Rupee edges lower; stocks slip

(Colombo) REUTERS: Sri Lanka’s rupee closed slightly weaker yesterday 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 US $ 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 yesterday, compared with 182.15/30 in the previous session, market sources said. Markets were closed on Tuesday for a holiday. On January 3, the rupee had fallen to an all-time low of 183.00 against the dollar. The rupee fell 19 percent 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 5 percent 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 US $ 5.9 billion this year, with US $ 2.6 billion of it due in the first 
three months. 

Sri Lankan shares closed slightly weaker, near their more than six-week closing low hit on Friday. 

The Colombo Stock Index ended 0.13 percent weaker at 5,973.34, hovering near its lowest close since November 26 hit on Friday. The benchmark stock index lost 5 percent in 2018. 

Turnover was Rs.950.2 million, more than last year’s daily average of Rs.834 million. 

Foreign investors sold a net Rs.620.6 million worth of shares yesterday. They have been net sellers of Rs.15.3 billion worth of stocks since a political crisis began on October 26. The bond market saw outflows of Rs.77.9 billion between October 25 and January 9, 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 December 26, bourse and the Central Bank s howed data. 

Sri Lanka President Maithripala Sirisena appointed a cabinet of ministers from his rival party on December 21 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 percent from last year to Rs.4.47 trillion in 2019, the Finance Ministry said last week.