Rupee edges lower; stocks slip

Reuters: Sri Lanka’s rupee closed slightly weaker on Wednesday in thin trade due to light dollar demand from banks and importers, while worries over political uncertainty and fiscal slippage weighed on investor sentiment. 

The International Monetary Fund (IMF) will resume discussions with Sri Lanka in February for further disbursal of part of a $1.5 billion loan, the lender said, after a political crisis led to talks being delayed by three months. 

The rupee ended at 182.30/40 per dollar on Wednesday, compared with 182.15/30 in the previous session, market sources said. Markets were closed on Tuesday for a holiday. On 3 January, the rupee had fallen to an all-time low of 183.00 against the dollar.

The rupee fell 19% in 2018, making it one of the worst-performing currencies in Asia, according to Refinitiv data, due to heavy foreign outflows. The rupee has declined about five percentage points since the political crisis started. 

A series of credit rating downgrades have made it harder for Sri Lanka to borrow as it faces record high repayments of $5.9 billion this year, with $2.6 billion of it due in the first three months. 

On Tuesday, the island nation’s junior Finance Minister, Eran Wickramaratne, told Reuters that Sri Lanka was considering an offer from Bank of China for a loan of $300 million, which could be raised to $1 billion, to help it meet repayments in the coming months. 

The Central Bank on 9 January said that the Reserve Bank of India (RBI) had agreed to provide $400 million to it under a regional swap facility and it had also requested a further bilateral swap arrangements of $1 billion. 

Sri Lanka’s shares closed slightly weaker, near their more than six-week closing low hit on Friday. The Colombo Stock Index ended 0.13 % weaker at 5,973.34, hovering near its lowest close since 26 November hit on Friday. The benchmark stock index lost 5 % in 2018. Turnover was Rs. 950.2 million ($5.22 million), more than last year’s daily average of Rs. 834 million. Foreign investors sold a net Rs. 620.6 million worth of shares on Wednesday. They have been net sellers of Rs. 15.3 billion worth of stocks since a political crisis began on 26 October. 

The bond market saw outflows of Rs. 77.9 billion between 25 October and 9 January, the latest Central Bank data showed. Foreign investors pulled a net Rs. 22.8 billion out of stocks last year, while they net sold Rs. 159.8 billion from Government securities from January through 26 December Bourse and Central Bank showed data. 

Sri Lanka President Maithripala Sirisena appointed a Cabinet of Ministers from his rival party on 21 December after he was forced to reinstate Ranil Wickremesinghe as Prime Minister, 51 days after he was sacked. The crisis is expected to ease, though tense relations between the two men could cause fiscal problems, analysts say. 

Sri Lanka plans to increase Government spending by 13.2% from last year to Rs. 4.47 trillion in 2019, the Finance Ministry said last week.