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Sunday December 3rd, 2023

Sri Lanka insurer asset risk rise due to sovereign downgrade: Fitch

ECONOMYNEXT – Asset risk of Sri Lanka insurers, who have around 71 percent of their investments in state or state connected investments had risen after a sovereign downgrade though local risk based capital ratios are not affected due to local treatment, Fitch, a rating agency said.

As at end-June 2020 Fitch-rated insurers had invested around 55 percent of their fixed-income portfolios in direct government securities.

“We estimate Fitch-rated insurers have invested around 55% of their fixed-income portfolios in direct government securities such as treasury bills, bonds, Sri Lanka Development Bonds (SLDB), repo and unit trust assets backed by government securities,” Fitch Ratings said in a report.

“The majority of these are denominated in local currency, while the exposure of Fitch-rated insurers to foreign currency-denominated sovereign debt, mainly in SLDBs, was at around 12% of government security investments.

“Insurers also invest in deposits and debt securities issued by state-owned enterprises including banks, non-banking financial institutions and corporations. We estimate investments in these assets represent around 16% of their fixed-income portfolios.”

Fitch downgraded Sri Lanka’s sovereign rating to ‘CCC’, from ‘B-’, in November 2020 due to the country’s increasingly challenging external-debt repayment position over the medium term.

The rating agency then recaliberated the national rating scale resulting in the downward revision or downgrade of the national ratings of some state-owned and private-sector institutions.

“We estimate that around 12 percent of the fixed-income investment portfolios of Fitch-rated insurers, or around 28 percent of deposits and debt instrument portfolios, were invested in these entities,” Fitch said.

“The increased asset risk, however, will not greatly affect the regulatory capital ratios of most Fitch-rated Sri Lankan insurers due to the limited rise in risk charges according to local risk-based capital (RBC) rules.

“The local regulatory RBC rules exempt debt securities issued or guaranteed by the government from charges on credit and concentration risk in the calculation of the regulatory capital ratio.

“In addition, some of the recent negative national rating actions were within the same national rating category and therefore not subject to additional credit risk charges according to these rules.” (Colombo/Feb16/2021)

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Sri Lanka UGC wants to boost number of IT-related degrees

ECONOMYNEXT – Sri Lanka’s University Grants Commission is of the view to boost the number of Information Technology (IT) related degrees in state universities with an aim to pave the way for a digital economy.

Sri Lanka’shigher education system has been producing more graduates in Arts stream while the degrees in highly demanded IT and other engineering services are being looked at only now.

“We do have a high demand for engineering, science, AI, computer and electronical engineering

studies,” Chairman of University Grants Commission, Sampath Amaratunga, told reporters at aa media briefing on Friday

“However, while avoiding neglecting the humanities, we should develop new IT skills.”

Amaratunga confirmed that a student who studied in any stream could obtain an IT degree, including students who studied in the arts stream.

The UGC data show that out of 18,490 engineering technology stream students who sat for their Advanced Levels (A/L) in 2022, 10634 were eligible for university.

“Even streams like agriculture should be encouraged to use technology,” Amaratunga said. (Colombo/Dec 2/2023)

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Sri Lanka leader inaugurates Climate Justice Forum at COP28 in Dubai

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe launched Climate Justice Forum (CJF) at the ongoing 2023 United Nations Climate Change Conference (COP28) held in Dubai in a move to gather support for vulnerable nations hit by climate-change led disasters.

This year’s climate summit held in Dubai’s EXPO2020 features a raft of issues for countries working to find common ground in tackling climate change, including whether to phase out fossil fuels and how to finance the energy transition in developing countries.

Wickremesinghe inaugurated the Climate Justice Forum at COP28 on Saturday and emphasized the critical importance of addressing climate issues with a sense of justice and equity.

The President had been in talks with many nations vulnerable to climate change disasters including African and South American countries to get their support for the CJF.

The move is to compel advanced and developed countries to look into the poor nations hit by the climate changes and help them to get over economic and debt burdens by either investing more in green energy initiatives or writing off debts to ease financial pressure.

Sri Lanka, which is now facing an unprecedented economic crisis, has seen increasing losses and damages, both human lives and physical properties due to climate change-led disasters like floods, drought, and earth slips.

In his speech at the COP28 forum, Wickremesinghe on Friday said the Climate Justice Forum will provide a platform for constructive and proactive engagements. (Dubai/Dec 2/2023)

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Sri Lanka IMF review goes to executive board on December 12

ECONOMYNEXT – The first review of Sri Lanka’s International Monetary Fund program is scheduled to go the lender’s Executive Board for consideration on December 12.

Sri Lanka officials were expecting the review to be completed in December as soon as official creditors gave their assurances.

According to the notice Sri Lanka had missed one performance criterion and has requested modifications.

Sri Lanka has outperformed on a number of quantity targets including inflation. In addition to quantity PCs there was also one non-accumulation of arrears.

There would also be re-phasing of access. The review was originally expected around September with another review based on December data, leading to September and March disbursements.

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