Stocks Tumble: Can The Government Manage The Economy In Time?
Economic Development Minister Basil Rajapaksa and Central Bank Governor Nivard Cabraal
As stocks tumble, the government is trying to improve its financial management. The question is whether it can adapt in time to stabilize an already shaky economy. The Colombo Stock Exchange (CSE) dropped 4% this morning (9 August) following a 1.41% drop on Friday and a 1.49% drop on Thursday.
The government responded by ordering that no stock can drop or rise more than 10%. This has alleviated huge drops but caused uncertainty in the market prompting economist and UNP MP Harsha De Silva to say the government was turning the CSE into a casino. While trying to stabilize the private sector, the government has also made moves to address salary irregularities and spending within the public sector as well.
Government MPs at training workshop in Beruwela
ECONOMIC MANAGEMENT
Following the suspension of the European Union GSP+ trade concession, the government made better financial regulation a hallmark of its policy. In response, the Central Bank issued a release saying that they could offset the loss of the concession (affecting 30% of all apparel exports) by “stabilizing and improving almost all macro-economic fundamentals.”
Political Drive
This is part of a broader political drive for development headed by President Mahinda Rajapaksa and his brother Basil Rajapaksa as Minister of Economic Development. The President has assembled his MPs in Beruwela for a two day workshop, saying “all should be united in brotherhood as a group that loves the country and carry forward the people friendly programme of the Government.” With the end of war, this program is now primarily economic.
Improving The Civil Service
In addition to educating MPs, the government has also committed to set up a financial training academy to create a competent civil service to match the political development drive. “The academy is being set up taking into consideration the inadequacy of training facilities in public finance, accountancy and taxation which are acutely felt needs,” government spokesemen Keheliya Rambukwella told a press conference. ”A massive development drive is being planned and accounting is an area that has to be geared to meet these requirements, sophistication has to be brought in,” he said.
This follows reports that the government was unable to collect over Rs. 9,402 million in tax revenue last year. Rambukwella has positioned the new Academy of Financial Studies as a way to improve the services of the Inland Revenue Department as well as other departments under the ambit of the Ministry of Finance.
Treasury Secretary P.B. Jayasundera has reportedly told department heads to cut back on expenses and foreign travel to improve efficiency. ““We were told that the Treasury is facing a severe financial crisis and has found it difficult to implement the promises given to the masses during the elections,” one official told The Sunday Leader.
Other ministries like Posts and Telecommunications and Power and Energy have begun tightening their belts, the former looking into salary irregularities and the latter taking steps to crack down on electricity piracy and conduct electricity audits for state organizations.
Opposition Ministers protesting the cost of living in Parliament
THE ACTUAL ECONOMY
All of this re-gearing, however, is being done within a machine already rapidly at spin. The Colombo Stock Market is already the second highest performing bourse in the world, albeit from a small base. Speculative trading, however, has already destabilized the whole market, forcing the government to step in and impose a daily 10% price band.
Private Sector Speculation
Companies related to Environmental Resources Investments have been fluctuating heavily, affecting the whole market. Trading in their holdings like Dankotuwa Porcelain, Blue Diamonds and Touchwood Investments were suspended until the company explained itself. Then all stocks were forbidden from move up and down more than 10%, upon which ERI stocks promptly fell the maximum 10%, showing that they still threaten to drag down the economy.
Public Sector Protest
The government has to keep this economic engine running, but at the same time it faces growing pressure from public sector employees for salary increases, from students for more funding for education, and from citizens for better health and environmental services in the face of a deadly wave of dengue. This is the delicate balance the Rajapaksa government faces as it seeks to modernize its financial management for a ‘future path’ while the actual economy that needs better management right now.
There is nothing to manage stocks. They go up as well as go down.
its profit taking. Worldover its the same and all stock market have become like casinos.
Stock markets in tiger economies in East Asia are famous playing fields.
Dushan….Your mother may be anybody but you would not sell her for a living or to boost your ego on this comments column.
You togather with Izzy appear to be people who will sell your parents but roast yours own sh8t to sell for a living.
Do not seek what the country can do for you but explore what you can do for the country.
Anybody is free to leave and return.
If you can find a heaven, for Gods sake just leave sri Lanka instead hanging around. SL will manage by itself & your two cents are not wanted.
Dushan your comments about the country and our leaders clearly display that you are a disgruntled & frustrated element who does not live with your feet grounded on our soil. It is high time people like you & Izzy leave this beautiful island to any fools paradise
A major technical correction to the over priced sri lankan stocks was inevitable at any moment. Every experienced investor has been expecting it any moment. If SEC allowed a few organized people to manipulate bankrupt Blue Diamonds and highly dubious Environmental Resources Investments PLC (related Dankotuwa. Ceylon Leather was already artificially very high) shares to artificially soar their stock prices this market would have crashed. Many genuine investors feel SEC stepped in late but at least sanity now prevails. The current technical correction will take a few more days and the market will stagnate for a while before fundamentally balanced stocks start picking up again. Once the market settles down SEC can review 10% band but keep a close tab on a daily basis
So… let me repeat that in full.
Do not seek what the country can do for you but explore what you can do for the country so that the politicians can take all the credit for it.
What a joke! Burger flipper became National Economics develepment minister….Sl must be suffering from educated people….
Stocks of Environmental Resource ( Greg ) and Dankotuwa were manipulated for certain. But the CSE was sleeping till the worthless Dankotuwa share which was bought by Greg at Rs. 9/= went manipulated up to Rs. 140. If you look at Greg they siphoned US$ 176 to a investment company in another country said to have invested 50% of the assets in a high worth metal company. I checked the investment in the company. It is less than 3% of the value of the company, which cannot be worth US$ 88. CSE is penalizing all by activating the 10% limit. Pl take this out and do some data mining to find the manipulators and fine them.
The authorities should have investigated the four companies which were trading at extraordinary levels after suspending them without interfering in the whole stock market. A classical example of another square peg in a round hole. Appointing ex-wife of presidents secretary, a lifetime public servant who had no experience in the free market economy and contribution by few self acclaimed financial pundits in ther treasury has effectively killed the stock market in sri lanka. This was the only area which was functioning successfully till the interference by the political stooges.
OHH now I know the truth about the recent news article that the Govt is investing EPF funds to artificially boost the stocks of some companies at the SEC. Cabral, Jayasundara and Basil good trio for lieing, deceiving and manipulating . Obalata suba anagathayak. Ratata anagattha anagathayak
Cabral and G.L are the two most pathetic people I know who use their educational qualifications for personal gains with no shame; none what so ever…
Cabraaal and GL, shameless people, and Basil, kokeda inna mattek dan pakaya welaaaa
Cabbaral has minimal qualifications, does not warrant him being in his current position ,only through bootlicking and social climbing. He is only a Chartered Accountant and that too a Sri Lanka one -not a member of the internationally recognised CCAB. How can you xpect the countrys economy to flourish with a hal-baked nitwit who talks through his posterior on economic issues. God save us all.
Pimba is very correct. Cabraal has been portrayed/painted as a big brain and an economic wizard though he is a SL qualified chartered without any international recognition. Purely a political appointment. So we cannot expect any magic from him as he has no previous experiences or expertise. Yet again there are no qualified team at all generally in any ministry or departments in order to function peroperly with adaquate plans except a handful who too are kept away from direct involment. Same story with the other two as well.
SOS!
Day by day I feel ashamed to be a Sri Lankan. The leaders of the Political Parties have contibuted greatly to the rot by not providing the public with capable gentlemen to vote for at elections. The voter has no choice, even if one does not vote as a protest a Mr. Nobody gets elected to parliament with a few votes as the numbers have to be filled. Currently we are reaping the effects of not appointing capable persons to parliament.
Oh! Don’t worry, we have all the financial wiz kids directing our country’s economy. Cabral, Basil, Dr.jayasundara, Prof.GL, Dr. Mervyn, Dr. MahindaThey know every thing, going by the way they talk about the country’s economy. They will emerge with flying colours whatever that may be. Even western countries will learn from them how to manage their economies. But their problem is they can not do as they want because they are subject to the laws of their countries.
This Cabbaraal fellow is a cunning crook like Ravi Karunnayaka. Really he should not be in the CB but in Welikada with his wife for the ponzi scams they jointly started before Golden Key and Sakvitji came to notoriety. In fact he endorsed these scams in his position at CB. And what about the oil hedging when the price of oil on the world mkt was around 140 dollars? Who is going to compensate the poor tax payer and his generations to come for this mad scheme? If this happened in China, this Great Brain would now be hanging from the Great Wall. Such is the state of affairs in Lanka where we have a half-educated idiot pulling the money strings of the country.Down the economic drain we go. while these cunning foxes build their ill gotten hotels and spas in destined heritage zones and change the fiscal rules to suit their own pockets and accounts..
Men with Doctorate degrees (PH.D) are plenty in this country, leave alone Honorary Doctors. This degree is now gradually devalued like our currency.
Even people without a basic univerrsity degree are awarded Doctorates, by
some of the stooges in Universities.
No wonder that the country has come to this state.
Good news……………awaiting to see country’s economy to crash down.
Hip hip hurrah
A poor villager(a farmer called Ranbanda) had a conversation with me over the telephone. He was a strong supporter of the SLFP and worked hard with Kobbekaduwa, our former presidential candidate.His opinion is that this Government can’t go longer with the prewailing wastage of the public resources.
The GOSL must go with the opposition parties to formulate a simple economic political model and in this exercise the Provincial Councils system should and must go to the hell as soon as possible. The public finance must be protected and distribute among the most needed sections of the society.
This is very funny. people on this forum have great respect for the opinion of village farmers like Ranbanda on how to run Sri Lankas economy. Cant blame them, when the biggest suit-and-tie RanBanda is making all the stupid decisions as head of the Central Bank with his ponzi schemes and fiscal limbo-dancing.
Today, considering the fast life-style that everyone leads, credit cards have a huge demand throughout the economy. Persons from every arena are using credit card and people who not using the credit card have arranged to apply for one in particular. Thanks for giving your ideas in credit cards.