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Monday June 3rd, 2024

Sri Lanka central govt debt at 105-pct of GDP in Dec 2023: analysis

ECONOMYNEXT – Sri Lanka’s central government debt to gross domestic product was largely unchanged at 105.49 percent by December 2023, compared to 105.45 percent in September, but down from end 2022, an analysis of official data shows.

Central government local and foreign debt was reported at 29,145 billion rupees by December 2023, with the rupee at 323.92 to the US dollar, up from 28,424 billion in September 2023.

Rolling GDP for the four quarters ending in December 2023 was 27,629 trillion rupees, up from 26,636 billion to September as the economy started to recover.

Central government debt was at 115.2 percent of GDP on the same basis at the end of December 2022. The central bank reported central government debt at 113.8 percent of GDP by end 2022 without defaulted loans.

Related Sri Lanka central government debt rises to 115.2-pct of GDP by end 2022: analysis

SOE guaranteed debt by end 2022 was about another 5.62 percent of GDP.

When government guaranteed debt was added, the debt to GDP ratio went up to 112.74 percent of GDP in December from 109.67 percent in September.

Related Sri Lanka public debt edges up to 109-pct of GDP in 3Q 2023: analysis

The government guaranteed debt increased with central bank borrowings from the Reserve Bank of India being given a Treasury guarantee added to guaranteed debt.

However, the central bank’s external debt is balanced by government securities, which are already covered backed by domestic debt.

When a flexible exchange rate (soft-pegged) central bank uses reserves for imports, whether borrowed or not, an equal amount of money is printed to suppress policy rates, through to the acquisition of government securities from banks through open market operations.

The securities on the asset side of the balance sheet, can be sold for dollars to repay the debt, as long as monetary stability is maintained by not injecting further liquidity though liquidity facilities to generate forex shortages.

Related Sri Lanka gives tax-payer guarantee to central bank’s US$2.45bn India debt

Without central bank debt, the SOE guaranteed debt was at 109.86 percent of GDP in December, almost unchanged from 109.67 percent in September.

Sri Lanka’s budget deficit, which was about two trillion rupees by November 2023, adds to the debt to GDP ratio, while growth in nominal GDP reduces it.

Currency appreciation also tends to reduce dollar debt in domestic currency. The exchange rate was largely unchanged at 323.92 US dollars by December 2023, against 324.44 rupees used in September.

From January to March the rupee has been allowed to appreciate close to 304 to the US dollar amid deflationary policy.

Some of the dollar debt taken from multilateral lenders have been used to repay debt. The central bank’s negative net foreign asset position has also improved over the year amid deflationary policy, with some foreign borrowings being paid back.

Sri Lanka defaulted in 2022 after aggressive macro-economic policy deployment involving inflationary rate cuts and tax cuts to boost growth (target potential output).

Macro-economists cut taxes and rates with central bank credit, after several years of revenue based fiscal consolidation (abandoning cost cutting) and depreciating the currency instead of allowing rates to go up when private credit recovered (exchange rate as the first line of defence) triggered output shocks.

From around September 2022, the central bank has provided monetary stability to economic agents to work. (Colombo/Mar24/2024)

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Water levels rising in Sri Lanka Kalu, Nilwala river basins: Irrigation Department

Sri Lanka Navy assisting in rescue operations (Pic courtesy SL Navy)

ECONOMYNEXT – Sri Lanka’s Irrigation Department has issued warnings that water levels in the Kalu and Nilwala river basins are rising and major flooding is possible due to the continuous rain. People living in close proximity are advised to take precautions.

“There is a high possibility of slowly increasing prevailing flood lowline areas of Kiriella, Millaniya, Ingiriya, Horana, Dodangoda, Bulathsinhala, Palinda Nuwara and Madurawala D/S divisions of Ratnapura and Kalutara Districts, up to next 48 hours,” it said issuing a warning.

“In addition, flood situation prevailing at upstream lowline areas of Ratnapura district will further be prevailing with a slight decrease.

“The residents and vehicle drivers running through those area are requested to pay high attention in this regard.

“Disaster Management Authorities are requested to take adequate precautions in this regard.”

The island is in the midst of south western monsoon.

DMC reported that 11,864 people belonging to 3,727 families have been affected due to the weather in Rathnapura, Kegalle, Kilinochchi, Jaffna, Mullaitivu, Kalutara, Gampaha, Colombo, Galle, Matara, Hambantota, Puttalam, Kurunegala, Kandy, Nuwara Eliya, Anuradhapura, Polonnaruwa, Badulla, Moneragala, and Trincomalee districts.

Meanwhile, the Meteorology Department stated that showers are expected on most parts of the island today.(Colombo/June3/2024)

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UNP gen secy defends call for postponing Sri Lanka poll, claims opposition silent

The UNP party headquarters in Pitakotte/EconomyNext

ECONOMYNEXT — United National Party (UNP) General Secretary Palitha Range Bandara has defended his call for postponing Sri Lanka’s presidential election by two years, claiming that his proposal was not undemocratic nor unconstitutional.

Speaking to reporters at the UNP headquarters Monday June 03 morning, Bandara also claimed that neither opposition leader Sajith Premadasa nor National People’s Power (NPP) leader Anura Kumara Dissanayake have spoken against his proposal.

“I have made no statement that’s undemocratic. My statement was in line with provisions of the constitution,” the former UNP parliamentarian said.

He quoted Section 86 of Chapter XIII of the constitution which says: “The President may, subject to the provisions of Article 85, submit to the People by Referendum any matter which in the opinion of the President is of national importance.”

Sections 87.1, 87.2 also elaborates on the matter and describes the parliament’s role, said Bandara.

“I spoke of a referendum and parliament’s duty. Neither of this is antidemocratic or unconstitutional. As per the constitution, priority should be given to ensuring people’s right to life,” he said.

“Some parties may be against what I proposed. They may criticse me. But what I ask them is to come to one position as political parties and make a statement on whether they’re ready to continue the ongoing economic programme,” he added.

Bandara claimed that, though thee has been much criticism of his proposal for a postponement of the presidential election, President Wickremesinghe’s rivals Premadasa and Dissanayake have yet to remark on the matter.

“I suggested that [Premadasa] make this proposal in parliament and for [Dissanayake] to second it. But I don’t see that either Premadasa nor Dissanayake is opposed to it. To date, I have not seen nor heard either of them utter a word against this. I believe they have no objection to my proposal which was made for the betterment of the country,” he said. (Colombo/Jun03/2024)

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300 of 100,000 trees in Colombo considered high risk: state minister

ECONOMYNEXT – Trees in Sri Lanka’s capital Colombo are being monitored by the municipal council, Army and Civil Defense Force as the severe weather conditions continue, State Minister for Defense Premitha Bandara Tennakoon said.

“Within the Colombo Municipal Council city limits, there are 100,000 trees. Of these, around 300 are considered high risk,” Tennakoon told reporters at a media conference to raise awareness about the current disaster management situation.

Not all trees required to be cut down he said. “We can trim some of the branches and retain them.”

The problem was that buildings in the vicinity of the tree had cut branches on one side, causing it to become unbalanced, the minister said.

New laws would be brought in so provincial/municipal institutions could strengthen enforcement of building codes.

“We don’t have a single institution that can issue a warning about a tree. Not one to tell us what trees can or cannot be planted near a road.

“Trees should be suitable for the area. Some trees have roots that spread and damage roads, buildings. When the roots can’t go deep, they tend to topple over.

“Now Environment Day is coming up, and anyone can go plant a tree by the road. We have to take a decision about this. We have to enforce laws strongly in future.” (Colombo/June3/2024)

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