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Tuesday August 16th, 2022

If I was Sri Lanka’s Finance Minister: Chandra Jayaratne

ECONOMYNEXT- Chandra Jayarantne, a former head of Sri Lanka’s Ceylon Chamber of Commerce and governance activist has proposed a reforms and taxes for next year’s budget as the country is in the grip of severe monetary instability, trade controls and a budget deficit.

Many of Sri Lanka’s post independence administrations have ended up fire fighting the balance of payments after economists advising politicians printed money through a Latin America-style central bank to keep interest rates and fund rural credit through re-finance.

The monetary instability also allowed economic nationalists to block free trade and promote import substitution as it happened in Latin America instead of free trade and export competitiveness.

Several reform oriented administrations have also had their programs de-railed and were forced to impose trade controls and focus on fire-fighting the balance of payments.

Sri Lanka after 2015 raised taxes and channeled most of the money into state salaries and subsidies raising spending to GDP from 17 to near 20 percent of GDP suffered growth shocks and currency collapses amid ‘stop-go’ monetary policy until 2019.

An already bloated public service, which is expanded with around 50,000 unemployed graduates periodically consuming most the fruits of productive sectors, triggering large current account deficit in the budget – regardless of tax hikes – undermining national savings.

In 2019 taxes were slashed and money was printed under Anglo-Saxon monetary stimulus and the state sector which was against expanded with 53,000 unemployed graduates last year consumed around 84 percent of tax revenues.

In 2021 Sri Lanka is facing the threat of sovereign default with the central bank headed for quasi-fiscal losses and difficulties in enforcing policy after a part of central government debt was transferred to it on top of amid reserve depletion.

Jayarante is advising the administration to avoid astrological beliefs, communicate the problem and take required action.

The full statement is reproduced below:

If I was the Minister of Finance

-Chandra Jayaratne-

If I was the Minister of Finance, I will seek the concurrence of the President, the Prime Minister and the Cabinet Colleague to structure the 2022 National budget on the undernoted Core Change Management Principles , Key Action Strategies and Proposals;

Core Change Management Principles

Recognizing that 6.9 million voters endowed the government with power in the fervent hope of “Prosperity and Splendour”, and as we owe to all citizens of today and the newer generations yet unborn, to deliver on such promises, it is time to have the “Courage to be Different” and govern;

• Abandoning blind hope, mystical and astrological beliefs, not waiting for the good times to emerge and drive the dark clouds of the three pronged risks of the pandemic, fiscal challenges and debt overhang;

• Discarding “Road Maps” that depend on selling state assets, hand to mouth existence matching day to day cash flows with committed outflows and reducing the operational freedoms of growth drivers by restrictions and controls; and

• Adopting best practices of governance, risk management and economics, and implement a change management oriented restructure and use this crisis as the way to deliver in the medium term the promises to and hopes of the citizens.

Core Strategies

• With transparency and integrity brief the legislators, the executive and the public at large via a series of public communications and announcements, the gravity of the macro economic crisis and financial stability/solvency challenges facing Sri Lanka in the short term, in the midst of the pandemic associated additional risks (subject to safeguarding that such disclosures will not in any way risk advance/crystallizr a further crisis), due to years of mismanagement by many governing regimes of the past failing year on year to address the twin fiscal and current account deficits;

• Appeal to all legislators, the executive and the public at large, post awareness of the impending crisis and possible consequences, to collectively and with commitment and in the belief that “We Can and We Will Overcome Our Challenges by Our Collective Efforts”, to support the strategic action essential in the difficult few years ahead;

• Reminding all citizens that in the critical period ahead sacrifices will be necessary by all; and assure them that the major share of such sacrifices will be borne by those with capacity to bear; and that a well designed and effectively administered “Safety Net” will protect the interests of the elderly, poor, marginalized and vulnerable segments of society;

• A strong social safety-net,with flexibility and rapid action capability, will be developed, encompassing better design and targeting, to enforce and implement eligibility criteria developed with World Bank assistance for Samurdhi. This strategy will be supported by an early introduction of ICT driven Aadhaar type schemes, Aadhaar Card and associated bank account systems for effective and efficient distribution. A shift from distortionary subsidies to income transfers will provide social protection and will be supported by a biometric identity and thus improve efficiency and reduce leakages;

• Market driven macroeconomic fundamentals will be the way forward, with a single minded focus on agro-industrial exports and services growth, led within a facilitative foreign policy framework, a market friendly consistent policy framework, foreign direct investments, technology transfers and manpower capabilities matching the emerging global opportunities;

• Gradually increasing growth rates of 5-8% commencing from 2022 will be the initial goal. Every attempt will be made to develop possible reform options, including policy and regulatory changes, digitization, fiscal adjustments and factor productivity enhancing other change management restructures. Care will be taken in the implementation to back load some reforms and fiscal adjustments to ensure that the pandemic induced economy is not subjected to growth contractionary fiscal policies upon decreasing government spending and increasing tax revenues;

• Good Governance, Policy Consistency, Rule of Law and Justice and elimination of Waste, Corruption, Money Laundering and Transfer Pricing, will be focused priorities in overcoming the macro-economic and financial stability challenges in the near term;

• Take strategic action to gradually increase the revenue to GDP to 12-15% over the next 3 years and enhance it to 18% by year 6;

• Principles of efficiency enhancements, equity where the ability to pay by those with capacity to contribute and bear the brunt of the enhanced taxes will be strictly enforced, with the poor and vulnerable populations being duly sheltered and covered by effective safety nets; simplicity in revenue collection systems will be key. A mix of measures to broaden the tax base and increase tax rates will be deployed with all measures taking account of distributional effects. Over time, the ratio of indirect to direct taxes should move from 80/20 to 60/40. Progressive taxes on both income (including capital gains) and wealth will be levied; with VAT rate increases being phased out; reductions in threshold and reduction in exemptions will be deployed;

• The continuance or selective application of all presently available and newly granted tax holidays and exemptions via strategic projects and Port City operations will be subject to continuous reviews to establish that these deliver above cut off growth, new employment generations, forex and long term cash flow supportive state revenue enhancements;

• Improved tax administration will be key to realizing revenue enhancements. Achieving the full potential of RAMIS, including connecting all revenue collecting agencies to Inland Revenue Department will be an important strategy. It will be necessary to buy back, with regular taxable payment of incentive allowances, the options now enjoyed by revenue agency and other staff members of the state services currently entitled to a share of fines, surcharges and confiscations. Effectively reviewed compulsory asset declarations by revenue agency official will need to be place;

• Set up an Independent Revenue Enforcement Authority with Powers of Prosecution and Recovery of Stolen State Assets and Avoided State Revenues, with two separate divisions (one reviewing all old cases and a case study files /reports) and the other current suspicious financial transactions, money laundering, terrorism financing, crypto currency operations, transfer pricing, serious financial crimes, related party transactions, misuse of beneficial ownership options and illegal offshore
wealth accumulations;

• All business entities above defined turnover levels engaged in import/export transactions, local and foreign trading/banking/finance and services would be required to provide the Revenue Enforcement Authority on an annual basis, with transfer pricing audit certificates, related party transaction details and beneficial holding details;

• Within the market based pricing policies, formulae based adjustments will be made to fuel, energy and public transportation prices;

• Every option will be taken to privatize/ monetize non strategic underutilized assets and non performing and unable to turn around state owned commercial entities (only where national security is not compromised);

• National budgets will be developed embedding strict austerity measures, prioritizations and justification assessments on Economy, Efficiency and Effectiveness criteria; change management options with zero based budgeting techniques will be deployed; A process for repeat testing prior to spend authorization of all large ticket discretionary expenditure will be enforced; all spends in excess of Rs. 500 mln per project will be subject to post audits. Strict approval criteria will be apply capital expenditure and any allocations with medium outcome returns and medium priority/risks will be re-phased;

• National resources of the sea, land and air space and all natural resources therein will be commercially leveraged with sustainability and optimization of returns;

• Transparent Requests for Proposals led competitive bidding and diligent evaluation and award processes will be followed for in all major procurements, major projects and monetization of state assets. In the constrained fiscal environment genuine Public Private Partnership modalities of Build Operate Transfer (BOT), Build Transfer (BT), Build Own Operate Transfer (BOOT) and Build Own Operate (BOO) will be pursued, especially for infrastructure development projects. Unsolicited proposals and bids will not be usually entertained and where in exceptions they are pursued, Swiss Challenge modalities will apply.

• Cease all new appointments to the public services and re-deployment with efficiency, effectiveness will be a key focus; introduce prioritized and targeted change management restructures of the public services to improve productivity, efficiency and effectiveness and assure all public servants and those paid on state account in state owned enterprises are deployed with given specific job responsibilities, accountabilities and expected to produce desired outcomes (KPI’s) with oversight supervision by designated superiors;

• Compliance with Fiscal Responsibilities Act and Active Liability Management Act and other targets approved by the Legislature will become accountable objective of the Executive and Public/Regulatory Authorities, with a medium term objective to reduce the Fiscal Deficit to 5% by 2025;

• The National Priority areas will include;
o Pandemic related allocations
o Safety Net allocations
o Health, Nutrition, Child and Elderly Care Allocations
o Education, Human Capability ( Knowledge, Skills, Attitudes and Values) Development aimed at Developing highly skilled and productive workforce meeting investor and development needs, especially regards the Industry 4.0, Emerging Digital and Artificial Intelligence related orking skills
o Investment/Exports ( Goods and Services) Promotion
o Livelihood support and creating new job opportunities, especially targeting bringing in the workforce women and youth
o Energy Security with an increasing share of renewable sources and developing matching battery storage capacities
o Food and Nutrition Security
o Water, Irrigation and Soil Enrichment
o National Security
o Environmental Sustainability and Ecology Preservations
o Port/Airport Development
o Value optimization of Natural and Sea Resources of Sri Lanka focusing on energy and Indian Ocean resources in building a new Blue Economy
o Transportation and Communications
o Early childhood and elderly care
o De-regulation, Digitization and advancing in Ease of Business and Other key Productivity/Quality and Competitive Advantage seeking opportunities
o Research, Innovations, Applied Research & Patent Development
o Disaster readiness

• Sri Lanka to approach the International Monetary Fund and Leading International Investment Banking Specialists for technical and professional assistance support to restructure the external debt obligations pursuing all available options including a moratorium, extending the tenor, hair cut etc. and arranging necessary external financing support under an International Monetary Fund Assistance Programme as the base for such fund raising;

• With an International Monetary Fund Assistance Programme in place and debt sustainably analysis developed, seek Budget support from multilateral funding agencies like World Bank and Asian Development Bank and also bi-lateral partners and their agencies of financial assistance ( China Development Bank/ USAID/ JICA/ EU/ Aus Aid/ CIDA/ MCC etc);

• In the interim pending above revisit and update the Medium Term Debt Management Strategy (2019/23) and pursue the selected path in managing the external debt commitments and once the debt restructure is completed update the strategy once more; and diligently, with commitment implement the revised strategy. Once market access is regained, use Asset Liability Management Act to deploy liability management techniques including buy-backs. Switching, securing zero coupon and green bonds etc

• Acceptance that International Financial Institutions, lenders, creditors investors, rating agencies, and network agencies must be made willing partners in the macroeconomic and debt sustainability management turnaround; and made to feel satisfied that genuine best efforts are being made to successfully turnaround and that all commitments will be collectively honored;

• All subsidies provided in agriculture, fisheries, energy, transportation, essential foods will be removed and pricing be market based with tapering down cash transfers with a sunset date and be extended on a selective basis to those severely impacted and unable to bear the weight of such changes;

• An globally acceptable Trade Policy, removing all anti-export bias in policy stance, including exchange rate inflexibility, para tariffs, non ad-valorem taxes, and shifting away from tariff structure that prevents penetration of global and regional supply chains will be introduced, optimizing trade and services opportunities via trade agreements; along with a Trade facilitations supportive single window in customs to implement WTO Trade Facilitation Agreement; A four band tariff will be introduced with the agreement of the trade associations whist exceptions subject to higher rates and surcharges being minimized;

• All state owned businesses will be required to undergo essential restructures in order that they become free cash-flow neutral by year 3 and positive by year 5; and failing they be subjected to closure or monetization. Business turnarounds and change management restructures will be supported and required changes Implemented with due oversight including agreed “Statements of Intent” developed by the large and fiscal sensitive State Owned Enterprises;

• Implementation of a proactive and data-driven monetary policy, using an inflation targeting as the anchor will be adopted, as the current practices and caps are now challenged by markets. The use of moral suasion and regulatory action warnings and restrictions on the use of market instruments for hedging and forward rates will cease forthwith;

• In order to promote export of goods and services, bring stability to exchange rates and attract value adding foreign direct investments, flexible market driven exchange rates will be a key strategic change, requiring high degree of professional and regulated implementation skills by the Central Bank;

• To promote foreign direct investments, export of goods and services, banking and finance supportive networks, focused attention and strategic action will seek improved sovereign ratings and rankings in leading global assessment indices including Ease of Doing Business, Business Confidence, Corruption Perceptions and High Risk and Other Monitored Jurisdictions;

• Board of Investments, the Export Development Board and the Port City Commission will collectively target Investment promotion with single minded focus in attracting high foreign currency value adding selected sectors and identified companies and entities, including those with opportunities to benefit from existing and planned Trade Agreements and Preferential Trading Regimes available to Sri Lanka;

• The grant of Tax holidays and exemptions will henceforth be limited; and where extended will be subject to regular reviews to establish these deliver above cut off growth, export incomes, new employment generations, introduction of new technology transfers with sustainable value addition, establishment of new niche markets and links to global supply chains, research and Innovation and long term cash flow enriching state revenue. These concessions will need to be administered with heavy fines and even penal sentences where deliberate and fraudulent commercial transactions are evidenced;

• Education, training and skills development initiatives will be aligned to drive growth and employment generation, exploiting country’s dynamic comparative advantages, location, labour and markets access and will be supported with essential investments. Resources will be allocated to develop manpower capability to provide off shore services and employment opportunities to youth by empowering them with high proficiency in English, selected other foreign languages, ICT and readiness with productive capacities and acceptable work ethic;

• Proactively seek significant increases in factor productivity and improvement in quality and efficiency of goods and services produced, especially in the agri-business, fisheries, SME’s and support them with incentives for restructure and in getting linked to local and overseas supply chains;

• Protecting the environment and ecology and protecting and assuring sustainability of national resources will be a key focus;

• Negotiations with stakeholders will be initiated to drastically reduce the number of public holiday including poya holidays (other than for vesak and poson);

• Policy consistency with speedy and effective administration and a high degree of accountability, transparency and diligent follow up will be key drivers of governance;

• A totally non aligned long term value adding foreign relations policy will be in place assuring good relations with all nations; Our missions in foreign countries will be subject to specific objectives, accountabilities and expected to produce desired outcomes (KPI’s)

• Reinforce the autonomy and independence of the Central Bank of Sri Lanka by enacting the 2019 agreed amendments to the Monetary Law Act, along with expanding the Monetary Board to be made up of nine members – the Governor, the three Deputy Governors for Monetary Policy, Financial Stability and Markets and Banking, Chief Economist of CBSL and four external members (Being professionals of high integrity and track record of achievements in Economics, Banking and Finance, Business and Commercial law) appointed by the President on the recommendations of the Constitutional Council. A former Governor or a Deputy Governor of the Central Bank will be appointed as an Independent Advisor to the Finance Minister and such nominee will be an observer (without a vote or right to participate in decision making) in the proceedings of the Monetary Board;

• Based on the best practices of limiting added risks during periods of heightened risks;
o Full organic Agriculture programme be targeted for 2050 and in the interim a hybrid cultivations will be permitted
o Palm oil, Turmeric and other local agro produce cultivations and manufacture ban be deferred till 2030
o Renewable sources based energy generation will be progressed subject to matching distribution capacities and meeting demands without black/brown outs

• Effective Communications with role model leaderships will be committed to take people in to confidence and make them aware of the challenges before the nation and the possible consequences and encourage the practice of extreme austerity measures by all concerned;

 

Proposals

 

Revenue Raising Measures

Tax 2018 2020 Recommended  
Income Tax- Personal Allowance Rs. 1.2 mln Rs. 3 mln Rs. 2.5 mln
Tax Slabs

 

First Rs.0.6 mln-4%

Next Rs.0.6mln-6%

Next Rs.0.6mln-8%

Next Rs.0.6mln-12%

Next Rs.0.6mln-16%

Next Rs.0.6mln-20%

Balance @ 24%

First Rs.3mln-6%

Next Rs.3mln-12%

Balance@ 18%

First Rs.2.5mln- 10%

Next Rs.2.5mln-15%

Next Rs.2.5mln- 20%

Next Rs.5.0mln- 25%

Next Rs.5.0mln- 30%

Balance @ 35%

PAYE* Applicable Withdrawn Reintroduce  
Wealth Tax Not Applicable Not Applicable Reintroduce with one house exempt and Allowance of Rs.50 mln and the first Rs. 100 mln at 0.25 %,Next Rs.100 mln at 0.5%, next Rs.100 mln at 0.75% and balance at 1%  
Gains from Realization

Of Investment Assets

10% 10% Exemption of trading stocks and shares

Withdrawn and taxed at 10%

 
Withholding Tax on Dividends and Interest Income * 15% and treated as final tax Withdrawn 15% and treated as final tax  
Withholding tax on Rents, Fees, Royalties * 15% (not a final tax) Withdrawn 15%% (not a final tax)  
Value Added Tax 15% with threshold Rs 12 mln per annum 8% with threshold Rs 300 mln per annum Year 2022 @ 10% with threshold Rs 120 mln per annum, 2023 @ 12 with threshold Rs 60 mln per annum and from 2024 @15% with threshold Rs 30 mln per annum  
Corporate Tax

 

Standard Corporate Tax rate 28%

Tobacco, Alcohol, Gambling – 40%

Lower rate – 14%

SMEs having a turnover up to LKR50Mn per annum, export of goods or services, agriculture and education

Standard Corporate Tax rate 24%

Tobacco, Alcohol, Gambling – 40%

·         Manufacturing -18%

Lower rate – 14% -SMEs having a turnover up to LKR500Mn per annum, export of goods or services, agriculture and education.

 

Standard Corporate Tax rate 30%

Tobacco, Alcohol, Gambling – 40%

Lower rate – 20% -SMEs having a turnover up to LKR 500Mn per annum, export of goods or services, agriculture and education.

 

 

*Supported by quick response directions

 

Growth Incentives

A State Budget vote Rs 20 billion will be available annually, to offer pre agreed “Start up Costs” reimbursement grants and Success Fees on achievement of set objectives, to promote Consultants, Professionals, Businesses, Universities, Academics, Researchers and Inventors to successfully implement pre approved project proposals, connected with:

• Enhancing factor productivity and generating incremental and sustainable local value addition enhancements of at least Rs. 500 million per annum

• Creating niche export markets for goods and services generating incremental and sustainable local value addition enhancements of at least Rs. 500 million per annum

• Technology transfers, leveraging ICT and digitization, use of artificial intelligence, productivity, quality and manpower training and development engagements generating incremental and sustainable local value addition enhancements of at least Rs. 500 million per annum

• Research and Innovations leading to the registering worldwide patents and setting up businesses capable of realizing incremental and sustainable free cash flow value creations of at least Rs. 100 million per annum

• Business turnarounds and change management restructures generating incremental and sustainable free cash flow value creations of at least Rs. 100 million per annum

• Commercial initiatives that create new ventures, niche markets and manpower capability development yielding sustainably new livelihood options for not less than 1000 persons
Improve Productivity and Value Enhancement of Agro- Fisheries-Livestock Products Supply Chain
Rs 15 billion will be allocated over 3 years as state capital contributions to Private Public Partnership ventures, to be competitively selected, setup and operated with majority private sector shareholdings, to provide Logistical Support to Improve Productivity and Value enhancement of Agro- Fisheries-Livestock Products Supply Chains via:

• Logistical centres in Trincomalee, Dambulla, and Matara offering temperature controlled Storage, sorting, packaging and storage, value added processing, distribution and sales

• Offer end to end supply chain and financings options support for smallholder entrepreneurs including forward contracting, procurement of timely supplies, financing, selling and post harvest distribution assisted via handheld devises leveraging ICT applications

• Productivity and quality enhancement, post harvest losses minimization, risk management, extension and advisory services

• Research and innovation to support sustainable competitive advantage

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Sri Lanka sovereign rating at SD but ISBs downgraded to ‘D’ by S&P

ECONOMYNEXT – Sri Lanka’s sovereign rating remains at Selective Default (SD), but the country’s sovereign bonds were downgraded to ‘D’ after missed interest payments, Standard and Poor’s, a rating agency said.

“The Sri Lanka government remains in default on some foreign currency obligations, including international sovereign bonds (ISBs),” the S&P said.

“We do not expect the government to make the payments within 30 calendar days after their due dates.

“We lowered the ratings on the affected bonds to ‘D’, following missed interest payments due on June 3, June 28, and July 18, and a missed principal payment due July 25.”

Sri Lanka is still paying senior creditors with money coming from deferred payments from the Asian Clearing Union.

Sri Lanka started to borrow heavily in foreign bond markets from 2015 after battering its currency peg with extraordinary liquidity injections under ‘flexible inflation targeting and the country lost the ability to roll-over maturing rupee bonds at gross financing level.

From 2015 to 2019, the country had monetary stability only in 2017 and 2019 as the pegged exchange rate regime was shattered with liquidity injections to target an ‘output gap’.

However the targeting the output gap led to currency crises (balance of payment deficit) and growth fell as stabilization measures were slammed.

From 2020 to 2022 even more aggressive liquidity injections were made and taxes were also cut saying there was a ‘persistent output gap’ until all foreign reserves including borrowed reserves were lost and the the country defaulted in peacetime.

The International Monetary Fund gave technical assistance to Sri Lanka to calculate the output gap and also endorsed ‘flexible inflation targeting’, with overnight repo injections, term repo injections, outright purchase of bond, despite having a reserve collecting peg.

On April 12, 2022 Sri Lanka defaulted despite being at peace.

The full statement is reproduced below:

Sri Lanka Bonds Downgraded To ‘D’ After Missed Payments; Sovereign Ratings Affirmed

Overview

The Sri Lanka government remains in default on some foreign currency obligations, including international sovereign bonds (ISBs).

We do not expect the government to make the payments within 30 calendar days after their due dates.

We lowered the ratings on the affected bonds to ‘D’, following missed interest payments due on June 3, June 28, and July 18, and a missed principal payment due July 25.

We affirmed our ‘SD/SD’ foreign currency and ‘CCC-/C’ local currency ratings on Sri Lanka. The outlook on the long-term local currency rating is negative.

Rating Action

On Aug. 15, 2022, S&P Global Ratings affirmed its ‘SD’ long-term and ‘SD’ short-term foreign currency sovereign ratings on Sri Lanka. At the same time, we affirmed our ‘CCC-‘ long-term and ‘C’ short-term local currency sovereign ratings. The outlook on the long-term local currency rating remains negative.

In addition, we lowered to ‘D’ from ‘CC’ the issue ratings on the following bonds with missed coupon or principal payments:

US$650 million, 6.125% bonds due June 3, 2025.

US$1.0 billion, 6.825% bonds due July 18, 2026.

US$1.0 billion, 5.875% bonds due July 25, 2022.

US$500 million, 6.35% bonds due June 28, 2024.

Our transfer and convertibility assessment at ‘CC’ is unchanged.

Outlook

Our foreign currency rating on Sri Lanka is ‘SD’ (selective default). We do not assign outlooks to ‘SD’ ratings because they express a condition and not a forward-looking opinion of default probability.

The negative outlook on the local currency rating reflects the high risk to commercial debt repayments over the next 12 months in the context of Sri Lanka’s economic, external, and fiscal pressures.

Downside scenario

We could lower the local currency ratings if there are indications of nonpayment or restructuring of Sri Lankan rupee-denominated obligations.

Upside scenario

We could revise the outlook to stable or raise the local currency ratings if we perceive that the likelihood of the government’s local currency debt being excluded from any debt restructuring has increased. This could be the case if, for example, the government receives significant donor funding, which gives it some time to implement immediate and transformative reforms.

We would raise our long-term foreign currency sovereign credit rating upon completion of the government’s bond restructuring. The rating would reflect Sri Lanka’s post-restructuring creditworthiness. Our post-restructuring ratings tend to be in the ‘CCC’ or low ‘B’ categories, depending on the sovereign’s new debt structure and capacity to support that debt.

Rationale

Sri Lanka’s external public debt moratorium prevents payment of interest and principal obligations due on the government’s ISBs. As such, interest payments due June 3, June 28, and July 18 on its ISBs maturing 2024, 2025, and 2026, and the principal payment on its July 25, 2022, ISB, would have been affected. Following the missed payments, and given our expectation that payment will not be made within 30 calendar days of the due date, we have lowered the issue ratings on these bonds to ‘D’ (default).

Overdue payments now include the following bonds:

US$1.0 billion, 5.875% bonds due 2022.

US$1.25 billion, 5.75% bonds due 2023.

US$500 million, 6.35% bonds due 2024.

US$1.5 billion, 6.85% bonds due 2025.

US$650 million, 6.125% bonds due 2025.

US$1.0 billion, 6.825% bonds due 2026.

US$1.5 billion, 6.20% bonds due 2027.

US$1.25 billion, 6.75% bonds due 2028.

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Sri Lanka rupee guidance peg edges up; market sees dull trade in govt securities 

ECONOMYNEXT – Sri Lanka’s rupee guidance peg on interbank spot trading strengthened by seven cents while yields on Treasury bills and bonds remained dull on Monday (15) with only a handful of maturities quoted ahead of the central bank’s monetary policy rates later this week, dealers said.

“There was nothing in the market. It was dull today,” a market dealer said.

The central bank will announce its latest key monetary policy rates on Thursday, August 18.

A bond maturing on 01. 06. 2025 closed at at 27.50/28.50 percent on Monday, slightly down from 27.30/28.30 percent on Friday.

The three-month T-bill closed flat at 26.00/27.00 percent on Monday.

Sri Lanka’s central bank announced a guidance peg for interbank transactions strengthened by 7 cents to 360.92 rupees against the US dollar on Monday from 360.85 rupees.

Data showed that commercial banks offered dollars for telegraphic transfers between 369.70 and 370.00 for small transactions. (Colombo/ Aug 15/2022)

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Sri Lanka stocks rally continues for 12th straight session on political stability hopes 

The main index fell for the 4th consecutive session

ECONOMYNEXT – Sri Lanka stocks gained for the 12th consecutive session on Monday (15) ending at their highest in more than four months pushed by retail shares amid signs of political stability after months of protests, dealers said.

The market generated 5.8 billion rupees in turnover, nearly twice of this year’s average daily turnover of 3.11 billion rupees.

The main All Share Price Index (ASPI) rose 1.82% or 164.04 points to 9,191.52, its highest since March 30. The index has risen 19.6% in the last 12 sessions.

“We are seeing a lot of volatility in the market today due to profit taking in the key shares that gained in the last 11 sessions,” a market analyst said.

“Profit-taking also returned after the CSE (Colombo Stock Exchange) published the last set of June reports that showed some counters having done very while some not so much, therefore, there is a significant reaction for that.”

In the last few sessions, the market was mostly driven by Lanka IOC and the plantation sector.

However, ahead of the fuel price revision, LIOC moved to red.

“There was a bit of profit taking on anticipation of price cuts. However, unless fuel prices are cut sharply, LIOC will continue to move,” the analyst said.

At the start of the month, CPC cut fuel prices by 10 rupees based on the price formula.

Globally, crude oil prices have dropped hence there is strong speculation that fuel prices will be cut further.

Last week, Sri Lanka announced a 75 percent electricity tariff hike.

Investors previously feared the move would drag the market down due to possible higher costs for manufacturing firms.

However, the political stability after four months of protest is seen as the catalyst for the market gain, dealers said.

The government also tabled an interim budget last week, revising the budget presented last year as the country is going through an unprecedented economic crisis amid plans on a four-year IMF loan programme, debt restructuring, fiscal reforms, and dealing with loss-making state-owned enterprises.

Sri Lanka already declared sovereign debt default on April 12 this year and failed to pay its first sovereign debt in May amid a deepening economic crisis which later turned into a political crisis and led to a change in the president, cabinet, and government.

The more liquid S&P SL20 index moved up, closing at 0.82% or 25.28 points stronger at 3,097.30.

Sri Lanka is facing its worst fuel and economic crisis in its post-independence era and the economy is expected to contract 7 percent this year.

The main ASPI gained 18.8 percent in August so far after gaining 5.3 percent in July. It lost 9.3 percent in June, 23 percent in April, and 14.5 percent in March.

The market index has lost 24.8 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year when large volumes of money were printed.

Sri Lanka’s sovereign debt default on April 12 has already led the country to be rated with restricted/selective default rating by rating agencies, which has weighed on investor sentiment.

Net foreign outflow was 117 million rupees on Monday while the total net foreign outflow so far this year is 1.3 billion rupees.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

Ceylinco Insurance which pushed the ASPI, closed 11.9 percent up at 2,143.2 rupees a share. Browns Investment closed 8.5 percent up at 8.9 rupees a share, and John Keells Holdings gained 2.5 percent to 129.7 rupees. (Colombo/Aug15/2022)

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