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Saturday April 20th, 2024

Sri Lanka new foreign minister pushes trade, investment with foreign envoys

MEETING: Foreign Minister G L Pieris with China’s envoy to Colombo.

ECONOMYNEXT – Sri Lanka’s newly appointed foreign minister focused on trade, investment, and Covid-19 combat when he met envoys of strategically important foreign nations to Sri Lanka, as money printing triggered forex shortages and brought the country closer to default.

Foreign Minister GL Pieris met envoys of India, China, the European Union, the United States, Japan, Russia, and Pakistan last week, the foreign ministry said in a raft of statements.

He discussed enhancing religious tourism with Indian High Commissioner Gopal Baglay, while appreciating the offer of 15 million US dollars by the India to preserve and promote Buddhist cultural sites in Sri Lanka and expressed interest in early implementation of the offer.

“It was agreed that the six Working Groups under the (India-Sri Lanka) Joint Commission, covering specific subject areas under education, science & technology, tourism, trade & investment, fisheries and the power sector, should meet at the earliest feasible opportunity,” the ministry said in the statement.

“The discussion also focused on the setting up of pharmaceutical manufacturing plants by India in Sri Lanka.”

Sri Lanka had discussed Covid pandemic, people-to-people exchanges, economic development, poverty eradication and multilateral cooperation with Chinese Ambassador Qi Zhenhong.

“In particular, the Foreign Minister Peiris requested China’s assistance for the immediate supply of liquid oxygen to meet the increasing demand.”

Sri Lanka’s decision to focus on trade and investment comes as the country is facing a foreign exchange crisis after money printing make up for tax cuts and to lower interest rates has resulted in sharp depreciation of the rupee and depleted of foreign exchange reserves.

The 81 billion dollar economy also faces a looming debt crisis after a series of sovereign downgrading has increased pushed up risk premiums and locked it out of international bond markets.

The economy has also been hit by a loss of tourism which was estimated to have brought in 4 billion US dollars a year.

Authorities have tried to blame forex shortages, which is a monetary shock coming from liquidity injections on the loss of tourism incomes, which is a ‘real’ shock that reduces the spending power of tourist workers and firms and trigger an equal fall in imports.

Coronavirus lockdown contracted the economy in the worst performance since records began and hit government revenues.

The government is keep to promote tourism and bring in foreign investment with sales or lease of state land.

At a meeting with Ambassador of the European Union Delegation to Sri Lanka Denis Chaibi Minister Peiris had also discussed the EU GSP Plus trade concession, including action underway by the government on issues raised by the trading bloc.

“Foreign Minister Peiris reiterated the significance of EU-Sri Lanka trade relations which continues to be mutually beneficial with potential for further expansion,” the statement said.
“Matters related to cooperation in the fishery sector were also discussed”

President Gotabaya Rajapaksa’s administration, seen as leaning towards China,
had vowed not to give into the demands of the EU and United Nations to address human rights violations in the past saying they are biased and influenced by Tamil activists.

However, since the European parliament adopted a resolution to consider withdrawing over GSP+ worth trade concessions, the government has taken a step back on its stance.

The United Nations Human Rights Council (UNHRC) has already passed a resolution to take some action on alleged human rights violations and Western diplomats say Sri Lanka is likely to face a tough stance in the next month’s Human Rights Council meeting.

Sri Lanka has also walked back on a 500 million US dollar terminal deal with India and unilaterally cancelled a light rail project with Japan, and cancelled a 480 million US dollar grant from US attributing various motives, denting relations with those countries.

The foreign minister had welcomed private sector investments from the United States when he discussed with US Ambassador to Sri Lanka Alaina Teplitz.

“Other bilateral matters, including convening of US-Sri Lanka Partnership Dialogue, Joint Commission of Trade & Investment Framework Agreement and US- Sri Lanka Sectoral Dialogues were also discussed in detail,” the ministry said.

During the meeting with Japanese Ambassador Akira Sugiyama, both agreed to work “to enhance trade, investment, and people-to-people contacts between the two countries to a further height.”

Ambassador of the Russian Federation to Sri Lanka Yuri B. Materiy has reiterated Russia’s interest in further expanding bilateral relations in multiple sectors including trade, investment and tourism, energy, science and technology, defence and counter-terrorism.

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Sri Lanka discussing giving extra land, water for Chinese oil refinery

ECONOMYNEXT – Sri Lanka is in discussions with China’s Sinopec to give extra land and assure water supplies after the company decided to expand the capacity of a planned oil refinery in Hambantota, Energy Minister Kanchana Wijesekera said.

“There are concerns on how the water supply is going to be provided for the refinery,” Minister Wijesekera told reporters Friday.

The refinery will need more land and also revise conditions in a Board of Investment agreement, he said.

Read more
Sinopec to double capacity of new refinery in Sri Lanka’s Hambantota

Recommendations and decisions from Sri Lanka’s side had already been sent and Sinopec is expected to revert back in May.

“We are hoping to sign the agreement once everyone has agreed,” Wijesekara said.

The principle agreements are expected to be signed by June, he said.

The refinery could sell up to 10 percent of its output in the domestic market.

“There is no commitment by the government to purchase anything,” Minister Wijesekera said. (Colombo/Apr19/2024)

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Sri Lanka rupee closes weaker at 302.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 302.00/50 to the US dollar in the spot forex market on Friday, down from 301.50/302.00 a day earlier, dealers said.

There was increased demand for dollars after the central bank bought 715 million dollars from forex markets. In the previous two months it was buying on average about 200 million US dollars, leaving market participants and bank in a ‘oversold’ position.

There were some official dollars sales Friday dealers said.

READ Sri Lanka rupee quoted wide to US dollar as peg inconsistencies flare up

Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed at 11.30/40 percent down from 11.35/40 percent.

A bond maturing on 15.09.2027 closed at 11.95/12.05 percent up from 11.90/12.05 percent.

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

A bond maturing on 15.09.2029 closed stable at 12.30/40 percent.

A bond maturing on 01.10.2032 closed stable at 12.40/50 percent. (Colombo/Apr19/2024)

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Sri Lanka stocks close down, banks trade down

ECONOMYNEXT – The Colombo Stock Exchange closed down on Friday, data on its site showed.

The broader All Share Index closed down 0.38 percent, or 44.80 points, at 11,753; while the S&P SL20 Index closed down 0.53 percent, or 18.46 points, at 3,456.

Turnover was at 1.4 billion. The diversified financials (Rs366mn) and banks (Rs266mn) sectors continued to see selling pressure.

“This was possibly due to uncertainty around the bond discussions,” market participants said.

With the exception of Sampath Bank Plc (up at 77.50) all other banks traded down in the day. Commercial Bank of Ceylon Plc was down at 104.50, Hatton National Bank Plc was down at 188.50, and DFCC Bank Plc was down at 77.00.

LOLC Finance Plc saw the most trades and closed up at 6.40. Another LOLC company, Browns Investments Plc, also saw high traded volumes and closed up at 5.60.

Softlogic Capital Plc was up at 7.00, and Softlogic Holdings Plc was up at 11.20. A trading suspension imposed on SHL.N0000 was lifted effective today as the company submitted the annual report for the year ended 31st March 2023.

However, shares of the Company will remain in the Watch List “due to Qualified Audit Opinion and Emphasis of matter on going concern in the Independent Auditor’s Report in the Audited Financial Statements for the year ended 31st March 2022.”

Dialog Axiata Plc, which announced its merger with Bharti Airtel Thursday, saw its share price close up at 11.90.

“There was some traction on index heavyweights,” market participants pointed out.

Top contributors to the APSI included Aitken Spence Plc (up at 134.50), Ceylon Tobacco Company Plc (up at 1,245.25, and Lion Brewery (Ceylon) Plc (up at 1,048.50).

There was a net foreign inflow of 5 million. (Colombo/Apr19/2024)

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