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Sunday March 26th, 2023

John Keells Hotels losses widen after Sri Lanka Easter bombings

ECONOMYNEXT – Net losses at John Keells Hotels Plc (KHL) grew 66 percent to 437 million rupees in the June quarter from a year earlier, as revenues from hotes in Sri Lanka fell 27 percent, on top of a closure of a property in the Maldives, interim accounts showed.

KHL which operates the Cinnamon branded hotels outside Sri Lanka’s capital Colombo, and the Maldives, said it lost 30 cents per share in the quarter. The firm’s share last traded at 7.70 rupees a share.

Sales in Sri Lanka fell 27.6 percent to 746.3 million rupees, as tourist arrivals to Sri Lanka plunged 71 percent in May after East Sunday bomb attacks, followed by a 57 percent fall in June.

Cinnamon Grand, which is part of the same chain but is operated through Asia Hotels and Properties Plc responsible for the group’s Colombo city hotels, was victim to the bombings.

Cinnamon hotels had offered discounts in the aftermath of the attacks, especially targeting locals.

Meanwhile, revenue at KHL’s Maldives operation fell 15.7 percent to 948 million rupees, as one of its island resorts, Cinnamon Dhonveli Maldives, was partially closed for refurbishment.

Group level revenue for the June quarter fell 22 percent to 1.7 billion rupees from a year earlier while cost of sales rose 19 percent to 658 million rupees, leading to gross profits falling 23 percent to 1 billion rupees.

Finance costs grew 75 percent to 104.6 million rupees.

Long-term borrowings as at June 30 grew to 10.9 billion rupees from 9.5 billion rupees three months earlier, while short-term borrowings grew to 1.6 billion rupees from 979.4 million rupees.

Total assets grew to 44.7 billion rupees from 37.3 billion rupees, as the firm changed accounting standards.

The move to SLFRS 16 from the older LKAS 17 standard changes lease rentals paid in advance to right of use assets.

KHL said that the main leases are for properties, typically ranging from 10 to 35 years, with options for extension. (Colombo/Jul25/2019)

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Sri Lanka seeks to settle India ACU debt, credit lines over 5-years

ECONOMYNEXT – Sri Lanka has requested India to settle payments due to the country under the Asian Clearing Union mechanism and credit lines given in 2022 over 5 years, Indrajit Coomaraswamy, an advisor the island’s government said.

Sri Lanka is negotiating with India to settle the money over a 5-year period, Coomaraswamy, a former central bank governor told an online forum hosted by the Central Bank.

“Our request from the Indians is to settle it over five years,” he said. “That I think is still in the early stages of negotiation. The same with the one billion line of credit.”

Sri Lanka’s central bank owed the ACU 2.0 billion US dollars to the Asian Clearing Union according to a year end debt statement, issued by the Finance Ministry.

Sri Lanka owned India, 1,621 million dollars according to ACU data by year end, excluding interest.

India has given a 1 billion US dollar credit line to Sri Lanka as well a credit line for petroleum.

Sri Lanka in March 2024 has paid 121 million US dollar out of a 331 million US dollar IMF tranche to settle an Indian credit line.

Indian credits were given after the country defaulted in April 2022 as budget support/import when most other bilateral lenders halted giving money. (Colombo/Mar26/2023)

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Sri Lanka coconut auction prices up 1.16-pct

ECONOMYNEXT- Sri Lanka’s coconut auction prices went up by 1.16 percent from a week ago at an auction on Thursday, data showed.

The average price for 1,000 nuts grew to 83,219.45 from 82,260.58 a week earlier at the weekly auction conducted by Sri Lanka’s Coconut Development Authority on March 23.

The highest price was 92,500 rupees for 1,000 nuts up from the previous week’s 90,600 rupees, while the lowest was 76,500 also up from 70,000 rupees.

The auction offered 900,010 coconuts and 583,291 nuts were sold. (Colombo/Mar 26/2023)

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Sri Lanka in talks for billion dollar equivalent Indian rupee swap

ECONOMYNEXT – Sri Lanka is in talks with India for a billion US dollar equivalent Indian rupee central bank swap, to facilitate trade, Indrajit Coomaraswamy, ad advisor to the government said.

“The amount is still uncertain it could be up to the equivalent of a billion US dollars,” Coomaraswamy told an online forum hosted by Sri Lanka’s central bank.

The money will be used to facilate India Sri Lanka trade, he said.

India has been trying to popularize the use of Indian rupees for external trade and also encouraged Sri Lanka banks to set up Indian rupee VOSTRO accounts.

However the first step in popularizing a currency for external trade is to get domestic agents, especially exporters, to accept their own currency for trade, like in the case of the US or EU, analysts say.

India’s billion US dollar credit to Sri Lanka given during the 2022 crisis is settled in Indian rupees (transaction need).

However the Indian government itself has chosen to denominate it in US currency for debt purposes (future value).

In most South Asian nations, receivers of remittances are willing to accept domestic currencies, leading to active VOSTRO account transactions.

Sri Lanka is expected to repay a 400 million US dollar swap with the Reserve Bank of India next year under an International Monetary Fund backed program for external stability and debt re-structuring.

Central bank swap proceeds sold to banks, which are then sterilized with inflationary open market operations, can trigger forex shortages and currency crises, analysts warn.

Sri Lanka went to the International Monetary Fund after two years of inflationary monetary operations by the central bank’s issue department (money printed to suppress interest rates) triggered the biggest currency crisis in its history and external sovereign default.

Sri Lanka had gone to the IMF 16 times with similar external troubles except for the April 2003 extended fund facility under Central Bank Governor A S Jayewardene which was a purely reform-oriented program with the World Bank (PRGF/PRSP) program at a time when he was collecting reserves with deflationary monetary policy and perhaps the lowest inflation since the Bretton Woods collapsed. (Colombo/Mar26/2023)

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