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Tuesday June 18th, 2024

Sri Lanka asks ADB to re-classify country to access cheaper funds after default

ECONOMYNEXT – Sri Lanka has requested Asian Development Bank to re-classify the Indian Ocean Island to enable to country to get cheaper funds, Foreign Minister Ali Sabry has said.

The request was made from ADB Vice President Shixin Chen at a meeting of ADB governors in South Korea.

“I requested, inter-alia, for a reclassification of #SriLanka which would enable the country to get access to better concessional financial facilities,” Minister Sabry said in a twiiter.com message.

Sri Lanka is middle income country which got lower amounts of the cheapest Asian Development Fund (ADF) resources and was given mostly Ordinary Capital Resource (OCR) loans, until its sovereign default in 2022 after severe monetary instability.

ADF only countries get access to the most concessional funds.

Sri Lanka has borrowed ADF funds at around 1.5 percent fixed a year with up to 32 year payback.

Sr Lanka has borrowed OCR funds at around 50 to 70 basis points above the London Interbank Offered Rate (now SOFR) floating rates.

The most vulnerable countries also get more grants.

Sri Lanka defaulted in April 2022 after seven years of flexible inflation targeting combined with output gap targeting (printing money to suppress interest rates to boost growth and generate inflation as high as 5 percent, despite having a reserve collecting peg).

The ADB is supporting Sri Lanka with policy loans under an International Monetary Fund program to stabilize the country after the collapse of its currency and default. (Colombo/May05/2023)

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Sri Lanka’s Ceylon Chamber links up with Gujarat Chamber

ECONOMYNEXT – The Ceylon Chamber of Commerce has signed an agreement with the Southern Gujarat Chamber of Commerce and Industry (SGCCI) to increase trade cooperation between India and Sri Lanka.

The MOU was signed by CCC CEO Buwanekabahu Perera, SGCCI President Ramesh Vaghasia, in the presence of Dr Valsan Vethody, Consul General for Sri Lanka in Mumbai, India.

“With the signing of the MoU, … the Ceylon Chamber of Commerce and SGCCI aim to facilitate trade between the two countries via initiatives such as trade fairs and delegations, business networking events, training programmes,” the Ceylon Chamber said in a statement.

“This partnership will open doors for Sri Lankan businesses to explore opportunities in Surat’s dynamic market and enable the sharing of expertise and resources between the two regions.”

Established in 1940, SGCCI engages with over 12,000 members and indirect ties with more than 2,00,000 members via 150 associations. It promotes trade, commerce, and industry in South Gujarat.

The region’s commercial and economic centre Surat has risen to prominence as the global epicenter for diamond cutting and as India’s textile hub, and is ranked the world’s 4th fastest growing city with a GDP growth rate of 11.5%

Surat’s economic landscape is vibrant and diverse. As India’s 8th largest and Gujarat’s 2nd largest city, it boasts the highest average annual household income in the country.

The nearby Hazira Industrial Area hosts major corporations like Reliance, ESSAR, SHELL, and L&T. (Colombo/Jun18/2024)

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Sri Lanka telecommunications bill some clauses ruled unconstitutional by SC: Speaker

ECONOMYNEXT – Sri Lanka’s Supreme Court has found a number of clauses in a proposed amendment to the Telecom Telecommunications Amendment bill unconstitutional, speaker Mahinda Yapa Abeywardana said.

“Clause No 8, proposed section 9A 2 of the bill is inconsistent with Article 12 1 of the constitution, however this inconsistency shall cease if word ‘may’ will be replaced with word ‘shall’ as set out in the determination of the supreme court.”

“Clause No 9 is inconsistent with Article 12 1 of the constitution and only can be passed with special majority required under paragraph 2 of the Article 84. However, the inconsistency shall cease if clause is amended as set out in the determination of the supreme court.

Clause No 12, proposed section 17 10 of the bill is inconsistent with Article 12 1 of the constitution and can only be passed with special parliament majority required under Article 84 paragraph 2. However, the inconsistency shall cease if clause is amended as set out in the determination of the supreme court.”

Sections of clauses 13, 18, 20, 33 and 35 were also in violation of the constitution, and could only be passed by a special majority of parliament. (Colombo/Jun18/2024)

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Sri Lanka to exempt one house from imputed rent wealth tax: President

ECONOMYNEXT – Sri Lanka will exempt one house from a proposed wealth tax outlined in an International Monetary Fund program, President Ranil Wickremesinghe said.

About 90 percent of the people’s houses are likely to be exempt from the proposed tax, he said.

“[O]ne house will be exempt from this,” President Wickremesinghe told parliament Monday.

“It is going to have a very high threshold and I do not think the vast majority of the people in this country should even be worried about their house

“Don’t worry your house will be safe.”

The IMF program document however did not mention an exemption on one house, but did mention an exemption threshold.

Taxing houses and thrift in general could have detrimental effects on people’s well-being, housing stock and their willingness to remain in the country without migrating, critics say.

Related Sri Lanka to tax imaginary rents on houses under IMF deal

The mechanism of imputed rents was used because rates on houses were assigned to provincial councils and courts could strike it down.

Opposition legislator Harsha de Silva said the Samagi Jana Balwegaya welcomed President Wickremesinghe’s statement. (Colombo/June18/2024)

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