SL Economy Booming - Source [Bloomberg]

Sri Lanka May Sell Rupee as Post-War Inflows Increase

Sri Lanka may sell its currency should it gain too much as foreign aid and investments flow into the country after the end of a 26-year civil war, central bank governor Nivard Cabraal said.

"The currency could appreciate when large amounts of money come in," Cabraal said in an interview in Colombo yesterday. "But we learnt some good lessons in 2005 post-tsunami that we shouldn't allow these conditions to drive the economy by itself and there has to be some kind of intervention."

Cabraal said excessive gains in the rupee could damage exports, which make up a third of the $32 billion economy and employ more than 2 million people in the island's tea plantations and textile factories. Millions of dollars of aid after a tsunami hit Sri Lanka on Dec. 26, 2004, increased demand for the rupee, strengthening the currency by 5.4 percent the following month and halving export growth from a year earlier.

"The near-term pressure appears to be toward appreciation of the rupee," said Anushka Shah, an economist at Citigroup Plc. in Mumbai. Buying dollars will also help "build foreign- exchange reserves."

The Lankan rupee has gained 2.5 percent to 114.85 against the U.S. dollar since May 16, when President Mahinda Rajapaksa declared victory over the Liberation Tigers of Tamil Eelam, who have been fighting for a separate homeland for ethnic Tamils since 1983.

Very Comforting

Sri Lanka's benchmark stock index, the Colombo All-Share Index, has climbed 16 percent since the Tamil Tigers were defeated, taking its gains this year to 47 percent. The index rose 0.6 percent to 2,197.73 at 11:15 a.m. local time, paced by John Keells Holdings Plc., which has investments ranging from transportation to tea and tourism. John Keells has increased 41 percent since May 16.

Cabraal said foreign-exchange reserves increased by about $120 million in the past two weeks as overseas investors snapped up local shares on optimism of political stability returning to the Indian Ocean island nation.
"That has been very comforting to the foreign exchange situation," Cabraal said.

The nation's reserves more than halved in the six months from September to $1.4 billion as the global recession hurt export earnings, prompting Sri Lanka to start talks with the International Monetary Fund in March for a $1.9 billion bailout.

IMF Loan

Sri Lanka's overseas sales dropped 7.8 percent in March from a year earlier, falling for the fourth straight month. That's the longest period of declines since 2002.

Standard & Poor's said May 21 the timing and implementation of the IMF loan was "uncertain" and cut the island's rating outlook to negative from stable. S&P rates the nation's long- term foreign currency debt at 'B', five levels below the investment grade.

The IMF on May 21 said it is near an agreement to lend the money to Sri Lanka, clarifying its position a week after U.S. Secretary of State Hillary Clinton said the U.S. was reluctant to support an IMF loan to Sri Lanka given the escalation in the country's civil war.

"The IMF loan has been delayed because some countries have expressed concerns which are of a non-economic nature," Cabraal said. "The IMF charter doesn't allow for such issues to be raised in the provision of structural loans - this will set a bad precedent."

Civil War

Now that the war is over, foreign direct investments into Sri Lanka could quadruple to as much as $4 billion a year by 2012, according to Dhammika Perera, chairman of the Board of Investment of Sri Lanka.

The last time Sri Lanka faced a huge inflow of foreign cash was when the tsunami struck the nation and killed more than 30,000 people.

The challenges the inflows may pose this time include higher inflationary pressures, Cabraal said.
"For the moment, inflation is benign and we expect it to touch zero percent by June," Cabraal said, adding that such a scenario would give him room to keep interest rates low and support economic expansion. He said the 3.3 percent increase in consumer prices in May from a year earlier, after a 2.9 percent gain in April, was a "blip."

Cabraal said the central bank will this month revise the nation's growth forecast for 2009, and may almost double it to 5 percent because of the increase in business confidence and as the liberation of rebel-occupied land boosts farm production.

"For a long time, every time someone spoke about Sri Lanka's economy, the response was if only not for this war," Cabraal said. "Today that has been removed and we have a tremendous new scope for economic development."

Hope......

Maybe the darkness inside me....
Can never be lightened...
Everything seem to take a long period..
even with hopes...
Thing doesn’t seem to changed much...
but I never stop believing..
That no matter how dark it may be...
no matter how cruel reality is..
I will always.. hope for miracle to happened

Rumblings from the Battlefield

It affected us finally – Source [ AP ]

Global recession hits Lanka: Companies cut workforce

Global recession which had taken a stranglehold on the world economy has spread its tentacles in Sri Lanka too forcing 16 leading business ventures to lay off their entire workforce while 29 companies have retrenched part of the staff, Inter Company Employees Union said.

Among the companies which had laid off their entire work force are several garment factories and manufacturers of aluminum products and tiles. Companies located in remote areas such as Anuradhapura had also been forced to close down because of the global economic downturn

Some manufacturers of apparels, cement, cloth, plywood and bags have reduced their workforce while the others have warned of possible retrenchment after the Sinhala-Hindu New Year in April.

ICEU President Wasantha Samarasinghe, a former JVP parliamentarian told Daily Mirror the export volumes of some companies had dwindled by 80 per cent, and as a result were compelled to suspend their business operations.

Mr. Samarasinghe said his union identified the business ventures which stopped the overtime work of their employees or sent them home on compulsory leave following the financial crisis.

He said a leading cement manufacturer had curtailed its production by 40 per cent while the export earnings of a ceramic product manufacturing plant had come down by 30 per cent.

The International Labor Organization has predicted that more than 50 million workers will lose their jobs worldwide due to the recession. In Sri Lanka, 50,000 private sector employees are expected to lose jobs this year. Sadly though, the government has not worked out any plan to ensure the welfare of those who may be pushed to the streets, he said.

Mr. Samarasinghe said that though a Compensation Formula was introduced, there was no fund to compensate those losing employment in the present circumstances.

We are proposing the establishment of a safety net for these people. If this down trend continues, the government will also lose its revenue in terms of taxes levied on exports and imports, he said.

UNP parliamentarian Kabir Hashim said the absence of a proper macro-economic policy had resulted in the present economic crisis effecting Sri Lanka.

Mr. Hashim said inflation had increased because of the government had printed money despite the warnings by opposition parties, and this had resulted in increasing interest rates leaving businessmen in the lurch.

Today, our garment manufacturers have to obtain loans at an interest rate of 12 or 13 per cent. However, it is only two or three percent in countries such as Vietnam and India. So, some of our leading manufacturers have started factories in those countries while closing down their plants here, Mr. Samarasinghe said.

However, Consumer Affairs Minister Bandula Gunawardane admitted that Sri Lanka had begun to feel the pinch of the global recession, and it was beyond the government s control.

In the United States, 2.6 million people have lost their employment. A similar situation prevails in countries such as Singapore, Britain and Dubai. We have not felt the crisis to that extent, he said.

Rubber exports contribute only 1.8 per cent to the economy. From tea, we get around 16 per cent. There is a notable impact on the garment industry. The Board of Investment has made arrangements to provide employment to those losing jobs in other industries. There will be no problem for skilled workers, he said.

Minister Gunawardena said the Labor Ministry had worked out a programme to train the unskilled workers so that they could be absorbed into areas where job security prevails.

When asked whether the government would be able to guarantee an income to all workers losing their jobs, the Minister said no government in the world could do it.

Good Article about our Economy – Source [Asian Tribune]

How the Global Economic Crisis Affects Sri Lanka.

We too have now begun to feel the heat of ill-effects of the world economic recession despite various optimistic statements made by politicians and the top brass at high echelons in the government. Hundreds of private sector establishments in a number of fields have been shut down and employees are facing challenges they never ever thought could be realities.

Even BOI companies with foreign investments are steering in the direction of scaling down operations and retrenching employees. Naturally and obviously, when the country after country even in the highly developed world have begun to feel the heat of the global meltdown at their doorway, an already ailing economy like ours cannot conceal from the after effects of the chaos in the global financial markets.

At a time when the whole world is tumbling in an ocean of economic recession and financial catastrophe there is no chance of survival for a smaller economy like ours. Of course the only possibility is that a direct impact of the global situation might not affect us straight away, but yet it's off spins might create a significant brunt. However, such off spins could be quite capable of totally devastating a diminutive economy like ours if the issues are not addressed in the right perspective at the right time.

Around one million expatriate workers distended all over the world mainly in the Middle East, remit increasing amounts of Dollars to inject strength into our ailing economy. This top foreign exchange earner of our country is facing the risk of slamming the brakes on worker remittances as a result of the global financial crisis which would rigorously intensify our economic wretchedness.

Moreover, apart from the uncertain labor market, we have reached the brink of falling world prices and demand on our main exports. Tea, rubber, cinnamon, coconut, garments, gems and a number of other commodities have faced the quandary of loosing demand in the international market thus experiencing sharp falls in prices as well as demand. Gem and jewelry industry can no longer attract overseas buyers for some time. Tourism is operating at grave losses.

Also we do not possess adequate foreign assets to brag. Of course extension of GSP+ concession to the garment exporters by a couple of years has given some sigh of relief to that industry. Nevertheless, with the added effect of synthetically held local currency, the situation has dramatically worsened. Needless to say that by artificially holding the local currency in order to lower import costs doesn't at all compensate for the losses the economy suffers through reduced export income.

Strongest economy on earth with ubiquitous assets and gigantic martial command escorting the economic, political, intellectual and military supremacy over all other nations is where the tribulation set in motion. Financial, trading, service and production sectors in the US market are in ruins; banking institutions, investment companies, insurance and other asset management companies have crashed. Even Europe, Japan and Australia are going through the same fate.

At the rate the financial crisis is swallowing up the world in full bloom and the credit crunch is munching the global markets in style, frail economies such as ours have no chance of standing alone. Most disturbing question is how long can we stand this situation? With all the efforts the world high powers are putting in, recuperation of the global trade and industry is at least a couple of years away. When the global financial crisis hit on the head, our economy was already burning in turmoil.

War, inefficiency, bribery, corruption , extortion, fraud, nepotism, cronyism, terrorism, frittering away public funds by the politicians and high ranking public servants, high energy costs, high inflation, uncontainable exchange rates, attitude problems are some of the factors that made things worse for our country. However, though the recent global crunch only added just one more factor to the hit list, the blow it can turn about could be severe due to its rapid and swift augmentation throughout. In every probability, there is no way Sri Lanka can keep away from the effects of economic recession but certainly the authorities could think and act sensibly towards finding ways of minimizing the impact by adopting proper policies. Most of all, the important thing is to adopt proactive policies.

It is a film that is extremely close to my heart.

John Q is a 2002 film starring Denzel Washington as John Quincy Archibald, a father and husband whose son is diagnosed with an enlarged heart and then finds out he cannot receive a transplant because HMO insurance will not cover it. Therefore, he decides to take a hospital full of patients hostage until the hospital puts his son's name on the donor's list. The film was directed by Nick Cassavetes.

John Q is a protest against the policies and hidden procedures of many insurance companies at that time. The film also stars Kimberly Elise, Anne Heche, James Woods, Ray Liotta, Eddie Griffin and Robert Duvall, among others.