signals on monetary policy
careful, Central Bank tells depositors
The Central Bank last week warned the public to
beware of unlicensed deposit taking outfits offering high rates
of return. "Our message to the public is: don't be tempted
by offers of super interest rates and super profits," Central
Bank governor A.S. Jayawardena said. "There are many small-time
money lenders but it is impossible to chase after all these
people, do sting operations, and take them to court," he
said. "So we told the public to be wary of extraordinary
offers." The bank last week advertised a list of approved
financial institutions and said the media had been advised not
to publish ads from those that were not registered. Jayawardena
said the public had burnt its fingers once from the type of
'double your money in two years' offers from some finance companies
which later collapsed. "The higher the return, the higher
the risk," he said. "So our message is: 'caveat emptor'
- be careful, let the buyer beware." He said it was "humanly
impossible to completely protect the public from these tricksters.
It is like expecting the police to completely eliminate murders.
"When we hear that there are people who are openly soliciting
deposits from the public without authority we bring to their
notice that they are flouting the law," he added. "We
have cautioned them and even taken some to courts after repeated
Bank will shortly publish statements on monetary policy and financial
stability as part of ongoing reforms designed to modernise the organisation,
and make it more transparent and accountable to the public. "Very
soon we'll be publishing our monetary policy statement," Central
Bank governor A.S. Jayawardena said in an interview.
give a clear picture of our monetary policy and an idea of where
inflation and interest rates are going to be. In other countries
it is even tabled in parliament."
bank will put out a "financial stability report" that
would outline the measures taken by the organisation to stabilise
the financial system, he said. "Then we'll be more accountable
to the public."
part of the reform process that will see the bank focus on its core
responsibilities and shed those that are not central to its main
Bank's main focus would be to ensure economic and price stability,
achieved through the conduct of monetary policy that will aim to
keep price increases as low as possible, and ensure system stability
by regulating and supervising banks and other financial institutions
to create stability of the financial system, Jayawardena said. "We
are modernising the bank to meet the demands and challenges of the
new international financial system," he said. "Till now
we have been looking at mainly the domestic financial scene."
Now there would
be more emphasis placed on the strength of the system and its ability
to meet the kind of shocks generated by large scale capital flows
that created the East Asian economic crisis, he said. "So we
need to strengthen the domestic banking system and must start with
the Central Bank," he said. The Central Bank was strengthening
its supervision of commercial banks and ensuring quicker detection
of any weaknesses through online monitoring, he said.
we used to leisurely do bank by bank supervision - taking a year
or two," he added. "Now we can no longer afford that luxury."
However, he warned, "the public must realise that despite Central
Bank supervision it cannot guarantee that everything is fine."
The bank was
also considering the virtue of making its bank deposit guarantee
system compulsory, Jayawardena said. The bank now has a voluntary
system but it is not used by commercial banks apparently because
of the need to pay a premium that would raise costs. Under new measures
to make government spending more responsible, the proposed Fiscal
Responsibility Act would restrict the size of the budget deficit
and reduce its borrowings from the Central Bank that helps to indirectly
Bank does not create money unless it finances the government budget
or finances credit expansion by commercial banks," Jayawardena
explained. "Credit expansion by commercial banks is kept under
check by the Central Bank. If they expand too much we rein them
in. "But the chief manner in which money is created by the
Central Bank is by lending to the government or by buying government
debt," he added. "So if we're to restrain the Central
Bank issuing money, the government must reduce its borrowings.
the government runs a deficit it can be financed by borrowing abroad
or by borrowing locally from the people," he said. "If
there is a shortfall it borrows from the Central Bank- the government
will issue government bonds, commercial banks will borrow from us
and subscribe to these government bonds. "So if you want to
curtail the Central Bank's ability to create money the government
must curtail its borrowing and stop deficit budgeting."
tourney boost to economy
music, traditional drummers and dozens of dancers launched Sri Lanka's
biggest cricket "party" - the ICC Champions trophy - last
Thursday, the country's tourism and trade sectors also had much to
is a massive boost to tourism while bringing other immense benefits
to the economy," noted Hemaka Amarasuriya, chairman of the
Sri Lanka Cricket Board Interim Committee.
He said some
5,000 spectators had arrived, mainly from South Asia, to watch the
action resulting in heavy bookings at city hotels. This is in addition
to the 220 players and officials which make up the 11 teams excluding
Sri Lanka "who are bound to spend money on, for instance, shopping
in the country," he said.
Last year tourists
to Sri Lanka spent $ 63.1 per head inclusive of hotel accommodation,
according to Sri Lanka Tourist Board figures.
tournament costs the ICC some $5.5 million, officials said.
said the sponsorship row also gave a lot of publicity for Sri Lanka.
"Good news or bad news
the publicity was good."
scandal in biz sector
The current turmoil in the corporate sector, marked by the
shock resignations of John Keells deputy chairman Jagath Fernando
and Union Assurance CEO Sarath Wikramanayake, has taken a new turn,
this time with a sexual flavour, with allegations that the boss of
a high-profile travel firm was sexually abusing male staffers.
High Court has issued an interim order restraining the travel boss
from functioning as the chairman and a director of the well-known
firm after a petition filed by a co-director alleged that he was
trying to sexually harass male members of staff of the travel department.
The court also
asked the travel boss to show cause why he should not be removed
as chairman and director of the company.
The man in
the centre of this controversy could not be reached for comment
last week. He is believed to be planning to go to court on Monday
to try to quash the decision, his associates said.
High Court order was in response to a petition submitted by a co-director
and shareholder owning 12.5 percent of the firm, who sought an order
against the chairman.
has alleged that the travel boss was trying to intimidate and coerce
male members of staff to perform sexual favours and those who refused
were verbally abused and victimised. He had refused a request from
the firm's Board of Directors to resign from his position, the petition
to sell EAP property to recover loan
Seylan Bank plans to auction a property owned by E.A.P. Technologies
(Pvt) Ltd, a unit of the E.A.P. group which operates ETV and is owned
by the Edirisinghe family.
The bank advertised
recently saying that an E.A.P. property at Sea Street in Kochchikade
North is to be sold by public auction to recover more than Rs. 30
million owed to the bank.
is being taken under the Recovery of Loans by Banks (Special Provisions)
Act since the E.A.P. firm had defaulted on the repayment of the
loan. The company's chairperson Soma Edirisinghe was not available
certain of striking oil
Sri Lanka plans to resume oil exploration off the country's
coastal belt shortly, once cabinet approval is granted, by inviting
bids from oil multinationals through a road show.
Power and Energy
Minister Karu Jayasuriya, in an interview with The Sunday Times
last week oozed confidence over the prospects of Sri Lanka striking
after cabinet approval for the project is given, treasury approval
must be sought for the fiscal terms and conditions of exploration
followed by an invitation to oil exploration firms.
are lucky, striking oil or gas would change the destiny of this
country in a new direction," Jayasuriya said adding that there
are positive signs of the existence of petroleum or gas deposits.
confident we would strike oil," said the minister who was able
to fulfil a promise of ending prolonged power cuts earlier this
The last time
oil exploration was done was in the early 1980s without any success.
discussing issues ranging from the power situation, oil exploration
to petroleum, said the next challenge of the government is to ensure
the country won't have to face another power cut.
He said while
demand for power was rising by an average eight percent, it is likely
to be around 10-12 percent next year with the peace process getting
peak hour demand is 1,350 MW. We will end up with 1,750 MW (supply)
by the end of the year with the commissioning of new projects and
the emergency purchases we have made," he said adding that
negotiations are underway to end some of these expensive contracts.
is also considering a downward adjustment of power tariffs next
power projects underway or to be undertaken are the Kukule Ganga
hydropower project being commissioned in October 2003; preliminary
work to start on the Upper Kotmale project in the next eight weeks
and proposals to be called for a thermal plant of 350 MW capacity
at Kerawalapitiya (near Wattala) and a 350 MW coal power plant in
also said the Ceylon Petroleum Corporation (CPC) won't be scrapped
under the plan to un-bundle the corporation's various activities.
"The CPC will compete with the private sector."
While the Indian
Oil Corporation (IOC) is close to refurbishing and running 100 fuel
stations from the CPC after both sides signed an agreement earlier
this month, Jayasuriya said they were looking for a third player
in the fuel import and distribution sector.