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Sri Lanka’s Central Bank Governor Discusses Cryptocurrency Regulation Amidst Calls for Relaxation

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In a press conference held today (May 28), Sri Lanka’s Central Bank Governor, Nandalal Weerasinghe, reiterated his concerns over the use of cryptocurrencies, which are currently not accepted in the country.

“Cryptocurrency has been recognized in some markets as an asset class, but this asset class is highly volatile and risky. So, without proper regulation and supervision, do we need the public to invest in highly volatile and risky assets?” the Governor questioned.

Weerasinghe stated that the decision to allow or disallow the use of cryptocurrency as a payment method or as an asset class rests with the government. He emphasized the need for a proper regulatory mechanism and a regulatory authority like the Securities and Exchange Commission (SEC) to ensure transparency and prevent money laundering.

The Governor also highlighted the challenges posed by exchange controls in Sri Lanka, where there is no free movement of capital. “How do you prevent capital from moving in and out if you allow cryptocurrency? There are a lot of factors to consider before any authority makes that decision,” he added.

This statement comes at a time when cryptocurrencies are gaining popularity worldwide. Sri Lankan President Ranil Wickremesinghe recently remarked, “Some young people are involved in cryptocurrency. They suggest relaxing regulations in this area to foster economic growth.”

This suggests that there is a growing debate within the country about the potential benefits and risks of cryptocurrencies, and how best to regulate them. For now, cryptocurrencies remain unaccepted in Sri Lanka, but the discussion around their regulation continues.

Source – Sri Lanka Business Online

Economy

Sri Lanka prints Rs100bn through open market operations

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Sri Lanka’s central bank has injected around 100 billion rupees against domestic assets through multiple liquidity tools by October 25 official data show, driving up excess money in the banking system to over 190 billion rupees.

The central bank injected 36.16 billion rupees through an overnight auction and 70 billion rupees for 7 days through a term auction of printed money.

By October 25, excess liquidity deposited in the central bank’s standing facility was 193.4 billion rupees, up from 138 billion rupees a month earlier.

Economynext – https://economynext.com/sri-lanka-prints-rs100bn-through-open-market-operations-184982/

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Economy

Sri Lanka’s Economy Stabilized – World Bank

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Sri Lanka’s economy has stabilized, with growth expected to reach 4.4 percent in 2024, surpassing earlier forecasts. This positive outlook follows four consecutive quarters of growth driven by the industrial and tourism sectors and supported by critical structural and policy reforms, says the World Bank.

Released today, the World Bank’s bi-annual Sri Lanka Development Update, titled Opening Up to the Future, cautions that the recovery remains fragile and hinges on maintaining macroeconomic stability, successfully restructuring debt, and continuing structural reforms to increase medium-term growth and reduce poverty. Key reforms aimed at boosting exports, attracting foreign investment, enhancing female labor force participation, improving productivity, and addressing challenges such as poverty, food insecurity, and vulnerabilities in the financial sector are crucial for achieving more inclusive and sustainable growth.

The report underscores the country’s potential for achieving higher and sustainable growth through trade. Sri Lanka has an untapped export potential estimated at $10 billion annually, which could create approximately 142,500 new jobs. There is significant opportunity for diversifying and expanding exports in manufacturing, services and agriculture, provided the necessary reforms are implemented.

“Sri Lanka’s recent economic stabilization, marked by four quarters of growth and a current account surplus in 2023, is a significant milestone,” said David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka.  “At this moment, Sri Lanka has a real opportunity to realize its export potential, which we estimate at $10 billion annually. There is an opening for Sri Lanka to deepen its participation in global value chains and take advantage of its geography and an evolving global landscape to generate jobs and sustain growth. The continued implementation of important economic and governance-related reforms will allow Sri Lanka to fully benefit from this moment.”

Looking ahead, the report projects a modest growth of 3.5 percent in 2025. Growth is then expected to follow a modest path over the medium term due to the scarring effects of the economic crisis. Poverty is expected to gradually decline but remain above 20 percent until 2026. Inflation is likely to stay below the central bank’s target of 5 percent in 2024, gradually increasing as demand picks up. The current account is projected to remain in surplus in 2024, driven by tourism and remittances.

The Sri Lanka Development Update is a companion piece to the South Asia Development Update, a twice-a-year World Bank report that examines economic developments and prospects in the South Asia region and analyzes policy challenges faced by countries in this region. The October 2024 edition, Women, Jobs, and Growthprojects growth of 6.4 percent in South Asia this year, making it the fastest-growing EMDE region in the world. Increasing women’s participation in the labor force and opening further to global trade and investment could help the region grow even faster and achieve its development goals, says the World Bank’s regional outlook.

Source – World Bank

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Economy

President appoints two senior economic advisors on honorary basis

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President Anura Kumara Dissanayake has appointed the Chairman of the Ceylon Chamber of Commerce, Duminda Hulangamuwa and Prof. Anil Fernando of the Sri Jayawardenapura University as Senior Advisors for Economic Affairs and Finance on honorary basis.

Cabinet Spokesman Minister Vijitha Herath said the appointments, effective September 24, 2024, come with the consensus of the Cabinet of Ministers.

He said both appointments were honorary without a salary payment or other benefits.

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