news
Sri Lanka exporters should convert, rupee worth 185 to dollar: Minister Cabraal
by Imesh Ranasinghe
Sri Lanka’s rupee should be around 185 to the US dollar, State Minister for Money and Capital Markets Nivard Cabraal has said urging exporters to convert dollar inflows without holding them back.
“I think the rupee should be around 185 to the US dollar depending on the macroeconomic factors,” Minister Cabraal said at a conference last week.
Cabraal a former central bank Governor kept the rupee stable for several years, though after a fall in 2012, it was not allowed to appreciate when credit fell in 2013 and the central bank bought billions of dollars for its reserves, for reasons that are not clear.
Sri Lanka’s rupee fell sharply in over January 2021 after the central bank printed money and brought rupee interest rates below local dollar yields over the past year amid a credit downgrade which drove up dollar bond yields, making forward premiums negative and incentivizing importers to cover forward.
As exporters also unwilling to sell forward at a discount, banks bought dollars in the spot and near term market, using the printed money from the central which are sloshing around as excess liquidity to provide forward cover to importers, putting pressure on exchange rate.
Some exporters loaned dollars and were borrowing rupees due to the inverted interest rates.
Due to unprecedented levels of excess liquidity in the overnight market interest rates did not move up in a correction – which would have raised the forward premium – despite interventions by the central bank which reduced some excess liquidity.
Excess liquidity fell from 266 billion rupees at the beginning of the year to around 120 billion rupees amid dollar losses to interventions and debt repayments.
The central bank then closed the forward market, preventing banks from giving forward cover.
“So the central bank took necessary actions about that,” Cabraal said. “And because of those actions taken by the central bank in the past few days, we once again saw the rupee being appreciated.”
Minister Cabraal asked exporters to convert their dollars as soon they receive them, as they may face losses by listening to fear mongers.
“We should keep in mind that it is a tough period for the world, so in such a tough period when we are going forward we all should go forward together,” he said.
“It’s like going in a boat, when that boat is going in a rough sea we should not shake the boat, If one or two tries to shake the boat everyone in the boat will have to face the consequences.”
Cabraal said if some are shaking the boat in that manner will, they will have to take necessary steps in order to stop them from shaking and making the boat unstable,
“It is what the central bank has done now,” he said. “There are other things the central bank can do but our opinion is that it is not necessary to do them now.”
Analysts have blamed a so-called ‘flexible exchange rate’ where a pegged exchange rate is suddenly turned into a floating exchange rate as money printing puts pressure triggering panic and uncertainty forcing importers settle bills immediately taking more credit and exporters to watch and wait.
There have been calls for central bank reform to stop the instability.
The rupee has appreciated in recent days from around 196 to 191 to the US dollar.
Meanwhile Cabraal said in 2014, when Mahinda Rajapaksa administration had left office, the US dollar was 131.5 rupees to the dollar.
At the time the only accusations from the economic experts in the opposition at that time were that the Central Bank is controlling the rupee as it was stable for years and the rupee should be allowed to float.
“But after they came into power the rupee depreciated for 5 years like never before with an annual average depreciation of 6.7 percent,” he said.
There were no global crisis or any other problem during those five years but the rupee depreciated to 181.63 against the US dollar.
“The rupee only depreciated by 2.6 percent in 2020, it is a big achievement when considering the tough period we are going through, meanwhile, the central bank was able to collect 282 million dollar to buttress its reserves,” Cabraal.
Other analysts had also blamed the last administration for giving the central bank independence to target a real effective exchange rate on contested claims that the rupee was more ‘overvalued’ than East Asia while printing money.
The resulting currency crisis then created consumption shocks that lowered growth.
More money was then printed on the basis that there was an output gap, triggering another currency crisis and destroying the economic credential of the United National Party, which was the largest partner of the then ruling coalition.
Analysts had warned of the outcome earlier.
Analysts and economists are now warning that the current monetary framework involving so-called modern monetary theory, with high levels of excess liquidity would also have dangerous consequences as soon as economic activity picks up.
While tourism receipts fell, with no dollar income for tourist sector workers and hotel owners to spend, imports will fall by the same amount, unless money was printed, and credit picked up.
There have been steady losses in foreign reserves, mostly from the financial account despite weak credit lowering imports. (ECONOMYNEXT)
Author
- News Advertiesment
See Kapruka’s top selling online shopping categories such as Toys, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka’s unique online services such as Money Remittence,News, Courier/Delivery, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka.
Author
-
sdfsdf sdf sf sf sdf sf sdf
Author
PCoI on Easter Sunday attacks:
By Shamindra Ferdinando
Attorney General Dappula de Livera, PC is not bound by recommendations made by the Presidential Commission of Inquiry (P CoI) into the 2019 Easter Sunday carnage, or presidential directives in that regard, according to authoritative sources.
They said that the AG couldn’t under any circumstances initiate legal proceedings until he had received the full PCoI report.
President Gotabaya Rajapaksa received the PCoI report on Feb 1. The President’s Office delivered a set of PCoI reports to Speaker Mahinda Yapa Abeywardena on Feb 23, a day after the report was presented to the cabinet of ministers. The Island raised the matter with relevant authorities in the wake of a section of the media reporting the PCoI recommending punitive measures against former President Maithripala Sirisena, Defence Secretary Hemasiri Fernando, IGP Pujitha Jayasundera, Chief of State Intelligence Senior DIG Nilantha Jayawardena, Chief of National Intelligence retired DIG Sisira Mendis and All Ceylon Makkal Congress (ACMC) leader and Samagi Jana Balavegaya MP Rishad Bathiudeen et al over the Easter Sunday carnage.
Sources pointed out that due to the inordinate delay in sharing the PCoI report with the AG, the department hadn’t been able to take preliminary measures required to initiate the proceedings. Sources said that a team of officers would take at least six weeks or more to examine the report before tangible measures could be taken.
With the AG scheduled to retire on May 24, 2021, even if the AG Department received the P CoI it would be quite a tough task to initiate proceedings ahead of retirement, sources said. However, in terms of the 20th Amendment to the Constitution enacted in last October, both the AG and the IGP could receive extensions beyond 60 at the President’s discretion.
Dappula de Livera received an Acting appointment as the AG a week after the Easter Sunday carnage whereas his predecessor Jayantha Jayasuriya, PC, was elevated to Chief Justice.
Responding to another query, sources said that the Attorney General two weeks ago requested Secretary to the President for a copy of the P CoI. However, the AG was yet to receive one, sources said. In spite of the AG not receiving a P CoI copy, the AG had instructed the IGP to obtain a copy of the report when he requested the police to complete investigations into the Easter Sunday carnage. The AG issued specific instructions after having examined police files pertaining to the investigations.
The IGP, too, hadn’t received a copy so far though some sections of the report were in the public domain.
Agriculture Minister Mahindananda Aluthgamage displayed at a live political programme on Derana a copy of the P CoI report he received at the cabinet meeting earlier in the day.
Sources said that the Attorney General’s Department couldn’t decide on a course of action in respect of the Easter carnage on the basis of a section of the report. In terms of the Commission of Inquiry Act (Section 24), the AG enjoyed significant powers/authority in respect of investigations; sources said adding that the Department urgently required both the P CoI report and police investigations report. The Attorney General’s Department has raised the delay in receiving a P CoI report amidst the Catholic Church attacking the government over the same issue.
Sources said that ministerial committee appointed to study the P CoI report couldn’t decide on how to proceed with the recommendations and the matter was entirely in the hands of the AG. Sources pointed out that the delay on the part of the government to release the report had received the attention of sections of the international media, including the New York Times. Public Security Minister retired Rear Admiral Sarath Weerasekera having met Malcolm Cardinal Ranjith at the Bishop’s House on Dec 8, 2020 said that the AG would get a copy of the P CoI report once the President received it. Minister Weerasekera said that the CID had handed over the relevant files after having completed investigations into eight blasts. Referring to the Parliamentary Select Committee (PSC) report on the Easter Sunday carnage, the former Navy Chief of Staff said that all such documents would have to be brought to one place and considered before initiating legal proceedings. Acknowledging that there could be delays, lawmaker Weerasekera said that on the instructions of the Attorney General a 12-member team of lawyers was working on the case. The minister vowed to expose the mastermind behind the Easter Sunday attacks. Investigations continued while some of those wanted were overseas, the minister said.
The minister acknowledged that the Attorney General couldn’t proceed without the P CoI report. Minister Weerasekera reiterated that once the President received the P CoI report, it would be sent to the Attorney General. The minister said that there were documents two to three feet high that needed scrutiny. The minister assured comprehensive investigation. The minister said that investigations pertaining to eight blasts had been completed and the reports handed over to the AG. However, the Attorney General had found shortcomings in those investigations.
Author
By Saman Indrajith
The Presidential Commission of Inquiry on the Easter Sunday bombings had failed to identify the mastermind of , the JVP said yesterday.
Addressing the media at the party headquarters in Pelawatte, JVP Propaganda Secretary MP Vijitha Herath said that the PCoI report had levelled accusations against former President Maithripala Sirisena, former IGP and head of intelligence for their dereliction of duty, shirking of responsibilities and not taking action to prevent the attacks and negligence. There were reference to the causes of the terror attacks and actions to be taken to avoid such attacks and the influence of extremist organisations. “However, there is no mention of the mastermind of the attacks, the handlers of the attackers and those whose interests the carnage served. It is also not mentioned whether there has been any foreign or local organisation behind those attacks. As per the PCoI report the attack took place as a result of culmination of extremism.
“According to the PCoI the extremist activities were a result of the prevailing political situation then. The entire nation was waiting to see who was responsible and who masterminded those attacks. The PCoI has failed to identify the true culprits responsible for the terror attacks. The report says that the leader of the suicide cadres killed himself in the attacks and it was a puzzle. That means those who are actually responsible for the attacks are still at large. The report does not provide exact details of the sources of the attacks. The PCoI had sittings for one year and five months. It summoned various persons and got their statements but it has failed to shed any light on the terror attacks. Everybody knows that the top leaders of the government and heads of security and intelligence establishments failed in their duties. Ranil Wickremesinghe was the second in command and he too is bound by the responsibility but the PCoI report fails to identify him as one of the persons against whom legal action should be instituted. The PCoI has treated Wickremesinghe and former President Maithripala Sirisena differently. We are not telling that this report is a total failure but we cannot accept this as a complete report. The PCoI handed over its report to the President on Feb 1. After 23 days it was sent to Parliament. Now, a copy of the report is there in the parliamentary library for the perusal of MPs.”
Herath said that the PCoI did not have powers to take punitive action. “It only has powers to name those responsible and recommend action to be taken against those named.
