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Saturday April 20th, 2024

Sri Lanka does not need the IMF at the moment, no default: Minister Cabraal

ECONOMYNEXT- Sri Lanka does not need the International Monetary Fund at the moment and there will be no default State Minister for Money and Capital Markets, Nivard Cabraal said.

“We also seen several news reports, which referred to Sri Lanka’s need to go to the IMF and seek support, as well as get to be supported by the IMF,” he told reporters.

“We don’t have a need to do that. We do have a respect for the IMF and worked with them in the past as well. However, at this moment of time, we have identified the needs as well as the requirements of our economy.”

Sri Lanka has lost foreign reserves of the central bank (dollar deposits of the bank invested abroad) as new money (deposit slips or IOUs called banknotes) were created by the central bank against Treasury bills and issued to the government to pay state workers and other expenses.

However as the new deposit slips (rupee banknotes) come up for redemption in the foreign exchange market at a given convertible parity (exchange rate) foreign reserves have been lost.

Convertibility is now suspended for most trade transactions, leading to a weakening in the parity (depreciation) of the central bank IOUs (rupee paper) and others such as dollars.

Convertibility is still given to the government for rupees including those created after failed Treasury bond auctions, for debt repayments. As a result foreign reserves have declined steadily.

Minister Cabraal said several strategies were put in place to raise more funds to repay loans.

“And we are confident that with our plan that we have put in place, as well as the new initiatives that we are taking, we will be able to ensure that Sri Lanka will not have to default at any time in the near future, or even in the foreseeable future, or for that matter in the future at all,” Cabraal said.

“And we have the necessary resources as well as the commitment, as well as the plans that will give us the opportunity as well as the ability to make that happen.”

“So I want to reassure all those who may have been concerned, as a result of these reports that Sri Lanka would not be able to meet its debt, that we are very much having the ability to do so. And we have the commitment to do so as well.”

Sri Lanka’s central bank has raised money through swaps with the Bank of Bangladesh, the Treasury has borrowed from China and land sales are planned to foreign investors.

“We have the ability to continue with our impeccable record, and to ensure that all creditors are being settled in due time, we have seen some news reports even in the past, saying that Sri Lanka will default in 2020, 2019. (Colombo/Sept04/2021)

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Sri Lanka discussing giving extra land, water for Chinese oil refinery

ECONOMYNEXT – Sri Lanka is in discussions with China’s Sinopec to give extra land and assure water supplies after the company decided to expand the capacity of a planned oil refinery in Hambantota, Energy Minister Kanchana Wijesekera said.

“There are concerns on how the water supply is going to be provided for the refinery,” Minister Wijesekera told reporters Friday.

The refinery will need more land and also revise conditions in a Board of Investment agreement, he said.

Read more
Sinopec to double capacity of new refinery in Sri Lanka’s Hambantota

Recommendations and decisions from Sri Lanka’s side had already been sent and Sinopec is expected to revert back in May.

“We are hoping to sign the agreement once everyone has agreed,” Wijesekara said.

The principle agreements are expected to be signed by June, he said.

The refinery could sell up to 10 percent of its output in the domestic market.

“There is no commitment by the government to purchase anything,” Minister Wijesekera said. (Colombo/Apr19/2024)

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Sri Lanka rupee closes weaker at 302.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 302.00/50 to the US dollar in the spot forex market on Friday, down from 301.50/302.00 a day earlier, dealers said.

There was increased demand for dollars after the central bank bought 715 million dollars from forex markets. In the previous two months it was buying on average about 200 million US dollars, leaving market participants and bank in a ‘oversold’ position.

There were some official dollars sales Friday dealers said.

READ Sri Lanka rupee quoted wide to US dollar as peg inconsistencies flare up

Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed at 11.30/40 percent down from 11.35/40 percent.

A bond maturing on 15.09.2027 closed at 11.95/12.05 percent up from 11.90/12.05 percent.

A bond maturing on 15.12.2028 closed stable at 12.15/25 percent.

A bond maturing on 15.09.2029 closed stable at 12.30/40 percent.

A bond maturing on 01.10.2032 closed stable at 12.40/50 percent. (Colombo/Apr19/2024)

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Sri Lanka stocks close down, banks trade down

ECONOMYNEXT – The Colombo Stock Exchange closed down on Friday, data on its site showed.

The broader All Share Index closed down 0.38 percent, or 44.80 points, at 11,753; while the S&P SL20 Index closed down 0.53 percent, or 18.46 points, at 3,456.

Turnover was at 1.4 billion. The diversified financials (Rs366mn) and banks (Rs266mn) sectors continued to see selling pressure.

“This was possibly due to uncertainty around the bond discussions,” market participants said.

With the exception of Sampath Bank Plc (up at 77.50) all other banks traded down in the day. Commercial Bank of Ceylon Plc was down at 104.50, Hatton National Bank Plc was down at 188.50, and DFCC Bank Plc was down at 77.00.

LOLC Finance Plc saw the most trades and closed up at 6.40. Another LOLC company, Browns Investments Plc, also saw high traded volumes and closed up at 5.60.

Softlogic Capital Plc was up at 7.00, and Softlogic Holdings Plc was up at 11.20. A trading suspension imposed on SHL.N0000 was lifted effective today as the company submitted the annual report for the year ended 31st March 2023.

However, shares of the Company will remain in the Watch List “due to Qualified Audit Opinion and Emphasis of matter on going concern in the Independent Auditor’s Report in the Audited Financial Statements for the year ended 31st March 2022.”

Dialog Axiata Plc, which announced its merger with Bharti Airtel Thursday, saw its share price close up at 11.90.

“There was some traction on index heavyweights,” market participants pointed out.

Top contributors to the APSI included Aitken Spence Plc (up at 134.50), Ceylon Tobacco Company Plc (up at 1,245.25, and Lion Brewery (Ceylon) Plc (up at 1,048.50).

There was a net foreign inflow of 5 million. (Colombo/Apr19/2024)

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