded in May 2020 three Sri Lankan banks’ Issuer Default Ratings after it downgraded Sri Lanka’s sovereign rating to ‘B-‘ with a Negative Outlook and revised down its assessment of the banks’ operating environment, both of which reflect the escalating impact of the coronavirus pandemic on the country’s economy.
Fitch also maintained a Negative Outlook on the banks’ ratings, as it believes the sovereign’s credit profile could constrain their ratings and to reflect the pandemic’s effect on banks’ intrinsic profiles.

The affected banks are – Bank of Ceylon (B-/Negative), National Savings Bank (NSB, B-/Negative) and DFCC Bank PLC (B-/Negative).

Fitch expects Sri Lanka’s economy to contract by 1.0% in 2020, from 2.3% growth in 2019, due to the impact of the coronavirus pandemic. The regulator has granted a spate of concessions for businesses and individuals affected by the pandemic, including for the banking sector, which is acting as the intermediary for the relief measures; see Sri Lankan Banks’ Risks to Persist Despite Regulatory Measures.

We expect banks’ financial profiles to come under stress from the increased challenges in the operating environment, and their key credit metrics are likely to be weaker than our previous expectations, notwithstanding regulatory actions. This led Fitch to revise its outlook for Sri Lanka’s banking sector to negative in March 2020.

We have also revised our assessment of Sri Lankan banks’ operating environment to ‘b-‘/negative, from ‘b’/negative. We expect the pandemic to continue to pressure the banks’ already-weak operating environment coming into the crisis.

There is a possibility of further downside risk to the economy if the pandemic becomes more pronounced or lingers, notwithstanding the support measures that could benefit banks. The operating environment continues to have a high influence on bank ratings as it affects financial and non-financial rating factors. This is reflected in negative outlooks assigned to all of the financial metrics’ midpoint scores.

Fitch expects the accumulation of potential credit stress, even though the banks are likely to report a lower stock of non-performing and Stage 3 loans in the near term than might otherwise have been the case due to the relief measures. We expect a spike in the impaired-loan ratio for the Fitch-rated banks excluding NSB to just over 13% in 2021, from 9.4% at end-2019, once these relief measures are lifted.

We also expect the banks’ earning and profitability to come under pressure from continued slow loan growth, narrower net-interest margins due to low interest rates, reduced non-interest income and higher credit costs.

The resulting impact on banks’ operating profitability could offset the benefit from the reduction in taxes announced in 2019. We expect pre-provision operating profit/average loans to fall from the current low of 3.9%, while provisions/average loans, which we expect to rise, was 1.1%, leaving a buffer of only 2.9%.

Sri Lankan banks have been raising their capital buffers in response to regulatory requirements – resulting in a core equity Tier 1 ratio of 12.6% at end-2019 for the Fitch-rated banks excluding NSB, but the capital buffers remain thin at some banks, including at some domestic systemically important banks.

There is potential for capital impairment should the downturn from the pandemic prove significantly worse than we expect.

We believe the banks’ funding and liquidity profiles could come under pressure if access to foreign-currency funding becomes more challenging given the deterioration in the sovereign credit profile, or if there is a flight to quality, which could affect banks with weaker domestic franchises.

Excess liquidity built up in 2019, muted lending prospects and potential liquidity support from the Central Bank of Sri Lanka could help banks to manage the impact from the deferment of loan repayments through the regulatory moratorium and other rescheduling and restructuring.

A revision of our rating Outlook on the three banks would most likely result from positive rating action on the sovereign and if our assessment of the operating environment is improved (other than for NSB).

However, we do not believe this is probable in the near term in light of the pressure on the sovereign rating and operating environment. The banks’ ratings could be downgraded if there is a sovereign downgrade or if the operating environment deteriorates beyond our expectation, further weakening the banks’ key credit metrics.

Fitch will also review the effect of the pandemic on Sri Lankan banks’ National Ratings.

[The Invisible]

Sri Lanka market closed for day after 38 seconds as stocks plunge

ECONOMYNEXT – Sri Lanka’s stock market closed trading for the day 38 seconds after the market re-opened on May 11 following a 7 week closure that upset foreign investors as a key index plunge over 10 percent.

The Colombo Stock Exchange’s S&P SL 20 index fell 10.1 percent on opening, crashing through a 5 percent circuit breaker.

Under market rules trading closes for the day when the index falls 10 percent.

Trading was halted 38 seconds after open, in the shortest trading day of the markets history.

It is not clear why the market was closed for 7 weeks but several mis-steps had happened in Sri Lanka’s economic policy recently.

The stock market which had a sophisticated trading system, was closed while Sri Lanka tea auctions went online.

Sri Lanka stocks had been hit by prolonged monetary instability, and a fiscal stimulus in the form of a tax cut in January. Monetary instability also resumed from early March amid another bout of stimulus.

Analysts had expected the market to fall around 10 to 15 percent before recovering on a best case scenario and about 30 percent in a worse case.

On Monday when the S&P SL 20 Index fell 196 points with about 100 points or about half the fall was accounted for by Sampath Bank, Commercial and John Keells Holdings, market official said.

Sampath Bank fell 19 rupees to 100, JKH fell 8.30 to 107.10 and Commercial Bank fell 5.10 cents to 55 rupees.

Trading was thin at only 24 million rupees, with 4.1 million shares traded. (Colombo/May11/2020)

[LSETech Contributor]

Actually this malfunction was highlighted many times. Now only people will realize the bad effect of it. Why those fellows let market down for 7 weeks by giving useless reasons? After the 7 weeks also they have failed with their findings. This need to be investigate and take necessary actions soon on them...  

WHY THEY COULDN'T KEEP UP AND RUNNING AN AUTOMATED SYSTEM...? WHAT'S WRONG WITH IT...

Now who is going to RESPONSIBLE and PAY for these brainless actions...

These useless fellows must be fired from their position if they can not take the responsibility of their position...  

Sri Lanka market closed for day after 38 seconds as stocks plunge

ECONOMYNEXT – Sri Lanka’s stock market closed trading for the day 38 seconds after the market re-opened on May 11 following a 7 week closure that upset foreign investors as a key index plunge over 10 percent.

The Colombo Stock Exchange’s S&P SL 20 index fell 10.1 percent on opening, crashing through a 5 percent circuit breaker.

Under market rules trading closes for the day when the index falls 10 percent.

Trading was halted 38 seconds after open, in the shortest trading day of the markets history.

It is not clear why the market was closed for 7 weeks but several mis-steps had happened in Sri Lanka’s economic policy recently.

The stock market which had a sophisticated trading system, was closed while Sri Lanka tea auctions went online.

Sri Lanka stocks had been hit by prolonged monetary instability, and a fiscal stimulus in the form of a tax cut in January. Monetary instability also resumed from early March amid another bout of stimulus.

Analysts had expected the market to fall around 10 to 15 percent before recovering on a best case scenario and about 30 percent in a worse case.

On Monday when the S&P SL 20 Index fell 196 points with about 100 points or about half the fall was accounted for by Sampath Bank, Commercial and John Keells Holdings, market official said.

Sampath Bank fell 19 rupees to 100, JKH fell 8.30 to 107.10 and Commercial Bank fell 5.10 cents to 55 rupees.

Trading was thin at only 24 million rupees, with 4.1 million shares traded. (Colombo/May11/2020)

[slstockVeteran]

1) Was it really 38 Seconds ?
I thought it went on for 2-3 mins ( maybe buffered data).

Anyway this has to be a WORLD RECORD!  
Hooray SL/CSE  ! You are a winner!  


2)

They had 7 weeks without any bother , to test this freaking trigger
system works.

Also , letting market open for 2 hours only is like asking people
to hurry up and panic.


Who is responsible should not be fired only but asked to pay up
compensation for the money we lose due to their incapacity to
do simple jobs  ( like making  a Auto trigger work properly after - 5%
or
keeping a stock market closed for 7 weeks leading to frustration, credit
costs and more panic )

Now who is going to RESPONSIBLE and PAY for these brainless actions...

These useless fellows must be fired from their position if they can not take the responsibility of their position...  

Sri Lanka market closed for day after 38 seconds as stocks plunge

[seekTop contributor]

1) Was it really 38 Seconds ?
I thought it went on for 2-3 mins ( maybe buffered data).

Anyway this has to be world records.
Hooray SL !


2)


They had 7 weeks without any bother , to test this freaking trigger system
works.

Also , letting market open for 2 hours only is like asking people
to hurry up and panic.


Who is responsible should not be fired only but asked to pay up
compensation for the money we lose due to their incapacity to
do simple jobs
( like making  a Auto trigger work properly after - 5%+
or
and keep a stock market closed for 7 weeks leading to frustration, credit
costs and more panic )

Now who is going to RESPONSIBLE and PAY for these brainless actions...

These useless fellows must be fired from their position if they can not take the responsibility of their position...  

Sri Lanka market closed for day after 38 seconds as stocks plunge

Some were asked to QA testing of the new breaking logic. It passed.

[The Invisible]

Sri Lanka stocks hurt by Coronavirus, underlying economic issues

ECONOMYNEXT – Sri Lanka stocks may fall 10 to 15 percent amid a Coronavirus crisis before recovering in line with regional peers though underlying pre-crisis economic problems will continue to weigh on stocks where profits have been depressed for some time, analysts said.

“If we look at our regional peers, the net impact year to date would be about minus 20 percent,” Nikita Tissera, Head of Research, Bartleet Religare Securities said in an online forum by Sri Lanka’s Echelon Magazine.

“We have actually fallen a lot far before the markets closed compared to the net amount.

“There are two ways of looking at it. Either we have o think that we have fallen too far before, or we could use our emerging peers as a guide to what the post Covid-19 equilibrium could really be.”

Index Movement

Some global markets had fallen steeply before starting to recover. Sri Lanka had lost 27 percent before markets closed on in March.

The Colombo All Share Index ended at 4,571 before the market was closed.

Sri Lanka’s stocks may fall at least another 10 percent before recovering, Chethana Ellepola, Director Research, Acuity Stockbrokers said.

“The reason I say a minimum 10 percent is because, the worst fall of the index was 41 percent for a full year back in 2008 after the Global Financial Crisis. I think most agree that this is far worse than the Global Financial Crisis.

Sri Lanka’s stock market was closed for seven weeks making foreign investors unhappy.

“I don’t think there is going to be a lot of buyers in the market,” Dimantha Mathew, Head of Research, First Capital Research said.

“There is going to be a lot of panic selling- from locals as well as foreigners. Because we have closed the stock market, one of the most liquid asset classes of Sri Lanka has now become illiquid.”

First capital forecasts the market to fall 25-30 percent before recovering towards the end of the year.

“At the moment we are looking 3,750 along with a rebound to 4,750 towards the end of the year,” Mathew said.

“However it could fall even lower if it goes into the worst case scenario. Even after that we are not expecting huge market gains because of the macro situation.”

“The deteriorating foreign reserves and the debt position towards the end of the year will make things worse in the following year 2021.”

Stimulus Issues

Sri Lanka’s economy is expected to contract 1 -3 percent in 2020 amid a Coronavirus lockdown and external issues stemming from ‘stimulus’.

Sri Lanka however has been contact tracing aggressively and is ahead of many countries in the world in the fight against Coronavirus.

Sri Lanka may be behind a few countries like Vietnam, which is the global leader in contact tracing and perhaps its neighbhours Cambodia, which is also tracing, though accurate information is scarce observers say.

Vietnam had already re-opened the economy, which was never fully closed, its stock markets are rising and sovereign bonds are trading at a premium to issue price.

The State Bank of Vietnam avoided any monetary stimulus that would have broken the Dongs mildly crawling peg with the US dollar up to now. In 2009 however a ‘stimulus’ led to a currency collapse and a prolonged slowdown.

Sri Lanka has closed several testing gaps in contact tracing over the last three weeks, with tests outside clusters located by symptomatic index cases, raising the chances of discovering cases missed by contact tracers.

But Sri Lanka is facing tighter external conditions after weak growth in 2019 coming from a currency collapse in 2018. Sri Lanka cut rates and injected liquidity in April and July 2018, triggering a currency pressure, which was worsened by a political crisis in October, economic analysts have said.

In January 2020, another ‘fiscal stimulus’ was engineered in the form of tax cuts without waiting for the cyclical recovery to happen from around mid 2020, spooking rating agencies and bond holders.

Rates were cut on January 30 and liquidity injections were made from the last week of February.

Injections were ratcheted up in March as the crisis hit, and jittery foreign investors sold down, International Sovereign bonds, pushing the yield of a bond maturing in October 2020 towards 100 percent as the rupee came under pressure and reserves started to fall.

The rating as later downgraded. But if the bond is repaid, confidence among foreign investors could rise.

The worst case scenario for the stock market could be a 15 to 20 percent decline, Danushka Samarasinghe, Chief Executive, Softlogic Capital Markets said.

“But there is a flip side, foreigners might return after we repay our international sovereign bond.

“The biggest concern of the foreigners is Sri Lanka going into debt defaults. What happened was, we closed our markets at the worst possible time. From the 20th of March onwards all the emerging markets and frontier markets have gained.

“And because we were closed we haven’t seen that gain. Therefore, there is a pent up force of selling pressure from the foreigners which could not be materialized due to the market closure.”

Foreign Reaction

Foreigners have always been a big part of Sri Lanka’s stocks markets. The closure of the market, where they were locked out may make them would add another negative for Sri Lanka.

Tissera said he did not expect foreigners to be “very thrilled” about the closure, as it nullified the idea of a market, though they could return if Sri Lanka got its act together.

In Egypt where the market was closed for several months of the Arab spring uprising, foreigners had returned.

Unlike bond markets where banks could buy bond with printed money from the central bank (from reverse repo auctions or the liquidity window) triggering currency collapses, stock investors cannot get credit from the banking when the market is falling.

Stock investors on credit face margin calls. As a result foreigners find it difficult to exit, due to lack of liquidity.

“The worst recorded outflow the Sri Lankan stock market has had was about 38 billion back in 2012/2013,” Ellepola said.

“That was when the economy was overheating and foreigners started to exit. We have to remember that they have been selling out for the past two years since the beginning of 2017.”

Foreigners have been net sellers in stocks and bonds for some time.

Bond investors have sold down their holdings from 450 billion rupees to around 20 billion over 5-year as the credibility of the Sri Lanka soft-peg dwindled and the currency fell steeply.

Sri Lanka had 267 billion rupees of foreign holding excluding the strategic holdings which 12 times greater than what remains in bond markets.

“Total foreign holding amounts to around 450 billion rupees along with the strategic holdings of Nestle, Ceylon Tobacco etc.,” Udeeshan Jonas, Senior Vice President, CAL said.

“We don’t see huge selling coming in but in terms of emerging and frontier market funds we see the fund sizes had shrunk significantly during the last 6-12 months.

“That is also because of the shift from emerging, frontier markets to developed markets not only in the context of Sri Lanka but also other frontier markets as well,” Jonas said.

But, given that foreigners are a little bit more worried on the fiscal conditions and on the market closure,”

“Normally you will witness the shift in terms of foreigners’ coming back into emerging and frontier market funds when you see the recovery cycle starting to happen. However, we will not see that happening in the next six months,’ Jonas said.

Bottom Fishing

Investors were also put off as profits of listed companies continued to falls steadily amid currency collapses, weak growth and rising bad loans.

“Profits from around close to 300 billion are likely to drop to 166 billion rupees this year,” Mathew said.

In 2020 Sri Lanka witnessed a 26 percent reduction in earnings making it the first instance in almost two decades where earnings declined for three consecutive years.

This year with banks expected to take a hit, profits would fall further.

“Banking sector will need t least 9-12 months to bottom-out and recover in terms of earnings. This year is going to be a pool of blood in terms of earnings,” Mathew said.

Debt moratoriums offered will slow the decent but banks would face higher levels of bad loans. Fitch Ratings had said that bad loans could rise to as much as 13 percent after regulatory forbearance is normalized.

Banks are going to have narrower margins and lower profits but they are trading at 0.4 to book value giving strong value, Jonas said.

The sectors to bounce back quicker will be food and beverages, telcos and the healthcare sectors.

“Dialog would be the stock which is closest to what we could call a ‘stay at home’ stock like Netflix,” said Tissera. Any currency fall however would hit Dialog.

“Others would be modern trade companies with last mile delivery like Ceylon Cold Stores and Cargills.

Lubricants could also do well with base oil set to fall.

Companies exposed to tourism along with companies with high debt levels will also suffer more.
(Colombo/May11/2020)

[nihal123Top contributor]

Thanks Invi

[lanka]

Thank you Invi

[nihal123Top contributor]

කොටස් වෙළඳපොළෙන් දැවැන්ත ගනුදෙනුවක්. වටවල වැවිලි සමාගමේ රු. බිලියන 3ක කොටස් හුවමාරු වෙයි
May, 12, 2020

අද දින (12) පෙරවරුවේ 11.09ට කොටස් වෙළෙඳපොළ S&P SL20 දර්ශකය 5%ක් ඉක්මවා ප්‍රමාණයකින් පහළ වැටීමෙන් පසු මිනිත්තු 30 ක කාලයකට දෛනික ගනුදෙනු අත්හිටුවනු ලැබීය.

එහිදී නැවත පෙරවරු 11.39 ට ගනුදෙනු ආරම්භ වීමෙන් පසු දක්නට ලැබුණු සුවිශේෂී සිදුවීමක් රුපියල් බිලියන 3ක් ඉක්මවූ දැවැන්ත තනි ගනුදෙනුවක් වාර්තා වීමයි.

මෙහිදී වටවල වැවිලි සමාගමේ විශාලතම කොටස් හිමියා වූ Estate Management Services (Pvt) Ltd සතුව පැවති කොටස් 150,937,043 ක් රු. 20.00 බැගින් ගනුදෙනු විය. මෙම ගනුදෙනුවේ සම්පූර්ණ වටිනාකම රු. බිලියන 3 ඉක්මවා තිබේ.

[nihal123Top contributor]

කොවිඩ්–19 ව්‍යාප්තිය මධ්‍යයේ බැංකු වෙත ද්‍රවශීලතාව ලබාදීම සඳහා මහ බැංකුව විසින් ක්‍රියාවට නංවනු ලබන සුවිශේෂ නියාමන ක්‍රියාමාර්ග මෙන්න
May, 13, 2020

කොවිඩ්-19 මගින් බලපෑමට පත් පුද්ගලයන් සහ ව්‍යාපාර සඳහා සහන සැලසීම වෙනුවෙන් ක්‍රියාත්මක කරන ලද ණය සහන යෝජනා ක්‍රමය සහ බැංකුවල අනෙකුත් හදිසි ද්‍රවශීලතා අවශ්‍යතා හේතුවෙන් බලපත්‍රලාභී වාණිජ බැංකු හා බලපත්‍රලාභී විශේෂිත බැංකුවල (බලපත්‍රලාභී බැංකුවල) ද්‍රවශීලතාවට සහ අනෙකුත් ප්‍රධාන කාර්ය සාධන දර්ශකයන් හට සිදු විය හැකි අහිතකර බලපෑම සලකමින්, බැංකුවල ද්‍රවශීලතා මට්ටම් ශක්තිමත් කිරීමේ අවශ්‍යතාව ශ්‍රී ලංකා මහ බැංකුවේ මුදල් මණ්ඩලය විසින් සැලකිල්ලට ගෙන ඇත.

මේ අනුව, මුදල් මණ්ඩලය විසින් මෙම සුවිශේෂී කාලයේ දී බැංකුවල හදිසි ද්‍රවශීලතා අවශ්‍යතා සපුරා ගැනීම සහ නො කඩවා ණය පහසුකම් සැලසීම තහවුරු කිරීම සඳහා බැංකු පනත සහ මුදල් නීති පනත ප්‍රකාර ව, බැංකුවල ද්‍රවශීලතා මට්ටම් ශක්තිමත් කිරීම සඳහා පහත සඳහන් අති විශේෂ නියාමන ක්‍රියාමාර්ග ක්‍රියාත්මක කිරීමට තීරණය කර ඇත.

අ) ආර්ථිකය තුළ ඉල්ලුම වැඩි කිරීම සඳහා බැංකු ක්ෂේත්‍රය විසින් සහනදායී පොලී අනුපාත යටතේ කාරක ප්‍රාග්ධන ණය සහ අනෙකුත් ණය පහසුකම් ලබා දීම තහවුරු කරනු පිණිස ප්‍රතිමූල්‍ය පහසුකම් සහ අනෙකුත් ණය පහසුකම් ඔස්සේ අමතර අරමුදල් සැපයීම
ආ) 2021 ජුනි 30 දින දක්වා ∶
(i) ව්‍යවස්ථාපිත ද්‍රවශීල වත්කම් අනුපාතය ගණනය කිරීම සඳහා කොන්දේසිවලට යටත් ව ඇතැම් වත්කම් ද්‍රවශීල වත්කම් සේ සැලකීමට බලපත්‍රලාභී බැංකු වෙත අවසර ලබා දීම සහ
(ii) ද්‍රවශීලතා ආවරණ අනුපාතය සහ ශුද්ධ ස්ථායී අරමුදල් අනුපාතය සඳහා අවම අවශ්‍යතාව, වැඩි දියුණු කරන ලද සුපරීක්ෂණය සහ නිරන්තර වාර්තාකරණයට යටත් ව 90% දක්වා අඩු කිරීම
ඇ) පිලිගත හැකි ඇප සුරැකුම් සහ ද්‍රවශීලතා පුරෝකථන පදනම් ව ශ්‍රී ලංකා තැන්පතු රක්ෂණ සහ ද්‍රවශීලතා ආධාරක යෝජනා ක්‍රමය යටතේ ද්‍රවශීලතා පහසුකම් හෝ හදිසි ණය සහ අත්තිකාරම් ලබා දීමේ රාමුව යටතේ බලපත්‍රලාභී බැංකු වෙත රුපියල් ණය සහ අත්තිකාරම් ලබා දීම

මේ අතර, මෙකී සුවිශේෂී අවස්ථාවේ දී බැංකුවල ද්‍රවශීලතා මට්ටම් ශක්තිමත් කිරීමේ අරමුණ පෙරදැරි ව, මුදල් මණ්ඩලය විසින් බලපත්‍රලාභී බැංකුවල ඇතැම් අභිමතානුසාරී ගෙවීම් (Discretionary Payments) සීමා කිරීමට තීරණය කර ඇත. මේ අනුව, 2020 දෙසැම්බර් 31 දක්වා වූ සීමිත කාලයකට බලපත්‍රලාභී බැංකුවල මුදල් ලාභාංශ ප්‍රකාශයට පත් කිරීම හෝ ලාභ මෙරටින් බැහැර කිරීම, තම කොටස් නැවත මිලදී ගැනීම, කළමනාකරණ දීමනා හෝ අධ්‍යක්ෂ මණ්ඩල සඳහා ගෙවීම් ඉහළ දැමීම නැවැත්වීමට නියෝග කර ඇත. මෙයට අමතර ව, ඉහත සඳහන් කාල සීමාව තුළ බලපත්‍රලාභී බැංකු විසින් සිදු කරනු ලබන අත්‍යාවශ්‍ය නො වන සහ ප්‍රාග්ධන වියදම් සිදු කිරීමේ දී හැකි තාක් දුරට විචක්ෂණශීලී වීම හෝ වැළකී සිටීමට අවශ්‍ය වේ.

කොවිඩ්-19 ව්‍යාප්තිය නිසා බැංකු විසින් මුහුණ පා ඇති සම්පත් හිඟතාව සහ දැනට පවතින වෙළෙඳපොළ තත්ත්වය සැලකිල්ලට ගනිමින් දේශීය වශයෙන් පද්ධතිමය වැදගත්කමක් ඇති බැංකු සඳහා වාර්ෂික ඇගයුම 2020 වසර සඳහා නො පැවැත්වීමට සහ දේශීය වශයෙන් පද්ධතිමය වැදගත්කමක් ඇති බැංකු ලෙස 2019 දෙසැම්බර් මස දී ප්‍රකාශයට පත් කළ බැංකු 2020 වසර සඳහා ද එලෙස සැලකීමට මුදල් මණ්ඩලය විසින් තීරණය කර ඇත.

බලපත්‍රලාභී බැංකුවල අධ්‍යක්ෂ මණ්ඩල සහ ජ්‍යෙෂ්ඨ කළමණාකාරිත්වය හට ඒ ඒ බැංකු වල ද්‍රවශීලතා මට්ටම් සමීප ව නිරීක්ෂණය කිරීමට සහ අති විශේෂ නියාමන ක්‍රියාමාර්ග නිසා හට ගන්නා ද්‍රවශීල අරමුදල් විචක්ෂණශීලී ව අදාළ කටයුතු සඳහා පමණක් යොදා ගන්නා බවට සහතික කිරීමට කටයුතු කරන ලෙස දැඩි ව උපදෙස් දී ඇත. මෙම අති විශේෂ ක්‍රියාමාර්ග ඔස්සේ ආර්ථික කටයුතු යළි ප්‍රාණවත් කිරීම සඳහා බැංකු විසින් විචක්ෂණශීලි ව අඛණ්ඩ ණය ප්‍රවාහ ආර්ථිකයට සපයනු ඇතැයි ශ්‍රී ලංකා මහ බැංකුව විසින් අපේක්ෂා කරන අතර එමගින් මූල්‍ය ක්ෂේත්‍රය ද ඇතුළු ආර්ථිකයේ සියලු ම අංශ ප්‍රතිලාභ ලබනු ඇත. මීට පෙර නො වූ මෙවැනි කාල වකවානුවක මේ වන තෙක් ගෙන ඇති සියලු ක්‍රියාමාර්ගවල අපේක්ෂිත ප්‍රතිඵල ළඟා කර ගැනීම සඳහා කොටස් හිමිකරුවන් ද ඇතුළු බැංකු ක්ෂේත්‍රයේ සියලු ම සම්බන්ධිත පාර්ශ්වයන්ගේ සහයෝගය ශ්‍රී ලංකා මහ බැංකුව අපේක්ෂා කර සිටී.

[The Invisible]

Sri Lanka facing ‘biggest forex crisis in history’ triggering import controls: Minister

ECONOMYNEXT – Sri Lanka’s has slapped import controls multiple ways to face the ‘biggest forex crisis in history’, Information Minister Bandula Gunewardene said as the central bank tens of billions of rupees in March and April driving excess rupees to the highest level since its creation.

“We are facing the worst foreign exchange crisis in history,” Minister Gunewardene told a weekly cabinet new briefing.

“This is the reason the Cabinet approved the import restrictions.”

Gunewardene said Sri Lanka usually imported 22 billion rupees of goods and exported about 11 billion rupees of hard goods exports.

There were also ‘invisible’ (adrushya) exports in the form of tourism. There were also remittances.

Economic Gap

Sri Lanka has a trade deficit because people earn money from services exports, as tourism, remittances and information technology exports and spends them on hard goods.

Government net foreign borrowings spent to build roads, airports or even pay salaries will also trigger imports, but not a currency crisis.

If the contractor is foreign the profit margin will go out of the country, without contributing to the trade deficit. But if the contractor is domestic, when the profit is spent or invested more imports will come, but no currency crisis

Foreign direct investment when used to build factories will also trigger more imports and widen the trade deficit, but there will be


In the absence of money printing, the expansion of the trade deficit from either remittances, tourism receipts, or net foreign borrows take to finance the deficit, needs to trigger any depreciation.

In the same way when exports fall, and companies cut salaries to workers and do not have profits to invest or save imports will also fall unless credit is taken backed by central bank re-finance (printed money) to pay salaries or cover losses.

If remittances are down imports will also fall as consumption spending will fall. If the government cuts foreign borrowings and capital or other expenses imports will also fall.

The concept that falling foreign earnings will lead to a consumption and investment fall that will reduce import and will have no impact on the exchange rate in the absence of money printing is a difficult concept for many people in soft-pegged countries to grasp, analysts say.

Import Substitution
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“Due to the Covid-19 pandemic many exports are down,” Gunewardene said. ” About 5 billion dollars of exports are from textiles. Tourism is also down. Remmittances are also down.

“If we allow the outward outward flows to go as before the rupee will fall,” Minister Gunewardene claimed.

“If it goes to 250, 350 rupee we will not be able to live in this country. There will be cost of living that no one will be able to bear.

“So this intervention (import controls) is part of a macro-economic management to keep the value of the country’s money stable, promote import substitution and domestic agriculture.

“It is done on the need to stop imports flowing in freely and build a domestic economy.”

Monetary Reform

There is no divine intervention or voodoo through which other countries attained monetary stability and halted balance of payments problems.

There have been calls to reform Sri Lanka’s central bank to stop forex shortages and draconian exchange controls that started shortly after 1951 with the creation of an unstable soft peg.

The central bank printed tens of billions of rupees in March and April to over-issue money in excess of a Coronavirus driven drawdown of cash, and the rupee fell to 200 to the US dollar from 182 under a so-called flexible exchange rate. It has since recovered.

After some interventions and a consumption and credit collapse driven by Coronavirus curfews as well as the controls, the rupee has stopped falling.

Under controls issued this month under an import control law enacted in 1969 which was widely used in Sri Lanka to run the ‘closed economy in 1970s’ after the US dollar collapsed leading to the break-up of the Bretton Woods system of soft – pegs some goods are completely banned.

When the US dollar collapsed against gold amid money printing, President Richard Nixon also slammed a self-imposed trade embargo called the Nixon shock.

The US usually imposes trade embargoes on countries like Cuba or Iran, to cripple them, not itself. Sri Lanka however completely closed the economy in the 1970s and crippled itself.


Following the collapse of the dollar, Mercantilists and Keynesians lost influence in the US and under President Reagan the Fed was reformed. Similar reforms were carried out at Bank of England and exchange controls were lifted.

Under the Sri Lanka import control gazette some goods can be imported without any restriction by paying a tax, others can be imported under license, other can be brought under three month suppliers credit.

Other good which are not essential but needed can be brought at high taxes, Minister Gunewardene said.

Trade controls, which are a type of self-imposed trade embargo can severely hit the supply chains of domestic firms and strangle economic activity.

Already companies are warning of being hit by trade controls. Minister Gunewardene said those affected by the trade controls can make appeals. (Colombo/May28/2020)

[spw19721Active Member]

thanks invi

[yellow knifeTop contributor]

Thanks Invisible