Re: Thread for News on CSE and SL Economy

[NIRMALSG]

Sampath Bank Brings Yet Another Innovation to Sri Lanka’s Digital Payments Landscape

Sampath Bank PLC today announced that it has become one of the first bank’s in Sri Lanka to serve as both an issuer and acquirer of Payment Exchange Name (PEN) based payments to its customers, thus facilitating a simpler method of conducting online transactions and driving greater digital financial inclusivity.

The new PEN system, which was launched by LankaClear at an event held at the Kingsbury Hotel recently, will allow Sampath Bank customers to make real-time, online payments via the Sampath Vishwa internet banking portal by simply using the receivers mobile number and PEN. Customers who register for this service will be able to assign a unique nickname, or PEN, to each of their bank accounts with any bank, all linked to their mobile number. This nickname can then be used, instead of their bank account number, to send or receive funds electronically.

This solution offers far greater convenience to customers as PENs will be easier to remember than lengthy account numbers, can easily be shared with outsiders, avoids disclosure of their account number and minimizes the chance of typing errors, while also having the lowest fee structure for online transactions. This will also be particularly beneficial to self-employed individuals and small business owners who can now shift to cashless operations conveniently and cost effectively.

“This year has seen significant growth in people’s acceptance and adoption of digital payment solutions due to the Covid-19 pandemic, but this has also helped pave the path towards a cashless society which is expected to bring about much economic growth. Sampath Bank has always prided itself on being a catalyst for technological advancements in the country’s Banking industry, while promoting greater financial inclusivity and customer convenience. We are excited to incorporate PEN transfers into our Sampath Vishwa portal, offering greater convenience and security to our customers,” said Tharaka Ranwala - Senior DGM-Consumer Banking of Sampath Bank PLC.

Sampath Bank is a 100% local bank that has deeply rooted itself in the lives of the people of Sri Lanka. Established in 1987, the bank has become a state-of-the-art financial institution that continues to be a market leader today thanks to its constant innovation and customer focused approach to business. It has introduced many firsts to the Sri Lankan banking sector including introducing ATMs to Sri Lanka, extended banking hours and slip-less banking to name a few. As part of its visionary 2020 approach, the bank is steadily transforming itself into a ‘tech company engaged in banking,’ from the traditional approach of a bank engaged in technology.

[The Invisible]

Sri Lanka downgraded to World Bank lower middle income country as per capita income falls

ECONOMYNEXT – Sri Lanka has been re-classified as a lower middle income country by the World Bank as per capita income dropped amid real effective exchange rate and flexible inflation targeting which brought currency collapses and growth rates below inflation.

Sri Lanka’s per capita gross national produced (GNP) dropped over 200 dollars from 3,968 dollars in 2018 to 3,741 dollars in 2019, while per capital gross domestic (GDP) product dropped from 4,079 dollars to 3,852 dollars following a currency crisis triggered which brought stagflation.

Monetary Instability

Sri Lanka has been following a combination of Real Effective Exchange Rate (REER) targeting involving deliberate devaluation of the currency run ahead of inflation, generating fresh inflation in the process and ‘flexible’ inflation targeting with consumer price target high enough to trigger involuntary currency collapses.

Monetary instability had worsened in peacetime, with currency crises coming with smaller gaps, compared to the latter part of the island’s long-running civil war with policy becoming more discretionary and pro-cyclical.

In 2018 a pro-cyclical rate cut in April was followed by liquidity injections, which was combined with a so-called buffer strategy for bond sales, involving overdrawing state banks re-financed with lender of last resort money, just as the credit system was recovering from a 2015/2016 crisis.


Sri Lanka’s per capita GNP also dropped from 3,969 US dollars in 2017 to 3,968 dollars in 2018 following a 2015/2016 currency collapse which was also triggered by pro-cyclical rate cuts and liquidity injections amid a sudden expansion of the budget deficit in 2015.

The last administration gave the central bank full independence to target the REER and also engage in pro-cyclical rate cuts, though there have been calls to reform the central bank, restrain its domestic operations, curb discretionary policy in a bid to bring monetary stability and sustained growth.

In 2020, however the central bank had come under pressure to print more money, and it has lost forex reserves. But private credit had slowed by April 2020, amid Coronavirus lockdowns. Sweeping import controls have also been brought after money printing.

Adjusted Threshold

The World Bank adjusts per capita Gross National Income using a so-called Atlas Method which seeks to smooth the effects of currency volatility and inflation.

The World Bank calculated Sri Lanka’s gross national income in 2019 to have fallen to 4,020 dollars from 4,060 dollars in 2018, under the Atlas Method.

The lender’s threshold for upper middle income countries also moved up to 4,026 dollars in 2019 from 3,996 dollars in 2018, which it said was due to inflation of special drawing rights, a composite denominator currency devised by the International Monetary Fund.

The classification is done every year at the beginning of July.

With per capita income rising Sri Lanka graduated out of World Bank’s cheapest loans from the International Development Association window in 2017.

However other countries which have seen GDP contract has ‘reverse graduated’.

Fellow Travellers

Indonesia and Philippines which also had bad central banks with depreciating currencies have ‘reverse graduated’ into IDA and graduated again. They are among the worst performers in the ASEAN.


The Philippines’s central bank was set up by John Exter, an American, with similar extensive discretionary powers as Sri Lanka’s central bank. The country haas experienced severe monetary instability and export of labour to the Middle East and or East Asian countries with greater monetary stability.

Related

Sri Lanka risks instability, stagflation by being in unstable soft-peg group: Bellwether

Meanwhile Nepal, where the Nepal Rastra Bank follows less discretionary policy but is pegged to the Reserve Bank of India, whose policy had also worsened in recent years, rose to a lower middle income country from a low income country.





Indonesia became an upper middle income country again with per capita income of 4,060 US dollars.

Other countries that regressed with Sri Lanka include Sudan, whose per capital GNI fell from 1,560 dollars to 590 dollars.

“For Sudan, the GNI series for 2009-2018 has been revised as a result of revisions to the exchange rates,” the World Bank said.

The Sudan pound has collapsed from 18,000 in 2018 to 55,000 this year.


Algeria also regressed from 3,970 US dollars in 2019 from 4,060 in 2018. (Colombo/July02/2020)

https://economynext.com/sri-lanka-downgraded-to-world-bank-lower-middle-income-country-as-per-capita-income-falls-71644/

[The Invisible]

Sri Lanka slashes policy rates 100bp amid Coronavirus slowdown

ECONOMYNEXT – Sri Lanka has slashed policy rate 100 basis points bringing the rate at which money is injected to the banking system at 5.50 percent and the rate at which excess money is withdrawn to 4.50 percent.

“The spread of the COVID-19 pandemic has significantly impacted near term growth prospects globally, while available indicators for Sri Lanka also suggest that economic growth is likely to have been severely affected during the second quarter of 2020,” the rate setting Monetary Board of the central bank said.

“The Board arrived at this decision with a view to inducing a further reduction in market lending rates, thereby encouraging the financial system to aggressively enhance lending to productive sectors of the economy, which would reinforce support to COVID-19 hit businesses as well as to the broader economy, given conditions of subdued inflation.”

“Although a rebound is expected during the second half of the year with the support of monetary and fiscal stimulus measures, the introduction of growth promoting and confidence enhancing structural reforms is imperative to foster high and sustainable economic growth over the medium term.”

Money market rates have been hovering around the earlier floor policy rate of 5.50 percent amid excess liquidity injected through domestic asset purchases in March and April which triggered pressure on the currency and led to import control hitting businesses and the economy in general.

However private credit has also been weak, which tends to keep rates near the floor rate.

Sri Lanka’s central bank generally triggers monetary instability by injecting large volumes of money to keep rate below the ceiling rate or in the middle of the corridor as the economy recovers from the last balance of payments crisis and credit picks up, analysts have showed.

Credit to private sector was about 30 billion rupees in May, data shows, though there is a pick up in credit to government as the deficit expands.

The central bank has also cut the statutory reserve ratio, one of the reasons Sri Lanka’s interest rates have been are higher than other countries with greater monetary stability.

Excess liquidity coming from domestic asset purchases eventually results in foreign exchange shortages (and reserve losses when the liquidity is mopped up through dollar sales) in a pegged exchange rate system when credit picks up.


Over the last week the central bank withdrawn some excess liquidity from the system. More liquidity is also due to be injected through central bank ref-finance of bank credit and discounting of contractor bills.

The full statement is reproduced below:

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 08 July
2020, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending
Facility Rate (SLFR) of the Central Bank by 100 basis points each, to 4.50 per cent and 5.50
per cent, respectively. The Board arrived at this decision with a view to inducing a further
reduction in market lending rates, thereby encouraging the financial system to aggressively
enhance lending to productive sectors of the economy, which would reinforce support to
COVID-19 hit businesses as well as to the broader economy, given conditions of subdued
inflation.

The spread of the COVID-19 pandemic has significantly impacted near term growth prospects
globally, while available indicators for Sri Lanka also suggest that economic growth is likely to have
been severely affected during the second quarter of 2020. Although a rebound is expected during the
second half of the year with the support of monetary and fiscal stimulus measures, the introduction of
growth promoting and confidence enhancing structural reforms is imperative to foster high and
sustainable economic growth over the medium term.

On the external front, the trade deficit is estimated to have narrowed during the first five
months of 2020, with the contraction in imports outweighing the contraction in exports. Reflecting
the impact of measures taken to stem foreign currency outflows, the Sri Lankan rupee, which remained
volatile briefly from mid-March to mid-April 2020, recorded a notable appreciation thereafter. Gross
official reserves stood at US dollars 6.7 billion by end June 2020, sufficient to cover 4.2 months of
imports.

Market interest rates continued to decline, reflecting the impact of policy rate reductions and the surplus liquidity in the domestic money market. However, further space remains for market lending rates to adjust downwards commensurate with the series of easing measures taken by the Central Bank thus far during the year. Despite high levels of surplus liquidity available to banks, credit extended to the private sector contracted significantly in May 2020.

However, credit extended to the private sector is likely to pick up in the period ahead, supported by the expected sharp reduction in lending rates and highly concessional credit schemes introduced to support COVID-19 hit businesses. Meanwhile, the notable increase in credit to the public sector drove the increase in domestic credit as well as the overall monetary expansion during the first five months of 2020.

In consideration of the need to support a rapid recovery of the economy, the Monetary Board, at its meeting held on 08 July 2020, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points each to 4.50 per cent and 5.50 per cent, respectively, with effect from 09 July 2020. The Monetary Board wishes to strongly reiterate that all financial institutions led by licensed commercial banks (LCBs) must pass on the full benefit of the cumulative reduction of 250 basis points in policy interest rates thus far during the year without delay.

LCBs are also expected to release to the private sector borrowers the enhanced levels of liquidity effected by the reduction of the Statutory Reserve Ratio (SRR) by 300 basis points thus far during the year, which has also reduced the cost of funds of banks. Such additional liquidity must be used to lend to productive sectors of the economy, along with concessionary credit schemes already announced by the Central Bank to help needy sectors of the economy. The Central Bank will continue to monitor domestic and global macroeconomic and financial market developments and take further measures to ensure that the intended outcomes of already implemented policies are realised.

The spread of the COVID-19 pandemic has significantly impacted near term growth prospects globally, while available indicators for Sri Lanka also suggest that economic growth is likely to have been severely affected during the second quarter of 2020.

Although a rebound is expected during the second half of the year with the support of monetary and fiscal stimulus measures, the introduction of growth promoting and confidence enhancing structural reforms is imperative to foster high and sustainable economic growth over the medium term.

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 08 July 2020, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points each, to 4.50 per cent and 5.50 per cent, respectively. The Board arrived at this decision with a view to inducing a further reduction in market lending rates, thereby encouraging the financial system to aggressively enhance lending to productive sectors of the economy, which would reinforce support to COVID-19 hit businesses as well as to the broader economy, given conditions of subdued inflation.


The spread of the COVID-19 pandemic has significantly impacted near term growth prospects globally, while available indicators for Sri Lanka also suggest that economic growth is likely to have been severely affected during the second quarter of 2020. Although a rebound is expected during the second half of the year with the support of monetary and fiscal stimulus measures, the introduction of growth promoting and confidence enhancing structural reforms is imperative to foster high and sustainable economic growth over the medium term.

On the external front, the trade deficit is estimated to have narrowed during the first five months of 2020, with the contraction in imports outweighing the contraction in exports. Reflecting the impact of measures taken to stem foreign currency outflows, the Sri Lankan rupee, which remained volatile briefly from mid-March to mid-April 2020, recorded a notable appreciation thereafter. Gross official reserves stood at US dollars 6.7 billion by end June 2020, sufficient to cover 4.2 months of imports.

[Rajapaksap]

ECONOMYNEXT – Sri Lanka’s forex reserves have recovered to 6.7 billion US dollars in June from 6.49 billion US dollars in May helped with purchases in the market and rupee-dollar swaps amid import restrictions, officials said.

Sri Lanka’s rupee collapsed to close to 200 to the US dollar after a spike in private credit in March fired by liquidity injections and a panic-inducing ‘flexible exchange rate’ where interventions are minimized after printing money allowing the peg to fall and panic importers into an early covering of bills.

In April private credit fell and there was a pick-up in May. The central bank sold 174 million US dollars to partially defend the peg in March and 98 million US dollars in April.

In April private credit fell to 12 billion rupees but it picked up to 30 billion rupees in May.

In May the central bank bought 61 million US dollars to prevent appreciation, data show.

“By today or tomorrow our net intervention would be zero,” the Central Bank’s Director of Economic Research Chandranath Amarasekera said.

He said the other reserve decline was due to debt repayments.

The currency collapse triggered sweeping ‘Nixon shock’ style import controls not seen since the 1970s.

The central bank funded the budget with printed money and targeted the overnight rate pumping excess liquidity into the banking system.

Central Bank Governor W D Lakshman said the import controls helped keep the value of the rupee.

“However the restriction on imports and investments abroad, allowing with gradually recovering inflows had helped keep the exchange value stable during the past three months,” Governor Lakshman said.

Countries that do not print money like Sri Lanka including Thailand and Vietnam have seen their currencies stabilize or appreciate as credit and consumption weakened, while countries, where money printing is banned by law such as Singapore and Hong Kong, has strengthened.

Hong Kong which operates a currency board at 7.8 to the US dollar saw the currency hit the upper trading band around 7.79 to the US dollar in the first week of March and is now trading at 7.74 on the lower trading band.

[Rajapaksap]

Latest change will push interest rates to single digits
Calls on all banks to pass on benefits to customers speedily
300 basis point reduction given so far in 2020
Despite high levels of liquidity, private sector credit only grew by Rs. 89 b in first five months
CB says SME credit volumes comparatively lower, filtration time consuming
Still confident of 1% to 1.5% growth for this year
Governor speaks on incident with President, says new system in place to convey decisions proactively
Notes CB was readying to implement same measures before Presidential outpouring
Opines reforms needed to reverse WB “symbolic” categorisation
By Uditha Jayasinghe

Putting its main focus on ensuring a growth rebound in the second half, the Central Bank yesterday reduced rates by 100 basis points and called on banks to ensure the market rates are slashed rapidly, to boost consumption and keep the economy on target to achieve 1% to 1.5% growth in 2020.

Central Bank Governor Prof. W.D. Lakshman told reporters that the Monetary Board had unanimously decided to reduce rates, its fourth such effort this year, as the priority was to promote growth which has been severely impacted by the COVID-19 outbreak. He recapped the numerous steps taken by the Central Bank to reduce rates and regulatory measures on banks and finance companies to enable them to provide relief to consumers since March, and called for banks to pass on these rate reductions to the public as swiftly as possible.

Accordingly, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank was reduced by 100 basis points each to 4.50% and 5.50%, respectively. This will essentially result in all lending rates reaching single digit levels, Central Bank officials assured.

“The Monetary Board wishes to strongly reiterate that all financial institutions led by licensed commercial banks (LCBs) must pass on the full benefit of the cumulative reduction of 250 basis points in policy interest rates thus far during the year without delay. LCBs are also expected to release to the private sector borrowers the enhanced levels of liquidity effected by the reduction of the Statutory Reserve Ratio (SRR) by 300 basis points thus far during the year, which has also reduced the cost of funds of banks.”

“Such additional liquidity must be used to lend to productive sectors of the economy, along with concessionary credit schemes already announced by the Central Bank, to help needy sectors of the economy. The Central Bank will continue to monitor domestic and global macroeconomic and financial market developments, and take further measures to ensure that the intended outcomes of already implemented policies are realised,” the Governor added.

Despite high levels of surplus liquidity available to banks, credit extended to the private sector contracted significantly in May 2020. Growth of credit to the private sector, which continued to pick up since December 2019, dropped in May 2020 to 6.4% (from 7.6% in April). On a cumulative basis, credit to private sector increased only by Rs. 89.9 billion during the first 5 months of 2020, data from the Central Bank showed.

Senior Deputy Governor Dr. Nandalal Weerasinghe, explaining the reasons as to why relief may be taking time to filter to companies, noted that private sector credit was yet to pick up after the COVID-19 slump, and volumes of small and medium enterprises (SMEs) were small in comparison to other segments of the economy. He also said that banks were conscious of recouping their costs, and were therefore making careful evaluations.  

He went onto express optimism that Sri Lanka will see a strong rebound in the second half, even though the latest rate reduction was made before the monetary authority had a chance to evaluate first quarter growth numbers, which are yet to be released by the Census and Statistics Department. Central Bank officials and other experts have predicted that Sri Lanka slipped into an unavoidable recession in the second quarter, due to the curfew causing a suspension of most economic activity. However, the Central Bank remains optimistic that Sri Lanka can reach the 1.5% growth target set out in its Annual Report, but acknowledged that given the uncertain global situation created by COVID-19, growth projections could be revised if necessary.

Prof. Lakshman emphasised that in order for Sri Lanka to post sustainable growth, it must focus on reforms, and that monetary policy-based relief was at best a medium-term support system. He also noted that if these were achieved, the recent World Bank categorisation change, which removed Sri Lanka from upper-middle income status and placed it back in the lower-middle income group, could be reversed. He also stressed that such labels were of “symbolic value”, and did not always reflect ground realities.

He also conceded that there were adverse impacts to reducing interest rates, such as reduced ability to attract foreign investors into Government securities, but reiterated that domestic growth remained the priority. Prof. Lakshman pointed out that despite an uptick in inflation expected in the next couple of months, inflation expectations remained well-anchored, and even though there was liquidity in the system, there were no signs that the economy was in danger of overheating. Central Bank Senior Deputy Governor Dr. Nandalal Weerasinghe also echoed these sentiments, and reiterated that it was the duty of the Central Bank to support the Government and the country at a time of unprecedented stress. He also insisted that the Central Bank has the necessary instruments to mop up excess liquidity if the need arises.

Responding to questions on the recent public berating dished out by President Gotabaya Rajapaksa to Central Bank officials, and whether that was an infringement of the institution’s independence, Prof. W.D. Lakshman defended his colleagues, and said that measures were already underway to provide relief before the fateful meeting.

“Before the meeting with the President, at least three rounds of meetings had already been held, and measures were being put in place under the legal mandate allowed to the Central Bank. Officials had already decided that under these provisions the Central Bank could give a refinancing facility and a rate adjustment had already been decided on. It was during this process that we had a meeting with the President,” the Governor explained.

When asked whether the President had asked for an update on what the Central Bank was doing before expressing his opinions, Prof. Lakshman said, “No, there was no request for details of what we were doing. I feel that perhaps it would have been better if there had been such a question directed at us first.” The Governor also said that following the episode, he had reached out to the necessary officials, and established a system whereby he could personally meet with President Rajapaksa and Prime Minister Mahinda Rajapaksa to give periodic updates on the Central Bank’s activities, to prevent such an incident occurring again.    

“There are many definitions of independence in relation to Central Banks, but my personal view is that the Central Bank is an institution linked to the Government structure and it is part of the State. This is the reality.”

[The Invisible]

Sri Lanka imports collapse 44 percent in May, after lockdowns, Nixon’s shock

ECONOMYNEXT – Sri Lanka’s imports have collapsed 44.3 percent to 994 million US dollars amid after Coronavirus lockdowns which hit consumption and Nixon’s shock style import controls after the rupee collapsed in March and April amid money printing.

Sri Lanka’s exports also fell 39 percent to 587 million US dollars, recovering from a 64 percent fall to 282 million US dollars in April, central bank data showed as lockdowns were eased and external demand picked up.

In the absense of money printing falling exports also lead to an equivalent fall in imports as former recipients of exports find their spending power slashed.

After printing unprecedented volumes of money in March and April and the rupee was allowed to fall to close to 200 to the US dollar under a ‘flexible exchange rate’ triggering panic among importers who covered bills early, Sri Lanka then slammed Nixon’s shock style import controls not seen since the 1970s.

Sri Lanka also slammed import controls after money was printed in 2018 without any Coroanvirus crisis.

The April trade balance fell to 407 million dollars from 823 million dollars a year earlier.

Sri Lanka also reported zero tourism revenues in May which will also reduce imports in the future. Gross inflows to the government fell to 111 million US dollars from 141 million a year earlier.

In the five months to May exports were down 28.4 percent to 3,519 million US dollars, and imports were down 19.2 percent to 6,619 million US dollars.

The trade balance was down to 3,100 million US dollars from 3,218 million dollars. (Colombo/July14/2020)

[Rajapaksap]

Sri Lanka’s export earnings have increased to US$ 1,020 million and import expenses have reduced to a record US$ 961 million in June this year, Co-cabinet Spokesman, Plantation Industries and Export Agriculture Minister Dr. Ramesh Pathirana yesterday said.

“The government’s vision of encouraging domestic production by reducing dependence on imports has resulted in this situation and the growth of export earnings over import expenditure indicates that the country will be economically stable within a very short period,” the Minister said.

Speaking at the weekly Cabinet media briefing held yesterday at the Government Information Department, Minister Pathirana further said that the decision taken by the government to limit imports has also shown progressive results and the people of the country can now live with a hope of a vibrant economy.

[Rajapaksap]

Treasury issues letters confirming bills due from Sri Lanka’s government to contractors
Author LBO
Posted on July 14, 2020 | Companies, Economy, Lead Story

Jul 14, 2020 (LBO) – Sri Lanka’s Treasury has commenced issuing confirmation letters verifying the bills due from the government to contractors and suppliers including for those in the construction sector.

Under this program, these letters will be issued in respect of the arrears for the years 2019 and 2020 reported on 31st May 2020, the Finance Ministry said.

These letters will be issued only to a licensed commercial bank nominated by the relevant contractor and a special account will have to be opened in the name of the contractor to pay the relevant arrears.

Accordingly, bills will be settled by the relevant ministry only through this special bank account in the name of the contractor.

[Rational Investor]

NO curfew - NO lock down!

[කිත්සිරි ද සිල්වාTop contributor]

Nothing bad will be heard until the GE is over.

NO curfew - NO lock down!

[Rational Investor]

Asian markets, risk assets ride up on vaccine hopes

SYDNEY (Reuters) - Asian shares jumped on Wednesday as optimism about a coronavirus vaccine bolstered risk appetite while the euro rose to a four-month top on the prospect of stimulus ahead of a crucial EU summit.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) rose 1.2%, edging closer to a recent five-month peak.

Japan's Nikkei (N225) added 1.5% to the highest since June 10 while Australia's benchmark index was up 1%. Chinese shares gained modestly with the blue-chip CSI300 index (CSI300) ticking up 0.3%.

E-mini futures for the S&P 500 rose 0.8%.

Risk appetite was boosted by Moderna Inc's (O:MRNA) experimental vaccine for COVID-19 which showed it was safe and provoked immune responses in all 45 healthy volunteers in an ongoing early-stage study.

On Tuesday, the Dow Jones Industrial Average (DJI) rose over 2%, while the S&P 500 (SPX) gained 1.34% and the Nasdaq Composite (IXIC) climbed 0.94%. (N)

"... the vaccine is more than a show stopper. It's the ultimate recession stopper," said Stephen Innes, markets strategist at AxiCorp.

The stock surge came despite lingering bad news about the coronavirus and after three U.S. states reported new record daily deaths from the pandemic, while tensions continued to grow between the United States and China.

"Although a mismatch between financial markets and the real economy remains in full effect, the removal of a single recessionary input (the virus) via a vaccine can pave the way for fast economic recovery," Innes added.

"So, the positive news on the vaccine can go a long way to explain the dissonance between the shift in the stock market sentiment relative to the angst on Main Street."

Simmering tensions between the United States and China also loom large, after U.S. President Donald Trump signed legislation and an executive order to hold China "accountable" for the national security law it imposed on Hong Kong.

The dollar was on the defensive, particularly against risk-sensitive currencies, following news of progress in vaccine development.

The euro (EUR=EBS) rose to as high as $1.1423, its strongest since March 10 and not far off its peak so far this year of $1.1495.

The single currency has been helped by hopes the European Union could agree at its summit later this week on a rescue financing package that will limit the economic damage to the bloc from the coronavirus pandemic.

The euro's strength helped to push the dollar index (=USD) to 96.056, a one-month low.

The yen was little moved at 107.27 per dollar , off a two-week high of 106.635 ahead of the Bank of Japan's policy announcement later in the day where it is expected to keep monetary policy steady.

The risk-sensitive Australian dollar rose 0.5% to $0.7009 .

There were still signs of wariness among investors, as yields on leading U.S. and euro zone government debt fell and safe-haven gold prices solidified gains above $1,800 an ounce.

Spot gold rose to $1,809 an ounce.

Oil prices rose on Wednesday after a sharp drop in U.S. crude inventories. Brent crude (LCOc1) futures were up 10 cents at $43 a barrel, and U.S. crude (CLc1) futures rose 14 cents to $40.43 a barrel. [O/R]

[Rajapaksap]

Power demand on par with June 2019 averages
Economic activities improved further in June - ICRA Lanka
The activities in the economy, especially the industry and services sector,  further improved in June as evident by increasing power demand which is almost on par with June 2019 average ICRA Lanka said.
Both the Manufacturing and Services sector showed noteworthy recovery in May. With partial lifting of the lockdown, the economic activities resumed helping the production activities in the manufacturing sector. Employers were seen reinstating some of the jobs they previously cut.
The order books showed improvement. With volumes picking up (especially in food & beverages, and textile & apparel sectors), manufacturers engaged in building input stocks. The supply disruption caused by the COVID pandemic seemed to be fading out slowly.
With improved mobility following the lockdown, trade and transportation sectors saw business activities picking up. Employment in troubled leisure and tourism sectors were seen contracting for yet another month. Backlogs started to deescalate as business is returning to normalcy. The activities in the economy, especially the industry and services sector, further improved in June as evident by increasing power demand which is almost on par with June 2019 averages.
Sri Lanka achieved a trade surplus in June because of the import controls, helped by a modest level of exports (USD 1.02 billion) almost on par with June last year. In the first two weeks of June, excess liquidity gradually started to build up and the CBSL’s SRR cut (200 bps) on 16th caused the outstanding overnight market liquidity to spike to the Rupees 196 billion immediately.
Rupee started appreciating in the first half of the month, which helped the CBSL to accumulate forex reserves. But subsequent to the SRR cut rupee gradually depreciated which was later moderated by the CBSL intervention. Defying the earlier expectations of modest inflation during the aftermath of COVID-19 pandemic, the data indicates the CCPI has declined to 3.9% (Y-o-Y) amidst falling aggregate demand in June, which is now below the lower bound of the CBSL’s inflation target.
The SRR cut and strengthening of rupee triggered a foreign outflow close to R 2 billion in the last two weeks of June. The reserve position improved by USD 193 million in June mainly as a result of increase in foreign currency reserves (USD 427 million) owing to rupee-dollar swap and purchase of  dollars from the forex market.
Activities in the real economy are expected to be moderate while inflation to remain benign. Interest rates are likely to remain low. Rupee will broadly remain stable but mild depreciation is likely. Wages may continue to grow at a slower pace. Equities may record modest gains. Commodity prices are expected to maintain the momentum.

[Rajapaksap]

Financial News Sri Lanka: With a view to preserving the foreign currency reserve position of the country and considering the possible negative impact on the Sri Lankan economy due to the outbreak of Covid-19 pandemic, the Hon. Minister of Finance, Economic and Policy Developments with the recommendation of the Monetary Board of the Central Bank of Sri Lanka and the approval of the Cabinet of Ministers have issued an Order introducing following measures on outward remittances on Capital Transactions for a period of six (06) months effective from 02 July 2020.

01. Suspend the general permission granted to make outward remittances for investments overseas through the Outward Investment Accounts by a person resident in Sri Lanka excluding the following;

a. investments to be financed out of foreign currency loans obtained by the investor from a person resident outside Sri Lanka under the provisions of the Foreign Exchange Act,
b. an additional investment to be made to fulfill the regulatory requirement in the investee’s country applicable on the investment already made in a company or a branch office in that country,
c. an additional investment/infusion of funds to be made by eligible resident companies in already established subsidiaries or branch offices in overseas up to a maximum of USD 20,000, for the purpose of working capital requirements of the investee,
d. the remittances up to a maximum of USD 20,000, for the purpose of maintenance of liaison, marketing, agency, project, representative or any other similar offices already established in overseas.

02. Suspend the outward remittances through Business Foreign Currency Accounts (BFCAs) or Personal Foreign Currency Accounts (PFCAs) held by persons resident in Sri Lanka, other than for the remittances on current transactions up to any amount or capital transactions up to a maximum of USD 20,000.

03. Limit the eligible migration allowance for the emigrants who are claiming the migration allowance for the first time, up to a maximum of USD 30,000.

04. Limit the repatriation of funds under the migration allowance by the emigrants who have already claimed migration allowance up to a maximum of USD 20,000.

05. Limit the authority of the Monetary Board of the Central Bank of Sri Lanka to grant special permission for investments on case by case basis, which exceeds the limits specified in the general permission, only to those satisfying the criteria mentioned in 1.a and 1.b above.

The above restrictions are only applicable to the identified capital transactions and do not impose any restrictions on already permitted current transactions.

The said Order published in the Extraordinary Gazette No. 2182/37 dated 02.07.2020 containing exact details can be accessed through “Downloads” in the official website of the Department of Foreign Exchange (www.dfe.lk).

[Rajapaksap]

Sri Lanka exports rebound in June 2020 as Covid-19 controlled, PPE $100mn
Saturday July 18, 2020 07:54:58

ECONOMYNEXT – Sri Lanka’s exports in June 2019 was down 26 percent from a year earlier to 906.02 million US dollar but extended a steep recovery seen in May after Coronavirus lockdown ended, the island’s Export Development Board said.

The EDB calculated PPE related exports at106.46 million US dollar in June 2020.

“Exports have become a national priority, now more than ever, it is certainly impressive to see a strong V shaped recovery in the export sector, comparatively to the lowest point in April 2020, exports are up 327 percent,” Chairman Prabhash Subasinghe said.

He said there was a chance for a ‘favourable’ balance of trade.

A ‘favourable’ trade balance is a Mercantilist idea dating back to the British East India Company and beyond who did not understand the entire balance of payments and that services and capital inflows (government borrowings and private foreign investment) triggered imports.

A country which has weak or contracting credit, is in difficulties, does not get much FDI, or is repaying foreign debt on a net basis can see a trade surplus.

Sri Lanka’s economic activities have recovered strongly with Coronavirus controlled by authorities with aggressive tracing and quarantined despite restrictions in testing which led to explosions of clusters.

However due to excess money printing in March and April Sri Lanka’s rupee came under pressure and the country is under Mercantilist import controls not seen even during a 30 year war when more classical economic knowledge prevailed.

Though total merchandise exports were down 16.4 percent from a year earlier in the six months to June, but was up 50.4 percent from May, the EDB said with some sectors seeing growth from last year in the month of June.

Coconut based products were up 19 percent from a year earlier to 65 million US dollars, spices and essential oils were up 29 percent to 31 million US dollars ad fish and fisheries products were up 16 percent to 26 million US dollars.

Natural Rubber, Industrial & surgical gloves, Coconut cream, Coconut Milk, Coconut Vinegar, Coconut Shell Charcoal,Pineapples, Arecanuts, Tamarind, Ginger, Essential oils, lemons, Sweat Potatoes were up, the EDB said.

Exports from apparel were down 20 percent in June to 402 million US dollars but was up 83 percent from 218 million US dollars in May

Exports of tea were down only 1.5 percent from a year earlier, and was up 6.14 percent from May.

[Rajapaksap]

June remittances improve amid COVID-19
By Mario Andree | Published: 2:00 AM Jul 27 2020



Sri Lanka’s largest source of foreign exchange, worker remittances, which has come under serious threat due to the COVID-19 pandemic affecting the global economy, has shown a growth in June this year for the first time since the country went into lockdown in March.

According to data released by the Central Bank of Sri Lanka, worker remittances increased 6.7 per cent during June this year to US$ 572.5 million compared to US$ 536.6 million last year.

However, cumulative earnings from worker remittances during the first six months of this year declined 8.9 per cent to US$ 2.98 billion, compared to US$ 3.27 billion a year ago.

In May this year, worker remittances declined 23.2 per cent to US$ 431.8 million, compared to US$ 562.1 million earned a year earlier.

In April this year, worker remittances amounted to US$ 375 million, down 32.3 per cent from US$ 553.7 million a year earlier. In March this year, the country earned US$ 492.1 million from worker remittances, down 13.9 per cent from US$ 571 million a year ago.

In February this year, the country saw worker remittances increase 5.4 per cent to US$ 527.3 million from US$ 500.5 million a year ago.

The country started this year on a positive note, with worker remittances increasing 6.5 per cent to US$ 581 million in January, compared to US$ 545.3 million a year earlier.

With migrant workers returning to Sri Lanka due to fear of the pandemic, and some as a result of losing employment, the future of remittances seems to be uncertain.

Worker remittances have been Sri Lanka’s largest foreign exchange earner and the country’s balance of payments has been highly dependent on the income generated by migrant workers.

The sector is also one of the largest employment providers to address the unemployment and poverty issues prevailing in the country; however, Sri Lanka has been witnessing a declining trend in the number of departures for foreign employment over the last few years.

[Rajapaksap]

Ada Derana Biz වෙබ් පිටුවෙන්   උපුටා ගත් වාර්තාවකි.


අපනයන ආදායම ක්‍රමයෙන් ඉහළට. ජූලි මාසයේ දී ඩොලර් මිලියන 1,060 ක ආදායමක්
July, 31, 2020

2020 ජූලි මාසයේ දී ශ්‍රී ලංකාවේ අපනයන ආදායම එක්සත් ජනපද ඩොලර් මිලියන 1,060 ක් බව වාර්තා වේ. මෙය පසුගිය 2020 ජූනි මාසයේ වාර්තා කළ ඩොලර් මිලියන 1,020 ක සහ 2019 ජූලි මාසයේ දී ලබා ඇති ඩොලර් මිලියන 999ක අපනයන ආදායම් අගයයන් ඉක්මවා තිබීම විශේෂත්වයකි.

ඒ අනුව ජූලි මාසයේ අපනයන ආදායම මාසික පදනම මත 3.92% කින් හා වාර්ෂික පදනම මත 6.10% කින් වර්ධනය වී තිබේ.

තවද 2020 වසරෙ මුල් මාස 07 තුළ මේ අනුව ශ්‍රී ලංකාව උපයා ඇති අපනයන ආදායම ඩොලර් මිලියන 5,747 ක් ලෙසින් වාර්තා වේ.

මේ අතර ශ්‍රී ලංකාවට 1977 දී විවෘත ආර්ථික ප්‍රතිපත්තිය හඳුන්වා දීමෙන් පසු ඉතිහාසයේ පළමු වතාවට 2020 ජූනි මාසයේ දී මෙරට අපනයන ආදායම, ආනයන වියදම ඉක්මවා ගොස් ඇති බව සම කැබිනට් ප්‍රකාශක අමාත්‍ය රමේෂ් පතිරණ මහතා  පසුගිය ජූලි 09 වැනි දින පැවති කැබිනට් තීරණ දැනුම් දීමේ මාධ්‍ය හමුවේ දී කියා සිටියේය.

[Rational Investor]

Sri Lanka SEC urges real estate securities with rules in place

ECONOMYNEXT – The Securities and Exchange Commission of Sri Lanka said rules are now in place for the issue of Real Estate Investment Trusts (REIT), where people can contribute for property projects and get returns and investors to raise funds.

The rules which were published on the government gazette on July 31, 2020 are an extension to the Unit Trust Code.

“These Rules which are comprehensive, will govern the setting up of and the conduct of a Sri Lankan REIT,” the SEC said in a statement.

“Specific provisions have been included for the verification of title and valuation of property that will form part of the assets of the REIT.”

REITs will have to distribute 90 percent of their income to the beneficiary holders and it will be tax pass through instrument.

REITs as a legal trust were originally developed in the US with 100 percent distribution under normal law, and were not a taxable entity separate from the beneficiaries, analysts say, unlike a limited company engaging property development.

Publicly traded REITs which have greater liquidity, are regulated by the SEC.

“Many real estate owners/developers can immediately benefit from the Unit Trust based REITs framework, which is now enabled under the capital market framework of the SEC,” the regulator said.
“In order to promote transparency and to distribute ownership among people of Sri Lanka, REITs are only allowed as listed REITs on the Colombo Stock Exchange,” the SEC said.

REITS allow an investor to take part in a commercial property project such as a office complex and get rents as dividends and sell them for capital gains without having to actually develop a property or raise enough to money to buy a property.

However depending whether there is an external manager who charges fees or not, the returns may change. High management fees are a problem in the US, especially in over-the-counter REITs, analysts say.

Sri Lanka’s SEC said REITs will give higher dividend and relative stable income through long leases and there will be investor protection with regulation.

Since they can be traded, persons can exit like a share. (Colombo/Aug02/2020)
https://economynext.com/sri-lanka-sec-urges-real-estate-securities-with-rules-in-place-72584/

[The Invisible]

Sri Lanka’s inflation in July 2020 at 4.8-pct

ECONOMYNEXT – Sri Lanka’s inflation picked up slightly to 4.8 percent in the 12-months to July 2020 from 4.7 percent a in June, data from the state statistics office showed.

The widely watched Colombo Consumer Price Index grew 0.1 percent in the month of July to 135.4 points from 135.3 points after growing 0.8 percent in June.

The food index grew 0.1 points to 148 in July after growing 2.6 percent in June and 1.3 percent in May.
The food index had grown 10.9 percent in the past 12-months.

Non-foods also grew 0.1 percent.

Sri Lanka’s rupee fell close to 200 to the US dollar from 182 as March credit spiked amid money printing, and had since been allowed to appreciate to around 186 to the US dollar, amid a collapse in consumption and private credit.

Sri Lanka’s central bank generally buys dollars to stop the rupee appreciating back to original levels in suspected implicit real effective exchange rate targeting. Sri Lanka has the worst record among South Asian monetary authorities for currency stability.

Import controls have been slapped, further hitting the economy.

The year-to-date inflation is running slightly behind 2019 up to July. (Colombo/Aug01/02020)

[Rajapaksap]

Daily FT reports;
July exports top $ 1 b mark despite COVID
Tuesday, 4 August 2020 00:58 -      - 209
PinterestFacebookMore2
• Apparel, tea, coconut, rubber, fruits and vegetables, agricultural crop exports do well in July
• EDB Chief terms Sri Lanka’s export story a ‘true success,’ commends resilience of exporters
• Bullish on food and agriculture exports, expects these sectors will help achieve $ 10.5 b target for 2020
• Expresses concerns over global impact from second or third waves of COVID-19
By Charumini de Silva

Proving the country’s resilience and rebound amidst the COVID-19 impact, merchandise exports in July have crossed the $ 1 billion mark, an achievement last enjoyed in January this year.

Provisional data shows that merchandise exports in July have surpassed $ 1 billion. This is slightly higher than the $ 998.5 million achieved in July last year, whilst pointing to a continuous pick up in exports as against $ 587 million in May and $ 906 million in June. Soon after the COVID-19 pandemic erupted exports in April fell to $ 277.4 million.
“We are optimistic and anticipate that we will be able to sustain this trend for the rest of the year,” EDB Chairman Prabhash Subasinghe told the Daily FT.

He said in July apparel, tea, coconut, rubber, fruits and vegetables and other agricultural crop exports had performed extremely well.

“This reflects the resilience of the exporter community amidst tough times owing to the COVID-19 pandemic,” he emphasised. “Sri Lanka’s export story is a true success. The exporters are quite resilient and agile to the market conditions and have added value to the customers even during these most difficult times,” he stressed.

Subasinghe was bullish about the food and agriculture exports and expressed confidence that these sectors would help Sri Lanka achieve the $ 10.5 billion target set for the year.

“Although export of apparel was a major concern in April, it has performed well beyond our expectations,” the EDB Chairman noted.

Though insufficient orders for the apparel sector beyond August is a concern, Subasinghe was optimistic and highlighted that it was important to assess the development on a monthly basis, as all economies were navigating through uncharted waters with the world facing one of the worst economic downturns due to COVID-19.

He said the US and the EU would continue to dominate the export markets for Sri Lanka for the remaining months of the year. “In spite of the high number of COVID-19 cases in the US, it has been a very strong market for our exports. We hope the trend will continue regardless of the US Presidential Election in November,” he added.

Sri Lanka’s single largest export market is the US, which accounted for 27% of total merchandise exports last year, while Europe accounted for 30%.

The EDB Chairman was concerned about any second or third waves of COVID-19 like in Australia and other countries in South East Asia.

In that context he commended the Government’s early and strict measures implemented to control the spread of COVID-19 in Sri Lanka as well as for the continued focus, support and strength extended to the export sector.

[The Invisible]

Sri Lanka GDP contracts 1.6-pct in 2020 first quarter amid Coronavirus

ECONOMYNEXT – Sri Lanka’s gross domestic product has contracted 1.6 percent in the first quarter of 2020 with a steep contraction in agriculture and manufacturing amid a Coronavirus lockdown, the state information office said.

The services sector had grown 3.1 percent with telecoms growing 15 percent, IT programming growing 9.6 percent and postal and courier services growing 7.7 percent.

Hotels and restaurants contracted 6.2 percent.

Industries contracted 7.8 percent with most areas contracting except, electricity and water.

Agriculture had also contracted 5.6 percent despite rice expanding 4.1 percent and vegetable up 5.0 percent. (Colombo/Aug05/2020)

[Rajapaksap]

Online meeting between Embassy of SL in Russia and Ural CCI on trade and economic cooperation




On 31 July, at the initiative of the Embassy of Sri Lanka in Russia, an online meeting was organised between the Embassy and the Ural Chamber of Commerce and Industry (CCI) for the discussion of potential ways to boost the trade and economic cooperation of the Ural region and Sri Lanka.

The Embassy was represented by Ambassador of Sri Lanka to Russia Prof. M.D. Lamawansa, Deputy Chief of Mission/Head of Chancery Mohamed Anas, and Second Secretary (Commercial) Chathurika Perera. The Ural CCI was represented by President of the Chamber Andrey A. Besedin, Head of the International and Interregional Affairs Department Anastasia Kolpaschikova, and Chief Specialist of the Department Irina Ulyanova.

The meeting commenced with a demonstration of presentations by both sides highlighting the investment and trade opportunities in Sri Lanka and the trade advantages of the Ural region.

In his remarks, Prof. M.D. Lamawansa underscored the leading role of the Ural region in the overall economic development of Russia and its industrial value. In turn, Andrey A. Besedin noted the potential for the establishment of direct collaboration between Ural and Sri Lankan enterprises and touched upon large-scale tourism and industrial exhibitions, in which Sri Lankan enterprises could participate in the near future in order to establish their networks of partners in the region.

In addition to a gamut of things, both sides specified tourism, pharmaceutical industry, food processing, and IT as some areas of mutual interest, where the Ural region and Sri Lanka could boost the bilateral trade relations. Particularly, the Ural CCI President expressed hope for an increase in the tourist outflows to Sri Lanka from the Ural region and ensured to provide support in promotion of Sri Lanka as a tourism destination. The parties agreed to link Ural and Sri Lankan enterprises specialising in food processing technologies for agricultural products, IT solutions, and manufacture of medical equipment and drugs and to continue further discussion on the possible cooperation in these sectors.

[Rajapaksap]

AirAsia Philippines starts seafarer flights to Sri Lanka’s Mattala airport
Monday August 10, 2020 05:46:46

ECONOMYNEXT – AirAsia Philippines had started operating seafarer repatriation flights to Sri Lanka’s Mattala Airport as the island serves as a hub for the global shipping industry to change crews.
The first AirAsia Phillippines charter had landed at Mattala Airport on August 09 at 1350hours local time, Airport and Aviation Services (Sri Lanka) Ltd, the state-airport agency said.
“Since the COVID19 pandemic has been controlled within the country, Sri Lanka has been able to come to the aid of the international shipping community by being a safe location for facilitating the change of ship crew, which is critical for the safe operation of ships,” AASL said.
“In light of this opportunity, Mattala Rajapaksa International Airport (MRIA) – the largest international airport serving Southeast Sri Lanka, is poised to become a hub for international ship crew changes.”
AirAsia Philippines Z28161 will depart on August 10 with 14 Filipino seafarers, after bringing 13 replacement crew.
Mack Air, the general sales agent for AirAsia, Ceyline Shipping Ltd had co-rdinated the crew change.
AASL had been facilitating crew changes with ships calling at Galle Harbhour in the South or to regular callers in Colombo.
Over 50 repatriation and seafarer flights have been operated out of Mattala since the last week of June, the AASL had said.
The crew changes are carried out according to guidelines of Sri Lanka Health Authorities.
Sri Lanka had controlled the spread of Coronavirus in the community, with aggressive tracing and quarantine.
Testing which had gaps initially had been ramped up. Sri Lanka health authorities say there is no community transmission but to reduce the risk of flare ups from earlier clusters social distancing is in place and the public have to ware masks. (Colombo/Aug10/2020)

[Rational Investor]

Dr. Godahewa to be State Minister for capital markets

For the first time in the history of Sri Lanka, a separate State Ministry for capital markets has been created.

According to a special Gazette Notification released by the Finance Ministry yesterday, two State Ministers are to be appointed. One would be in charge of finance, capital markets and State enterprises reform. The other will be in charge of Samurdhi, micro-finance, self employment and enterprise development.

Meanwhile government sources stated that newly elected MP and a former stock market regulater, Dr. Nalaka Godahewa will be the inaugural State Minister for capital markets and State enterprises reform.

President Gotabaya Rajapaksa has decided on 28 ministries and 40 State Ministries identifying their specific functions.
https://ceylontoday.lk/news/dr-godahewa-to-be-state-minister-for-capital-markets

[කිත්සිරි ද සිල්වාTop contributor]

This guy has a dubious track record (Checkered past, just like PBJ) and wonder why such people are still being considered for such sensitive positions.
.

Dr. Godahewa to be State Minister for capital markets

For the first time in the history of Sri Lanka, a separate State Ministry for capital markets has been created.

According to a special Gazette Notification released by the Finance Ministry yesterday, two State Ministers are to be appointed. One would be in charge of finance, capital markets and State enterprises reform. The other will be in charge of Samurdhi, micro-finance, self employment and enterprise development.

Meanwhile government sources stated that newly elected MP and a former stock market regulater, Dr. Nalaka Godahewa will be the inaugural State Minister for capital markets and State enterprises reform.

President Gotabaya Rajapaksa has decided on 28 ministries and 40 State Ministries identifying their specific functions.
https://ceylontoday.lk/news/dr-godahewa-to-be-state-minister-for-capital-markets

[The Invisible]

NG is deemed to have a vision to develop Sri Lanka capital market when he was the regulator. I think his appointment was given keeping the same in mind.