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Saturday March 2nd, 2024

Sri Lanka makes offer to restructure domestic debt

ECONOMYNEXT – Sri Lanka has made the offer to re-structure domestic as part of efforts to meet International Monetary Fund targets to make government debt sustainable after sovereign default.

Sri Lanka is offering to swap debt in provident funds for new instruments with a longer duration in line with an Extended Fund Facility (EFF) of the IMF.

“It is justified by the ambitious nature of these targets, the need to manage Sri Lanka’s public debt rollover risks in the future and the imperative of ensuring a fair contribution from all creditors to the resolution of Sri Lanka’s debt problem, without however jeopardizing the stability of the domestic financial system,” the Finance Ministry said in a statement.

The bond exchange is expected to be completed by the end of the month.

Dollar debt of domestic banks would also be restructured.

The domestic debt optimization plan is summarized as follows:

(a) Conversion/exchange of Treasury Bonds that have been issued under the Registered Stock and Securities Ordinance, No. 7 of 1937 (as amended) into new Treasury Bonds to be issued under the said Registered Stock and Securities Ordinance to certain eligible holders of Treasury Bonds specifically superannuation funds defined as employee trust fund, an approved provident fund or a pension fund, or an approved termination fund within the meaning of the Inland Revenue Act, No. 24 of 2017 (as amended), with a minimum participation requirement of 100 percent of the total face amount of the Treasury Bonds maturing between 2024 and 2032 (inclusive) and not less than 50 percent of the total face amount of the Treasury Bonds maturing in 2023 outstanding on the business date prior to the date of launch of the said conversion/exchange held by such superannuation funds, to avoid incurring a tax rate to 30 percent on the taxable income attributing from Treasury bond investments of such superannuation funds that may be applied from 1 October 2023 onwards. However, the Treasury Bonds maturing on 15 July 2023 will be excluded from the above perimeter.

(b) Conversion of Treasury Bills that have been issued under the Local Treasury Bills Ordinance, No. 8 of 1923 (as amended) and are held by the Central Bank of Sri Lanka (CBSL) into Treasury Bonds issued under the said Registered Stock and Securities Ordinance.

(c) Conversion of the provisional advances made by the CBSL to the Government of Sri Lanka to be converted into Treasury Bonds to be issued under the said Registered Stock and Securities Ordinance.

(d) Exchange of outstanding Sri Lanka Development Bonds (SLDBs) issued under the Foreign Loans Act, No. 29 of 1957 to Treasury Bonds denominated in United States Dollars or Sri Lanka Rupees issued under the said Registered Stock and Securities Ordinance.

\(e) Restructuring of local law foreign currency denominated bank loans of the Government.

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Sri Lanka eyes SOE law by May 2024 for better governance

ECONOMYNEXT – Sri Lanka is planning to pass a Public Commercial Business (PCB) Act improve governance of state-owned enterprise by May 2024 as part of an anti-corruption efforts following an International Monetary Fund assessment.

Sri Lanka’s state enterprises have been used by politicians to give ‘jobs of the boys’, appropriate vehicles for personal use, fill board of directors and key positions with henchmen and relatives, according to critics.

Meanwhile macro-economists working for the state also used them to give off-budget subsides or made energy utilities in particular borrow through supplier’s credits and state banks after forex shortages are triggered through inflationary rate cuts.

The government has taken billons of dollars of loans given to Ceylon Petroleum Corporation from state banks.

There have also been high profile procurement scandals connected to SOEs.

An SOE Reform Policy was approved by Sri Lanka’s cabinet of ministers in May 2023.

The Public Commercial Business (PCB) Act has now been drafted.

A holding company to own the SOEs will be incorporated and an Advisory Committee and Board of Directors will be appointed after the PCB law is approved, the statement said. (Colombo/Mar01/2024)

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Sri Lanka rupee closes at 308.80/90 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 308.80/90 to the US dollar Friday, from 309.50/70 on Thursday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.02.2026 closed at 10.65/75 percent up from 10.50/70 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent from 11.90/12.10 percent.

A bond maturing on 01.07.2028 closed at 12.15/35 percent down from 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent up from 12.30/45 percent.

A bond maturing on 15.05.2030 closed at 12.30/45 percent down from 12.35/50 percent.

A bond maturing on 01.07.2032 closed at 12.50/13.00 percent from 12.55/13.00 percent. (Colombo/Mar1/2024)

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Sri Lanka stocks close up 0.37-pct, Expo to de-list

ECONOMYNEXT – The Colombo Stock Exchange closed up 0.37 percent on Friday, and SG Holdings, the parent company of Expolanka Holdings Plc, said it was taking the company private.

Expolanka is the largest listed company on the Colombo Stock Exchange.

“Expolanka Holdings PLC has, at the Board Meeting held on 1st March 2024, considered a request from its principal shareholder and resolved to initiate the de-listing of the Company’s shares from the Official List of the Colombo Stock Exchange subject to obtaining necessary shareholder approval and regulatory approvals,” the company said in a stock exchange filing.

As per arrangements with SG Holdings Global Pte Ltd, the Company’s majority shareholder, it will purchase its shares from shareholders who may wish to divest their shareholding in the Company at a purchase price of Rs 185.00 per share. The share closed up at 150.50.

The broader All Share Index closed up 0.37 percent, or 39.47 points, at 10,691; while the S&P SL20 Index closed down 0.64 percent, or 19.59 points, at 3,037.

Turnover stayed above the 1 billion mark for the sixth consecutive day, registering 1.4 billion.

Crossings in Melstarcorp Plc (135mn) up at 89.50, Hatton National Bank Plc (64mn) up at 158.00, Hemas Holdings Plc (53mn) up at 75.00 and Central Finance Company Plc (26mn) up at 103.50, added significantly to the day’s turnover.

“The upward trend is continuing, with more retail buying also coming in, the number of trades was more than 10,000 today,” a market participant said. “Investors are looking for undervalued stocks and buying in quantities.” (Colombo/Mar1/2024).

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