Powerful quake hits central Italy

A strong earthquake has struck near Norcia in central Italy, following last week's damaging tremors, experts report.

The quakes come nearly two months after a major earthquake killed almost 300 people and destroyed several towns.Sunday's quake measured magnitude 6.6, the largest so far, and was at a depth of only 1.5km (0.9 miles).

There were no immediate reports of casualties but many buildings are reported to be destroyed.

The US Geological Survey said the epicentre of the quake was 68km south-east of the regional centre of Perugia and close to the small town of Norcia.

Tremors were felt in the capital Rome.(BBC)

TRC blocks Tamil website for incitement

The Telecommunication Regulatory Commission (TRC) yesterday blocked a Tamil website following complaints from the Media Ministry and the Justice Ministry, TRC Director General Sunil Sirisena said.

Mr. Sirisena said the complaint was that the website was carrying false propaganda about judicial decisions given in the north, criticising judges and lawyers and posting news inciting the public in the north.

He said the particular website was using Sri Lanka Telecom as the service provider and the site had been blocked until investigations were completed by the Defence Ministry and the Media ministry. This is the first website to be blocked after the new government took over last year.

SL ranks 31st in Global Youth Development Index

Sri Lanka ranked 31st in the Global Youth Development Index (YDI) 2016 which was compiled by the Commonwealth Secretariat based on a country’s condition for the youth in terms of employment, education, health, civic and political spheres.

“Of the eight South Asian countries, five improved their YDI scores, with the largest improvements being made in Sri Lanka and India,” the report said.

According to Business Insider India, India has performed poorly, coming 133rd in the index.

India was placed below the neighboring countries like Nepal (77), Bhutan (69) and Sri Lanka (31).

The top 10 countries on the index are Germany (1), Denmark (2), Australia (3), Switzerland (4), United Kingdom (5), Netherlands (6), Austria (7), Luxembourg (8), Portugal (9) and Japan (10).

The YDI is a composite index of 18 indicators that collectively measure multi-dimensional progress on youth development in 183 countries, including 49 of the 53 Commonwealth countries.

It has five domains measuring levels of education, health and well-being, employment and opportunity, political participation and civic participation for young people.

SL ranks 31st in Global Youth Development Index

‘VAT inflation’ slams markets

Rs 7,210 million worth of foreign funds left the Treasury (T) Bond and T Bill market last week, causing further downward pressure on the rupee.

This follows a similar Rs 8,792.3 million exit the previous week, taking such exits in the last two weeks to a massive Rs 16,002.3 million (Rs 16 billion).

Such exits are caused due to expectations that the USA's Federal Reserve System (Fed.) for the first time this year will hike its key policy rate known as the Fed. Funds rate when they meet in another two months time in December, i.e. after the November Presidential Election to decide on their rating policy.

These expectations have caused foreign funds to leave the local T Bond and T Bill market and re-park their assets in US based investments for 'better and safer' returns, thereby inducing depreciative pressure on the rupee.

Such exits however are paid for, from the Central Bank of Sri Lanka's (CBSL's) foreign reserves at a discounted conversion rate of Rs 146/90 to the US dollar, whereas in the foreign exchange (FX) market is currently dealing in one week's forwards which closed last week at an inflated price of Rs 148/30/50 to the dollar, thereby causing essentials to rise in price, causing inflationary pressure, as Sri Lanka is an import dependent economy.

On Friday, CBSL's foreign reserves were poorer by US$ 9.08 million (Rs 1,334.21 million) due to such an action, data showed. Conversions are made, based on the current, controlled 'spot' price of Rs 146.90 to the dollar, as CBSL deals in 'spot.'

Meanwhile, the face value of CBSL's money printing increased by Rs 8,246.88 million to Rs 151,526.23 million (net of reverse repos and standing lending facility) Friday over Thursday to meet the Government of Sri Lanka's (GoSL's) funding needs, thereby causing demand side inflationary pressure on the economy.

CBSL's moral suasion instrument is currently controlling both the 'spot' and 'spot next' at prices of Rs 146.90 and Rs 148/05/148/20 to the dollar in interbank trading, respectively.

In normal markets however, where there are no such FX controls, the FX market deals in 'spot', where such transactions are settled after two market days, whereas, as far as 'spot next' transactions are concerned, it's three.

In related developments, as upward inflationary expectations hit the economy with the new VAT hike too coming in to effect on Tuesday (1 November), the Colombo stock market, besieged by the advent of a high interest rate regime as a result, continued to record successive lows at Friday's trading as well, making its thirteenth lowest and fifteenth lowest turnover and share volumes with figures of Rs 288.8 million and 10.78 million respectively, in the calendar year to date.

As a result, the benchmark ASPI fell sharply by 0.21% to 6,424.85 points and the more sensitive S&P SL 20 Index by 0.33% to 3,562.36 points.

Inflation (price hikes) hits the poor, the fixed wage and the vulnerable the hardest. A counter to rising inflationary expectations is interest rate hikes.

CBSL at 7:00 p.m. on Monday (31 October) will set the course of its monetary policy direction, when it unveils its monetary policy report for the current month, then. What the market will look at in this connection is the direction of CBSL's rate setting, policy rates.

With its lending facility currently at 8.50% and deposit facility at 7% respectively, however, a rate hike, to tackle inflationary pressure, with its 'trickle down' effect on market interest rates, is not conducive for the development of the Colombo stock market, with the fixed income market gaining ascendancy for better returns by investors in such a scenario at the expense of the former.

I’m ready for any investigation

Former Central Bank Governor Arjuna Mahendran said he will before long prove himself innocent of allegations and charges of wrongdoing in connection with the controversial Central Bank Bonds issue.

In a telephone conversation last Friday, from Singapore, he said he was not hiding away to duck this issue, but was prepared to face any probe to clear his and his family's honour.

He said his son-in-law Arjun Aloysius was not a director of the controversial primary dealer Perpetual Treasuries at the time of this controversial Bonds issue going on the boards at the Bank.

"He resigned immediately after my appointment as Governor of the Central Bank of Sri Lanka. But, I was aware that all bond transactions and decisions were done through Perpetual Treasuries' CEO and not by its directors," he said.

He said as the Governor he had instructed the Public Debt Department to abolish the long practised, corrupt private placement procedures related to issuance of government bonds and instead introduced a more transparent and open bidding process.

"All this blame is because of this open bidding process. Corrupt primary dealers are creating all the problems," he said.

The COPE report tabled in Parliament last Friday held Mahendran responsible for the controversial Central Bank Bonds scam.

COPE has recommended legal action against Mahendran.

FCID Finds bullet- proof jeep hidden in Batticaloa

The FCID yesterday took into custody a bullet-proof jeep valued over Rs 70 million, which had been kept under wraps in a garage in Batticaloa.

FCID sources said they were currently looking into the likelihood that this vehicle had been provided by the then Presidential Secretariat as part of the security arrangements for a former Eastern Province Chief Minister during the last regime. FCID sources said they will submit details of the vehicle when they file action in Court shortly.

Sri Lanka Rupee sinks to 2nd lowest value

The exchange rate (ER) sank to its second lowest ever value in its retail selling price by commercial banks in Colombo yesterday, egged on by expectations that the Federal Reserve System (Fed.), for the first time this year, will hike its key policy rate when they meet in December, i e, after the November US presidential election.

This has resulted in foreign funds fleeing local financial markets in favour of US based assets, thereby causing downward pressure on the ER.

As a result, the ER edged closer to the Rs 150 level, declining sharply by 29 Sri Lanka cents to Rs 149.69 to the US dollar in commercial banks' average selling rate in Colombo for Telegraphic Transfers (TT) at 9:30 a.m. yesterday (compared with Thursday's close), according to Central Bank of Sri Lanka (CBSL).

The lowest the ER has fallen is Rs 150.54 which was on 30 March, 2016. In the calendar year to date, the ER has declined by 2.40% (Rs 3.51) to the dollar in commercial banks' average rates in Colombo for TT, having closed last year at Rs 146.18, according to CBSL.

A Bloomberg report of Thursday said that the market has priced a 72% chance of the Fed, raising rates at its December meeting. The Fed last December, for the first time after nine years, raised its policy rate, known as the Fed Funds Rate (FFR), which previously had been brought down to zero levels at the height of the global financial crisis in 2008. But due to the recovery of the world's largest economy, the Fed in its policy setting meeting last December raised the FFR by 25 basis points (bps) to be currently in the range of 25-50 bps.

Meanwhile, in May 2013, when then Fed Chairman Ben Bernanke said that the Fed would begin scaling down on its bond buying programme amounting to some US$ 85 billion a month (bigger than Sri Lanka's economy estimated at $ 82.3 billion last year) at that time, beginning September 2013.

That resulted, in the intervening months, in foreigners exiting the local Treasury (T) Bill and T-Bond market, causing depreciative pressure on the rupee, similar to that which is now taking place, 3½ years later.

As Sri Lanka is an import- dependent economy, a weak rupee will make the prices of essentials rise, hitting the poor and the fixed wage earner the hardest. Further, when it comes to the Government of Sri Lanka's (GoSL's) foreign debt servicing requirements, the necessary dollars are bought from CBSL's foreign reserves after paying the CBSL in rupees.

This is done to prevent further weakening of the rupee if the required dollars are bought from the foreign exchange (FX) market, instead. But the flip side is that other than depleting the country's international reserves and increasing the island's rupee debt burden, it will also cause upward pressure on local interest rates due to the required excess liquidity required for such a purpose being bought from the money market to pay off CBSL for the dollars purchased.

In the meantime, the money market was short for the thirty fifth consecutive market day yesterday, triggered by the twin combination of CBSL's protection of the rupee both in the FX market and due to the aforesaid mechanisms involved in the treatment of GoSL's foreign debt servicing commitments.

Kahatagaha graphite mine workers end protest

The protest against the privatisation of the Kahatagaha graphite mine ended yesterday after the protesters were assured that the government has not taken any decision to privatise the mine.

Industry and Commerce State Minister Champika Premadasa met the protesters who were fasting for three days, 1,132 feet underground against the alleged privatisation of the mine.

While discussing with the protesters, State Minister Premadasa, spoke with Prime Minister Ranil Wickremesinghe over the phone, to explain about the protesters’ demands.

Prime Minister Wickremesinghe assured that the government has not taken such steps to privatise the Kahatagaha graphite mine, which State Minister Premadasa conveyed to the protesters.

State Minister Premadasa promised the protesters a meeting with Prime Minister Wickremesinghe on November 8 at the Parliament premises.

Three protesters on hunger strike were hospitalised.