May 20, 2022

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Sri Lanka exchange halts again after 13% plunge

Sri Lanka exchange halts again after 13% plunge

Crisis-hit Sri Lanka‘s stock exchange halted again Monday after a nearly 13 percent plunge, derailing the bourse’s tentative reopening after a two-week break aimed at forestalling a market collapse.

The island nation is grappling with its worst economic downturn since independence in 1948, with months of regular blackouts and acute shortages of food and fuel.

Equities have shed nearly 40 percent of their value since January, with the local currency falling by a similar amount against the greenback in the past month.

Monday was the first morning of trade on the Colombo bourse since a weeklong Sri Lankan New Year holiday and a subsequent five-day trading halt after the government hiked interest rates and defaulted on its $51 billion foreign debt.

The local S&P index fell seven percent in the opening minute of trade, more than the five percent needed to trigger an automatic half-hour halt.

Shares continued their rapid slide after a brief resumption, prompting the market to declare a halt to trading for the rest of the day.

Sri Lankan officials were in Washington last week to negotiate with the International Monetary Fund for a bailout, but official sources said there was no immediate prospect of emergency funding from the lender.

Colombo is now banking on further bilateral help from India, China and Japan to help keep the country afloat, a finance ministry source told AFP.

Sri Lanka’s economic collapse began to be felt after the coronavirus pandemic torpedoed vital revenue from tourism and remittances, leaving the country unable to finance essential imports.

Utilities unable to pay for fuel have imposed long daily blackouts to ration power, while long lines snake around service stations each morning as people queue for petrol and kerosene.

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Hospitals are short of vital medicines, the government has appealed to citizens abroad for donations and record inflation has added to everyday hardships.

‘Painful few years’
Public anger over government mismanagement of the crisis is at a fever pitch and thousands of protesters have been camped outside the seafront office of President Gotabaya Rajapaksa to demand his resignation for more than two weeks.

Nationwide demonstrations have seen crowds attempt to storm the homes and offices of other government figures.

Last week a man was shot dead when police fired on a road blockade in the central town of Rambukkana — the first fatality since largescale protests began last month.

Finance minister Ali Sabry, who is part of the delegation meeting with the IMF in Washington, warned last week that the economic situation would likely deteriorate even further.

“It is going to get worse before it gets better,” Sabry told reporters. “It is going to be a painful few years ahead.”