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Tuesday April 23rd, 2024

Sri Lanka main opposition stalwarts waiting to support president, rival parties claim

ECONOMYNEXT — All is not well at Sri Lanka’s main opposition Samagi Jana Balawegaya (SJB) according to several MPs from rival and newly allied parties who claim that a section of SJB stalwarts plan to extend their support to President Ranil Wickremesinghe.

Both Wickremesinghe’s United National Party (UNP) and the ruling Sri Lanka Podujana Peramuna (SLPP) insist that a crossover is imminent.

UNP general secretary Palitha Range Bandara told reporters on Tuesday February 13 that SJB and opposition leader Sajith Premadasa is trying to cobble together an alliance using spent forces even as the forces to be reckoned with in the opposition camp have started to join the president.

He did not, however, name names.

“Mr Premadasa cannot move it forward as a political party. What he has to do is make the smart choice and join the president and the UNP and work for the future of the country,” said Bandara.

SLPP parliamentarian Piyal Nishantha told reporters that Premadasa has been collecting politicians who have been rejected by the people and attempting to inflate their worth.

“The most prominent individuals with him will join Mr Wickremesinghe and engage in politics in due course. There is no need to name names. I can guarantee that a large group of Mr Premadasa’s people will definitely come forward to support the government,” said Nisthana.

Critics of the SJB say the party leadership has been cosying up to erstwhile SLPP loyalists who, in the wake of the popular protests that saw the ouster of then President Gotabaya Rajapaksa in 2022, left the government and sat in the opposition benches as independent MPs. Most of these ex-SLPP members, who now make various opposition groupings, were at the forefront of the Rajapaksa campaign in the run-up to the 2019 presidential election.

One such group is the Freedom People’s Congress (FPC) led by MP Dullas Alahapperuma, who Premadasa and the SJB backed in 2022 for the presidency.

FPC member and MP Dilan Perera told reporters on Tuesday that some people in the SJB are attempting to scuttle their efforts at forming a grand alliance with the SJB.

“There may be one or two in our team who are deal makers with Mr Wickremesinghe. The opposition must understand at least now that unity within the opposition is essential,” said Perera.

“We tried to make a grand alliance and make the leader of the SJB the leader of the country. But when we try to do that, MPs in the SJB try to sabotage it,” he said.

No SJB parliamentarian has officially crossed over or has made any public remarks indicating a possible crossover in the past few months. (Colombo/Feb14/2024)

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Sri Lanka single borrower limits cut to 25-pct of bank capital, SOEs also included

ECONOMYNEXT – Sri Lanka’s central bank has issued directions limiting loans to a singe borrower or a group of connected customers to 25 percent of Tier I capital, with state enterprises which turned out to be the biggest borrowers, also included.

In a 2007 direction, banks were allowed to give loans up to 30 percent of capital for a single customer and 33 percent for a group but the rules were widely violated in the case of state enterprises, which were used as off-budget vehicles to give energy and other subsidies.

Banks will have to limit exposures to 25 percent starting from January 2026.

According to transitional provisions published in the direction seems to indicate that some banks may have single borrower exposures of 85 percent or more.

They will be required to bring exposures down to 60 percent by 2027 and 25 percent by 2028.

Download the direction from here Sri-Lanka-single-borrow-limit-direction-2024

Energy utilities were made to borrow from state banks to run off-budget subsidies under plan avoid a price formula during the Rajapaksa regimes.

Sri Lanka’s state banks ended up with large debts to Ceylon Petroleum Corporation partly due to flexible inflation targeting (printing money to cut rates as soon as inflation fall triggering forex shortages) even when fuel was market priced in 2018, analysts have shown.

When rates were cut with inflationary open market operations, triggering forex shortages, CPC was barred from buying dollars and forced to get suppliers’ credit denominated in dollars.

The suppliers’ credits were later converted to dollar loans from state bank loans, usually after the currency collapsed from the inflationary rate cuts or inflationary open market operations to sterilize interventions or both, analysts have shown.

The CPC loans have since been taken over by the government.

Banks have also funded roads and other state projects.

“Licensed banks shall gradually reduce the exposures to Public Corporations to meet the maximum limit,” by December 2030 according to the direction.

“Public corporation shall mean any corporation, board or other body which was or is established by or under any written law other than the Companies Act, with funds or capital wholly or partly provided by the Government.”

Many of the newer state enterprises however have been suddenly set up under the Companies Act, unlike earlier where a specific act was passed by the parliament to set up corporation or a statutory authority.

Borrowings of CPC and CEB eventually hit the financial stability of state banks while actual bad loans were under-reported. Now the bad loans are being covered with a state capital injection.

Under an International Monetary Fund and World Bank backed program, the so-called ‘sovereign bank nexus’ is being severed to protect the banking system.

Government securities, central bank sterilization securities, loans guaranteed by multilateral lenders or high rated foreign banks are excluded. (Colombo/Apr23/2024)

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Sri Lanka exceeds tax revenue target by 6% in first quarter

ECONOMYNEXT – Sri Lanka’s revenue collecting bodies have outperformed and exceeded tax revenue target by 6 percent for the first quarter ended on March 31, State Revenue Minister Ranjith Siyambalapitiya said.

“After many years of difficult challenges, it has been possible to exceed the expected state revenue in the first quarter of 2024,” he said in a statement.

The government expects a revenue collection of 4,106 billion rupees in 2024.

“The reason for the economic crisis in the past period was the reduction in the level of government revenue. Considering the achievement of higher than the target in the first quarter of this year and the revenue pattern, the 2024 will become a year in which the revenue targets can be achieved,” he said.

The three tax revenue collecting bodies – Sri Lankan Customs, Excise Department, and Inland Revenue Department have collected 834 billion Sri Lanka rupees in the first quarter.

“It is a 6% higher than the expected revenue target of 787 billion rupees,” Siyambalapitiya said.

He said the Inland Revenue Department exceeded its target by 13 percent to 430 billion rupees compared to the target of 381 billion rupees in the first quarter of 2024.

He also said Customs Department has managed to reach the target of 353 billion rupees and the Excise Department has also achieved 96% of the revenue requests and earned 51 billion rupees in the first quarter.

The island nation has raised Value Added Tax (VAT), imposed new taxes, and increased personal income taxes to boost the revenue under an International Monetary Fund-backed reforms in return of a $3 billion External Fund Facility.

People have started to grumble over the government’s higher taxes without reducing some of the state expenditures. The government has been in the process to privatize some key state-owned enterprises. However, that process faced delays amid gradually rising protests against the move. (Colombo/April 22/2024)

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Sri Lanka rupee closes stronger at 300.50/301.00 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed stronger at 300.50/301.00 to the US dollar with the spot market becoming active in the second half of Monday, dealers said.

The rupee closed at 302.00/50 to the US dollar on Friday amid moral suasion.

On Monday a foreign bank sold dollars to the central bank around 302 levels, following by more sales, dealers said after trading started without proper spot market quotes.

On Friday a 302 level was indicated by some dollar sales, dealers said.

Sri Lanka’s rupee came under pressure over the last week, despite broadly deflationary policy, after the central bank collected large volumes of dollars in March.

Bond yields were flat as buyers awaited the next development in sovereign bond re-structuring, market participants said. There were both positive and negative sentiments among bond investors, dealers said.

A bond maturing on 15.12.2026 closed flat at 11.30/40 percent

A bond maturing on 15.09.2027 closed flat at 11.95/05 percent.

A bond maturing on 15.12.2028 closed flat at 12.15/25 percent.

A bond maturing on 15.09.2029 closed marginally higher at 12.25/35 percent from 12.30/40 percent.

A bond maturing on 01.10.2032 also closed flat at 12.40.50 percent. (Colombo/Apr19/2024)

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