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Tuesday March 28th, 2023

How are COVID-19 cases in South Asia suddenly on the decline?

Covid-19 lockdown community lunch – Image by Rajesh Balouria courtesy Pixabay

ECONOMYNEXT – New COVID-19 cases in India have plummeted from a peak of 90,000 a day in September to just over 10,000 in February. In Bangladesh, daily cases have dropped to a 10-month low. The number of active cases in Pakistan has decreased by some 20,000 over the last two months. Life is almost back to normal in Kathmandu, Nepal. Bhutan has been called the world’s unlikeliest pandemic success story. What’s going on in South Asia?

India’s numbers in particular have baffled some scientists. Just over six months ago there were very real concerns that the “fragile” healthcare system there would collapse under the weight of the raging pandemic. Fast forward to February 2021 and daily cases have dropped significantly. According to CNN, on February 9, Delhi reported zero virus deaths for the first time in nearly nine months. Contrast that to how dire things were in November last year when nearly 90% of all critical care beds with ventilators in New Delhi were full. The Associated Press (AP) reported that by the second week of February only 16% of these beds were occupied.

Credit: BBC

What has led to this dramatic change? Is there something unique about South Asia that might explain its sharply declining cases and relatively low mortality rates? Is it vaccination? Is it the climate? Is it something in the water?

A number of explanations have been put forward: The country’s (and by extension the region’s) younger population, a partial herd immunity in urban areas, under-reporting of cases and deaths, reduced testing, increased restrictions, and relatively better innate immunity owing to a higher incidence of other infectious diseases.

The Indian government, according to AP, has attributed the dip in that country’s cases to mandatory mask-wearing. But this does not explain how the decline appears uniform even in areas where mask-wearing is not strictly practiced. Under-reporting, meanwhile, does not explain the demonstrably reduced stress on India’s health system. The dip cannot be attributed to vaccination either, which began only in January.

The threshold for herd immunity for COVID-19, experts say, may be 70% or higher, which means a vast majority of the population need to have developed immunity to the virus either by getting infected or through vaccination. A serological survey that tested for antibodies in January found that more than half the population in Delhi had contracted the disease.

“This is a huge increase,” community medicine specialist Dr Hemant Shewade was quoted by CNN as saying. He added that big cities may see “considerably reduced” transmission due to the rise in immunity.

While there may be some herd immunity in urban centes, India’s total numbers are far below the 70% required to achieve national herd immunity. According to AP, only about 270 million, or about 20% of the population, had been infected by the virus before vaccination began.

Serum Institute of India CEO Adar Poonawalla was quoted by CNN as saying India might not achieve herd immunity for years. “Until you get that real magical 90% herd immunity or vaccine immunity, which will come after three or four years, you really should exercise precautions,” Poonawalla, whose company is the largest manufacturer of COVID-19 vaccines in India, told CNN in January.

Rural areas with lower population densities and therefore reduced transmission rates have reported fewer cases of infection, which may at least partly explain the nationwide decline. Another, perhaps more intriguing, possibility is the idea that the prevalence of infectious diseases such as cholera, typhoid and tuberculosis could have helped build a stronger initial immune response to the new virus.

Shahid Jameel, a virologist and director of Ashoka University’s Trivedi School of Biosciences told AP on February 16: “If the COVID virus can be controlled in the nose and throat, before it reaches the lungs, it doesn’t become as serious. Innate immunity works at this level, by trying to reduce the viral infection and stop it from getting to the lungs.”

What of the low mortality rates in the region? A study published in the International Journal of Infectious Diseases attributed this to cross-reactive immunity, which, Dr. Giridhar R. Babu, a Bengaluru-based epidemiologist who was part of the research team, says plays a significant role in reducing the severity of the disease.

”The presence of cross-reactive T cells presumably from prior coronavirus infections can also attenuate the severity of the disease. Another reason for the low mortality is based on the emerging evidence suggesting asymptomatic and mildly symptomatic patients have high SARS-CoV2 specific cytotoxic T-cell responses, ” Bahu told The Week in December.

Meanwhile, one expert in Sri Lanka does not believe there is anything unique about what’s happening in India or elsewhere in the region except perhaps Bhutan, a country that imposed stringent border controls and ramped up testing. Institute for Health Policy (IHP) Executive Director Dr Ravindra Rannan-Eliya told EconomyNext yesterday that, over the past two months, cases have been on the decline  in many developing and developed countries.

“This is not due to vaccination – although a lot of people think this is the case in the USA. You see exactly the same decline in Canada starting January 7, a country that has had much less vaccination than the US,” he said.


Rannan-Eliya, far from being baffled by South Asia’s declining cases, believes the virus “basically won” in India, Pakistan, Nepal and Bangladesh – an outcome he attributes to inadequate testing, ineffective lockdowns and poor contact-tracing and isolation measures.

“If you extrapolate from an infection rate of 30% in India, what this means is that, at the minimum, 0.5 million Indians died. The actual number is probably more than 1 million. It’s a similar situation in the other three countries. When I looked at the data for Pakistan recently, there is very strong evidence that most deaths were not counted. There were also a large number of unreported deaths outside Islamabad and in the poorer provinces. There is probably also going to be a long term health cost also with tens of millions suffering long COVID,” he said.

The virus spread freely through the population resulting in partial immunity, said Rannan-Eliya. In combination with continued restrictions, he explained, this should now be sufficient to bring case numbers down. However, if remaining restrictions such as school closures are now lifted, cases may well go up again.

“Looking forward, the big concern is whether there are any new variants spreading. Genomic sequencing is very limited in these countries, so it’s possible we don’t know yet. Variants could easily reverse this scenario. The most obvious example of this is Manaus in Brazil which achieved 70-80% herd immunity last year, but has now suffered a huge second wave because of a variant that is immune resistant,” he said.

In Kerala, the southern Indian state that had previously done an exemplary job of containing the virus, as of mid-February contributed to nearly 50% of the country’s active COVID-19 cases. A new, more transmissible variant is suspected to be behind the recent surge. A new variant was in fact discovered in the state earlier this week, but according to Indian media, it may not be the culprit.

“I don’t think that these countries are exactly back to normal. They have continuing low levels of transmission, and as immunity wanes or as restrictions are relaxed or both, they may see further small waves. If they get some dangerous variants, then these future waves might not be small,” said Rannan-Eliya.

With regard to climate and innate immunity boosted by exposure to other diseases, he said: “I think temperature certainly, and possibly previous cold virus infections, may have slowed spread, but the impacts would have been small. Bear in mind that the worst infected countries in the world are largely hot countries – Brazil, India, Peru, South Africa, much of Africa, etc. So it’s not a big factor. South Asia can be largely explained using standard epidemiology and considering the serology survey data.”

Reported by Himal Kotelawala (Colombo/Feb27/2021)

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Sri Lanka stocks weaken for the second session on profit taking

ECONOMYNEXT – Sri Lanka’s stocks closed weaker on Tuesday for the second consecutive session mainly driven by month-end profit-taking by investors, according to brokers.

The main All Share Price Index (ASPI) closed down 0.56 percent or 51.81 points to 9,233.40.

The market has been on a downward trend since last week as investors are adopting a wait-and-see approach until more clarity is given regarding local debt restructuring after the International Monetary Fund approved the extended loan facility.

“The market is down as the selling trend continues,” said Ranjan Ranatunga of First Capital Holdings, speaking to EconomyNext.

“As there is a price decline in all shares across the board, combined with the month ending followed by margin calls, the market continued on a downward trend.”

The market generated a slow and thin turnover of 860 million rupees.

The main contributor to the turnover is Lanka IOC, following news that the Sri Lanka cabinet has granted approval for three oil companies from China, the United States, and Australia in collaboration with Shell Pl to lease 150 fuel stations for each company to operate in the local market.

The fears of debt restructuring mainly affected the banking and financial sectors, which dragged the index down for the day.

The market saw a net foreign inflow of 30.9 million rupees, and the total offshore inflows recorded so far in 2023 are 1.01 billion rupees.

The most liquid index, S&P SL20, closed 0.81 percent or 21.68 points down at 2,656.30.

The market saw a turnover of 860 million on Tuesday, below this year’s daily average of 1.8 billion rupees.

Top losers were Vallibel One, John Keells Holdings, and Hatton National Bank.

Analysts said the downward trend is expected to continue for the rest of the week as profit-taking is expected to continue. (Colombo/March28/2023)

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Sri Lanka rupee closes weaker at 325/328 to dollar, bond yields up

ECONOMYNEXT – Sri Lanka’s treasury bond yields were up at close on Tuesday and the rupee closed weaker in the spot market, dealers said.

A 01.07.2025 bond was quoted at 31.20/60 percent on Tuesday, up from 30.75/31.00 percent on Monday.

A 15.09.2027 bond was quoted at 28.25/29.00 percent, up from 28.10/60 percent from Monday.

Sri Lanka rupee opened at 325/328 against the US dollar steady, from 322/325 from a day earlier. (Colombo/ March28/2023)

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Sri Lanka Telecom on track rating upgrade track on planned stake sale: Fitch

ECONOMYNEXT – Sri Lanka Telecom has been place on watch for a possible rating upgrade after the government, which has defaulted on its sovereign debt said it will sell down its majority stake.

“The rating reflects the potential rating upside due to weakening linkages with SLT’s parent, the government of Sri Lanka (Long-Term Local-Currency Issuer Default Rating: CC), due to the government’s plan to sell its 49.5 percent stake in the company,” the rating agency said.

“Fitch will resolve the RWP when the proposed disposal becomes practically unconditional, which
may take more than six months.”

The agency said it expect SLT’s revenue growth to slow to a low single-digit percentage in 2023 amid weakening consumer spending due to consumers increasingly prioritising essential needs, such as food and medicine, as real income has fallen significantly following the currency depreciation and unprecedently high inflation.

The full statement is reproduced below;

Fitch Places Sri Lanka Telecom’s ‘A(lka)’ Rating on Watch Positive

Fitch Ratings – Colombo – 27 Mar 2023: Fitch Ratings has placed Sri Lanka Telecom PLC’s (SLT) National Long-Term Rating of ‘A(lka)’ on Rating Watch Positive (RWP).

The RWP reflects the potential rating upside due to weakening linkages with SLT’s parent, the government of Sri Lanka (Long-Term Local-Currency Issuer Default Rating: CC), due to the government’s plan to sell its 49.5% stake in the company. Fitch will resolve the RWP when the proposed disposal becomes practically unconditional, which may take more than six months.

SLT’s ratings are currently constrained by its parent’s weak credit profile under Fitch’s Parent and Subsidiary Linkage (PSL) Rating Criteria. SLT’s Standalone Credit Profile (SCP) is stronger than that of the state, reflecting the company’s market leadership in fixed-line services, second-largest share in mobile, ownership of an extensive optical fibre network and a strong financial profile. The extent of SLT’s rating upside, following the proposed disposal, will depend on the credit profile of its new parent, the linkage strength with SLT according to our PSL criteria, and the proposed funding structure.


Disposal Plan: SLT announced on 20 March 2023 that the Sri Lankan cabinet has granted in-principle approval to sell the 49.5% stake in SLT held by the state. The disposal is part of a plan to restructure state-owned entities (SOEs) to improve the state’s financial position. SLT said steps have yet to be taken to identify potential buyers and it will take at least eight to 12 months to finalise the transaction. We believe the government will push through the disposal as SOE restructuring is an integral part of the IMF’s financial support to Sri Lanka.

Sovereign Ownership Pressures Rating: We assess the legal ring-fencing and access and control between SLT and the state as ‘Open’ under the PSL criteria, given the absence of regulatory or self-imposed ring-fencing of SLT’s cash flow and the government’s significant influence over the subsidiary’s operating and financial profile. SLT’s second- biggest shareholder, Malaysia-based Usaha Tegas Sdn Bhd with a 44.9% stake, has no special provisions in its shareholder agreement to dilute the government’s influence over SLT.

Higher Rating: However, the PSL criteria allows for a stronger subsidiary to be notched above the weaker parent’s consolidated profile in extreme situations, such as when a parent is in financial distress but the subsidiary continues to operate independently and its banking access appears unaffected. We do not believe SLT is at risk of default in the next 12 months, as it has sufficient liquidity and its debt does not carry cross-default clauses that can be triggered by the parent’s distress.

SLT’s ‘A(lka)’ rating therefore reflects its relativities with national peers, but is still below its SCP due to the drag from state ownership. We apply our PSL criteria because our Government-Related Entities (GRE) Rating Criteria states that in cases where the SCP of the GRE is higher than the government’s IDR, the relevant considerations of the PSL criteria will be applied to determine whether the IDR of the GRE is constrained or capped at the government’s rating level.

Weak Demand in 2023: We expect SLT’s revenue growth to slow to a low single-digit percentage in 2023 amid weakening consumer spending. Consumers are increasingly prioritising essential needs, such as food and medicine, as real income has fallen significantly following the currency depreciation and unprecedently high inflation. SLT’s subscriber numbers and minutes of usage have already fallen in 2022. Competition has also intensified, especially in the mobile segment, leading to lower realisation of recently introduced tariff hikes.

Weak demand should be offset to an extent by increased migration to SLT’s fibre-to-the- home (FTTH) network, from its own copper network, and subscriber additions. FTTH carries higher revenue per user than the copper network. SLT had 475,000 FTTH connections, a 35% increase yoy, by end-2022.

Weakening Profitability: We expect SLT’s EBITDA margin to narrow to around 34% in 2023 (2022: 35.6%) amid lower demand and ongoing cost escalations. All telecom operators increased tariffs by 20%-25% in late 2022 to tackle falling margins. However, the realisation into revenue remains weak, especially in the mobile segment, due to deep price cuts by one of the smaller operators and falling demand. SLT’s fixed-line business is able to maintain stable EBITDA margins due to the recent tariff hike and the FTTH segment’s higher revenue per user.

Leverage to Stabilise: We expect SLT’s EBITDA net leverage to remain around 1.3x in 2023 (2021: 0.9x, 2022: 1.3x) amid falling profitability. However, its leverage is strong for the rating. We expect capex of around LKR25.0 billion annually over 2023-2024 on network upgrades and expanding its fibre infrastructure.

Interest-Rate Hikes, Currency Depreciation Manageable: We expect SLT to maintain its EBITDA interest coverage closer to 4.0x over 2023-2024 (2022: 4.4x) despite interest rates rising almost threefold. Most of SLT’s debt is on variable interest rates, which will raise costs. SLT’s foreign-currency revenue, which accounts for 10%-12% of group revenue, is more than sufficient to meet the group’s foreign-currency operating expenses and interest costs. SLT had around USD10 million in foreign-currency debt at end-
December 2022, compared with USD40 million in foreign-currency cash deposits.

Sector Outlook Deteriorating: Fitch expects the average 2023 net debt/EBITDA ratio for SLT and mobile leader Dialog Axiata PLC (AAA(lka)/Stable) to remain around 1.3x (2022: 1.3x) amid weak margins and high capex. We expect sector revenue growth to slow to 8% in 2023 (2022: 15%), while the average 2023 EBITDA margin for SLT and Dialog should narrow to 31% (2022: 32%) amid low usage and high costs.

SLT’s SCP benefits from market leadership in fixed-line services and the second-largest position in mobile, along with ownership of an extensive optical fibre network. SLT has lower exposure to the crowded mobile market and has more diverse service platforms than Dialog. However, Dialog has a larger revenue base, lower forecast EBITDA net leverage and a better free cash flow (FCF) profile than SLT. Dialog is rated at ‘AAA(lka)’, while SLT’s rating is under pressure because of the state’s weak credit profile.

SLT has a larger operating scale than leading alcoholic-beverage manufacturer Melstacorp PLC (AAA(lka)/Stable), which distributes spirits in Sri Lanka through its subsidiary, Distilleries Company of Sri Lanka PLC (AAA(lka)/Stable). Melstacorp is exposed to more regulatory risk in its spirits business because of increases in the excise tax, but this is counterbalanced by its entrenched market position and high entry barriers.

Consequently, the company can pass on cost inflation and maintain its operating EBITDA margin, supporting substantially stronger FCF generation than SLT.


Fitch’s Key Assumptions within Our Rating Case for the Issuer:

– Revenue growth to slow to 4% in 2023 amid falling subscriber numbers and lower usage due to weakening consumer spending;

– Operating EBITDA margin to narrow by 150bp to 34% in 2023 due to higher costs and lower volume;

– SLT to continue capex on expanding its fibre and 4G network with LKR25 billion spent annually in 2023 and 2024;

– Effective tax rate of 28% from 2023;

– Dividend payout of 33% of net income over 2024-2025


Factors that could, individually or collectively, lead to positive rating action/upgrade:

– Fitch will resolve the RWP when the proposed disposal becomes practically unconditional, which may take more than six months, and once Fitch has sufficient information on the new majority shareholder’s credit profile and linkages with SLT and the proposed funding structure.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

– Fitch would remove the RWP and affirm the National Long-Term Rating at ‘A(lka)’ with a Stable Outlook if the proposed disposal does not proceed and the linkages with the state remain intact.


Manageable Liquidity: SLT’s unrestricted cash balance of LKR14 billion at end- December 2022 was sufficient to redeem its contractual maturities of around LKR11 billion. SLT’s short-term working-capital debt amounted to another LKR10.0 billion and we expect the company to roll over the facilities given its solid access to local banks.

Liquidity is further enhanced by about LKR15 billion in undrawn bank credit facilities, although these are uncommitted. SLT typically does not pay commitment fees on its undrawn lines, although we believe most banks will allow the company to draw down the funds because of its healthy credit profile.

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