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Friday June 2nd, 2023

Sri Lanka imports up 23-pct in January as tourism recovers

ECONOMYNEXT – Sri Lanka’s imports grew 23.1 percent from a year ago to 1,959 billion rupees in January 2022 data showed, with a higher volume of exports and tourism revenues giving more income for people to spend.

Exports grew 17.5 percent to 1,101 million US dollars in January.

Tourism revenues grew 148 million US dollars from just 4 million US dollar, also giving more money for tourism workers to spend on imports.

Analysts had warned that a tourism recovery will not help solve forex troubles which was created by money printed to keep interest rates down and a broken monetary regime (a soft-peg which had lost credibility).


Sri Lanka has to hike rates, tourism recovery will not help end forex crisis: Bellwether

Higher interest rates to stop domestic credit and a float was required. An attempt was made to float the currency in March, which has not succeeded as of April 2022.

Worker remittances fell 61 percent to 259 million dollar.

Remittances are however coming through indirect channels boosting incomes of people allowing them to spend on imports. Imports some of which are not coming in official statistics are also being settled through remittances through Undiyal style unofficial channels.

The trade deficit, a legacy measure which ignores services receipts such as remittances or tourism, 859 million dollars in January, up from 655 million US dollars last.

The trade deficit was expected to grow as soon as tourism resumed.

There was a 36 million US dollar inflows to the stock market, which could also add to the trade deficit if the recipients spent the money, or the government borrowed an spent the money after the sellers of the stocks saved it in a bank.

Foreign direct investment data was not available. However FDI would also add to the trade deficit as the money was spent domestically to build factories or buildings.

The overall balance of payments deficits was 3.9 billion US dollars, around the same as in December.

The government had received 111 million US dollars on loans on a gross basis. A 500 million dollar sovereign bond was paid in January and a 400 million US dollar swap was received to replenish central bank reserves from India.

In order to turn the balance of payments around, reduce imports, the central bank has to raise interest rates to curtail domestic credit and the government has to stop capital projects which are not financed with foreign borrowings. (Colombo/Apr02/2022)

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  1. Bodil helene larsen says:

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Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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