ECONOMYNEXT – Sri Lanka’s shares fell on slow and weakened sentiments on Tuesday as investors await for more clarity on local debt restructuring as the government promises to disclose the framework in May, an analyst said.
The Main All Share Price Index (ASPI) was down by 0.93 percent or 83.19 points to 8,823.01, while the most liquid index S&P SL20 was down 1.04 percent or or 26.69 points to 2,542.68.
Meanwhile, an International Monetary Fund team in Sri Lanka will be briefing about the progress of the program on May 15.
The debt restructuring program of the country is scheduled to be taken up by the International Monetary Fund’s Executive Board on March 20, 2023, after China gave assurances to restructure debt.
The government has disclosed that the stance on domestic debt restructuring will be made aware towards the end of May, however The International Monetary Fund is in constant dialog with Sri Lanka over domestic debt restructuring plans, Senior Mission Chief Peter Breuer said.
To meet the targets a country and its creditors have to re-structure its debt. To meet GFN ceilings Sri Lanka has to at least extend the maturity of all or most of its domestic debt.
The IMF team will be in Sri Lanka till May 23. The team will know more about Sri Lanka’s progress and any corrective measures that are needed at the end of the mission.
Sri Lanka is showing commitment towards implementing an economic program with the International Monetary Fund and the country has less choices in with debt becoming unsustainable, IMF’s director of Asia Pacific Region, Krishna Srinivasan told reporters in Colombo.
The top losers of the day were Sampath Bank, Nation’s Development Bank and Hatton National Bank. The market recorded a total turnover of 945,272,280 rupees.
“Since the banking sector is down the index is also coming down with it,” an analyst said.
Although there was a wait and see approach adopted by the entire market and the market was coming down on banks, the banking sector contributed 297 million rupees, the capital goods sector contributed to 272 million rupees and the Food, Beverage & Tobacco Industry contributed to 105 million rupees.
Analysts said the low volumes seen in the market are due to the debt restructuring concerns, and investors are waiting for the monetary policy review for the next month.
The market generated a foreign inflow of 48.3 million rupees, bringing the net foreign outflow for the year to 2.1 billion rupees.
“There is foreign interest coming in ever since the country got the IMF approval and there is some economic progression,” the analyst said.
Sri Lanka is making progress in an International Monetary Fund agreement but improvements have to be made, State Minister for Finance Shehan Semasinghe said.
Increasing revenues and avenues to strengthen the economy were being explored, he said.
Domestic debt optimization was one of the steps that had to be completed.
“Domestic debt optimization should not be politicized,” Minister Semasinghe said. (Colombo, May 15, 2023)