When the five days long stretch of holidays ended last week and the Colombo bourse reopened for trading on Tuesday, the market surged 6.71 percent (633.69 points up) on the broad All Share Price Index (ASPI) while the Standard and Poor SL 20 index covering the 20 largest and more liquid companies quoted on the Colombo Stock Exchange (CSE) leaped 10.29 percent (279.57 points). The ASPI surge was the second highest single day gain since the civil war ended in 2009. Furthermore, the ASPI crossed what market analysts call the 10,000 point “resistance level” for the first time since September 15, 2022, with the day’s market turnover at Rs. 7.42 billion being the highest daily turnover for the year.
President Ranil Wickremesinghe had good reason to celebrate the market reaction to the ongoing debt restructuring and optimization efforts, both foreign and domestic, which had comfortably cleared the parliamentary hurdle the previous Saturday. This was the first time the House had ever sat on a Saturday. A run on the banks, feared by some was attributed to June 30 being declared a special bank holiday to neatly slot into the weekend and two public holidays as a precautionary measure against such an eventuality. This may have been unnecessary, analysts opined after the event. However that be, the performance of financial market including bills and bonds once the total picture was unveiled leaves room for satisfaction. Fears of members of the Employees Provident Fund (EPF), long a captive lender to government, taking a blow in the short to medium term have also receded.
While the country situation has improved immeasurably since last year when both President Gotabaya and Prime Minister Mahinda Rajapaksa vacated office – the president can take most of the credit for that – acute hardship especially on the cost of living front is very much with us. Even the middle class is in a tight bind and the plight of the poor, among them daily wage earners, is almost unimaginable. True, there are occasional favourable newsbytes like a decline in inflation promised to recede further during the course of this year. But anybody shopping for essential groceries are all too aware of prevailing reality.
The rupee strengthened against the dollar and other hard currencies but inevitable market fluctuations remain a fact of life. Cooking gas prices were lowered a few days ago, motor vehicle fuel prices were lowered but since adjusted upward at least where the high demand 92 octane product was concerned. The lower end of the spectrum of electricity consumers will get some much needed relief this month. Taxes have been doubled and prices of some previously unavailable goods have doubled and tripled but the worst fears have not materialized.
We run today a news story about Sri Lankan’s “jumping ship,” leaving the country in droves in a process that began to accelerate in the middle of last year. According to data maintained at the Sri Lanka Foreign Employment Bureau (SLFEB), 122,000 Lankans left the country for work in 2021. This jumped to 311,000 last year. In the first five months of 2023, as many as 122,000 foreign job seekers – same as in the whole of 2021 – had left. Officials admit that these figures may be under-stating reality as many people leaving for Middle Eastern jobs and employment elsewhere in Asia leave on tourist visas and are not registered at the SLFEB. The losses include skilled workers and professionals.
As Central Bank Governor Nandalal Weerasinghe, recalled from retirement in Australia, has said in an interview we run today on the macro-economic picture (see page 11) that the more difficult part of salvaging Sri Lanka’s economy will be the restructure of domestic debt while navigating a political minefield. He is quoted saying: “This is the most challenging part of debt restructuring. It is very politically sensitive, socially sensitive and also there is some impact on domestic (bond) holders,” The process of doing this difficult job has already begun and it must be unequivocally said that Sri Lanka is fortunate that an apolitical professional central banker is at the helm of driving it forward. Undoubtedly it will be no smooth ride and obstacles will surely surface along the way. How well this process will be navigated is an open question with President Wickremesinghe now making fairly clear that he is looking for a second term, this time elected by the people, come November 2024. This would entail sometimes taking decisions aimed at winning votes subordinating the national interest. Depending entirely on what the situation was at the height of the aragalaya, and what it is when people next go to the polls will not be enough.
Whether the government will press on with last week’s attempt via an SLPP Private Member to reconvene local bodies whose tenure has ended remains to be seen. This has revolted most Lankans already seething at their being denied these elections after nominations closed on the excuse there was no money to run them. It must be said in fairness to the president that he may have nothing whatever to do with this attempt to reconvene local bodies which may be a wholly an SLPP affair, allegedly directed by Basil Rajapaksa, that party’s national organizer. Members of local bodies are useful storm troops at election time and this most likely is what’s behind that move. But is the SLPP thinking of running its own candidate at the next presidential election rather than backing RW who its MP’s elected to the presidency in July 2022? However several SLPP MPs have already pledged allegiance to Wickremesinghe.