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Friday January 27th, 2023

India to expand investment in Sri Lanka’s energy sector, other core areas: Jaishankar

ECONOMYNEXT – India will encourage greater investments in Sri Lanka’s economy, particularly in energy, tourism and infrastructure development, India’s External Affairs Minister S Jaishankar said after his government pledged support for the crisit-hit island nation’s debt restructuring efforts.

Jaishankar, who is on a two-day official visit to Colombo, told reporters on Friday January 20 that India is counting on Sri Lankan authorities’ facilitating a more business-friendly environment, amid reports that the regional power is looking to cement its growing presence in Sri Lanka in a bid to counter decades of Chinese influence.

“India will encourage greater investments in the Sri Lankan economy, especially in the core areas like energy, tourism and infrastructure. We count on the Government of Sri Lanka to provide a more business-friendly environment to create a powerful pull factor. I am confident that the gravity of the situation is realised by policymakers here,” Jaishankar said.

Flanked by Sri Lanka President Ranil Wickremesinghe and Foreign Minister Ali Sabry, Jaishankar said at the press conference in Colombo that Sri Lanka is facing challenges in energy security and that a search for solutions must necessarily encompass the larger region.

India’s strategic interest in Sri Lanka’s energy sector, particularly in renewable energy, has been controversial.

“Only then will Sri Lanka get the full benefit of scale. This country has enormous renewable energy potential that can become a sustainable source of revenue. It has the capability as well for Trincomalee to emerge as an energy hub. In its support for Sri Lanka, India is prepared to be a reliable partner on such initiatives. We have today agreed in-principle on a renewable energy framework that would take this cooperation forward,” he said.

The two countries have been discussing the establishment of a refinery at the Trincomalee Port. Publicly traded Lanka IOC, a unit of Indian Oil Corporation and state-run Ceylon Petroleum Corporation own 49/51 percent stakes in Trinco Petroleum Terminal Ltd, which control 51 tanks in a World War Ii era tank farm by the Trincomallee Port.

The Indian foreign minister also called for strengthened connectivity between the two South Asian nations to promote travel as a high priority.

“Definitely, encouraging Indian tourists to make RuPay payments and utilize UPI would be most helpful in this regard.

“In a turbulent world, it is essential that India and Sri Lanka steady their trade. The use of rupee settlement for trade is obviously in our mutual interest,” he said.

Commenting on the Indian finance ministry’s letter to the IMF on Sri Lanka, Jaishankar said India felt strongly that Sri Lanka’s creditors must take proactive steps to facilitate its recovery.

“India decided not to wait on others but to do what we believe is right. We extended financing assurances to the International Monetary Fund (IMF) to clear the way for Sri Lanka to move forward.

“Our expectation is that this will not only strengthen Sri Lanka’s position but ensure that all bilateral creditors are dealt with equally,” he said.

Ahead of Jaishankar’s visit, the Indian government informed the IMF that it strongly supports Sri Lanka’s debt restructuring efforts in the latter’s bid to secure a 2.9 billion dollar bailout package over a four-year period.

Colombo owes New Delhi roughly 1.5 billion US dollars, not counting central bank swaps. In 2022, India provided some 4 billion dollars in assistance during the currency crisis, the worst in decades.

Related:

India tells IMF it strongly supports Sri Lanka’s debt restructuring efforts

(Colombo/Jan20/2023)

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Sri Lanka shares fall at market close on profit taking

ECONOMYNEXT – Sri Lanka shares fell on Thursday as profit taking entered the market mainly on financial and diversified sectors, brokers said.

The main All Share Price Index (ASPI) fell 0.13 percent or 11.50 points to close at 8,926.56.

“The market was trading on dull trade mainly due to profit taking,” an analyst said.

“Also we saw investors taking a sideline as quarterly reports started to come”.

The earnings in the first quarter of 2023 are expected to be negative with revised up taxes and an imminent electricity tariff hike.

Earnings in the second quarter are expected to be more positive with the anticipation of IMF loan and possible reduction in the market interest rates as the tax revenue has started to generate funds.

The central bank’s policy decision was expected and investors have been eying on IMF deal with hopes of rapid economic recovery from the current unprecedented economic crisis, however since the market gained in the last sessions profit taking has come about, analysts said.

The market has been on a rising trend on the hopes of a faster IMF deal. However, the central bank government said the IMF deal is likely in the quarter or in the first month of the second quarter.

The most liquid index S&P SL20 fell  0.33 percent or 9.21 points to 2,798.

LOLC had seen some attention by investors as the firm disposed 90,256,750 shares held with Agstar PLC at 15-17.50 rupees a share.

The market witnessed a turnover of 1.2 billion rupees, lower than the month’s daily average of 1.9 billion rupees.

Expolanka dragging the market down closed 2.36 percent down at 186.7 rupees a share. Sampath bank fell 1.41 percent to close at 42 rupees a share while Royal Ceramic Lanka closed 2.59 percent dwn at 30.1 rupees a share.

(Colombo/Jan26/2023)

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Sri Lanka bonds yields steady at close

ECONOMYNEXT – Sri Lanka bond yields were steady at close on Thursday, dealers said, while a guidance peg for interbank transactions by the Central Bank remained steady.

A bond maturing on 01.05.2024 closed at 31.00/20 percent unchanged from the last close.

A bond maturing on 15.05.2026 closed at 26.60/90 percent, up from 28.50/70 percent on Wednesday.

A bond maturing on 15.09.2027 closed at 28.60/85 percent, up from 28.50/60 percent at the last close.

The three months bill closed at 29.75/30.25 percent unchanged from the last close.

The Central Bank’s guidance peg for interbank US dollar transactions appreciated by another 2 cents to 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 360.49 rupees on Thursday, data showed.  (Colombo/Jan 26/2022)

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Sri Lanka central bank workers protest tax hike as governor defends painful measures

ECONOMYNEXT – Employees of Sri Lanka’s Central Bank have joined a week-long “black protest” campaign organised by state sector unions against a sharp hike in personal income tax, even as Central Bank Governor Nandalal Weerasinghe said painful measures were needed for the country to recover from its worst currency crisis in decades.

President of the Central Bank Executive Association Jayadu Perera told EconomyNext on Friday January 26 that while the protesting CBSL staff were not opposed to paying taxes, they take issue with the unprecedented increase which came into effect in the new year.

Perera claimed that the tax he paid in December had increased six-seven fold.

“This is true for most public servants, and we cannot bear this burden,” he said.

“This is a very unfair tax since it is the professionals of this country that make all the sacrifices,” he added.

Perera complained that Sri Lanka’s ruling class maintain high living standards and enjoy all the luxuries while subjecting workers like him to an “extremely unfair and unjust” tax.

Opposition to Sri Lanka’s newly increased direct taxes has been rising, with a number of unions and professional associations taking to the streets demanding that the decision is reversed.

The government, however, defends the tax hike arguing that it is strapped for cash as Sri Lanka, still far from a complete recovery, is struggling to make even the most basic payments, to say nothing of the billions needed for public sector salaries.

Economists say Sri Lanka’s bloated public service is a burden for taxpayers in the best of times, and under the present circumstances, it is getting harder and harder to pay salaries and benefits.

Defenders of the tax hike say that the road to recovery is a painful one, and Central Bank chief Weerasinghe, meanwhile, told reporters at the monthly monetary policy review on Wednesday January 25 that the country would have to take certain painful measures to come out of the crisis.

Asked about the trade union action organised by his staff – with most employees dressed in black – Weerasinghe joked that he too was in black but said in a more serious vein that at CBSL, anyone was free to exercise their democratic right to protest.

He also stressed that taxation is not under the purview of the Central Bank whose primary obligation is monetary policy.

The CBSL staff, however, continues to protest.

“This tax increase was implemented without any discussion with workers who are the victims of this policy,” claimed Perera.

Acknowledging the country’s dire financial straits, he said: “But why must only the professionals make sacrifices? Why not the politicians?”

Another worker who did not wish to be named claimed that he was left with just 10,000 rupees after tax.

“This an intolerable burden laid upon our heads. We will continue this protest until they give us relief. Today we did it during the lunch break. In the future we will do more,” he said.

Other workers who shared these sentiments told EconomyNext that most of them have debt obligations of their own and once they have settled loans, interest and other bills, a large income tax is the last straw.

“We have our own personal commitments. All we say is that taxation should be fair, transparent and equitable. Show us the rulers that are being taxed the same way,” said one CBSL worker.

Sri Lanka’s new tax regime has both its defenders and detractors. Critics who are opposed to progressive taxation said it serves as a disincentive to industry and capital which can be invested in business. They argue that a flat rate of taxation is implemented where everyone is taxed at the same rate.

Others, however, contend that the new taxes only affect some 10-12 percent of the population and, given the country’s economic situation, is necessary, if not vital.

Critics of the protesting workers argue that most of the workers earn high salaries that most ordinary people can only dream of, and though there may be some cases where breadwinners could be taxed more equitably, overall, Sri Lanka’s tax rates remain low and are not unfair. (Colombo/Jan26/2023)

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