Re: Thread for News on CSE and SL Economy

[කිත්සිරි ද සිල්වාTop contributor]

Let's give them the benefit of doubt.

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.

[Rational Investor]

Investors are accepting NG's appointment in a positive way..

[කිත්සිරි ද සිල්වාTop contributor]

Yes.
My car My Petrol කිව්වලු.  

Investors are accepting NG's appointment in a positive way..  

[The Invisible]

Anyway I don't think today's market movement is due to NGs appointment. It should be mainly by the resumption of trend of LOLC in moving towards 190s in anticipation of a great quarter. Many finance related stocks have joined the rally mid way. Then it flowed through to Construction sector started by AEL. All are linked to future expectations at least for next few months.

[chutiputhaTop contributor]

Do you see a clear direction of the market at present , hope by today

Anyway I don't think today's market movement is due to NGs appointment. It should be mainly by the resumption of trend of LOLC in moving towards 190s in anticipation of a great quarter. Many finance related stocks have joined the rally mid way. Then it flowed through to Construction sector started by AEL. All are linked to future expectations at least for next few months.

[Rajapaksap]

Hon. Cabraal is the state minister in charge of the subject of the capital market. Not NG. I feel Cabral is also good.

[කිත්සිරි ද සිල්වාTop contributor]

Purchase Of Greek Bonds Case Against Cabraal.

[The Invisible]

Sri Lanka’s exports surpass USD 1bn mark in July with V shape recovery

Aug 14, 2020 (LBO) – Sri Lanka’s exports have surpassed the USD 1 billion mark in July after six months time period where a similar achievement was only recorded in January during this year.

Export Development Board (EDB) Chairman Prabhash Subhasinghe mentioned, “We have witnessed a phenomenal increase in exports in July 2020 with a new record for the year. Sri Lankas strategic location, its reliable manufacturing and export base and proactive and rapid action by the Sri Lankan Government to control Covid 19 have fulfilled our global customers needs. This is the reason for our remarkable recovery in exports, compared to when the crisis hit us. However, we need to be cautiously optimistic as we move towards year end due to the possible resurgence of Covid 19 in the US and European markets.”

As per the Customs statistics, earnings from merchandise exports recorded double-digit growth rate of 11.31% in July 2020 to US$ 1,090.18 Mn compared to July 2019. Moreover, earnings from merchandise exports in July 2020 increased by 20.3 % compared with the value recorded in June 2020.

This strong performance is consistent with the gradual lifting of restrictions due to Covid 19 pandemic within the country and globally. Increases in exports were recorded as; Europe Region (21.17%), South Asia(11.47%) and Middle East (8.91%) in July 2020 compared to July 2019.

Being the largest single export destination, United States of America has absorbed US$ 256.09 Mn worth of exports in July 2020 recording a 5.67% increase in comparison to US$ 242.36 Mn absorbed in June 2020.

Export Performance of Major Sectors in July 2020

Earnings from exports of Apparel & Textiles and Rubber & rubber-based products grew significantly during the month of July 2020 owing to higher demand for personal protective equipment (PPE) such as face masks, protective suits, surgical gloves, etc.,. PPE related exports have recorded US$ 115.1 Mn in July 2020.

Export earnings from tea in July 2020 which made up 12% of merchandise exports increased by 17.63% y-o-y to US$ 130.93 Mn and the export volume was also increased by 11.24% in July 2020 compared to July 2020. In addition, export earnings from tea recorded 1.39% increase in June 2020 in comparison to June 2019. The expansion was mainly due to higher demand for tea from Turkey and Russia.

Table 1: Merchandise Export Performance

Product 2019 Jan- July 2020 Jan- July % Growth 2019 July 2020 July % Growth

Apparel & Textiles 3226.11 2403.70 -25.49 473.52 467.04 -1.37
Tea 796.26 702.59 -11.76 111.31 130.93 17.63
Rubber & Rubber Based Products 535.32 434.25 -18.88 78.21 85.08 8.78
Coconut & Coconut based Products 370.35 356.39 -3.77 56.30 74.78 32.82
Diamonds, Gems & Jewellery 175.28 85.51 -51.22 17.49 14.35 -17.95
Electrical & Electronic Products 228.00 176.25 -22.70 32.63 32.15 -1.47
Spices, Essential Oils & Oleoresins 170.69 155.71 -8.78 26.60 41.22 54.96
Food & Beverages 220.96 218.42 -1.15 27.90 62.14 122.72
Seafood 163.98 117.59 -28.29 20.39 18.47 -9.42
Ornamental Fish 9.15 7.82 -14.54 1.13 1.44 27.43
Vegetables 18.39 15.53 -15.55 2.46 2.69 9.35
Fruits 23.75 20.23 -14.82 3.30 3.38 2.42
Other Export Crops 17.15 49.69 189.74 2.76 10.54 281.88
Cut Flowers & Foliage 11.65 7.72 -33.73 1.56 1.08 -30.77
Boat Building 63.61 1.64 -97.42 0.27 0.28 3.70
Petroleum Products 196.70 205.82 4.64 31.04 35.17 13.31
Other Manufactures 681.77 493.67 -27.59 92.51 109.44 18.30
Total 6,909.12 5,452.53 -21.08 979.38 1090.18 11.31

Sri Lanka’s Trade Performance in Major Markets

Exports to EU Region recorded an increase of 21.67% to US$ 356.64 Mn in July 2020 compared with July 2019. Meanwhile, exports to United Kingdom as the largest trading partner in the EU Region recorded an increase of 18.66 % to US$ 100.1 Mn in July 2020 compared with July 2019. In addition exports to UK has increased by 53.08% in July 2020 compared to June 2020.

Further, exports to Germany, Itally, Belgium, Netherlands, Canada, China, Japan and Turkey have aslo shown better performance during this period.

https://www.lankabusinessonline.com/sri-lankas-exports-surpass-usd-1bn-mark-in-july-with-a-v-shape-recovery/

[The Invisible]

Sri Lanka to maintain stable rupee, draw foreign investors: Minister Cabraal

ECONOMYNEXT – Sri Lanka will maintain a stable rupee and competitive interest rates and create conditions to bring back foreign investors to capital markets, State Minister for Finance Nivard Cabraal said.

“We will keep a stable rupee, and competitive interest rates for all to do business,” Cabraal said soon after assuming office at the Finance Ministry in Colombo.

Sri Lanka’s rupee fell from 131 to the US dollar at the end of 2014 to 182 to the US dollar by the end of 2019 amid ‘flexible exchange rate’ (a discretionary external anchor) and ‘flexible inflation targeting (a discretionary domestic anchor) while growth plunged.

Most foreign investors in rupee bonds left as the credibility of the peg weakened steadily. Foreign investors in stocks, some whom have been in the country for decades are also leaving.

Meanwhile Cabraal, a former central bank governor until the end of 2015, said there were 3.4 billion US dollars of foreign investments rupee Treasuries five years ago, which had fallen to below 200 million US dollars.

“We have to raise this,” he said. “We have to follow policies that help capital to flow in to debt and equities markets.”

The administration will support domestic businesses to be strong but also create conditions to draw foreign investors, he said.

“We will protect and support domestic businesses to become strong,” he said. “We are open to the world. We are asking the world to come and do business with Sri Lanka.”

“Some of these policies may sound contradictory, but that is where we must maintain a balance.”

He said Sri Lanka has never defaulted on foreign debt and will maintain the record.

“We now have political stability and a strong mandate to make economic decisions,” he said.

State enterprises will be strengthened, not sold he said.

He said the control of Covid had laid a strong foundation, though there were many challenges ahead.

Sri Lanka had already used some tools to stimulate the economy.

“We will use the all tools available to stimulate the economy,” he said.

However countries with pegged exchange rates that engage in stimulus may have unfortunate consequences, analysts say.

Sri Lanka earned a downgrade after an estimated loss of about 500 billion rupees in taxes in a ‘fiscal stimulus’ of about 3.8 percent of gross domestic product.

After the crisis Sri Lanka injected liquidity of over 420 billion rupees which is a monetary stimulus of about 2.7 percent of estimated GDP, which sent the rupee reeling to 200 to the US dollar until private credit turned negative.

Import controls, not seen since the collapse of the Bretton Woods system of soft-pegs in 1971, have also been brought in.

The rupee has since been allowed to return to around 184 to the US dollar. (Colombo/Aug14/2020)

[Rajapaksap]

Daily Ft;
Apparel sector exports continue to grow in July with support from stakeholders
Friday, 14 August 2020 00:00 -      - 1038

As exports cross the $ 1 billion mark in July, led by pent-up demand that is driving a surge in sales in some markets, companies are becoming more optimistic about the near future. Apparel in particular is riding the wave of demand to continue its upward momentum and perform extremely well in July.

Hela Clothing is one such apparel company that is currently enjoying a growth in their exports. The company has attributed its ability to remain competitive in the current business landscape to quick decision making and support from their network of partners. The industry had been suffering since the outbreak of COVID-19 and the lockdown went into effect in April. It was estimated that collectively the apparel industry had lost $ 1.5 billion in revenue for the year. However, consecutive upward movement in apparel exports is highlighting the resilience of the industry and its players.

Like Hela Clothing, many in the industry have relied on the support and understanding of all their stakeholders to help navigate the unchartered waters of the pandemic.

“Support from all our stakeholders helped us meet the challenges of the moment and bounce back faster than expected,” said Hela Clothing Chairman A.R. Rasiah. “This includes support from our valued employees, our trusted banking partners as well as from the Export Development Board and the Board of Investment who helped us each step of the way to ensure that we got what we needed to function during the lockdown and after.”

“Thanks to this unwavering support we are now on stronger footing,” he added.

The industry which saw dire predictions in April was faced with mass unemployment and dramatically reduced salaries due to deep pay cuts. But the current state of exports would appear to paint a different story – one of recovery. This is a sentiment cautiously shared by Hela Clothing as the company witnesses renewed interest from their customer portfolio. The improved results and outlook led the company to start repaying deferred salaries in July.

“From the start in April we wanted to make sure everyone understood that we were not instituting a pay cut but rather a deferment of a part of their pay. And once we were in a stronger financial position we would be paying those deferments back,” said Rasiah.

Hela has said that these payments will be evaluated on a month-by-month basis and depend on the financial viability of the company. However, they do intend on paying back all deferred pay at the earliest possibility to ensure that their employees do not face any unnecessary burden. The company also hopes that this action will have a wider positive implication for the national economy.

While Hela Clothing has been fortunate the export industry as a whole and the nation still have many challenges ahead. The US, which remains Sri Lanka’s single largest export market (27% of total merchandise exports in 2019), is still battling to flatten the curve and recent plans to re-open states have faced major obstacles as the country continues to post record infection figures daily.

[The Invisible]

Sri Lanka central bank buys US$162mn in July 2020 amid negative private credit

ECONOMYNEXT – Sri Lanka’s central bank has bought 162.5 million dollars from the interbank forex markets in July 2020 after negative private credit in May and June official data show.

Sri Lanka has also slapped severe import controls, not seen since the break-up of the Bretton Woods system in 1971 when the entire economy was closed. The contribution of the import controls make to negative private credit is not clear.

Sri Lanka’s forex reserves picked up by 400 million US dollars to 7.1 billion US dollars in July after a 500 million dollars swap from the Reserve Bank of India.

Related

Sri Lanka private credit negative for second month in June 2020

Sri Lanka forex reserves rise to US$7.1bn in July 2020 after India swap

The intervention data does not show official transactions, such as reserve appropriations to repay debt.

Sri Lanka’s highly unstable soft-peg with the US dollar came under severe pressure after record money printing in March and April 2020 coupled with a so-called ‘flexible’ exchange rate.

The ‘flexible exchange rate’ is a set of discretionary practices were foreign reserve sales interventions (which extinguishes excess liquidity injections and push up short term rates) are delayed for the peg to break and panic spread among importers who will then borrow and cover their bills early.

In March private credit surged to 100 billion rupees.

The liquidity is injected (monetary stimulus) to target the call money rate as private credit begins to recover (pro-cyclical) from an earlier balance of payments crisis under a so-called ‘flexible’ inflation targeting to close a perceived output gap, at different levels of inflation.

In May and June private credit was negative, though the public sector deficit expanded as tax revenues fell partly due to a so-called ‘fiscal’ stimulus involving value added and other tax cuts.

In June the central bank also bought dollars on a net basis, purchasing 69 million US dollars and selling 9.25 million dollars.

By purchasing dollars the central bank can stop the currency appreciating as credit turns negative, in an explicit or implicit de facto real effective exchange rate targeting exercise.

Except after the 2009 crisis, the central bank has kept the exchange rate close to the level the peg had broken and prevented appreciation, in the worst record among South Asian monetary authorities.

During the March-April liquidity injection cycle the rupee fell from around 182 to close to 200 to the US dollar. It was then kept around 185 to the US dollar in July.





Over the last two weeks the rupee had been allowed to appreciate slightly.

All central banks in South Asia derive their currencies from Indian rupees or pegs to the Indian rupees at around 4.70 to the US dollar at the end of World War II.

The worst record is seen in Sri Lanka followed by Pakistan and Bangladesh. However Bangladesh central bank has followed better policies for over a decade, keeping the exchange rate stable, allowing strong phase of growth.

Bhutan and Nepal does not practice interventionist monetary policy and has kept strong pegs, bt fixed to the India rupee, where the Reserve Bank of India has bad policy.

The most monetary stability has been provided by the Monetary Authority of Maldives, where per capita income is now over 11,000 Us dollars. (Colombo/Aug17/2020)

[The Invisible]

Sri Lanka stock exchange woos IT firms with revised requirements

ECONOMYNEXT – Sri Lanka’s stock exchange has offered options for information technology firms with a track record to list, including via a second tier board with entry requirements which accommodates valuations of tech firms.

Colombo Stock Exchange Chief Executive Rajeeva Bandaranaike said listing requirements were changed to cater to the models seen in tech sector.

“Companies that ideally could not look at a listing on the main board as a result of the three consecutive year profit requirement now have other options,” Chief Regulatory Officer of CSE Renuke Wijayawardhane was quoted as saying at a forum with an IT industry body.

“Companies with positive net assets for two financial years could list on the CSE with an aggregate net profit after tax for three years, an alternate which does not require companies to be profitable for three consecutive years.

“To broaden the entry routes, we have also introduced revenue and cashflow options in addition to the two profit-based routes. ”

Companies that could show an aggregate revenue of 3 billion rupees for three financial years or positive operating cashflow after adjusting for working capital for two consecutive years could apply to list.

Companies that have revenues of 5 billion rupees at the point of listing could also use the route.

Companies could see a listing on the Diri Savi Board if they had a revenue of 350 million rupees for the financial year immediately preceding the date of application and a market capitalization of two billion rupees at the point of listing.

“When it comes to Financing there are many options companies can evaluate from bootstrapping, Angel investors, debt capital, Venture Capital to private equity,” Chairman of the Federation of Information Technology Industry Sri Lanka (FITIS), Abbas Kamrudeen said.

“But my belief is that for those companies that have matured to some extent, there is no better option to financing than going public.

“The reason being, it not only gives you flexibility and speed in future rounds of financing, but it will allow you to understand the true value of your organization.”

[Rajapaksap]

Govt comfortable repaying foreign debt, sovereign bond in 2020
ECONOMYNEXT.COM
Govt has seen no difficulties repaying foreign debt 2020, including a billion dollar sovereign bond, with only 2.5 billion US dollars left to pay in the balance of the year, a top official said.

In October 2020, a billion dollar bond is maturing which cannot be rolled over due to adverse market conditions.
Sri Lanka had 7.2 billion US dollars in reserves. “To repay the October maturity we are more than comfortable,” Deputy Governor Nandalal Weerasinghe told reporters last week.

[Rajapaksap]

CEAT ramps up ‘2-wheeler’ tyre production by 85% in 3 months
Monday, 7 September 2020 01:20 -      - 153
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CEAT Kelani Holdings has announced the achievement of an 85% increase in the production of tyres for the ‘two-wheeler’ segment over just three months, as a full-bodied response to the needs of the local market consequent to the temporary import restrictions introduced by the Government.

Maximising capacity utilisation at its manufacturing plants at Kelaniya and Kalutara, the company pushed production of tyres for motorcycles and scooters from 27,000 units a month in June to 41,000 per month in July and August, and is on target to produce 50,000 tyres in September, increasing volumes by 52% in the first step and by an incremental 22% thereafter.

The sharp increases in production of tyres for the two-wheeler segment follows similar ramping up of production of truck and bus tyres as well as passenger car radials by CEAT Kelani, which prior to these increases was producing half of Sri Lanka’s pneumatic tyre requirements. To achieve the increases in two-wheeler capacity, the company said it had utilised available capacity at its three-wheeler tyre plant in Kalutara.

CEAT Kelani currently manufactures 32 different types of scooter and motorcycle tyres in 43 varying specifications, and now caters to 37% of local market requirements for two-wheeler tyres.

“The import restrictions challenge domestic industries to show what they are truly capable of, and we are pulling out all the stops to fully utilise the capacity we have to support the government’s initiative of import substitution through increased domestic manufacturing,” CEAT Kelani Managing Director Ravi Dadlani said.

“We are continuing to look at ways of meeting demand for the most popular categories and sizes of tyres, and are keeping the government informed of the products that we are not equipped to manufacture, so that they can be imported,” he added.

CEAT’s increased production of truck and bus tyres has resulted in the company producing 100% of the segment’s requirements and enabled the Government to make a saving of Rs. 11 billion a year in foreign exchange. The company’s latest initiative in the two-wheeler tyre segment is estimated to enable a further saving of Rs. 350 million a year through import substitution, Dadlani disclosed.

The expansion of production capacity for this segment of tyres has resulted in a 100% increase in the production of sizes 90/90-12 TL and 90/100-10 TL that fit popular scooter models such as Honda Dio, Yamaha Ray ZR, Honda Grazia, TVS Wego, and Suzuki Burgman.

Meanwhile, CEAT’s production of tyre size 90/90-17 TL that fits motorcycle models such as TVS Apache, Bajaj Pulsar 160 NF and Bajaj Pulsar 180 has increased by 400%, and the company has achieved a 100% increase in the production of the 100/80-17 TL tyre that is required for the popular Yamaha FZ. Production of tyres for Bajaj Pulsar 150, Bajaj CT 100, Bajaj Platina, and TVS Heavy Duty Super XL has also increased significantly, the company said.

Notably, CEAT Kelani Holdings has kept the prices of its tyres unchanged since December 2019 to support customers and the economy, despite the additional investments made in increasing capacity and an increase in market prices due to demand.

CEAT Kelani Holdings is considered one of the most successful India-Sri Lanka joint ventures in the manufacturing sector. The joint venture’s cumulative investment in Sri Lanka to date totals Rs. 8 billion, inclusive of Rs. 3 billion committed in January 2018 for expansion of volumes, technology upgrades and new product development.

The company’s manufacturing operations in Sri Lanka encompass pneumatic tyres in the radial (passenger cars, vans and SUVs), commercial (Bias-ply and radial), motorcycle, three-wheeler and agricultural vehicle segments.

[Rajapaksap]

Australia announces business partnership opportunities in Sri Lanka for COVID-19 recovery
Author LBO
Posted on September 15, 2020 | Economy
Sep 15, 2020 (LBO) – The Australian High Commission in Colombo announced a call for proposals on 14 September 2020, to support COVID-19 economic recovery in Sri Lanka under the Business Partnerships Platform (BPP).
The BPP is a flagship initiative of the Australian Government. It supports partnerships with businesses to deliver sustainable economic growth and poverty reduction, while also ensuring commercial returns for businesses.
“Business will play a central role in rebuilding Sri Lanka’s economy as it recovers from COVID-19, and this exciting opportunity to partner with the Australian Government can support positive change through improved livelihood opportunities, enhanced gender equality and an inclusive economic recovery,” said David Holly, Australian HIgh Commissioner to Sri Lanka.
The BPP can co-finance with businesses to support COVID-19 economic recovery by establishing partnerships that contribute to digitalisation, skills development for workers and micro, small and medium-sized enterprises, economic opportunities for women, or green recovery.
In Sri Lanka, they are seeking partnerships in the following sectors:
• Information and communication technology (ICT)
• Agriculture technology and fisheries
• Online education and education technoogy
• Financial inclusion
Businesses can apply individually or in a consortium. The Australian Government will provide matched funding of up to AUD 500,000 to successful business initiatives.
Businesses with a commercial idea that could make a lasting social impact are encouraged to contact the Australian High Commission in Colombo, R.Sivasuthan@dfat.gov.au or visit: www.thebpp.com.au for further information. Applications close 4 November 2020.
To participate in an information session, register online at https://thebpp.com.au/call-for-partnerships/bpp-sri-lanka-call-for-partnerships

[Rajapaksap]

Australia announces business partnership opportunities in Sri Lanka for COVID-19 recovery
Author LBO
Posted on September 15, 2020 | Economy
Sep 15, 2020 (LBO) – The Australian High Commission in Colombo announced a call for proposals on 14 September 2020, to support COVID-19 economic recovery in Sri Lanka under the Business Partnerships Platform (BPP).
The BPP is a flagship initiative of the Australian Government. It supports partnerships with businesses to deliver sustainable economic growth and poverty reduction, while also ensuring commercial returns for businesses.
“Business will play a central role in rebuilding Sri Lanka’s economy as it recovers from COVID-19, and this exciting opportunity to partner with the Australian Government can support positive change through improved livelihood opportunities, enhanced gender equality and an inclusive economic recovery,” said David Holly, Australian HIgh Commissioner to Sri Lanka.
The BPP can co-finance with businesses to support COVID-19 economic recovery by establishing partnerships that contribute to digitalisation, skills development for workers and micro, small and medium-sized enterprises, economic opportunities for women, or green recovery.
In Sri Lanka, they are seeking partnerships in the following sectors:
• Information and communication technology (ICT)
• Agriculture technology and fisheries
• Online education and education technoogy
• Financial inclusion
Businesses can apply individually or in a consortium. The Australian Government will provide matched funding of up to AUD 500,000 to successful business initiatives.
Businesses with a commercial idea that could make a lasting social impact are encouraged to contact the Australian High Commission in Colombo, R.Sivasuthan@dfat.gov.au or visit: www.thebpp.com.au for further information. Applications close 4 November 2020.
To participate in an information session, register online at https://thebpp.com.au/call-for-partnerships/bpp-sri-lanka-call-for-partnerships

[The Invisible]

Sri Lanka 2019, 2020 budget deficit data controversy hots up

ECONOMYNEXT – Suddenly changing published data to overstating a budget deficit for 2019 and understating a deficit for 2020, flouting accounting conventions will undermine investor confidence and backfire on the country, opposition legislator Harsha de Silva warned.

Sri Lanka’s Finance Ministry in November suddenly submitted data to parliament claiming that the 2019 budget deficit was 9.6 percent of gross domestic product and not 6.8 percent as earlier reported and projected a 7.9 percent deficit for 2020.

“It is not possible to deceive international financial markets with this type of data,” opposition legislator Harsha de Silva warned.

“We ourselves will be deceived. Our people will suffer. Greece got into serious trouble by trying numbers magic. They mis-reported revenues and expenses. 2010 May Greece said the budget deficit was 7.5 percent of GDP.

“Later they said it was 12.5 percent. The International Monetary Fund later said it was 15.4 percent.”

De Silva said the numbers did not match with the data already published by the central bank.

The Finance Ministry had pushed back expenses of 421 billion rupees to 2019 though they were settled in 2020 to lower the deficit in 2020 and hike the deficit in 2019.

In a further complication on November 17, a budget for 2021 showed a deficit projection as 8.9 percent, worse than the 7.9 percent in 2020, which shows a reversal of fiscal management and not the fiscal consolidation usually expected in budgets.

However Sri Lanka prepares budget on a cash basis, and over time the numbers balance out.

Gona, Mee Haraka budget

“There is a recognized accounting convention in making fiscal data,” de Silva said. “The data is prepared on a cash basis. It is not done on an accrual basis.

“It is done in the same way every year. For example in 2015 when the new government came, I asked the Treasury how much arrears there were. I was told there were over 240 billion rupees on unsettled bills.

“But that government did not put them into 2014. They were accounted for in 2015. The revenue is recorded that way so is revenue.

“In that case revenues should also be put back because the taxes came from the previous year.

“There is no hybrid accounting system here or anywhere else. There cannot be a cow and buffalo (ela harakai mee harakai) budgets.”

Education Minister Bandula Gunewardene charged that in 2016, then Finance Minister Ravi Karunanayake had also mis-represented data.

He said non-existent data had been presented.

De Silva said the projected nominal GDP for 2021 of 16,030 billion rupee also did not gel with growth projections and expected inflation. He said it was not possible to fudge numbers for a long time.

He said the 2020 deficit would be higher if the GDP number is lower.

“Investors go to know about it,” de Silva said. “That is why they exited Greek bonds. I am not equaling Sri Lanka to Greece but there are lessons to be learnt.”

Analysts have warned that Sri Lanka has a Latin America style central bank where the effects on the economy of a sovereign default could be different to Greece.

Monetary instability and currency falls in 2018 and 2020 had earned the country two downgrades including a total of three notches to Caa1 (CCC+) by Moody’s which has virtually locked the country out of capital markets.

Greece could not depreciate the currency as it was part of a Euro monetary union and bank deposits, salaries or most pensions of the people did not melt away.

But in Latin America all debt, public and private as well as salaries are melt as currencies fall, making vast swathes of people destitute.

The economic program of the former administration where de Silva was a state minister was also brought down by a two successive currency collapses, coming from call money rate targeting and Real Effective Exchange Rate Targeting, critics have said.

With the IMF coming up with never ending programs without fixing the central bank, a so-called backlash against what was called neo-liberalism – the type of economics practiced in East Asia with good central banks – emerged in the region starting from Chile. (Colombo/Nov18/2020)

[pjrngroup]

Thanks INVI.

[The Invisible]

Sri Lanka keeps policy rates unchanged in Nov 2020 amid liquidity injections

ECONOMYNEXT – Sri Lanka is keeping policy rates unchanged in November 2020 the central bank said amid unprecedented liquidity injections through outright monetization of debt that has kept excess liquidity at over 15 percent of the monetary base over several months.

The monetary authority will also introduce directed credit for business and a ceiling 7 percent interest rates for housing loans by salaries employees.

“With price declines observed in certain food items, near term inflation is expected to remain low,” the Central Bank said.

“Inflation is expected to gradually gather pace over the next two years with the expected improvement in aggregate demand, stimulated by accommodative monetary and fiscal policies and the normalisation of global oil prices.”

Sri Lanka’s private credit and consumption has been weak since a March 2020 Coronavirus lockdown but private credit has started to pick up over the pst two months.

The central bank said it was keeping the rate at which money is injected overnight 5.5 percent and the rate at which excess liquidity is withrawn at 4.50 percent.

The central bank has been monetizing debt at Treasuries auctions at different tenors around 5 percent, through a type of yield curve targeting.

The Treasury bill stock of the central bank topped 566 billion rupees last week after failing to sell most of the offered bills.

Sri Lanka fails to sell 80-pct of Treasuries at auction

A part of the bill stock represent forex reserves appropriated to settle foreign loans.

[The Invisible]

Sri Lanka to start directed lending, ceiling 7-pct rate for wage earner housing loans

ECONOMYNEXT – Sri Lanka will start directed lending under the policy of the current administration and will mandate a ceiling 7 percent rate for housing loans of salaries workers the central bank said.

“The Board also recognised the need to promote economic sectors with higher growth and earning potential, and in this regard, decided to introduce lending targets in the near future for selected sectors in conformity with the policies of the Government,” the central bank said in its November 2020 monetary policy statement.

A 7 percent ceiling housing rate mortgage rate will also be mandated for at least 5 years.

“Furthermore, complementing the concessional loans schemes proposed by the Government in the Budget 2021, the Monetary Board decided to introduce a maximum interest rate on mortgage backed housing loans obtained by salaried employees from licensed banks,”

“Accordingly, licensed banks will be made to charge only 7 per cent per annum for such loans, at least for the first five years of the loan tenure.

The remaining tenure of the loan is to be charged at the monthly Average Weighted Prime Lending Rate (AWPR) plus a margin of up to 1 percentage point. Directions to this effect will be issued to licensed banks shortly.

It is not clear whether housing loan customers will lose fixed rate loans from now on and be exposed to severe interest rate volatility in the future.

Due to central bank liquidity injections made to keep rates down when private credit picks up, Sri Lanka has a history of currency crises, which triggers steep corrective rate spikes.

Under the last administration Sri Lanka began to resort to sweeping central planning of interest rates with then Governor Indrajith Coomaraswamy mandating both lending and deposit price controls.

The central bank kept the policy rate at which new money is injected to the banking system at 5.5 percent and the rate at which excess liquidity is withdrawn at 4.50 percent.

The rate setting monetary board said it was “of the view that the prevailing surplus liquidity conditions provide sufficient space for a further reduction in market lending rates without an adjustment to policy interest rates.”

Tens of billions of rupees has been injected through debt monetization at various tenors of the yield curve keeping excess liquidity around 15 to 20 percent of the monetary base or around 150 to 180 billion rupees for several months.

Some of the liquidity has also come from dollar purchases amid weak overall domestic credit.

But some of the maturing foreign debt has been settled with forex reserve appropriations. (Colombo/Nov26/2020)

[The Invisible]

Sri Lanka extends exchange controls till mid 2021

ECONOMYNEXT – Sri Lanka is extending an exchange control that barred companies and individuals from investing money for another six months from January 2020, the state information office said.

The cabinet of ministers had cleared a proposal from the Minister of Finance to extend the controls which are due to expire in January.

In 2020 Sri Lanka suspended a general permission under the country’s exchange control laws that allowed companies to invest in foreign stocks, securities or sovereign bonds as the rupee came under pressure due to money printing.

Private credit then weakened. But credit has started to pick up since then.

Under the earlier general permission resident listed companies were allowed to invest 2 million dollars a year, unlisted companies 500,000 dollars, a partnership 300,000 dollars or an individual 200,000 dollars.

A company or partnership was also allowed to invest up to 300,000 dollar a year without prior permission from the central bank.

Under the new controls, a company was limited to send up to 20,000 dollars for a branch office or liaison office.

Foreign currency account holders were barred from transferring above 20,000 dollars.

The controls were originally imposed in April as the rupee slid towards 200 to the US dollar.(Colombo/Dec01/2020)

[NIRMALSG]

Sri Lanka plans to list state-run hotels and land firm Selendiva in 2021: Treasury Secy

ECONOMYNEXT – Sri Lanka is planning to list a state-run hotel and real estate company in the Colombo Stock Exchange by the end of the first half of 2021, Treasury Secretary Sajith Attygalle said.

The company will hold Grand Hyatt, Grand Oriental Hotel, Hotel Developers, and land belonging to the Cey-Nor Foundation.

“It will hopefully be listed in the market before the end first half of 2021,” Attygalle told an annual economic forum organized by the Ceylon Chamber of Commerce.

“More assets will be vested in it.”

Grand Hyatt and Hotel Developers were two firms that were expropriated in 2011. Hotel Developers was listed in the CSE when it was expropriated.

An expressway company will be set up to hold existing and new expressways that are built, along with attendant land.

He said the firm will raise funds.

The government will also incorporate two companies to work with the private sector to develop robotics and biotechnology.

They will have private-sector representation in their boards.
Sri Lanka will issue new financial regulations to allow the firms more autonomy he said.

[NIRMALSG]

වසර දෙකහමාරකට පසු සියලු කොටස් මිල දර්ශකය ඒකක 6,500 කඩඉම පසුකරයි

කොළඹ කොටස් වෙළෙඳපොළ වර්ධනාත්මක ප්‍රවණතාව අඛණ්ඩව පෙන්නුම් කරමින් අද (08) දිනයේ දී සියලු කොටස් මිල දර්ශකය ඒකක 90.24 ක ඉහළ යාමක් වාර්තා කළේය. මේ අනුව සියලු කොටස් මිල දර්ශක අගය දිනය අවසානයේ දී ඒකක 6,564.00 ක් ලෙසින් සටහන් වූ අතර මෙය 2018 පෙබරවාරි 26 දිනය පසු වාර්තා වූ වැඩිම සියලු කොටස් මිල දර්ශක අගය ලෙසින් වාර්තා වේ. එසේම 2018 මැයි 04 වනදායින් පසු ඒකක 6,500 සීමාව පසුකිරීමට සියලු කොටස් මිල දර්ශකය මුල් වරට සමත් වූයේ ද අද දිනයේ දීය.

මේ අතර අද දින ගනුදෙනු පිරිවැටුම රුපියල් බිලියන 4 සීමාව ඉක්මවා ගිය අතර රු. බිලියන 4.23 ක වටිනාකමකින් යුතු කොටස් ගනුදෙනු එහිදී වාර්තා විය. මෙහිදී බ්‍රවුන්ස් ඉන්වෙස්ට්මන්ට්ස් (රු. මිලියන 617.51), ජෝන් කීල්ස් හෝල්ඩිංග්ස් (රු. මිලියන 484.35), රෝයල් සෙරමික් (රු. මිලියන 200.07) යන සමාගම්වල කොටස් ගනුදෙනු දෛනික පිරිවැටුමට ඉහළ දායකත්වයක් ලබා දෙන ලදී.

සියලු කොටස් මිල දර්ශකයට අනුව 2020 වසර තුළ දී වසර ආරම්භයට සාපෙක්ෂව 7.09% ක වර්ධනයක් අත්පත් කර ගැනීමට කොළඹ කොටස් වෙළෙඳපොළ මේ දක්වා සමත් වී ඇත.

[NIRMALSG]

Sri Lanka’s Lanwa Sanstha Cement Corporation to start production in June 2021

ECONOMYNEXT – Sri Lanka’s Lanwa Sanstha Cement Corporation (Pvt) Ltd, affiliate of Ceylon Steel Corporation Limited said it is aiming to start commercial production at its 2.4 million metric tonne cement grinding plant by June 2021.

The facility is located in a 63 acres plot in the Mirijjawila Export Processing Zone, Hambantota.

Under the first phase 70 million is being invested under a Board of Investment approval to construct a 2.4 million metric tonne plant.

Another 10 million dollar expansion is planned in a second phase which would add another 1.2 million metric tonnes.

“This facility will serve to benefit the construction industry…by delivering products of premium quality to the market,” Chairman of Lanwa Sanstha Cement Nandana Lokuwithana said in a statement.

“The plant is the first of its kind in Sri Lanka utilizing cutting-edge European technology to yield optimum outcomes while being environmentally conscious through continuous monitoring.”

Lokuwithana also heads UAE based Onyx group, Marriot Al Jadaf Hotel in Dubai, Marangoni Industrial Tyres Lanka (Pvt) Ltd and Rigid Tyre Corporation (Pvt) Ltd in Horana.

The plant will have mills from Gebr Pfeiffer of Germany and other technology from Siemens. Packing will be from FLSmidth.

The plant will have Stacker Reclaimer Yard and two bridge-type ship unloaders.

Raw materials will be carried to the plant along a 2.4 kilometre covered conveyor, which the firm said will avoid pollution.

It will produce Ordinary Portland Cement (OPC), Portland Slag Cement (PSC) & Portland Limestone Cement (PLC). (Colombo/Dec10/2020)

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Sri Lanka economic conditions does not require IMF bailout: Minister Cabraal

ECONOMYNEXT – Current economic conditions in Sri Lanka does not require an International Monetary Fund bailout and the country is confident of managing the State Minister for Money and Capital Markets Nivard Cabraal has said.

“The conditions that are available in Sri Lanka today would not necessarily need us to go the IMF for any bailout,” Minister Cabraal told an business forum hosted by Asia Securities, a Colombo-based investment house.



“We are quite confident that we can manage what we have now, and with the expected revenues and the expected foreign inflows that we have targeted, particularly from exports which have been quite robust with fairly good order books

“We have seen remittances even stronger than prior to Covid.”

Cabraal said there were investment commitments to the Port City and about 2.5 billion dollars in foreign direct investments were expected in 2021.


“All these factors gives us the confidence to say that we can manage the resources that we have, which are not extraordinarily large but which are sufficient to take us through 2021,” he said.

“And thereafter we will have much more placid times and we are confident that we can make that work without too much difficulty.”

There have been rising unease among analysts over large scale monetizing of debt with unprecedented volumes of money bring printed, despite operating a soft-pegged exchange rate regime.

Excess liquidity is now about around 25 percent of reserve money (without excess liquidity) or about 1.2 billion US dollars, with warning that it will pressure the currency as soon as there is a sustained recovery in credit, regardless of whether there are import controls or not.

“We have of course seen monetary accommodation in the last few months but that is true with every country,” Cabraal said.

“A lot of countries have gone though this process with a reasonable degree of monetary accommodation.



“But in Sri Lanka we have also seen stable exchange rates, which has been one of the hallmarks of our macro-management in the last few weeks or months.

“Which has made sure that Sri Lanka has rupee stays stable, that our interest rates stay sable and we can have a reasonably good passage towards growth in the next few months and years.”

Cabraal said a strong recovery was seen with the third quarter of growing 1.5 percent after contracting 16 percent in the second quarter.

Businesses were adapting to working amid Coronavirus, he said.

In 2021, if tourism resumes and comes to around 50 to 60 percent of 2019 levels, it will help the economy, he said.

The government also had a public sector investment pipeline which will directed to roads and water (Colombo/Dec17/2020)