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Tuesday December 5th, 2023

Sri Lanka insurers escape Covid mortality but hit by central bank fallout

ECONOMYNEXT – Sri Lanka’s insurers have so far not been hit by Coronavirus mortality or healthcare costs unlike other countries but import controls will hit insurance growth due to controls on vehicle imports, while currency depreciation will also push up claims costs, a ratings analyst said.

Rishikesh Sivakumar, Senior Analyst Fitch Ratings, said Sri Lanka’s insurance companies have not seen claims from mortality rise unlike in other countries.

No Covid Claims

Nor have health claims come, with all cases being treated at state hospitals.

Sri Lanka has seen only 09 deaths in the Coronavirus crises.

Sri Lanka has been aggressively contact tracing and quarantining Coronavirus cases having completely ended the first Wave from China in January along with Vietnam and Cambodia.

Sri Lanka started to quarantine Second Wave arrivals from March, but there was a surge of domestic cases linked to Navy due to an initial reluctance to test frontline workers and random community test which allowed asymptomatic cases to grow.

Of the 900 cases about half are from the military. Most of the military contacts have also been rounded up. Amid random community testing which started two weeks ago, no new cases have turned up.

Vietnam has already opened the country, but Sri Lanka is still watching Colombo and Gampaha where most of the cases turned up.

But Sri Lanka’s economy has been hit by monetary instability and also uncertain fiscal policy after a steep tax cut in January.

Hit from Monetary Instability

Sri Lanka’s central bank also cut rates and printed money from just before the crisis hit, despite worsening deficits, de-stabilizing the rupee, which fell to 200 to the US dollar at one point.

The central bank then tightened exchange controls and then authorities also slapped 1970s era trade controls. Ministers told the public to grow kollu (horsegram).

Coronavirus curfews have led to fall in domestic consumption and private credit is also expected to slow to low single digits.

When private credit is weak, the rupee tends to stabilize, printed money is not loaned out by banks to create excess demand and pressure the rupee.

However there is still the risk that pressure will come from state salaries and expenses financed with printed money as deficits expands, analysts say.

Meanwhile Sivakumar said import controls will slow the growth of insurance market.

While the lockdown is in progress, accident claims may also fall, he said. But the falling rupee will hit claims negatively in the future.

The rupee is now at around 189 to the US dollar from around 182 before money printing began. A weaker rupee will also push up spare parts and repair costs, Sivakumar said.

In Sri Lanka insurance sector growth is sensitive to downturns unlike in some other Asian markets where insurance is not considered a discretionary item but essential, Sivakumar said.

Lower interest rate in 2020 could also hit profits of insurers. With stock market down, insurers will also be hit on their portfolios.

Sri Lanka’s stocks were already hit last year after the rupee collapsed and domestic consumption was hit, leading to bad loans in banks. Analysts had warned in 2018 that monetary policy errors would lead to instability just as the economy recovered.

Fitch had already downgrade state-run Sri Lanka Insurance after the soveriegn rating was cut.

Analysts had warned that a downgrades were inevitable unless the central bank was reformed to and its ability to generate monetary instability was blocked.

Sri Lanka is recovering, Central Bank threat looms: Bellwether

Sri Lanka needs monetary discipline to avoid further downgrades: Bellwether

Analysts and classical economists have called for the reform of the central bank, to stop currency depreciation and monetary instability which had held the country back from 1951. (Colombo/May15/2020)

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Sri Lanka stocks close up as some investor interest returns

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).

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

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)

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

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)

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