FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka


Submit PostSubmit Post
ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post



Latest topics

» Synergies of possible merger between Sampath Bank and PABC
by CHRONICLE™ Today at 5:42 pm

» Japanese money laundering via PABC Bank raise CB eye brows
by Sstar Today at 3:29 pm

» ACCESS ENGINEERING ( AEL.N )
by ADVENTUS Today at 1:50 pm

» FUTURE of BROWNS INVESTMENT PLC (BIL)
by ONTHEMONEY Today at 12:40 pm

» Prime Lands Residencies Limited (PLR)
by Nandun Today at 10:42 am

» GLAS will be winner with Super Gain.
by SL-INVESTOR Today at 9:14 am

» "MFL" DEAL to 12 RS (multi finance plc)
by sahan8896 Today at 7:48 am

» EXPOLANKA HOLDINGS PLC (EXPO.N0000)
by Captain Yesterday at 11:51 pm

» Growing Fear
by Wickyz Yesterday at 8:15 pm

» Daily Foreign Transactions
by Pradeep90 Yesterday at 7:40 pm

» CONGRATULATIONS TO FINANCIAL CHRONICLE ON THIS 11TH YEAR
by CHRONICLE™ Yesterday at 3:31 pm

» HNB to merge with Seylan Bank?
by reyaz Yesterday at 11:37 am

» There are howmany funds in Sri Lanka?
by reyaz Tue May 04, 2021 4:52 pm

» Positive for BIL
by samaritan Tue May 04, 2021 3:33 pm

» The Introduction of COVID 19 Vaccine and CSE
by Mr. X Tue May 04, 2021 1:22 pm

» HAYLEYS FIBRE PLC (HEXP.N0000)
by samaritan Tue May 04, 2021 1:21 pm

» Next market support level
by celtic tiger Tue May 04, 2021 1:17 pm

» NDB.R An opportunity not to be missed
by stocknoob Tue May 04, 2021 12:56 pm

» Lanka Aluminum
by stockchaser Tue May 04, 2021 11:33 am

» Ban of chemical fertilizers is a great news
by Mr. X Tue May 04, 2021 9:43 am

EXPERT CHRONICLE™

ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

CHRONICLE™ NEWS PRODUCTS

FINANCIAL CHRONICLE™

Views & Reviews, Analysis, Evaluations, Discussions, Gossip and Hot Tips relating to Sri Lankan companies listed on the Colombo Stock Exchange (CSE)
Contribute




DAILY CHRONICLE™

Latest news and articles published in Newspapers, Websites, Blogs and other online news sites relating to business and investments in Sri Lanka
Contribute



ECONOMIC CHRONICLE™

This is a section that provide news, views, analysis, predications relating to Political and Socio-Economic factors and how such activities affect the Stock Market and other economic activity of the Country.

Contribute




EXPERT CHRONICLE™

This is an exclusive section for Expert Articles which will help member to share knowledge through comments and responses of the members. All members are allowed to reply and make comments to these articles.

Contribute


Submit Post


CHRONICLE™ YouTube

Youtube Videos and other visual presentations relating Stock market and other investment advise submitted by members or other contributors.

Contribute


Submit Post


කොළඔ කොටස් වෙළඳපොළේ වංශකථාව
කොළඔ කොටස් වෙළඳපොළේ ලැයිස්තුගත සමාගම් කොටස් ගැන තොරතුරු¸විශ්ලේෂණ¸සාකච්ඡා¸ කටකතා¸රසකතා යන සියල්ල අපේම සිංහලෙන් කතා කළ හැකි ‘කතා මණ්ඩපය’

Contribute

Twitter Feeds
POPULAR COMPANIES
A

ABANS ELECTRICALS PLC

ACCESS ENGINEERING PLC Hot

ACL CABLES PLC

ACL PLASTICS PLC

ACME PRINTING & PACKAGING PLC

AGSTAR PLC

AITKEN SPENCE HOTEL HOLDINGS PLC

AITKEN SPENCE PLC

ANILANA HOTELS AND PROPERTIES PLC

ARPICO INSURANCE PLC

ASIA ASSET FINANCE PLC

ASIA CAPITAL PLC

B

BAIRAHA FARMS PLC

BALANGODA PLANTATIONS PLC

BIMPUTH FINANCE PLC

BLUE DIAMONDS JEWELLERY WORLDWIDE PLC

B P P L HOLDINGS PLC

BROWNS BEACH HOTELS PLC

BROWNS INVESTMENTS PLC

C

CARGO BOAT DEVELOPMENT COMPANY PLC

CENTRAL INDUSTRIES PLC

CEYLON COLD STORES PLC

CEYLON GRAIN ELEVATORS PLC Hot

CEYLON TEA BROKERS PLC

CEYLON TOBACCO COMPANY PLC

CHEVRON LUBRICANTS LANKA PLC

COLOMBO FORT LAND & BUILDING PLC

COMMERCIAL BANK OF CEYLON PLC

CITRUS LEISURE PLC Hot

COMMERCIAL CREDIT AND FINANCE PLC

D

DANKOTUWA PORCELAIN PLC

DFCC BANK PLC

DIALOG AXIATA PLC

DIALOG FINANCE PLC

DIPPED PRODUCTS PLC

DISTILLERIES COMPANY OF SRI LANKA PLC

DUNAMIS CAPITAL PLC

E

EAST WEST PROPERTIES PLC Hot

EASTERN MERCHANTS PLC

EXPOLANKA HOLDINGS PLC

E-CHANNELLING PLC

F

FIRST CAPITAL HOLDINGS PLC

G

GALADARI HOTELS (LANKA) PLC

GUARDIAN CAPITAL PARTNERS PLC

H

HATTON NATIONAL BANK PLC

HAYLEYS PLC

HAYLEYS FABRIC PLC

HAYLEYS FIBRE PLC Hot

HEMAS HOLDINGS PLC

HIKKADUWA BEACH RESORT PLC

HNB ASSURANCE PLC

HVA FOODS PLC

J

JANASHAKTHI INSURANCE COMPANY PLC

JOHN KEELLS HOLDINGS PLC Hot

JOHN KEELLS HOTELS PLC

L

LANKA ASHOK LEYLAND PLC

LANKA IOC PLC

LANKEM CEYLON PLC

LANKEM DEVELOPMENTS PLC

LAUGFS GAS PLC

LAUGFS POWER LIMITED

LOLC FINANCE PLC

LOLC HOLDINGS PLC

LUCKY LANKA MILK PROCESSING COMPANY PLC

M

MELSTACORP PLC

N

NATIONAL DEVELOPMENT BANK PLC

NATION LANKA FINANCE PLC

NESTLE LANKA PLC

O

ORIENT FINANCE PLC

OVERSEAS REALTY (CEYLON) PLC

P

PANASIAN POWER PLC

PEOPLE'S LEASING & FINANCE PLC

PIRAMAL GLASS CEYLON PLC

PRIME FINANCE PLC

R

RAIGAM WAYAMBA SALTERNS PLC

RENUKA AGRI FOODS PLC

RENUKA CAPITAL PLC

RENUKA HOLDINGS PLC

RICHARD PIERIS AND COMPANY PLC

RICHARD PIERIS EXPORTS PLC Hot

ROYAL CERAMICS PLC

S

SAMPATH BANK PLC

SEYLAN BANK PLC

SIERRA CABLES PLC

SINGHE HOSPITALS PLC Hot

SMB LEASING PLC

SOFTLOGIC HOLDINGS PLC

SOFTLOGIC LIFE INSURANCE PLC

SRI LANKA TELECOM PLC

SWISSTEK (CEYLON) PLC Hot

T

TEEJAY LANKA PLC

TESS AGRO PLC

THREE ACRE FARMS PLC

TOKYO CEMENT COMPANY (LANKA) PLC Hot

U

UNION BANK OF COLOMBO PLC

V

VALLIBEL FINANCE PLC

VALLIBEL ONE PLC Hot

VALLIBEL POWER ERATHNA PLC

W

WASKADUWA BEACH RESORT PLC


You are not connected. Please login or register

FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Banana republic central bank

Banana republic central bank

Go down  Message [Page 1 of 1]

1Banana republic central bank Empty Banana republic central bank Mon May 06, 2019 4:20 pm

Uaecoindubai

Uaecoindubai
Manager - Equity Analytics
Manager - Equity Analytics
Sri Lanka's soft-pegged Central Bank has made a 137 billion rupee profit by busting the currency from 153 to 182 to the US dollar in 2018 in the course of following polices involving real effective exchange rate targeting and printing money to keep rates down.

A soft-pegged Central Bank is the most dangerous monetary authority compared to others that follow non-contradictory policy such as hard pegged agencies or fully floating ones.

A soft-pegged currency collapses because the Central Bank implement deploys implicit or explicit weak side convertibility undertakings (defending a peg) but resists the credit system from adjusting to the interventions by printing an almost equal amount of money (sterilising the forex sales) to keep rates down.

The currency would continue to fall until the Central Bank either floats, ending printing, or allows rates to go up, slowing credit. In Sri Lanka both happen, in what analysts have called 'rawulath ne kendeth ne' (neither the beared nor the soup is saved) outcomes.

The people and businesses then have to recover from the effects of both a credit slowdown and the currency collapses, which slashes the real capital available for re-investment when the credit recovers.

In 2019, the Central Bank also forced a cut in deposit rates, further hurting savers.

The Central Bank booked a gross 146 billion rupee nominal profit on its foreign assets as the rupee collapsed, due to money printing in 2018 as the rupee collapsed.

The Central Bank also earned 8.9 billion rupees printing money into the banking system to sterilize interventions. In the 2018 crisis, most of the money was printed through term reverse repo deals.

The Central Bank earned 25.5 billion rupees on its reserves.

Interest income from foreign reserves or capital gains from the liquidation of foreign assets is the only way a pegged Central Bank can earn profits (seigniorage) without causing harm to the people, businesses, and the nation at large.

All other profits are inflationary including gains from the rupee collapse. In 2017, the first year since mid 2014 when Sri Lanka had moneary stability, the bulk of 48 billion rupees of profts came from foreign assets.

A soft-pegged Central Bank's profits fall when there is low inflation and can even make losses due to sterilization (mopping up) costs. Currency appreciation can also generate 'losses'.

In 2018, the Central Bank also lost a part of the foreign income due to swaps, which are convertibility forward market convertibility undertakings given to borrowers in foreign currency, in a quasi-fiscal activity.

There have been calls to bring strict monetary rules to prevent the Central Bank from generating monetary instability and criminalize the most dangerous tools or actions of the Central Bank including liquidity shocks, becoming counter-party to Soros-style swaps and floating-with-excess-liquidity.

Under its underlying monetary law, which was developed to take Sri Lanka to the Bretton-Woods system of failed soft-pegs in 1950 ending a hard peg, the 'profits' from currency collapse cannot be transferred to the government.

The real value (external) of Central Bank assets remain unchanged when the domestic currency collapses against a reserve or anchor currency.

Under the monetary law act, there was a 20 billion rupee loss in 2018. About 11 billion rupees came from a transfer to a pension fund for Central Bank workers.

In the profit and loss account, another 7.1 billion rupees were paid as salaries and other benefits to workers.

At the time Sri Lanka dissolved its hard peg, where the balance of payments determined the domestic money supply, it was illegal to print money to resist the balance of payments and generate a crisis.

Countries that suffered most from second class pegs like Sri Lanka include those in Latin America.

"This law had been drawn up under American tutelage and along the lines that have been the subject of experiment in certain Latin American countries for some eight years past," Britain's Banker Magazine wrote prophetically in July 1950 soon after the soft-pegged monetary law was passed in then-Ceylon.

"The step from an 'automatic' currency system (such as he which Ceylon inherited with is Colonial Currency Board) to an ultra-modern 'managed' currency system is necessarily fraught with great dangers and there may be some who will regret that Ceylon has decided to run such risks at this time."

At the time of independence, the currencies of India, Ceylon, Maldives, Nepal, Mauritius, Dubai and several gulf countries were around 4.70 to the US dollar either through outright 'dollarization' of the Indian rupee or through currency boards (hard pegs).

Singapore's first finance minister Goh Keng Swee said the country decided to preserve the 'strange anachronism' from the Colonial era because printing money led to balance of payments troubles.

READ MORE: Why Singapore chose a currency board over a central banK

Singapore later modified its currency board law to allow its money to appreciated when the US Fed had bad policy. The Singapore dollar is now at 1.2 to the US dollars from 3.06 at the break up of Bretton Woods in 1971.

The currency of Dubai, a financial centre that does not operate fancy monetary policy is at 3.67 from the 4.76 in Indian rupee days. Gulf countries abandoned the rupee after the Reserve Bank of India was mis-used to print money for the Nehru administration's 5-year plans.

Sri Lanka's rupee fell from 4.76 to 5.96 to the US dollar in the latter stages of Bretton Woods partly due to a balance of payments crisis on Sterling and has fallen to 176 so far.

With tinkering of Maldives Monetary Authority Law to enhance its lender of last resort facilities the Rufiyaa has also come under pressure. Its most recent fall was to 15.3 to the US dollar from 12.8.

The Maldives, with greater monetary stability, has been able to boost per capita income to about 11,000 US dollars

Back to top  Message [Page 1 of 1]

Permissions in this forum:
You cannot reply to topics in this forum