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Tuesday May 30th, 2023

China top lender to Sri Lanka up to April 2021

ECONOMYNEXT – China was the top lender to Sri Lanka for the first four months of 2021, disbursing 514.9 million US dollars including a 500 million budget support loan, slightly down from a year earlier, official data shows.

In the first four months of 2020, China also gave 568.4 million dollars including a 500 million dollar budget support loan from China Development Bank which was the first tranche of a 1.2 billion dollar loan.

Up to April 2021, the World Bank gave 134.4 million dollars in loans and 0.6 million in grants, up from 775 million dollars last year.

The Asian Development Bank gave 113.6 million US dollars up from 95.9 million dollars last year.

The Asian Development Bank and the World Bank has ramped up lending to Sri Lanka in a Coronavirus pandemic, re-directing parts of already approved loans and entirely new loans to help build hospital capacity, PCR testing labs and vaccine purchases.

Agencies such as the World Bank find it difficult to give budget support loans without debt sustainability sign off from the International Monetary Fund, persons familiar with the process say.

Sri Lanka has generally shunned budget support loans after 2005 as the country embarked on a path of import substitution, economic controls to give high profits to so-called crony rent-seeking firms as well as state-led development.

World Bank budget support loans require economic liberalization for private citizens to work, compete and earn tax revenues for the state so that the loans could be repaid.

Import substitution firms on the other hand earn profits by diverting trade taxes to their own bottom line in a practice known as tax arbitrage.

Sri Lanka had said it will limit foreign borrowing as difficulties emerged with repaying foreign debt amid greater monetary instability in recent years.

Sri Lanka has seen higher levels of monetary instability with the central bank becoming more active particularly after 2015, injecting large volumes of money under discretionary ‘flexible’ policies leading to falls in the credibility of a peg with the US dollar and output shocks. (Colombo/July07/2021)

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Sri Lanka President cleared to discuss cancelled LRT after soured Japan relations

ECONOMYNEXT – Sri Lanka’s Cabinet of Ministers approved a proposal by President Ranil Wickremesinghe discuss resuming a Japan funded. Light Rail Transit (LRT) project cabinet spokesman said, as the island nation is in the process of mending ties with Tokyo.

However, any such deals are likely to take place after the debt restructuring and Sri Lanka starts to repay its foreign loans to come out of default, analysts say.

Former President Gotabaya Rajapaksa unilaterally cancelled the 1.5 billion US dollar LRT and East Container Terminal (ECT) projects in 2021. Japan agreed to fund the LRT project while it was one of the tripartite members of the ECT project along with India and Sri Lanka.

The abrupt cancellation hit the diplomatic ties between the two countries and Sri Lankan government officials have said Japan had given the project to Sri Lanka at a very lower financing cost.

President Wickremesinghe returned from Japan late last week after having met top officials of the Japanese government including its prime minister.

“In recent history, due to the stopping of several agreements and proposals suddenly, President Wickremesinghe went to Japan after creating the background to clear some of the worries we have,” Cabinet Spokesman Bandula Gunawardena told the weekly media briefing.

“Before he went, he got the approval from the cabinet to resume the discussion on the light railway project. He got the approval from the cabinet to get parliament approval for bilateral agreements signed or any other investments project. Any change or cancellation of a project could be done only with the approval of the parliament.”

Japan has backed Sri Lanka under Wickremesinghe’s presidency after the island nation declared sovereign debt default. (Colombo/May 30/2023)

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Sri Lanka to tighten grip on television with broadcast law

ECONOMYNEXT – Sri Lanka has formulated a broadcast authority law to regulate electronic media which will be made public soon, Cabinet spokesman Minister Bandula Gunawardana said.

“The draft prepared by a cabinet subcommittee under Justice Minister Wijedasa Rajapaksa has discussed with various parties will be given to all media institutions and broadcast media,” Gunawardana said.

“We do not have to hide or force anyone. A legal framework that can be acceptable to all for all sectors.”

“In a week or two Minister Wijedasa will discuss with state and private stakeholders.”

At the moment Sri Lanka has issued frequencies without conforming to an “international procedures”, he said.

In Sri Lanka television frequencies are issued under a state television act.

Successive administrations in Sri Lanka has since around 1980 mis-used state television duopoly which including for conducting elections according to critics.

Private television as well a raio emerged around the 1990s and has since over shadowed state media.

There have been calls by ruling party politicians from time to time to control private media. There is now calls to control social media.

At a Committee on Public Accounts meeting of the Department of Government Information, ruling coalition legislators called for regulation of television content. (Colombo/May30/2023)

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Sri Lanka rupee at 296.75/297.25 to dollar at open, bond yields steady

ECONOMYNEXT – Sri Lanka’s rupee opened at 297 /297.50 against the US dollar in the spot market on Monday, while bond yields were steady, dealers said.

The rupee closed at 296.75 /297.25 to the US dollar on Monday after opening around 296.50 /297.50 rupees.

A bond maturing on 01.09.2027 was quoted at 26.50/75 percent steady from Friday’s close at 26.50/65 percent.

Sri Lanka’s rupee is appreciating amid negative private credit which has reduced outflows after the central bank hiked rates and stopped printing money. (Colombo/ May 29/2023)

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