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Thursday April 18th, 2024

European Union concerned over Sri Lanka import controls; says trade not one way street

ECONOMYNEXT – The European Union, a key buyer of Sri Lanka exports that has also offered GSP+ benefits to the island has raised concerns over import controls slammed in the wake of monetary instability in March and April 2020.

The EU delegation said the EU had bought more than a billion Euros worth of goods (220 billion rupees) from Sri Lanka than it bought 2018 and 2019 creating a so-called trade surplus in favour of Sri Lanka.

“Trade, however, is not a one-way street,” the EU delegation said in a statement.

“The current import restrictions are having a negative impact on Sri Lankan and European businesses, and on Foreign Direct Investment.

“Such measures impair Sri Lanka’s efforts to become a regional hub and negatively impactSri Lankan exports by constraining the import of raw material and machinery.

“We recall that a prolonged import ban is not in line with World Trade Organisation regulations.”

Analysts have called for Sri Lanka’s Latin America style central bank set up in 1950 by a Federal Reserve money doctor to be reformed to restore monetary instability and have free trade without foreign exchange troubles.

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The controls in 2020 are the worst since 1970s when Sri Lanka went in for a closed economy with severe import and exchange controls as the Bretton Woods system of soft-pegs collapsed, with the central bank buying large volumes of Treasury bills.

The full statement is reproduced below:

Joint Statement
The Delegation of the European Union (EU) and the Embassies of France, Germany, Italy, Netherlands and Romania issue the following statement.
19 November 2020, COLOMBO – As COVID-19 continues to bring a number of challenges, we, theColombo-based Heads of Missions representing the European Union and its Member States, held a series of high-level meetings, including with Foreign Minister Gunawardena. On this occasion, we underlined the EU’s long-standing support for Sri Lanka as a reliable partner, including through over 1 billion EUR of grants over the last 25 years, notwithstanding the Member States’ bilateral assistance.

In addition to our significant development cooperation, we recall that the EU is a crucial economic partner for Sri Lanka. Thanks to the EU’s special Generalised System of Preferences (GSP+), Sri Lanka enjoys competitive, predominantly duty- and quota-free access to the EU market, based on the continued implementation of 27 international conventions on human rights, labour, environment, climate change and good governance.

Not least due to these unilateral trade preferences, the EU is the second biggest export market for Sri Lanka worldwide, with a positive trade balance of more than 1 billion EUR (about 220 billion LKR) in 2018 and 2019.

Trade, however, is not a one-way street. The current import restrictions are having a negative impact on Sri Lankan and European businesses, and on Foreign Direct Investment. Such measures impair Sri Lanka’s efforts to become a regional hub and negatively impactSri Lankan exports by constraining the import of raw material and machinery. We recall that a prolonged import ban is not in line with World Trade Organisation regulations.

Sri Lanka’s withdrawal of support for the United Nations Human Rights Council Resolution 30/1 remains a source of concern. The Government has stated its continuing commitment, including to the EU, to fostering reconciliation,justice and peaceful coexistence among Sri Lanka’s diverse communities. The EU stands ready to support the Government’s efforts in this area. The rule of law and a vibrant civil society are essential in this regard.

We are looking forward to continuing our deep engagement with Sri Lanka, in line with our shared international commitments and obligations.

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  1. Chandana says:

    Everything has pros and cons. Timely article.

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  1. Chandana says:

    Everything has pros and cons. Timely article.

Sri Lanka’s discussions with bondholders constructive: State finance minister

ECONOMYNEXT – Sri Lankan authorities continue to engage all debt restructuring negotiations in good faith, within principles of equitable treatment among creditors, and with maximum transparency within the norms of such negotiations, State Minister of Finance, Shehan Semasinghe has said.

“It is standard practice, when a representative group of bondholders is formed, to entertain confidential discussions with such group and its appointed advisors. In the case of Sri Lanka, the Ad Hoc Group of Bondholders represents holders controlling more than 50% of the bonds, which make them a privileged interlocutor for Sri Lanka,” Semasinghe said on X (twitter).

“It is well understood that given the price sensitive nature of the negotiations, and according to market regulations, discussions with the Group and its advisors are to be conducted under non-disclosure agreements. This evidently restricts the ability of the Government to unilaterally report about the substance of the discussions.

“The cleansing statement, which was issued on the 16th of April, at the conclusion of this first round of confidential discussions with members of the Group, aims at informing the Sri Lankan people, market participants and other stakeholders to this debt restructuring exercise, about the progress in negotiations. It provides the highest possible level of transparency within the internationally accepted practices in such circumstances.

“As informed in this statement, confidential discussions held in recent weeks with bondholders’ representatives proved constructive, building on the restructuring proposals presented by both parties. During the talks both sides successfully bridged a number of technical issues enabling important progress to be made. Sri Lanka articulated key remaining concerns that need to be addressed in a satisfactory manner.

“The next steps would entail further consultation with the IMF staff regarding assessments of the compatibility of the latest proposals with program parameters. Following these consultations, we hope to continue discussions with the bondholders with a view to reaching common ground ahead of the IMF board consideration of the second review of Sri Lanka’s EFF program.”

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Sri Lanka rupee weakens at 301.00/302.05 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 301.00/302.05 to the US dollar in the spot forex market on Tuesday, from 299.00/10 on Tuesday, dealers said. Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed stable at 11.30/35 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent up from 11.95/12.00 percent.

A bond maturing on 15.12.2028 closed at 12.10/20 percent down from 12.10/15 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent.

A bond maturing on 15.03.2031 closed at 12.30/50 percent. (Colombo/Apr17/2024)

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Sri Lanka Treasury Bill yields down across maturities

ECONOMYNEXT – Sri Lanka’s Treasuries yields were down across maturities at Wednesday’s auction with the 3-month yield moving down 7 basis points to 10.03 percent, data from the state debt office showed.

The debt office sold all 30 billion rupees of 3-month bills offered.

The 6-month yield fell 5 basis points to 10.22 percent, with 25 billion rupees of bills offered and 29.98 billion rupees sold.

The 12-month yield dropped 4 basis points to 10.23 percent with 18.01 billion rupees of bills sold after offering 23 billion rupees. (Colombo/Apr17/2024)

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