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Monday December 11th, 2023

Sri Lanka housing hit by protectionist taxes, monopoly power: Developers

ECONOMYNEXT – Sri Lanka’s residential construction costs are kept artificially high with protectionist taxes creating monopolies and prices of steel, tile and fitting costs have rocketing after rupee collapsed, condominium developers have said.

Protectionist import duties have led to a fall in quality, the Condominium Developers Association ofSri Lanka said said calling for a “review of protectionism and the revisiting of negative lists.”

“Condominium Developers are being held to ransom by suppliers of building materials, fittings, fixtures and even services to an extent that the continuity of this vital sector of the economy is under serious threat,” the association said.

The industry is also facing re-imposition of value added tax, a new social security contribution levy on top of import duties and multiple layers of PAL, CESS and Excise Duty.

There was “needless and unjustified protectionism such as in the case of Tiles, Steel, Cement, Furniture, Kitchen, and Doors, which affect choice, product quality, availability and price and create a monopoly for a few players with dire consequences on an entire industry.”

“…Floor tiles that were Rs 150 sq. ft in 2021 are today Rs 450 to 600 and moreover have a delivery time of 4 months with no guarantee of prices being held.”

President Ranil Wickremesinghe this week allowed property developers to import tiles direct.

Related Sri Lanka property developers allowed to import tiles

Price of steel has shot up 350 percent from 100,000 rupee a tonne in 2021 to 450,000 rupees now.

Price of cement has increased from 800 rupees to 3100 rupees per 50kg bag or about 287 percent.

Prices of some fittings are more than 500 percent the condominium developers association said.

About 600,000 person are employed in the construction industry, the association said, while there were more indirectly dependent.

“It is this vast multitude whose livelihood is being subverted by short-sighted policies of greed and unfettered profiteering.”

The industry has already stopped new developments, and developers are forced to raise prices. Meanwhile developers and buyers who have contracted at fixed prices are in a quandary. (Colombo/Aug26/2022)

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Sri Lanka rupee opens at 327.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee opened at 327.00/50 to the US dollar on Monday, from 327.00/30 Friday, dealers said.

On the Colombo Stock Exchange, both indices opened up: The All Share Price Index 0.28 percent at 10,823, and the S&P SL20 0.35 percent at 3,113.85.

Bond yields were up.

A bond maturing on 01.08.2026 was quoted at 14.05/20 percent from 14.05/15 percent.

A bond maturing on 15.01.2027 was quoted at 14.05/20 percent from 14.10/25 percent.

A bond maturing on 01.07.2028 was quoted at 14.20/50 percent from 14.20/35 percent.

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Sri Lanka promoting Buddhist tourism from Vietnam, ASEAN

ECONOMYNEXT – Sri Lanka is planning to boost Buddhist tourism by linking temples in the country with those in East Asia, Foreign Minister Ali Sabry said after to welcoming a delegation of monks from Vietnam.

President Ranil Wickremesinghe, and Minister Sabry have initiated a temple-to-temple program where 100 Sri Lanka temples will be linked with counterparts in the Association of South East Asian Nations region.

“Tourism development will get a lot of growth with the temple-to-temple program,” Minister Ali Sabry said.

Along with the delegation of monks, five travel agents from Vietnam were also invited.

Under the first phase of the Temple-to-temple programs, several monks from Sri Lanka had received invitations from Indonesia, Malaysia, South Korea and Vietnam the Foreign Ministry said.

The Temple-to-Temple diplomacy program will be extended to Singapore, Japan, Thailand and Cambodia during the second phrase of the program.

Sri Lanka is targeting 2.3 million tourists in 2023, after getting about 1.5 million this year. (Colombo/Dec10/2023)

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ADB $200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”

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