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Lack Of Confidence In Real Economy Persists

Aug 7, 2010 3:04:20 PM - thesundayleader.lk

Dr. Mervyn de Silva

With limited opportunities for investment, the market was forced to park their excess cash caused by inflows, in Government securities, resulting in a sharp fall in yields at Wednesday’s primary Treasury (T) Bill auction.
Weighted average yields of T Bills of 91, 182 and 364 day maturities fell by 12, 16 and 20 basis points each to 7.78%, 8.48% and 8.80% respectively at Wednesday’s auction, while T Bond yields of   2011, 2012, 2013 and 2014 maturities have fallen by 25 basis points in the past two weeks due to inflows, because of investors ploughing their excess money on Government Securities and not on the real economy, market source told this reporter on Friday.
2014 maturing T Bonds closed the week at 9.25%, 2012 at 8.70% (less than the one year T Bill yield) and the 2011 under 8.50% in secondary market trading, they said.
The US dollar which last Friday commanded a price of Rs. 112/75 in spot trading, dropped by a further 40 Sri Lanka cents to Rs. 112/35 on Monday, before Central Bank intervention which lasted through the week prevented the greenback from falling further.
Despite the war ending nearly 15 months ago, investments in the real economy are yet to see the light of day, with one captain of industry who didn’t want to be named saying that Tuesday’s thuggish behaviour of Deputy Highways Minister Dr. Mervyn de Silva in public, has placed the country in a bad light in the eyes of the international community.
De Silva taking the law into his own hands tied a Samurdhi employee onto a tree at a public function in his Kelaniya electorate for alleged dereliction of duty.
“Such incidents are not a fillip to investments,” the source said.
At one end of the spectrum there is a Cabinet Minister who launched a protest in front of the UN Office in Colombo, and at the other end there is another Minister who ties a public servant onto a tree for allegedly not carrying out his duties, bringing to shame Sri Lanka’s 1.2 million strong public service, whilst at the same time causing contempt on the Executive and his Government both locally and internationally when such actions go unpunished, he said.The lead story on these pages in The Sunday Leader issue of July 25, 2010 under the heading “Lack Of Confidence Puts Brakes On Investments” also highlighted this issue.
A country’s economy is directly connected to the politics of that nation, and a no confidence vote in an economy of a country by investors also translates to a no confidence vote on the government and the political system of that country by such industry players.