(Bloomberg) — Authorities in Sri Lanka this week are expected to name a new finance minister and raise interest rates as they struggle to stabilize an economy spiraling into chaos by a lack of dollars and surging inflation.
Prime Minister Ranil Wickremesinghe, appointed last week, is expected to soon choose a finance minister, who will help lead talks with the International Monetary Fund over badly needed aid.
Click here for the latest on developments in Sri Lanka
Meanwhile, the Central Bank of Sri Lanka is expected to raise its benchmark standing lending rate by 75 basis points on Thursday from 14.5%, the median in a Bloomberg survey shows as of Tuesday, as it tries to battle Asia’s fastest inflation.
The decisions come as the South Asian country barrels toward its first official default, with the 30-day grace period for missed interest payments on dollar bonds ending Wednesday.
Read more: Sri Lanka Stumbles Toward Its First Default on Foreign Debt
The prime minister on Monday warned that the country was down to its last day of gasoline supplies, as it doesn’t have the dollars to pay for shipments aboard tankers anchored just offshore. He also said it would need to print money to pay government salaries, a move that will certainly worsen inflation already running near 30%.
What Bloomberg Economics Says…
“Facing a cratering currency and the risk of hyperinflation, the Central Bank of Sri Lanka is sure to hike rates further — crushing growth. But we think the worst of the inflation storm will pass fairly quickly. The prospect of consumer price gains cooling into 2023 should allow the central bank to limit its remaining rate increases to 400 basis points.”
— Ankur Shukla, Economist
For the full note, click here
Sri Lanka is suffering a shortage of food, medicine and energy while its currency has been in a free fall, fueling protests and violence that pushed Prime Minister Mahinda Rajapaksa to resign last week. His brother Gotabaya, the president, appointed long-time opponent Wickremesinghe in a bid to calm the situation and restore order. Central bank Governor Nandalal Weerasinghe had earlier threatened to resign if political stability wasn’t established.
The country’s monetary authority has raised interest rates by 850 basis points so far this year. Meanwhile, the currency has lost more than 40% against the dollar since the end of February, while its foreign exchange reserves dipped 4.7% in April to $1.8 billion. Officials, however, warned earlier this month that the country has about $50 million in usable reserves.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
