Sri Lanka: Foreign Debt Falls While Foreign Reserve Maintains At $7.5 Billion

By Eurasia Review-Monday, August 10th, 2015

Sri Lanka’s foreign debt under the new government has decreased while maintaining the foreign reserve at US$ 7.5 billion.

Sri Lanka has borrowed only 43 billion rupees in the first half of this year as external debt. The Ministry of Finance releasing a press release attributed this lower amount recorded to the efficient manner in which the reforms introduced by the new government to the public administration and the financial management.

As envisaged in the budget -2015 the approved amount of commercial loans to be taken in this year is Rs 195 billion of which the government has so far obtained 43 billion rupees which is only a 22 percent. But, according to the General Treasury, the total outstanding government debt increased by 8.8 percent to Rs. 7,390 billion by end of 2014 from Rs. 6,793 billion in 2013.

However, the outstanding total debt reached an all-time high of Rs 3272 billion in June 2014 and the lowest recorded was Rs 70 billion in 1986.

According to statistics available at the General Treasury the annual debt servicing during the 2015 is estimated to be Rs 1,265 billion. The Ministry said that the new government has retired some of these debts which were obtained at higher interest rate and obtained new debt under the lower rate of interest. As a result the government’s debt servicing interest rate to GDP ratio has come down to 3.5 percent from the earlier rate of 5 percent.

Meanwhile the Finance Ministry said that the government revenue in the first six month of the year has gone up by 18 percent to Rs 703 billion when compared with the corresponding period in 2014. The revenue reported in the first six months of 2014 was Rs 596 billion. The increase in the government revenue and the curtailing of extravagance expenditures with efficient financial management by the new government led to managing the public debt efficiently under the new government, the Finance Ministry release further stated.

Standard and Poor’s rating has confirmed Sri Lanka’s ‘B+’ rating with a stable outlook expressing the hope that Sri Lanka’s foreign reserve will grow and the external debt will fall in the next three years as the risks associated with the external settings are mitigated by growing foreign reserve. As at present country’s international reserve remain at US $ 7.5 billion.

Prageeth questioned for 3 days on his book ‘Rajapakse family’-suspect reveals in his confession; how did the copy reach Gota’s hands?

(Lanka-e-News- 11.Aug.2015, 10.30PM) The suspect sergeant major Ran Banda who was arrested day before yesterday(09) at Kurunegala in connection with journalist Prageeth Ekneliyagoda abduction and murder case, has  in his confession to the CID stated, the latter was detained in the Girithale army camp and questioned for three days pertaining to the book he wrote about the Rajapakse family.

After the abduction of Prageeth on 2010-01-04 night at Rajagiriya by two Tamil nationals attached to the intelligence division of the Girithale camp , he was taken to Girithale camp , and there Prageeth was questioned by him , Ran Banda confessed.

This interrogation went on for three days , and the primary question centered on two issues: the book written about Rajapakse family by Prageeth which was to be printed ; and the other was about the ties that existed between Prageeth and Fonseka , Ran Banda in his confession had revealed.

Thereafter , Major Siriwardena who was acting as  the second commanding officer of the camp who was promoted to post of  temporary Colonel had appeared and said ,’we have a trip to go with him,’  and taken  Prageeth along with him. Since that point of time , he did not see Prageeth again , Ran Banda disclosed in his confession.

Major Siriwardena was earlier working under Colonel Shammi Kumararatne, and it is the latter who had given instructions to the former, and during that period it was Colonel Shammi who had been the commanding officer of the Girithale army camp.

Was it the book ‘Rajapakse family’ book that courted disaster for Prageeth?

The book ‘Rajapakse family’ was written by Prageeth in view of the presidential elections at that time. This book is about  how many of the Rajapakses have secured appointments under that government ; whether they have the requisite educational qualifications and so forth , about which topics people were not paying attention to.

Mangala Samaraweera who was of the SLFP (M) faction at that time was in the ready to print this book . But someone had robbed the type setting copy of the proof that was being read at his Rajagiriya office.

Later, showing a proof reading photocopy of that typesetting to Kelly Senanayake a famous printer and social activist, the CID questioned him, to learn whether that book was being printed by Kelly, to which question Kelly had replied he had not undertaken such a task. The CID had then asked him who had written that book ? Kelly had said he was not aware of that.

During the days following Prageeth’s abduction, Kelly revealed to Lanka e News his suspicions in that connection. He said, he saw Prageeth’s notes confirming that he had been reading  the copy of the proof  and he identified Prageeth’s writing .In the circumstances , the crucial question is , how did this leak out ?

After the CID resumed investigations into the abduction ,a journalist Keerthi Kumara Lokuliyana giving evidence at the CID disclosed that a copy of the book ‘Rajapakse family’ prepared by Prageeth had been robbed by Prem Kulatileke.

When it was probed how a copy of a booklet in Mangala Samaraweera’s office even before being printed reached the hands of Gotabaya Rajapakse, the answer to it was found when it was discovered that Ruwan Ferdinands who was a secretary to Mangala for a long while had been in the secret payroll of Gotabaya.

During that period when Lanka e News inquired from him about this based on the media exposures, Ruwan  repudiated it. Nevertheless  by now , the clandestine relationship between Gotabaya and Ruwan is well known. This was borne out by the series of discussions with Gotabaya  that were published in the website of Ruwan Ferdinands boosting the image of Gotabaya even before the heat of the election defeat settled down.

Ruwan Ferdinands has collected huge sums of money from Gotabaya by  stooping to these sordid activities, yet a journalist of his who was involved in the media discussions revealed that she was not paid any money by Ferdiinands.

Meanwhile, a shadow editor in England of Ruwan Ferdinands website had recently spoken to a high profile UNP politico and requested not to jail Gotabaya in case there a new government comes to power as Gotabaya is one who can do some work, and therefore can be used.

When the whole country is demanding that the  heinous  crimes committed by Gotabaya be searched and he be put in jail, this request made by this bloke had baffled and perplexed the UNP upper crust politico. It is now very clear that since this bloke is functioning as Ruwan‘s shadow editor, a better or more unselfish request cannot be expected of him.

Taking into careful consideration  all the circumstances and the background relating to the robbery of the copy of the book ‘Rajapakse family’ written by Prageeth from the office of Mangala Samaraweera, it can be inferred who was behind this robbery and conspiracy.Following the discovery of the secret ties Ruwan had with the Rajapakses , Ruwan was dismissed by Mangala Samaraweera from the post of secretary to him.

It is also now known why the media belonging to Ruwan is resorting to most sly and cunning schemes to distort the facts regarding the abduction and murder of Prageeth , and paint a picture that those crimes were the result of Karuna’s criminal activities.

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by     (2015-08-11 18:24:26)

Climate Changes

By Ranil Senanayake –August 11, 2015

Ranil Senanayake

Internationally there is a palpable sense of urgency among the climate scientists. While waiting for our climate scientists to even twitch from their slumber, we should begin to consider what all this means to us. There seems to be a real concern that the sea level will rise substantially. On July 20th, a major study suggested that mean sea levels could rise 10 times faster than previously predicted: 10 feet by 2065. While the level is up for debate the fact of sea level rise seems to be certain. One emerging, disturbing fact is that while the IPCC climate [change] models predict a gentle, slow change, the current experience is one so rapid that neither scientists, nor animals can keep up with it.

As our fossil profligate lifestyles, keep pumping carbon dioxide into the atmosphere a large part of it is absorbed by the oceans. As the oceans absorb carbon dioxide from the atmosphere, it’s converted into carbonic acid and the pH of seawater declines. Unlike a prediction of massive sea-level rise just decades away, the warming and acidifying oceans represent another problem that seems to have kick-started an oceanic mass extinction on the same time scale. Acidification has a direct effect on mollusks and other marine animals with hard outer bodies: A striking study last year showed that, along the West Coast of the US, the shells of tiny snails are already dissolving, with as-yet-unknown consequences on the ecosystem.

The combination of excessive nutrients from agricultural runoff, abnormal wind patterns and the warming oceans is already creating seasonal dead zones in coastal regions when algae blooms suck up most of the available oxygen. The appearance of low-oxygen regions has doubled in frequency every 10 years since 1960 and should continue to grow over the coming decades at an even greater rate.Read More

SRI LANKA: Wasim Thajudeen; what people have a right to know

August 11, 2015

With the exhumation of Wasim Thajudeen’s body, and the start of the reinvestigation into the case a large body of information has been placed before the public by various sources. Therefore, it would be quite natural for the people to want to have truthful answers to many of the questions have been raised through such information. Some of these questions are as follows…

1. Is the alleged accident a fake one, or was there a genuine accident?

2. If the accident is a fake, as it is assumed by many, then who caused the fake accident?

3. Was there in fact an accident, or was it only an appearance of an accident made to take place?

4. What were the injuries caused by the accident if such an accident took place at all, then what are the other injuries that have been caused prior to the accident?

5. In whose car was the deceased body found in? Was it his own car, which he generally used, or is it someone else’s car?

6. What is the link between the car in which his body was found in, and the vehicle that was reported to have been taken into custody, and which is said to have formally belonged to the Red Cross Office and had later been gifted to the ‘Siriliya Saviya’ social services programme?

7. Was the burning of the car caused due to the accident or was the fire caused externally?

8. Was the victim dead at the time the vehicle caught fire, or has the fire had anything to do with his death?

9. As it has been reported, if there are other injuries found on the body - several fractured ribs, several teeth being broken and several other injuries – then why did the Judicial Medical Officer who performed the first inquiry, ignore these injuries?

10. If the accident was in fact staged, then who caused the injuries that led to his death and what is the history of disputes which led to the conflicts, and which ultimately resulted in Thajudeen’s death?

All these, are questions of public interest, as Thajudeen’s death is no longer viewed purely as a private matter of one particular individual but is a matter arising out of the way certain people wielded power and such an incident could have been caused only because of the possibilities for the abuse of power that existed at the time.

The very characterisation of the death as an accident in the original report to court can be reasonably assumed to have been made possible due to the possibilities for such abuse of power at the time.

The impression that has been created in the public mind is that similar to several other deaths that occurred during the previous regime; of the former Sunday Leader Editor Lasantha Wickramatunga; of several politicians such as Nadarajah Raviraj; of the cartoonist Prageeth Ekneligoda who disappeared; and cases of many young students who were abducted, kept in Navy custody and made to disappear thereafter; and in many such other crimes that were a product of the political circumstances of the time, the death of Thajudeen can only be explained in terms of abuse of power and the political patronage given to criminals.

The sudden revelation of the suspicious circumstances relating to Thajudeen’s death arising out the re-investigation of the case, has in fact provided opportunities for the public to probe into matters that threaten their security during the many previous years.

Therefore, the authorities owe an investigation, as thorough as possible, which if required should go beyond the investigations by forensic pathologists into other forms of forensic investigations, relevant to this case. In other fields of forensic science, there are experts in the country and where they are not available expertise could be obtained from more developed nations.

Sergeant major who abducted Prageeth arrested: Girithale camp commanding officer was Jagath the ‘cattle thief’ when Prageeth was murdered

(Lanka-e-News- 10.Aug.2015, 11.30PM) Sergeant major Ran Banda attached to the Girithale military camp who was linked to the abduction and murder of journalist Prageeth Ekneliyagoda was arrested yesterday (09) at Kurunegala by the CID. He is an army intelligence division officer , and a sinhalese . Already two Tamil officers of the intelligence division have been arrested.

Unbelievably when this arrest was being made it is several  media coolies who were in the pay of Gotabaya and parasitic on him throughout in the past to fill their pot bellies who had become most jittery and distraught, even more than the army officers. Among them is a media website  ‘Gode father’ (village blood sucking leech). These unscrupulous shameless media coolies are trying through publicity gimmick  to white wash Gotabaya’s villainy and criminalities even in this murder by fastening it on Karuna Amman or LTTE. Because the two suspects taken into custody are Tamil nationals of the intelligence division  these media scoundrels are attempting to distort the facts and paint a false picture.

It is well for  these media coolies instead of behaving like latrine coolies to understand whether these two suspects of the army intelligence division were earlier on with  Karuna Amman or Prabhakaran group or MGR, when these ghastly crimes were committed they were in the army intelligence division, and it  was Gotabaya who used them secretly as hired assassins, while the  operation was carried out by Hendavitharane, a close sidekick of Gotabaya.

Today at the time of writing this article , Hendavitharane and Gotabaya have enlisted the Tamil former LTTE members for the election campaign of Mahinda Rajapkse at Kurunegala. They are about 50 in number , and the police intelligence division is keeping a close surveillance on them. It has also come to light these Tamil ex LTTE members were not rehabilitated and had never been in any rehabilitation camps.

After  Prageeth’s abduction , he  was handed over to the Girithale army camp. At that time the commnading officer of that camp was Major general Jagath Wijesuriya , a most abominable henchman of Gotabaya . 

This Jagath is a notorious harak hora (cattle thief). When this cattle thief was transporting robbed cattle in a vehicle requisitioned by the army , he got caught red handed to a high rung army officer. He was punished on this account – he was demoted to the rank of Colonel. As this punishment was meted out during the time when General Sarath Fonseka was the army commander , Jagath the harak hora nursed a most venomous and vicious grudge against Fonseka. 

Later Gotabaya who wanted to take revenge on Fonseka , promoted the harak hora to major general from Colonel post, and appointed him as a discipline protecting officer for the entire army.This Gotabaya who appointed this harak hora to maintain discipline in the army , next made  him  the Girithale camp commanding officer. When Prageeth was handed over to the Girithale camp , it was this harak hora Jagath Jayasuriya the lapdog of Gotabaya  who was the commanding officer of that camp.

One illustration that bears testimony to the truth that Jagath the harak hora would do any sordid and criminal bidding of Gotabaya without any demur is  : when General Fonseka was forcibly carried away anad abducted from his home after the presidential elections then, it was Jagath the harak hora who played a major role, assisted by Major general Pujitha Manawadu. Except these two villainous scoundrels , no other army officer at that time was inclined to carry out Gotabaya ‘s illegal orders.As a reciprocal gesture for all the pariah work he did on behalf of Gotabaya , Jagath the cattle thief of Sri Lanka was appointed as deputy Ambassador. Until the government of good governance came into power he was in  Japan . Now this cattle thief has retired from the army.

When  Prageeth was murdered within  Girithale camp, it was Jagath the harak hora and shameless lapdog of Gotabaya who was the army commanding officer of the camp . It can therefore be inferred at whose behest Prageeth was killed in cold blood.

In any event we have a word of caution to those including the CID and the squalid media coolies whoever  are  trying to camouflage this brutal crime. It is well if they can bear in mind that the public are keenly watching the developments . Hence if they want to play safe,  these hired scoundrels should not try to whitewash the villainy and criminalities of Gotabaya , the devil incarnate

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by     (2015-08-11 00:34:48)

Army Sampath's presence at Kotahena shooting confirmed

2015-08-11 

Police Spokesperson ASP Ruwan Gunasekara said that underworld criminals known as 'Army Sampath' and 'Sankha' were present during the shooting, which occurred in Kotahena on 31 July, 2015. 

ASP Gunasekara said that this fact has been confirmed in the statements given by witnesses who were present at the place of the shooting. But, it is yet to be verified whether the two criminals were involved in election canvassing, he further stressed.

Pilfering As A Way Of Life – Cabinet Papers Of The UNP Led Government

By Rajiva Wijesinha –August 11, 2015

Prof. Rajiva Wijesingha

After the Central Bank Bond Scam, which there were so many desperate efforts to conceal, evidence about further financial fraud by the present government has come in thick and fast. Most worrying perhaps was the contract signed with regard to an unsolicited bid by the Metallurgical Corporation of China to construct the first phase of what is now known as the Central Expressway.

Or rather I should say the agreement, for a contract has been reported to Cabinet for only part of the area allocated to MCC. For the first section, from Kadawatha to Kossinna, there seems to be no contract, and no actual figure has been reported to Cabinet. It seems to be Rs 30 billion (the so-called savings which the Prime Minister claimed to have made on another road). He did not give details of these savings, which in fact happened because the scope of the road was cut down. And he did not tell Cabinet the precise length of the section of the central expressway to be built with these ‘savings’. Kabir Hashim has said it is 4 kilometres, which means that the people are paying Rs 7.5 billion per kilometer if we accept the Prime Minister’s claim about the ‘savings’.

The second part of the road is from Kossinna to Meerigama. That was an unsolicited project, with negotiations conducted over a weekend. The Prime Minister argued for giving this contract on the basis that another contract with the same company, signed by the previous government, had lapsed. He did not mention that the Attorney General, whose advice had been sought, had recommended that that contract be cancelled. Instead he said that, since the company had to be compensated for start up costs (how much these were was not revealed) they should be given a fresh contract for a different section of the expressway. The rate agreed on was Rs4.5 billion a kilometer, over 60% more than same company had quoted for the contract with the previous government that had lapsed.Read More

Army wakes up or makes up ! orders bans on its members participating in elections and social activities, but why?

(Lanka-e-News- 11.Aug.2015, 10.30PM)  The Army headquarters has issued a circular banning members of the army from participating in elections and social activities. This circular A 009 /2015 dated 7 th August is signed by Director administration , Brigadier N.A. Dharmaratne.

This circular states,  it is  issued based on the provisions of enactment  No. 17 of 1947 of the army . Under the army regulations , no permanent , auxiliary  or voluntary force officer or soldier can take part in election campaigns except for exercising their franchise. Internet  social media and propaganda activities  are also forbidden.

In case his wife is contesting , even his taking part in her election activities in his official residence is prohibited. Collection of funds , discussions , holding meetings in pursuance of  political agendas and aims in uniform or otherwise too are strictly forbidden.

The actual question at issue does not concern  the bans imposed. If this army disciplinary  law is in force since 1947 , what is the action going to be taken  by president Maithripala Sirasena  who is also the defense minister, against the officers from the top to the bottom including the army commander who brazenly and openly violated election laws during the January 8 th 2015 elections? Based on the directives issued on 7 th August , disciplinary action must have been  taken against every officer who transgressed the army regulations and be punished. When that is the position the burning   question  is , whether the army disciplinary laws in force  since 1947 were  not operative on 8 th January 2015?

Another issue is , the aforementioned circular has been introduced to come into effect from12 th August .If the army enactments are in operation from 1947 , then this 12 th August directive is for what purpose ? Is it to operate from high noon when scorching sun is right above the heads? Though the election laws operate from the time the nominations are handed over , the army disciplinary laws do not operate in that manner and  are not subordinate to  the election laws. Those are disciplinary laws in force since 1947 . When these are the stark unerring  facts , why is this law  enforcement to take effect from   12 th August ?
The copy of the  relevant  directive is herein

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by     (2015-08-11 18:36:50)

President calls for urgent report into LTTE vehicles in Army use

Aug 11, 2015

President Maithripala Sirisena has ordred the Army commander to immediately make a list of LTTE owned vehicles seized by the Army.

The president has cited intelligence reports to him that those vehicles were being used for illegal activities, and could be used to unleash violence during the election. He has stressed that all these vehicles should be listed and confiscated.

Previously, the police arrested one such vehicle, a white van, being used by Maj. Gen. Prasanna Silva for his personal use. According to the law, all LTTE used vehicles and other properties should be produced before courts and confiscated. Later, they could be used by the military, but only through the justice ministry secretary. However, many top military officers are presently using such vehicles without following this procedure.

It is now revealed that most of the white vans being used to abduct people during the past were the ones that had been seized from the LTTE.

Despite regular highlights by the media about these vehicles and illegal activities, the present government, too failed to take any concrete measure.

Tsunami funds: Champika says MR may lose civic rights if guilty 



2015-08-11
United National Front for Good Governance (UNFGG) General Secretary and Minister Patali Champika Ranawaka said today that former president Mahinda Rajapaksa would be stripped of his civic rights if he was found guilty of misappropriating Tsunami funds.

“Mahinda Rajapaksa will have to face the charges levelled against him with regard to the misappropriating of Tsunami funds and assisting a terrorist organisation. He had presented a Cabinet note instead of a proper Cabinet paper to release funds for the LTTE. Since he had taken measures in his capacity as the then finance minister when asking the Treasury to release the funds to the LTTE, the legal immunity of a president will not be able to protect him,” the minister told a news conference.

He said according to Clause No: 157 of the Constitution, aiding and abetting a terrorist organisation could result in a person losing his or her civil rights for seven years. It also includes the from employment in state institutions if they are state employees.

The minister said Mr. Rajapaksa had provided Rs.800 million to the LTTE, through the Reconstruction and Development Agency (RADA) headed by former parliamentarian Tiran Alles and said the police had found records of a part of it being a cash transaction of some Rs.169 million.

He said the funding of the LTTE by Mr. Rajapaksa through bogus companies had continued until the LTTE attacked former Defence Secretary Gotabaya Rajapaksa in 2006.

“Neither Mahinda Rajapaksa nor his brother Basil, who had secret meetings with LTTE front-liner Emil Kanthan, had denied the charges against them of having funded the LTTE,” the minister said.

He challenged the former president for an open debate on charges against him and said he was equipped with evidence to prove the charges.

Meanwhile, commenting on the Supreme Court delaying the arrest of former MP Tiran Alles, the minister said the case was blow to the reputation of the Supreme Court.

“The case should not be heard in the Supreme Court. I may be charged of contempt of court for making these remarks but I’m not afraid to tell the truth,” he said adding that they would make sure the judges are impartial in future and would probe all cases of corruption and disappearance. (Lahiru Pothmulla)

Pix by Pradeep Dilrukshana 

How Israel’s siege deprived a baby of his mother’s love

Adeem Abu-Middain The Electronic Intifada 8 August 2015

Rasha (center) with her mother- and father-in-law.

It was a typical Gaza summer day: hot and humid. The war was still raging on, and I was filled with an overwhelming sense of sadness and despair.

I decided to go to the town of Beit Hanoun which lies at the northern end of the Gaza Strip to interview survivors of Israel’s bombardment of a United Nations school on 24 July. Sixteen civilians who had sought shelter there were killed in that attack; scores were left wounded.

How Israel’s Siege Deprived a Baby of His Mother’s Love by Thavam Ratna

Oath Keepers: who are the armed militia men in Ferguson?

TUESDAY 11 AUGUST 2015

Heavily armed white men have been making unofficial patrols of the streets of Ferguson with assault rifles - who are they and why are they allowed to carry guns?

Members of the Oath Keepers walk with their personal weapons on the street during protests in Ferguson, Missouri on August 11.

The four, who say they are from a patriotic organisation called the Oath Keepers, were seen by police and protesters armed and protected by bullet proof jackets on the fourth protests.
However, St. Louis County Police Chief Jon Belmar told NBC news that their presence was "both unnecessary and inflammatory."

Who are they?

Oathkeepers on the streets of Ferguson: Police in riot gear clashed with protesters who had gathered in the streets to mark the anniversary of the shooting of an unarmed black teen

The organisation says it is made up of current and former U.S, soldiers and police who pledge to "defend the Constitution against all enemies, foreign and domestic."

They say that they are loyal to the constitution, not to politicians. They often wear military fatigues.

The organization - which claims to have more than 30,000 members - was founded in 2004 by former U.S. Army paratrooper and Yale Law School graduate Stewart Rhodes.

How many are there?

Members of the Oath Keepers provide security at the Sugar Mine Mine in Oregon after mine owners invited them to help with a bitter dispute the the U.S. Government

It is unclear. The organisation has claimed to have more than 30,000 members.

Only four were present on the streets of Missouri. On Facebook they have almost 330k likes.

Why are they allowed to carry guns?

Missouri state has an "open carry" law which allows people to openly carry a fire arm in public.

No licence is needed to carry a gun when outside of a vehicle. If the gun is carried inside a vehicle a concealed pistol licence is needed.

It is not clear how the current state of emergency affect these laws but the men went unchallenged by police on the streets of Ferguson suggesting they were not openly flouting a law.

Gun-rights advocates see the practice as a way to normalize gun ownership and deter crime.

Those who want gun-control see the open display of weapons in safe places such as restaurants and shops is intimidating and encourages violence.

Why were they in Ferguson?

The armed Oath Keepers had been called in by mine owners to an effort to protect their claim in April

The men said that they were there to protect a media organisation. A man, who gave his name as John, said that the journalist in question was from the InfoWars website.

InfoWars is a conspiracy theory website fronted by the controversial radio host Alex Jones.

"There were problems here, there were people who got hurt. We needed to be prepared for that," the man told Reuters news agency.

The presences of four heavily armed white men in a mainly black neighbourhood quickly drew criticism from those who questioned the sense of being heavily armed in such a sensitive situation.

China devalues yuan after poor economic data

100 Yuan notes are seen in this illustration picture in Beijing November 5, 2013.

REUTERS/JASON LEE/FILES

BY PETE SWEENEY AND LU JIANXIN-Tue Aug 11, 2015

China devalued its currency on Tuesday after a run of poor economic data, a move it billed as a free-market reform but which some suspect could be the beginning of a longer-term slide in the exchange rate.

The central bank set its official guidance rate down nearly 2 percent to 6.2298 yuan per dollar - its lowest point in almost three years - in what it said was a change in methodology to make it more responsive to market forces.

It was the biggest one-day fall since a massive devaluation in 1994 when China aligned its official and market rates.

"Since China's trade in goods continues to post relatively large surpluses, the yuan's real effective exchange rate is still relatively strong versus various global currencies, and is deviating from market expectations," the central bank said.

"Therefore, it is necessary to further improve the yuan's midpoint pricing to meet the needs of the market."

The People's Bank of China (PBOC) called it a "one-off depreciation", but economists disagreed over the significance of a move that reversed a previous strong-yuan policy that aimed to boost domestic consumption and outward investment.

"For a long time, I gave the PBOC credit for holding the line on the renminbi (yuan) and recognising that while it might be tempting to try to shore up the old-growth model by devaluing the currency, that really was a dead end," said fund manager Patrick Chovanec of U.S.-based Silvercrest Asset Management.

He said a strong yuan was needed to force China toward consumption and away from low-end manufacturing. "What the world needs from China is not more supply; what it needs is demand."

The devaluation followed weekend data that showed China's exports tumbled 8.3 percent in July, hit by weaker demand from Europe, the United States and Japan, and that producer prices were well into their fourth year of deflation.

The move hurt the Australian and New Zealand dollars and the Korean won, fanning talk of a round of currency devaluations from other major exporters. But some of Asia's most interventionist central banks appeared to be holding their nerve on currency policy.

"I don’t think the move would trigger a global currency war," a Japanese policymaker said.

Economists pointed out that until Tuesday, China had held the yuan firm while its neighbours had debased their currencies.

FEAR OF DEFLATION

While a weaker yuan will not cure all the ills of China's exporters, which suffer from rising labour costs and quality problems, it would help relieve deflationary pressure, a far bigger economic concern in the view of some economists.

Falling commodity prices have been blamed for producer price deflation, putting China at risk of repeating the deflationary cycle that blighted Japan for decades.

Growth in China, the world's second-largest economy, has slowed markedly this year and is set to hit a 25-year low even if it meets its official 7 percent target.

The devaluation hit shares in Asia and Europe. Chinese airline stocks also fell, given the impact higher fuel prices would have on their bottom line, though exporter stocks rose.

Some said the move was also to blame for a fall in futures contracts tracking the S&P 500 index, given the potential hit to U.S. exports to China.

MONEY MANAGEMENT

Spot yuan ended at 6.3231 on Tuesday, its weakest close since September 2012. The spot yuan is allowed to rise or fall by 2 percent from a midpoint that is set each day.

In the past, the central bank set the midpoint by a formula based on a basket of currencies, but the methodology was never publicised and many believed the midpoint was frequently used as a way to bend the market to policy goals.

Under the new method, investors moving assets out of yuan could take the rate lower in the weeks ahead.

The yuan had been locked in an extremely narrow intraday range since March, varying only 0.3 percent.

Some economists said the devaluation was also designed to support Beijing's push for the yuan to be included in a basket of reserve currencies known as Special Drawing Rights (SDR), which are used by the International Monetary Fund to lend money to sovereign borrowers.

"The PBOC aims to move the renminbi to a freer floating and accessible currency, prerequisites for it to be given the IMF’s reserve stamp of approval, and will see it move in a wider band," said Angus Campbell, analyst at FXpro.

The IMF proposed in a report this month to put off any move to add the yuan to its benchmark currency basket until after September 2016, and it gave mixed reviews of Beijing's progress in making key financial reforms to its currency market.

(Additional reporting by Samuel Shen and Kazunori Takada in SHANGHAI and Vidya Ranganathan in SINGAPORE; Editing by Mark Bendeich, Will Waterman and Ian Geoghegan)