Economy

Sri Lanka, IMF to continue discussions to renew reform deal

Wednesday September 27, 2023 3:33 pm

ECONOMYNEXT – Sri Lanka and the International Monetary Fund will continue discussions to reach a staff level agreement for the next phase of the program, a statment issued after the mission concluded a review mission said.

“The team will continue its discussions in the context of the First Review with the goal of reaching a staff-level agreement in the near term,” the statement said.

The full statement is reproduced below:

Colombo, Sri Lanka – September 27, 2023: An International Monetary Fund (IMF) mission team led by Mr. Peter Breuer and Ms. Katsiaryna Svirydzenka visited Colombo from September 14 to 27, 2023 to discuss economic and financial policies to support the approval of the First Review of the program under the EFF arrangement.

At the end of the mission, Mr. Breuer and Ms. Svirydzenka issued the following statement:

“The people of Sri Lanka have shown remarkable resilience in the face of enormous challenges. Sri Lanka has made commendable progress in implementing difficult but much-needed reforms. These efforts are bearing fruit as the economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 percent in September 2022 to below 2 percent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased. Despite early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with Q2 real GDP contracting by 3.1 percent on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months.

“Sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth. The authorities have met the program’s primary balance targets and remain committed to this important pillar of the program so as to support their efforts to restore debt sustainability. However, revenue mobilization gains–while improved relative to last year–are expected to fall short of initial projections by nearly 15 percent by year end. While partially due to economic factors, the onus of fiscal adjustment would fall on public expenditure if there were no efforts to recoup this shortfall. This could weaken the government’s ability to provide essential public services; and undermine the path to debt sustainability. To increase revenues and signal better governance, it is important to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.

“Against continued uncertainty, it also remains important to rebuild external buffers by strong reserves accumulation. Building on the Central Bank of Sri Lanka’s success in controlling inflation, refraining from monetary financing will help keep inflation in check. Other challenges include maintaining cost recovery of electricity pricing.

“The government has made steady progress on structural reforms. Key legislations passed in Parliament, including the new Central Bank Act and the Anti-Corruption Act, could improve governance if implemented effectively. The IMF Governance Diagnostic report would inform future reform measures to strengthen governance when published. A new welfare benefit payment scheme was enacted with new eligibility criteria that aims to improve targeting, adequacy, and coverage of social safety nets. To ensure financial stability, steps were taken on conducting bank diagnostics, developing a roadmap for addressing banking system capital and liquidity shortfalls, and improving the bank resolution framework.

“The authorities have also made headway on regaining debt sustainability through the execution of the domestic debt restructuring and advancing discussions with external creditors. As Sri Lanka is restructuring its public debt which is in arrears, Executive Board approval of the first program review requires the completion of financing assurances reviews. These financing assurances reviews will focus on whether adequate progress has been made with debt restructuring to give confidence that it will be concluded in a timely manner and in line with the program’s debt targets.

“Discussions are on-going, and the authorities are continuing to make progress on their plans for revenue mobilization targets, anti-corruption efforts, and other important structural reforms.

“The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, State Minister Mr. Shehan Semasinghe, Chief of Staff to the President Mr. Sagala Ratnayaka, Secretary to the Treasury Mr. K M Mahinda Siriwardana, and other senior government and CBSL officials. The IMF team also met with Parliamentarians, representatives from the private sector, civil society organizations, and development partners.

“We would like to thank the authorities for the excellent collaboration during the mission. The team will continue its discussions in the context of the First Review with the goal of reaching a staff-level agreement in the near term. We reaffirm our commitment to support Sri Lanka at this difficult time.”

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Markets

Sri Lanka stocks close up as some investor interest returns

Monday December 4, 2023 6:12 pm

ECONOMYNEXT – The Colombo Stock Exchange closed up on Monday, CSE data showed.

The All Share Price Index was up 0.22 percent, or 23.33 points, at 10,743.59.

The S&P SL20 index was up 0.68 percent, or 20.60 points, at 3,067.73.

Turnover was at 708 million. The banks sector contributed 189 million, while the food, beverage and tobacco sector contributed 176 million of this.

Sri Lanka’s stock market has seen some investor interest return after last week’s news that the country had managed an agreement on a debt restructuring deal with an official creditor committee, and foreign funds for some development projects resumed.

Top positive contributors to the ASPI in the day were Sampath Bank Plc (up at 71.50), LOLC Holdings Plc (up at 379.00), and Commercial Bank of Ceylon Plc, (up at 90.90).

There was a net foreign outflow of 52 million.

Citrus Leisure Plc, which announced that its banquet hall and revolving restaurant at the Lotus Tower would launch on or around Dec 9, saw its share price rise to 6.20 rupees. (Colombo/Dec4/2023).

Bonds & Forex

Sri Lanka rupee closes broadly steady at 328.10/30 to the US dollar

Monday December 4, 2023 5:24 pm

ECONOMYNEXT – Sri Lanka’s rupee closed at 328.10/30 to the US dollar on Monday, from 328.00/10 on Friday, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.70/14.00 percent from 13.70/95 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.10 percent from 13.90/14.05 percent.

A bond maturing on 15.01.2027 closed at 14.00/14.10 percent from 14.05/10 percent.

A bond maturing on 01.07.2028 closed at 14.20/35 percent from 14.15/25 percent.

A bond maturing on 15.05.2030 closed at 14.25/45 percent, from 14.20/45 percent.

A bond maturing on 01.07.2032 closed at 14.05/40 percent, from 14.00/45 percent. (Colombo/Dec4/2023)

Crime

Gov minister highlights abortion rights, sex-ed for children, and Sri Lanka men killing their women

Monday December 4, 2023 4:21 pm

ECONOMYNEXT – Sri Lanka’s legislators have politicized the topics of rape and violence without addressing the elephant in the room, Jeevan Thondaman, Minister of Water Supply and Estate Infrastructure Development said in parliament on Monday (4).

“All the members here are talking about rape. What happens after that? We must talk about abortion rights. That is not something anyone wants to touch on, and that is why we are in this place right now,” Thondaman said.

“Despite alarming statistics on rape and violence, women are often blamed and punished for it. The criminalisation of abortion is a major example of this.”

Sri Lanka has some of the most restrictive abortion laws in the world. According to a 2016 estimate by the Health Ministry, he said, approximately 658 abortions take place a day, and close to 250,000 a year.

“That’s 250,000 women whose lives you are endangering.”

He added that what was needed at this point in time was comprehensive sexual education (CSE) for children and young people.

“Only through CSE in schools will children and young people develop, accurate, age appropriate knowledge attitude and skills; positive values such as respect for human rights, gender equality, diversity and attitude and skills that contribute to a safe, healthy and positive relationship.”

Thondaman pointed out that CSE plays a pivotal role in preparing young people for a world where HIV, AIDS, sexually transmitted infections, unintended pregnancies, and sexual and gender based violence still pose a risk to their well-being.

“CSE basically empowers children take control and make informed decisions freely and responsibly.”

Thondaman also highlighted the findings of a 2021 study (Fatalities_20211109_UNFPA) by the UNFPA and the University of Kelaniya that showed that a majority of women killed in Sri Lanka were murdered by those close to them.

“62 percent of homicides of Sri Lankan women are committed by either an intimate partner, ex-partner or family member. 84 percent are killed in their own homes by someone they know.”

Police and the judiciary have failed Sri Lanka’s women, the minister pointed out.

“Only 5 percent of these cases, between 2013-2017, were ever concluded. Men claim they were provoked, or are of unsound mind or have mental illness: These have been successful defenses. And the Police often express sympathy to this narrative as opposed to the victim’s.”

“We have a history of protecting oppressors.”

It takes 7-10 years for a child rape case to conclude, he pointed out.

Establishment of child courts are needed, he said, as well as several legislative amendments. “The government is working on a new law to reform the domestic violence act, reform of marriage and divorce laws to ensure there is an easier path to divorce: no one should be forced to remain in a marriage that is either abusive or not healthy.” (Colombo/Dec4/2023)