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Tuesday July 23rd, 2024

Fitch downgrades People’s Leasing & Finance to A+(lka)

ECONOMYNEXT- Ratings agency Fitch downgraded state-owned People’s Leasing & Finance Plc (PLC) to a national long-term rating of A+(lka) from AA-(lka) while affirming the issue default rating at B- with a stable outlook, after assessing it as a standalone firm.

Fitch had earlier rated PLC based on an expectation of extraordinary support from its parent, Sri Lanka’s second largest lender People’s Bank.

“We assess PLC’s standalone profile to be incrementally weaker on the national scale, driving the downgrade of its National Long-Term Rating,” Fitch said.

“We believe People’s Bank’s ability to provide extraordinary support has weakened, even though we assess People’s Bank’s propensity to support PLC as unchanged.”

“PLC’s standalone profile takes into account its strong domestic franchise among domestic non-bank financial institutions, underpinned by its linkage to PB and its market share (around 12 percent of non-bank financial institution-sector assets at end-9M19), as well as its high-risk appetite stemming from exposures that are more susceptible to operating conditions.”

The rating cut on PLC follows Fitch cutting the outlook on People’s Bank.

Fitch said PLC’s standalone strength is now higher than if based on expectation of support from People’s Bank.

The ratings agency said weakening links between PLC and its parent is negative to support assumptions.

Rating upside is limited due to the negative outlook on both the parent and the sovereign, Fitch said.

A weakening credit profile could lead to further downgrades, the ratings agency said.

The full Fitch review follows:

Fitch has downgraded People’s Leasing & Finance PLC’s (PLC) National Long-Term Rating to ‘A+(lka)’ from ‘AA-(lka)’ and affirmed the IDR at ‘B-‘ with a Stable Outlook.

The revision of the Outlooks follows Fitch’s Outlook revision on the Sri Lankan sovereign (B/Negative); see Fitch Revises Outlook on Sri Lanka to Negative; Affirms at ‘B’, dated 18 December 2019.

Fitch has revised its assessment of Sri Lanka’s operating environment to ‘b’/negative, from ‘b’/stable, primarily to reflect the risk of doing business in the jurisdiction, which we believe could heighten in the medium term.

Increased macroeconomic volatility could pressure the banks’ and non-bank financial institutions’ credit profiles should the sovereign’s credit profile deteriorate further.

The operating environment has a high influence on the banks’ ratings, as it is likely to constrain their intrinsic credit profiles through its effect on financial and non-financial key rating factors.

PLC’s IDRs and National Long-Term Rating reflect its intrinsic credit profile, as we believe the rating based on its standalone strength is now higher than if based on the expectation of extraordinary support from its parent, PB. This follows the rating action on PB.

We believe PB’s ability to provide extraordinary support has weakened, even though we assess PB’s propensity to support PLC as unchanged.

PLC’s standalone profile takes into account its strong domestic franchise among domestic non-bank financial institutions, underpinned by its linkage to PB and its market share (around 12% of non-bank financial institution-sector assets at end-9M19), as well as its high-risk appetite stemming from exposures that are more susceptible to operating conditions.

PLC’s ‘b-‘ standalone profile and IDR are already low on the international rating scale and adequately reflect the downside risk to its operating environment and credit profile from any further weakening in the sovereign’s credit fundamentals.

However, we assess PLC’s standalone profile to be incrementally weaker on the National scale, driving the downgrade of its National Long-Term Rating.

PLC’s Sri Lanka rupee-denominated senior unsecured debt is rated at the same level as its National Long-Term Rating, as the debentures rank equally with other senior unsecured obligations.

Rating upside for PLC is limited given the challenging operating environment and the Negative Outlook on PB and the Sovereign.

A weakening in strategic linkages between PLC and its parent would also be negative for our support assumptions.

Upside for PLC’s National Long-Term Rating is most sensitive to positive rating action on the sovereign, as this could strengthen PB’s ability to provide support to PLC to a level above our assessment of PLC’s standalone profile.

This would include a revision of our Outlook on the sovereign rating to Stable from Negative.

With regards to downgrade triggers, PLC’s National long-term rating is likely to be more sensitive to any weakening in its credit profile, compared with its already-low IDRs on the international scale.

Deterioration in PLC’s standalone profile would most likely be due to a weakening in its operating environment and related risks or an increase in its risk appetite that weakens its asset quality and capital buffers.

The senior debt ratings will move in tandem with the National Long-Term Rating.

Long-Term Foreign-Currency IDR affirmed at ‘B-‘; Stable Outlook

Long-Term Local-Currency IDR affirmed at ‘B-‘; Stable Outlook

National Long-Term Rating downgraded to ‘A+(lka)’ from ‘AA-(lka)’; Stable Outlook

Sri Lanka rupee-denominated senior unsecured debentures downgraded to ‘A+(lka)’ from ‘AA-(lka)’

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Sri Lanka to introduce digital program for foreign workers facing problems

ECONOMYNEXT – Sri Lanka will introduce a digital program via smart phones for migrant workers to report any concerns while employed abroad, Minister of Labor and Foreign Employment Manusha Nanayakkara said.

“We will have a digital program that is accessible from their smart mobile phones where domestic workers can notify us if they have not got their salary or if they have fallen into some trouble,” Nanayakkara said in parliament on Tuesday.

Sri Lanka has sent 301,000 domestic workers and 360,000 skilled workers abroad, Nanayakkara said.

Several workers, especially domestic workers, face abuse at the hands of foreign employers.

Nanayakkara said that the government only receives 0.001 percent of complaints with regard to abuse.

“We can only act on complaints received from people who go through legal channels. We are educating those who go through the Foreign Employment Bureau on how to escalate complaints.” (Colombo/Jul23/2024)

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Sri Lanka cabinet approves apology from Muslims for COVID-19 cremation ahead of election

ECONOMYNEXT – Sri Lanka’s Cabinet of Ministers approved a proposal to tender apology for the grievance caused for ethnic minority Muslims due to the cremation of bodies during the Covid-19 pandemic, Foreign Minister Ali Sabry said.

The move comes ahead of the upcoming presidential poll in which Muslim votes are likely to become crucial for all candidates.

The government of former President Gotabaya Rajapaksa led by current ruling party Sri Lanka Podujana Peremuna (SLPP) forced Muslims and Christians to cremate the dead bodies of those who died of Covid-19 in 2020.

The   Organisation of Islamic Cooperation (OIC) which includes Islamic states globally raised the forced cremations issue at the 46th United Nations Human Rights Council (UNHRC) in February 2021 after the SLPP government rejected repeated requests by local and global Islamic bodies.

The policy was later reversed, but the move hit diplomatic ties with Middle Eastern and OIC nations which is the highest source of employment for Sri Lankan expatriates.

Former President Gotabaya Rajapaksa later said the decision was based on expert advice. Rajapaksa who was seen as an anti-Muslim leader was heavily criticized for his decision ahead of 2020 parliamentary polls while his elder brother and then Prime Minister Mahinda Rajapaksa declined to discuss the issue with Muslim parties which asked to reverse the decision.

Hundreds of Muslims were cremated during the Covid-19 period before Rajapaksa government allowed a separate burial ground for Muslim Covid-19 victims in the Eastern town of Oddamavadi.

“A joint Cabinet Paper presented by Ministers Ali Sabry, Wijeyadasa Rajapakshe & Jeevan Thondaman apologising for the grievance caused to the Sri Lankan Muslim community due to the cremation of bodies during the Covid-19 pandemic, approved by the Cabinet,” Minister Sabry  tweeted quoting Cabinet Spokesman.

Already President Ranil Wickremesinghe and Estate Infrastructure Minister Jeevan Thondaman had tendered an apology in the parliament. The latest cabinet move is a formal and official apology.

BURIAL OR CREMATION

Along with the apology, the Cabinet approved proposed law on burial or cremation of dead bodies on religious discretion.

“As stipulated in the guidelines published by the Ministry of Health on the Clinical Management of COVID19, cremation was made compulsory in removal of the dead bodies of the persons who died due to the COVID-19 virus. The decision created displeasure among the various religious groups and human right activists especially Muslim religious persons,” a government document on the cabinet decision showed.

“The studies made in this respect have been confirmed that the faeces and the urine are the primary source of transmission the virus but not with the safe burial. Therefore, in order to prevent arisen of such condition in future, attention has been drawn to introduce a law, a certain person or relations to be selected the burial or cremation of the dead person at their discretion.”

“Further, it has been seemed that introduction of new laws is appropriate to donate the dead bodies to the Medical Faculty, if necessary.”

“Accordingly, Cabinet of Ministers has approved the joint proposal presented by the Minister of Justice, Prison affairs and Constitution Reforms, Minister of Foreign affairs to instruct legal Draftsman in order to prepare a draft for the introduction of new law.”

Rajapaksa’s arrogant policy led the OIC and Middle East nations to reject Sri Lanka’s repeated requests for credit lines and loans to buy oil before the country collapsed following an unprecedented economic crisis in 2022.

Minister Sabry faced harsh criticism from human rights defenders and from members of the Muslim community for what they claimed was his silence in the face of the inhumane, unscientific decision by the Rajapaksa government.

The Rajapaksa government’s stubborn insistence on cremating Muslim and Christian victims of the Covid-19 virus was against the communities’ religious beliefs and drew widespread condemnation and concern of Muslim countries and leaders.

Rajapaksa, after the economic crisis hit the country, was forced to flee in the face of massive protests against him in July 2022. (Colombo/July 23/2024)

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Fireworks erupt in parliament over Sri Lanka’s VFS Global controversy

ECONOMYNEXT – Sri Lanka’s parliament erupted in heated debate after government legislators raised a privilege issue against Committee on Public Finance Chair Harsha de Silva, who last week tabled report on a controversial visa deal with the IVS-GBSVFS Global, consortium.

Justice Minister Wijedasa Rajapaksa questioned the propriety of raising a privilege issue against a Committee chairman, who was acting under powers derived from the Constitution, saying it amounted to challenging the Speaker himself.

Related Sri Lanka visa deal with IVS-VFS be cancelled or revised, forensic audited: COPF Chief

Sri Lanka’s Department of Immigration had awarded a visa issuing monopoly to IVS-GBS-VFS Global without tender which was charging 25 dollars per visa compared to an earlier 1 dollar by Mobitel, and it should be terminated or revised, de Silva said presenting a report earlier this month.

Privilege Over VFS Report

State Minister Shehan Semasinghe said de Silva had presented a defective and false report misleading parliament saying among other things that the report was unanimously approved by the COPF membership.

As a result, privileges of 16 members had been broken, and misleading a parliamentary committee was a punishable offence and de Silva should be referred to the privileges committee.

De Silva said he severally and individually rejected the charges and all views of the members were attached to the final report and he would stand down as COPF chair until the matter was decided.

“This was not done secretly. There were three weeks for members to respond,” de Silva said.

“There was a debate about the tourism arrival numbers, which was included. If I am to be imprisoned, do it. I am not afraid. Give me an opportunity and I will show how each word is true.

Semasinghe said there was no desire on the part of government members to remove de Silva from the COPF.

Government member Nimal Lanza said that he was under the impression that tourist arrivals had fallen due to the VFS deal but there was an increase this year. There was no desire to imprison de Silva, he said.

Verbal Exchange

Public Security Minister Tiran Alles said five years of data was given, and there was an increase in tourism arrivals. And after April there were 53,000 tourists under new categories, which brought revenues of 1.4 billion rupees.

The report was also attached as an addendum, de Silva said.

Minister Alles questioned why the Deputy Speaker was allowing a debate over the VFS deal which would now attract media headlines.

“If you are allowed, all our members must be allowed to speak,” he said.

Opposition leader Sajith Premadasa said if competitive tenders were called, there would not have been a charge of 25 dollars per visa as Mobitel was charging only one dollar.

Premadasa said he was responding due to charges made against de Silva and claims that he had committed a punishable offence. The opposition leader questioned how his microphone was muted.

Justice Minister Wijedasa Rajapaksa said while it was fair to allow de Silva to respond to the initial charge, a long debate should not have been allowed on the matter and also the contents of the report.

“The second bad precedent is this. It is not important whether it is Harsha de Silva or not. There are many committees. Can the Chairman of a Committee be called over a privileges issue?

“Under the Constitution there are powers to make standing orders. It is implemented through the 1953 Privileges Act. The Chairmen have certain powers. The Chairman has acted under the limits of his powers.

Parliament Undermined

Minister Rajapakshe said while there may be errors in a report, the Parliament’s powers were diminished if privilege questions were raised against Chairmen of a committee who carried out there duties.

“There may be errors in the report. We have seen that. But I am raising a question on the constitution.

“In this way, in whatever Committee, if he did his official duties, if he is made an accused in another committee of the same parliament and there is an investigation, it is the parliament’s power that is degraded.

“So it is the confidence people have in the parliament that is reduced. There is a legal question here. The Chair should consider whether it is possible to raise a question like this

“Ultimately the final responsibility of all these Committees rests with the Speaker. It is the Speaker’s powers that are delegated to the Chairman of a Committee.

“So, this challenge is made against the Speaker. How is the Speaker doing this?

“If the next day, the COPE, or COPA issues a report, someone asks to put him in the punishment log (dandu kanda) or to do whatever and calls him to the privileges committee.

“What are you going to ask at the Privileges committee? What punishment are you going to give? (Colombo/July23/2024)

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