An Echelon Media Company
Sunday September 24th, 2023

Sri Lanka Central Bank informs EPF members: “decided to opt for” DDO

ECONOMYNEXT – The Central Bank of Sri Lanka (CBSL) informed the members of the island nation’s largest pension scheme, Employees Provident Fund (EPF) that it has opted for the government’s domestic debt optimization (DDO) option with a long-term view in the best interest of the members.

It said the two options given to the EPF under the parliament approved DDO were exchange option and non-exchange option.

A central bank’s analysis showed the return on EPF could fall to as low as 6.79 percent if the DDO option was not chosen within the next 12 years as against 8.02 percent if opted for DDO.

Under exchange option, the EPF can exchange a minimum required amount of existing Treasury bonds with 12 new Treasury bond series that mature from 2027 to 2038 and the new bonds are offered with a coupon rate of 12 percent per annum until 2026 and 9 percent thereafter. The EPF would continue to pay income tax at 14 percent per annum on its taxable income attributable from its Treasury bond portfolio.

Under the non-exchange option, the existing Treasury bonds will be subject to a 30 percent tax rate on the taxable income of the Treasury bond portfolio.

“…the Monetary Board of the CBSL as the custodian of the EPF, having considered the two options available, decided to opt for the Debt Exchange offer with a long-term view in the best interest of the members of the Fund,” the central bank said in a statement.

The EPF has tendered 2,667.5 billion face value of Treasury bonds for debt exchange, including an additional 149 billion rupees in addition to the minimum participation requirement considering its comparative benefits to the Fund, it said.

“The Government has accepted the same and issued new Treasury Bonds to EPF with an equivalent face value.”

President Ranil Wickremesunghe’s government got the parliament approval for the DDO early in July, but it was delayed due parliament could not amend the Inland Revenue Act in tandem with the DDO following fundamental rights cases filed by opposition and activists.

The Supreme Court cleared the legal barrier early this month.

The central bank said the decision was taken after careful analysis by experts.

“The Monetary Board envisaged that out of the two options, Debt Exchange is distinctly the better option considering the assessments that have been carried out on the basis of several prudent and realistic assumptions,” it said.

“Further, the Monetary Board is of the view that with the proposed Debt Exchange and the other reforms being implemented by the Government, the sustainability of public finance will be restored with its ability to service its debt. The Monetary Board was also cognizant that unless debt sustainability is restored without undue delay, there is a high risk of the Government not being in a position to fully service the obligations on the pre-exchange bonds held by the EPF leading to very serious adverse consequences to the EPF.”

“Hence, opting for the DDO was in the best interest of the members of EPF based on the two options available, given that a large share of EPF’s assets is invested in Treasury bonds. It is also important to note that after the participation in DDO current balances of EPF members will not be reduced and the Fund will be able to distribute at minimum 9% per annum return to members in foreseeable future.” (Colombo/September 14/2023)

Comments (1)

Your email address will not be published. Required fields are marked *


    You have to educate. the members of EPF more about this without technical jargon with simple Arithmetical example

View all comments (1)

Comments (1)

Cancel reply

Your email address will not be published. Required fields are marked *


    You have to educate. the members of EPF more about this without technical jargon with simple Arithmetical example

Sri Lanka India industrial zone around Trinco, maritime links mooted

ECONOMYNEXT – Sri Lanka’s Ports Minister Nimal Siripala de Silva had highlighted the desire of both the Governments to work closely to develop the industrial zone at Trincomalee, after accepting an invitation to participate in a maritime summit.

The Global Maritime India Summit (GMIS) will be held in India from October 17-19, 2023 at Mumbai where Sri Lanka has been invited at a partner country.

At a curtain raiser event on September 22, India’s High Commissioner in Colombo, Gopal Baglay had said both countries were working on enhancing sea connectivity according to a vision document launched during a recent visit of the President of Sri Lanka to India.

Minister de Silva will lead a delegation from Sri Lanka to the summit.

Secretary to the Ministry of Ports, Shipping and Waterways, Government of India, T K Ramachandran said the Global Maritime India Summit aims strengthen the Indian maritime economy by promoting global and regional partnerships and facilitating investments.

The event will give an opportunity to the Government of Sri Lanka to attracting greater investment from India in development of its maritime infrastructure, Ramachandran said.

It will also facilitate greater business to business interactions. (Colombo/Sept24/2023)

Continue Reading

Sri Lanka brings back import para tariff on milk

ECONOMYNEXT – Sri Lanka has brought back an import para tariff called the Ports and Airports Levy, to several grades of milk powder.

Milk powder has been removed from a list of PAL exemptions, making them liable for a 10 percent tax.

The PAL para tariffs are also a contentious issue in terms of export competitiveness, and the government has previously given undertakings that they will be eliminated.

Trade freedoms of the poor figure in an IMF/World bank reform program with the governments.

Milk is a protein rich food, in a country where children of poor families are facing stunting and malnutrition.

Economic nationalism is seen at high levels in food, with several businessmen are pushing for trade protection, amid an overall autarkist (self-sufficiency) ideology, going directly against policies followed in East Asia, which the same as hold up as examples.

Sri Lanka keeps dairy product prices up ostensibly to bring profits to a domestic dairy company and farmers.

Sri Lanka also keeps maize prices up, ostensibly to give profits to farmers and collectors. (Colombo/Sept22/2023)

Continue Reading

Sri Lanka govt warns liquor manufacturers: pay defaulted tax or lose licence

ECONOMYNEXT – Sri Lanka government which is struggling to raise the state revenue despite   higher taxes, has warned liquor manufacturers to pay defaulted taxes or lose their licence.

The government is now getting tough with past tax defaulters amid concerns over falling short of this year’s revenue target agreed with the International Monetary Fun (IMF).

“Liquor manufacturing firms owe us 660 crore rupees (6.6 billion rupees),” Siyambalapitiya told  reporters on Thursday (21).

“Most of this or around a third is the only excise tax amount to be paid. The rest is penalty. If a liquor manufacturer does not pay on time, we impose a penalty of 3 percent per month This means 36 percent (penalty) per annum,” he said.

“We have given them deadline to repay the basic excise taxes. If they don’t pay, we will cancel their licence.”

President Ranil Wickremesinghe’s government committed an ambitious revenue target among many other reforms to the International Monetary Fund (IMF) in return to a $3 billion loan package.

However, the revenue could face a short fall of 100 billion rupees, State Finance Minister Ranjith Siyambalapitiya has said.

A new Central Bank Act also has legally prevented the government of printing money at its discretion as  in the past.  (Colombo/September 24/2023)

Continue Reading