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Tuesday, January 31, 2023

Bandula now in two minds about being Finance Minister – The Morning

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  • Neither accepted nor rejected offer, says former Trade Minister

BY Shenal Fernando

Former Minister of Trade Bandula Gunawardana is now in two minds about accepting the Finance Ministry portfolio, which has been left vacant following former Justice Minister Ali Sabry’s 24-hour tenure as Finance Minister.

Speaking to The Morning Business yesterday (7) Gunawardana, while stating that he has not yet accepted the Finance portfolio, also implied that he has not rejected the offer either. When pressed on whether he intends to accept the Finance portfolio, he stated: “Let’s wait and see.”

The continuing vacancy of the post of the Finance Minister is concerning due to the fact that Sri Lanka’s economy appears to be running on life support and thus effective policy intervention in the short term is essential.

Since the 7 March decision by the Central Bank of Sri Lanka (CBSL) to float the exchange, the Sri Lankan rupee has collapsed significantly. As of yesterday, the Sri Lankan rupee has depreciated significantly by over 57.6%, and according to the average buying and selling telegraphic transfers (TT) exchange rates published by the CBSL yesterday, the selling rate of a US dollar stood at Rs. 320.0 while the buying rate of a US dollar stood at Rs. 309.4.

Furthermore, rising commodity prices due to high inflation have resulted in severe public dissatisfaction with the Government. According to the Department of Census and Statistics, Sri Lanka’s inflation on a year-on-year (YoY) basis reached 18.8% in March 2022 as per the Colombo Consumers’ Price Index (CCPI), increasing from 15.1% in February 2022. Similarly, food inflation reached 30.1%, increasing from 25.7% in February. The CCPI had increased by 4.8 index points during the month of March compared to February, reaching 164.9.

However, according to the inflation dashboard computed by Johns Hopkins University Professor of Applied Economics and Cato Institute Senior Fellow Steve Hanke, the annual inflation rate of Sri Lanka was the sixth highest in the world at 55%, behind only Venezuela, with an annual inflation rate of 140%, followed by Zimbabwe with an annual inflation rate of 134%, Lebanon with an annual inflation rate of 117%, Turkey with an annual inflation rate of 101%, and Sudan with an annual inflation rate of 96%.

Furthermore, according to PublicFinance.lk, which is a platform for public finance-related information in Sri Lanka run by Verité Research, over 98% of Sri Lanka gross foreign reserves as of January 2022, which stood at $ 2.3 billion, was made up of short-term swaps maturing within 12 months. Currently, as of end-March 2022, Sri Lanka’s gross foreign reserves have fallen to $ 1.9 billion of which only $ 1.7 billion is made of liquid foreign reserves.

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