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Sunday March 26th, 2023

Sri Lanka hotel occupancy picks-up, revenues weak amid aggressive price cuts

ECONOMYNEXT – Sri Lanka’s hotel revenues are weak but occupancy is starting to pick up with aggressive price cutting drawing international and domestic tourists, industry officials said.

"Revenue is very low and I think it will take a year or two for revenue to return to the levels seen before the Easter Sunday attacks," said Saliya Dayanda, President of the Cultural Triangle Hoteliers Association and co-chair of the Association for Dambulla and Sigiriya Tourism Promotion.

Sri Lanka hotels had slashed rate by around 50 percent in May and June to increase occupancy. Some hotels are already quoting similar rates for the same months in 2020.

Sri Lanka is sometimes seen as pricey compared to East Asian rivals and prices now more comparable on booking engines.

Central Bank Governor, Indrajith Coomaraswamy had also said that while occupancy rates at hotels are picking up even for the winter season (November through February) revenues may be pressured due to discounted prices.

Occupancy rates at hotels across the country had fallen to below 10 percent in May, but has recovered, with some chains such as Jetwing claiming occupancy rates of around 50-60 percent for July with discounts also being offered for local tourists.

Rohan Gamage, President of Bentota/ Beruwela Hoteliers Association said that occupancy at hotels in the resort area are only around 30 percent, including locals, compared to 80 percent before the attacks.

Hotels in the Western and Southern coasts fall after Monsoon rains start in May, but Sri Lanka’s East coast and Kandy as well as ancient cities are popular around that time.

Arrivals to Sri Lanka have picked up, from a 71 percent fall in May to a 57 percent fall in June, and in the first two weeks of July, the recovery has accelerated further, the state tourism office has said.

The government has launched a number of tourism promotion programs, and has cut airport taxes and charges in an attempt to lower air fares to Sri Lanka.
 (Colombo, 22 July, 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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