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Tuesday December 5th, 2023

Sri Lanka in last stages of making debt restructuring plan: President

ECONOMYEXT – Sri Lanka is in the final stages of a debt re-structuring plan prepared with international experts and which will be presented to the International Monetary Fund and negotiations will begin with creditor nations, President Ranil Wickremesinghe said.

Negotiations would begin with state creditors first.

“The finalization of the debt restructuring plan has commenced in collaboration with Lazard and Clifford Chance, who are international financial and legal experts,” President Wickremesinghe told in his inaugural address to a new session of parliament.

“We would submit this plan to the International Monetary Fund in the near future, and negotiate with the countries who provided loan assistance.

“Subsequently negotiations with private creditors would also begin to arrive at a consensus.”

He said an economic planning framework would be presented in an interim budget for the rest of the year and in the 2023 budget.

IMF discussions will continue in August.

“It is our expectation to conclude the staff level negotiations expeditiously and successfully,” he said.

“We are also looking at formulating necessary policies, rules and regulations, and programmes, to strengthen the export economy,”

“Our economic legacy is based on foreign trade. From the ancient times, Sri Lanka was known worldwide as a major economic hub located on the Maritime Silk Road (MSR), and was identified as the ‘Granary of the East’.

“Sri Lanka was the center that distributed rice from the entire region across the world.”

Sri Lanka however lost the ability engage in international trade after a central bank was set up in 1950 which printed money to suppress rates, created forex shortages and broke the currency peg and triggered trade and economic controls.

As domestic credit surged with liquidity injections and sterilized interventions the country lost reserves and ended up as a top customer of the IMF, repeatedly.

Sri Lanka went to the international bond markets with bullet repayments in 2005 and sovereign bond holdings ratcheted up sharply from 2015 under flexible inflation targeting with output gap targeting (printing money for stimulus).

In 2022 Sri Lanka defaulted for the first time. Soft-pegged Latin American nations, default repeatedly.

Sri Lanka is now in the worst currency crises in the history of the central bank with the rupee down to 360 to the US dollar from 200 at the beginning of the year.

Sri Lanka now has a budget deficit over 10 percent of GDP with taxes cut in 2019 for stimulus on top of money printing.

Wickremesinghe said Sri Lanka aimed to have a primary surplus in the budget by 2025.

National debt which had soared to 140 percent of GDP was expected to be brought down below 100 percent by 2032.

“If we build the country, the nation and the economy through the national economic policy, we would be able to become a fully developed country by the year 2048, when we celebrate the 100th anniversary of independence,” he said.

“When I draw long-term plans in this manner some ridicule me. Yes, I am not like other politicians. I have long term plans.

“My planning in not for my own betterment, but for the young generation of today. I clearly know that I would not eat the fruit of the tree that I plant. But tomorrow, our children of the future generations will enjoy the fruit.”

He made no mention of plans to tame the domestic operations of the central bank and bring back the monetary stability lost in 1950 through ‘independent monetary policy’ with a peg, now called flexible inflation targeting with a peg.

Sri Lanka is planning to institutionalize flexible inflation targeting and flexible exchange rate and extreme form of a reserve collecting peg with a high 6 percent inflation targe, from 2015 to 2019 through a new monetary law. (Colombo/Aug03/2022)

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Sri Lanka rupee closes stronger at 327.40/90 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 327.40/90 to the US dollar on Tuesday, from 328.10/30 the previous day, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.60/70 percent from 13.70/14.00 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.00 percent from 13.90/14.10 percent.

A bond maturing on 15.01.2027 closed at 14.00/15 percent from 14.00/14.10 percent.

A bond maturing on 01.07.2028 closed at 14.10/20 percent from 14.20/35 percent.

A bond maturing on 15.05.2030 closed at 14.20/35 percent, from 14.25/45 percent.

A bond maturing on 01.07.2032 closed at 14.10/35 percent, from 14.05/40 percent. (Colombo/Dec5/2023)

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Sri Lanka stocks close down as investor sentiment dips

ECONOMYNEXT – The Colombo Stock Exchange closed down on Tuesday, CSE data showed.

The All Share Price Index was down 0.40 percent, or 43.50 points, at 10,700.09.

The S&P SL20 index was up 0.43 percent, or 13.32 points, at 3,054.41.

Turnover was at 711 million. The capital goods sector contributed 172 million, the food, beverage and tobacco sector contributed 140 million, and banks 113 million of this.

Top positive contributors to the ASPI in the day were John Keells Holdings Plc (up at 193.00), Richard Pieris And Company Plc (up at 19.80), and Nation Lanka Finance Plc, (up at 0.40).

Negative contributors were Commercial Bank of Ceylon Plc (down at 89.70), Sampath Bank Plc (down at 71.00), and Central Finance Company Plc, (down at 106.00). (Colombo/Dec5/2023).

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Sri Lanka plans to reduce number of school grades from 13 to 12

ECONOMYNEXT – The Ministry of Education proposes to reduce the number of school grades from 13 to 12, according to a government information department statement.

“Every child will be given the opportunity to finish school in 17 years through the proposed new education reforms,” education officials were quoted as saying after a discussion on budget allocations.

Under the proposed system, pre-school education will be at the age of 4 years, the primary section between grades 1-5, junior section between grades 6-8, and senior section between grades 9-12.

The General Certificate of Education Ordinary Level Exam (GCE O/L) is proposed to be conducted in grade 10, and the Advanced Level Examination in grade 12.

It has also been decided to reduce the number of mandatory subjects at the GCE O/L Exam from 9 to 7.

Three new subjects, information and communication technology (ICT), technical and professional skills, and religion and values will be made mandatory and included in those 7 subjects. (Colombo/Dec5/2023)

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