An Echelon Media Company
Monday December 11th, 2023

Sri Lanka IMF deal nod could be Jan 2023

ECONOMYNEXT – Sri Lanka is expecting to get International Monetary Board approval for its program by December 22 to January 2023 after getting debt re-structuring assurances from bi-lateral lenders according to a presentation made to creditors.

Sri Lanka is encouraging bilateral creditors including Paris Club, India and China to form themselves in to an ad-hoc creditor platform and give financial assurances before December 2022.

Sri Lanka also has to complete a series of prior actions to get IMF board approval. Usually a country has to end money printing, exchange policy conflicts and crush domestic investments to stabilize the external sector before getting the first draw down.

Sri Lanka has already raised taxes, raised energy prices and presented an interim budget.

Sri Lanka also has to present a 2023 budget to get IMF board approval which usually happens in November.

Sri Lanka also has to present a new central bank law.

A draft already compiled has the most vicious anchor conflicting soup, legalizing ‘flexible’ exchange rate (a reserve collecting soft-peg with no credibility) with ‘flexible’ inflation targeting (discretionary monetary policy to target an output gap and extend the credit cycle beyond that of the anchor currency triggering external crises especially when the US hikes rates) according to critics.

Flexible inflation targeting and the accompanying currency crises led to a steep rise in commercial debt over the past 7 years at the central government and the Ceylon Petroleum Corporation, while depressing growth (output shocks) as policy was tightened suddenly to close the hole in the BOP.

Sri Lanka now has to find a way to deal with SOE dollar debt – a type of ‘bridging finance’ as they are called in the island – accumulated while ‘flexible inflation targeting’ as well.

Sri Lanka has gone to the IMF 16 times due to its soft-peg, but managed to avoid default as the country did not have market access to borrow large volumes of foreign debt.

Market access countries in Latin America with anchor conflicts default with debt around 50 to 60 percent of GDP, revenue to GDP in excess of 20 percent of GDP, usually every two to 2.5 Fed cycles.

Sri Lanka also has to do some financial sector reforms including a resolution framework, participants said.

Central Bank Governor Nandalal Weerasinghe had told creditors, Sri Lanka could get IMF board approval by December, though the published presentation put a wider target of December 2022 to 2023.

Sri Lanka has to get assurances of re-structuring from bi-lateral creditors on before IMF Board approval.

Authorities are now promoting an ad hoc-bi-lateral creditor platform of Paris Club and non-Paris club lenders.

President Ranil Wickremesinghe had already met ambassadors and informed them.

Private debt re-structuring proper will start after the IMF board approval.

Private creditors will be kept informed. Details of economic plans will be shared with the advisors to creditors under non disclosure agreements.

Sri Lanka expecting to wrap up private debt re-structuring by June 2023.

Leave a Comment

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

Leave a Comment

Leave a Comment

Cancel reply

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

Sri Lanka wants university research to lead to commercially viable products

ECONOMYNEXT – Sri Lanka’s ministry of industries wants to ensure commercially-ready products and services are produced by university research, by facilitating partnerships with factories and entrepreneurs.

After a currency crisis, Sri Lanka’s government is in a drive to boost its trade balance by increasing exports.

“Our export basket hasn’t changed recently, partly because our small and medium entrepreneurs don’t have sufficient research and development facilities (like the multinationals) to innovate their products for the export market,” Additional Secretary of the Ministry of Industries, Chaminda Pathiraja said.

“At the same time, state universities and research institutes produce a large amount of research findings yearly, which end up sitting in those institutions; they don’t reach the industry,” Pathiraja said at a press briefing to announce a program on commercialization of new products and research, to be held tomorrow at the Waters Edge.

The networking forum will bring innovators and manufacturers together to focus on the commercialization of research for the value added tea, coir, spice, dairy products, gem and jewellery and packaging products industries.

“We want to encourage collaboration, through programs like our University Business League etc, so that the research output can be commercialized, and what is produced by our factories can increase in quantity and quality. We must focus on the export market.”

The objective of this program, he said, was to reduce the gap in acquiring innovators’ ideas and skills by the investors, and ultimately boost the manufacturing sector’s efficiency in alignment with the export market.

Continue Reading

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.

Continue Reading

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)

Continue Reading