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Monday March 4th, 2024

Sri Lanka launches UPI to facilitate payments by growing Indian tourists, boost formal transactions

ECONOMYNEXT – Sri Lanka launched Unique Payment Interface (UPI), a digital payment method used by India to facilitate payments by growing Indian tourists into Sri Lanka and increase formal banking, officials said.

The new payment system was launched in the presence of Indian Prime Minister Narendra Modi, Sri Lankan President Ranil Wickremesinghe, and Mauritius Prime Minister Pravind Jugnauth with Indians making payments in Colombo and Port Louis.

The launch will allow Indians to make payments in Sri Lanka through UPI to any vendor who uses Lanka QR using a smartphone without any cash or card.

Officials said Sri Lanka has identified 65,000 hotspots where Indian tourists frequently visit and 10,000 of such locations will be enabled to use UPI in the next three weeks, while the rest will be enabled by March 31 this year.

Topping the list, Indian tourists of over 300,000 accounted for a fifth of the total 1,487,303 foreign visitors who arrived into the island nation in 2023.

The maximum amount is limited to 200,000 Sri Lankan rupees per transaction, Kenneth de Zilwa, Chairman of LankaPay, a body which has been in the forefront in digitalizing the country’s banking and financial services sector by keeping the elements ‘innovation’ and advanced ‘technology’ at its core.

“QR request system is still to take off in Sri Lanka unlike what we have seen in India. It was done through the Indian government pushing. In Sri Lanka it is not the case,” Zilwa told reporters at a media briefing in Colombo.

We are optimistic about the QR payments. We have already signed up with International partners who can bring traffic. The UPI is one such partner. With more international partners we expect the usage and popularity to increase because the merchants themselves will see the benefits.”

The UPI will allow Indians to use only their smartphones to scan the Lanka QR code and make any payments in Sri Lanka. The measure also will help the Sri Lankan authorities to motivate merchants to switch into digital payment and thus shift from the current informal income measures to formal income.


However, Sri Lankans who go to India are not allowed to use the same facility in India.

“This is stage one and in stage two it will be done,” Channa de Silva. The CEO of LankaPay said when asked if Sri Lankans also could use the same platform in India.

An official who is involved with the new digital payment method said Sri Lankan authorities are concerned over allowing locals to use the same facility because there will be more outflows.

President Wickremesinghe at the launch emphasized the centuries-old economic relations between Sri Lanka and India and added that he hopes to maintain the momentum of connectivity and deepening of the relationship between the two countries.

Indian Prime Minister Modi said India’s UPI comes in a new role of Uniting Partners with India.

“Use of technology is promoting transparency, reducing corruption and increasing inclusivity in society”, Modi said.

Modi expressed the confidence that connection with UPI will benefit Sri Lanka and Mauritius and digital transformation will get a boost, local economies will witness positive change and tourism will be promoted.

“I am confident that Indian tourists will give priority to destinations with UPI. People of Indian origin living in Sri Lanka and Mauritius and students studying there will also get special benefits from it”, the Prime Minister added.

India witnessed 100 billion transactions took place via UPI last year worth 8 trillion Sri Lankan rupees.

Sri Lanka last year saw 1.1 million transactions last year with 380,000 Lanka QR registered, from 599,000 in 2022. The country also witnessed 3.3 billion rupees worth money transferred using the Lanka QR code in 2023 compared to 1.9 billion rupees in the previous year.

 With guidance from the Reserve Bank of India and the Central Bank of Sri Lanka, NPCI International Payments Limited of India and LankaPay of Sri Lanka have collaborated for enabling the acceptance of UPI services through LankaQR.

This is expected to allow merchants in Sri Lanka to accept seamless digital payments from Indian tourists. (Colombo/Feb 12/2024) 

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Sri Lanka rupee opens at 308.20/50 to the US dollar

Sri Lanka stocks reversed its falling trend and gained for the first time in six sessions on Tuesday closed stronger on Tuesday (21).

ECONOMYNEXT – Sri Lanka’s rupee opened at 308.20/50 to the US dollar Monday, from 308.80/90 on Friday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.08.2026 was quoted stable at 10.90/11.00 percent.

A bond maturing on 15.09.2027 was quoted at 11.90/12.00 percent from 11.90/12.05 percent.

A bond maturing on 01.07.2028 was quoted at 12.20/30 percent from 12.15/35 percent.

The Colombo Stock Exchange opened up; The All Share was up 0.60 percent at 10,755, and the S&P SL20 was up 1.24 percent at 3,077. (Colombo/Mar4/2024)

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Sri Lanka central bank swaps top $3.2bn by December

ECONOMYNEXT – Sri Lanka’s central bank borrowed US dollars from various counterparties through swap transactions, which had topped 3.2 billion US dollars by December 2024, official data show.

The net short position, including swaps disclosed by the central bank, grew by over almost 1.28 billion US dollars from December 2022 to 3,280 million dollars.

The gross position grew from 2,263 million dollars to 3,280 million US dollars over the year.

The central bank supported some state banks with dollars to cover their dollar exposures, which had since been paid back.

By December reported gross reserves of the central bank was 4,491 million US dollars, against swaps of 3,280 billion US dollars.

Swaps of around 1500 related to the People Bank of China.

Swaps allow a central bank to increase gross reserves, without raising domestic interest rates.

Swaps with domestic counterparties lead to liquidity being injected into money markets, which can be mopped if domestic credit growth is moderate.

At the moment many private banks have large dollar positions invested outside the country, which cannot be used for transactions domestically because of a money monopoly given to macro-economists. (Sri Lanka repays debt or collects reserves of U$5bn via banking system since rate correction)

However unwinding swaps after private credit has picked, or engaging in swaps after private credit has picked up, may lead to money being injected to maintain the policy rate, leading to excess credit by banks and balance of payments deficits and or currency collapses, analysts say.

Central bank swaps in the third quarter of 2018 led to a collapse of the currency under the ‘exchange rate as the first line of defence’ policy peddled to Sri Lanka, critics have said earlier.

Domestic currency proceeds of swaps were the primary ammunition to bust East Asian currencies in 1997-98.

Any depreciation after the swap proceeds have been used for imports (effectively mis-targeting rates) a central bank will run a forex loss.

The PBOC however had put a rule, preventing the use of the swap after gross reserves fell below 3 – months of imports, preventing Sri Lanka from getting into further trouble through the use of official reserves for private imports.

Sri Lanka’s central bank also used borrowings from the Reserve Bank of India, via the Asian Clearing Union to run BOP deficits.

Losses from exposed dollar positions of central banks which have gained ‘independence’ from fiscal rules and parliaments and engaged in macro-economic policy, including the Fed, have led to taxpayers bearing the losses in the end.

Swaps were invented by the Fed in the early 1960s, as it deployed macro-economic policy (printed money for growth) threatening its gold reserves and the Bretton Woods system.

Sri Lanka has other borrowings also, including from the IMF, which has made net foreign assets of the central bank negative. (Colombo/Mar05/2024)

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Sri Lanka loses MICE tourists to Thailand on minimum room rates

ECONOMYNEXT – Sri Lanka has lost Meetings, Incentive Travel and Exhibition travelers to competitors in East Asia and India due to minimum room rates as higher standard rooms were available in other countries at lower prices, industry officials said.

President of the Sri Lanka Association of Inbound Tourist (SLAITO) Nishad Wijetunga said they the industry managed to retain a majority of booking made before the minimum room rates were imposed by the state last year.

“However, there were MICE groups that were supposed to come and cancelled Sri Lanka and went to places like Thailand and other parts of India and we lost,” Wijetunga told EconomyNext.

“We know that large groups of MICE (tourists) are affected.”

India is a key source of MICE tourists to Sri Lanka.

Sri Lanka’s businesses have got used to protectionism and try to push up prices with import taxes to extract more money from customers using the coercive power of the state, with tiles and steel being among the most prominent examples.

RELATED: Stand-alone hotels unviable in Sri Lanka due to high construction, capital costs

High priced tiles and steel in turn makes hotels expensive to build and make the leisure industry less competitive, analysts say.

However, in tourism, unlike in building materials customers are not trapped within the country and are free to move to other markets.

Managing Director of CEC Events and Travels, Imran Hassan, said the industry lost groups to East Asia due to minimum room rate.

In one instance, an operator was in discussions to get a group of 900 passengers.

“And that moved out to Thailand,” Hassan said. “Like that, there are many instances that the minimum room rate was not conducive.”

Thailand in 2023 attracted 28.04 million tourists.

A group that used to come to Sri Lanka annually used to take 40 to 50 five-star hotel rooms. This time Sri Lanka competed by offering lower standard.

“This year, they’re only giving 10 rooms to the five-star hotels,” Hassan explained. “They are staying in smaller hotels because they can’t afford it because it has become so expensive.”

“But overall, we are working with the authorities to correct it.

“We don’t mind demand and supply situation taking the rates up as in the Maldives. But what we are saying is keep an open market.”

RELATED : Sri Lanka should say good bye to minimum room rates: President

President Ranil Wickremesinghe has said Sri Lanka cannot progress with protectionism and the country has to learn to face competition. (Colombo/Mar04/2024)

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