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Message: <blockquote data-quote="earthling" data-source="post: 26558105" data-attributes="member: 967">Sri Lankan Banking system in danger of collapse - GammanpilaSri Lanka’s Energy Minister Udaya Gammanpila said there was no fuel stabilization fund, a key strategy of the current administration which rejected market pricing of fuel while in oppositionMinister Gammanpila said the fuel sector losses and debt was a dangerous challenge which was worse than Tamil Tiger terrorism.“When I was not a minister, the cabinet on March 30, 2020, decided to establish a fuel stabilization fund,” he told reporters in Colombo.“Even though it was said that the fuel stabilization fund would be established, such a fund did not operate (kri-yarth-mer-ker) as an unexpected thing happen in the month of March,”“Due to the fast spread of the pandemic, the government lost revenue from tourism, lost foreign investments, lost remittances sent by migrant workers and lost the tax revenue from import of motor vehicles,” he said.“At last, the government had to rely on tax revenue from imports and fuel".WHAT HAPPENED TO THE FUEL STABILIZATION FUND?Finance Ministry reports showed that the Fuel Stabilization Fund was set up in 2020 but contributions stopped as prices started to pick up and a tax surcharge on fuel was removed.Deepening the mystery further, official data showed that the underlying account of the Fuel Price Stabilization Fund was in fact 26 billion rupees negative by end 2020.Further, the Fuel Price Stabilization Fund itself was set up with 50 billion rupees in printed money, which would create over 275 million dollars of forex shortages when loaned out of banks.PRINTING MONEY DEEPENS THE CRISISAnalysts had warned that with the Federal Reserve printing money energy prices were going to be shock to Sri Lanka’s economy in 2021 due to the price fixing strategy.Money printed to fix energy prices had contributed to currency crises in 2000/2001, 2004, 2008, and 2012.Money is printed either to cover lost taxes (2004), or to keep interest rates down as state-run Ceylon Petroleum Corporation borrows money from state banks to subsidize fuel outside the budget (2008/9 and 2011).CPC ABOUT TO COLLAPSE BOC AND PBBank of Ceylon loaned 200 million dollars and another 700 million under a sovereign guarantee to CPC, in what was named a ‘cover up loan’ while the People’s Bank loaned 900 million to CPC.As a result, CPC owed over 1.8 billion US dollars to the Bank of Ceylon and People’s Bank by end 2018. It is not clear whether new dollar loans were taken by CPC in 2020 also.Further, the Fuel Price Stabilization Fund was set up with 50 billion rupees in printed money, which created over 275 million dollars of forex shortages when loaned out of banks.CPC A GREATER DANGER THAN TIGER TERRORISTSMinister Gammanpila said the Sri Lanka was now facing a bigger challenge than the Tamil Tiger terrorists.“Instead of lying to the people I like to tell them the truth. The truth is bitter. We only have three months of (import) reserves,” Minister Gammanpila told reporters.More than the loss to the CPC it is the effect on the entire economy. We have to decide whether we stand up as a nation or is buried. We are in an economic challenge which is more dangerous than Tiger terrorism.”The banking system which had loaned over 600 billion to the Ceylon Petroleum Corporation was in danger of collapse, he said.State run banks have been borrowing dollars in the interbank forex markets, including through swaps paying effectives rates over of 10 percent. <a href="https://economynext.com/sri-lanka-minister-warns-of-financial-terror-mystery-deepens-over-fuel-stabilization-fund-83101/" target="_blank">https://economynext.com/sri-lanka-minister-warns-of-financial-terror-mystery-deepens-over-fuel-stabilization-fund-83101/</a>WE ARE TOTALLY FUCKED !!</blockquote>

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