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Sunday March 26th, 2023

Questions over EPF, state banks buying SriLankan Airlines shares

ECONOMYNEXT –  Sri Lanka’s cabinet of ministers had been told that Bank of Ceylon would benefit from buying shares in loss-making SriLankan Airlines after the exit of Emirates, and the share transfer itself had appeared to have been done in an irregular way, a commission of inquiry heard.

The commission is probing alleged irregularities in SriLankan Airlines and Mihin Lanka from 2006 to 2018. Emirate’s management of the airline was terminated in 2008, and the airline then started making losses.

Company Secretary Dalrene Thirukumar, who had joined the airline in 2013, presented documents filed by her predecessor in 2010.

A cabinet paper submitted by the Finance Ministry had said that it was desirable for strong institutional investors such as state banks be allowed to purchase shares in SriLankan, as they would benefit from the prevailing economic conditions and the tourism development to follow.

In addition to the Bank of Ceylon, People’s Bank, National Savings Bank and Employees Provident Fund had ended up taking shares of the loss-making airline, though the required documentation to carry out sales could not be located.

Thirukumar was asked whether she found a cabinet decision authorizing the EPF, NSB and People’s Bank to purchase shares held by Emirates.

She said she had not found such a document.

Thirukumar said that there was an incomplete transfer instrument copy between Emirates and BOC filed with SriLankan, and she was unable to confirm whether the copy was a draft or an original.

The transfer of Emirates shares took place in June 2010, but the next SriLankan board meeting held in August showed that BOC had only purchased 12.5 million shares from Emirates, while People’s Bank had purchased 4.2 million shares, NSB 4.2 million shares, and the EPF 1.8 million shares, Thirukumar said.

She was also asked whether there were instruments at SriLankan detailing the transfer of Emirates shares to People’s Bank, NSB and EPF.

She said that her office has conducted a ‘cursory search’, and had not located such documents. She said that a more detailed search will be conducted.

She said that according to the SriLankan Articles of Association, all transfers of shares should have an acceptable instrument.

She said that before the transfer, the government had held 51 percent of shares in SriLankan. Employees of the airline had held just under 6 percent of the shares.

The Valuation Department estimated the 51 percent of SriLankan shares held by the government to be worth 440 million US dollars in a letter written to the Finance Ministry. Cabinet documents showed the 43.36 percent of Emirates-held shares to be worth 53 million US dollars.
(COLOMBO, 02 August, 2018)

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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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