An Echelon Media Company
Thursday February 22nd, 2024

Sri Lanka opposition leader vows to bring millions to the streets

SJB protestors at Galle Face, Nov 16

ECONOMYNEXT – Sri Lanka opposition leader Sajith Premadasa has vowed to bring millions to the streets in defiance of a controversial statement by President Ranil Wickremesinghe that he would use the military to block another uprising.

Speaking at an event organised by the main opposition Samagi Jana Balawegaya (SJB) in Negombo on Saturday November 26, Premadasa said the SJB under his leadership would defeat efforts by the Wickremesinghe government to quell protests.

“The president and government groups are saying in parliament that if another people’s struggle comes, they will suppress it using the military. That they will use the Prevention of Terrorism Act (PTA) to suppress the struggle. We’re not prepared to be cowards,” said Premadasa.

“We’re told to obtain permission to go on a political march on the road. If this is a challenge, the SJB and the SJB alliance under the leadership of Sajith Premadasa, [are prepared] to come out to the road in the millions. We will defeat these hollow boasts of the government using the power of the people,” he said.

Addressing parliament last week, President Wickremesinghe said the authorities will block any unlawful protests aimed at toppling the government. The state forces and a state of emergency would be used for this purpose, he said. However, peaceful protests may continue as long as permission is obtained from the police, he said.

President Wickremesinghe, who had long maintained the image of a democrat and a statesman, has been under fire both locally and internationally ever since he assumed the presidency for an alleged intolerance of protest.

He has been courting controversy since his ascend to Sri Lanka’s all powerful executive presidency, with activists, civil society groups, human rights defenders and opposition legislators critcising him for what they claim has been a crackdown on peaceful protest – the same series of youth-led peaceful protests that unseated his predecessor Gotabaya Rajapaksa, landing him the highest seat of power in the land.

His recent pronouncements on human rights activists have not helped matters.

Wickremesinghe and his defenders, however, claim that he is still a liberal democrat who respects the right to free speech and peaceful assembly, and that he only wants to stop the more extremist elements that they claim have hijacked the protests with a view to toppling the government through a violent revolt. These groups, government spokesmen and other backers of the president claim, are attempting to destabilise the country at a time when stability is crucial to economic recovery.

Government members and other critics of the SJB, meanwhile, argue that the main opposition party is using the Aragalaya to their own political ends and are criticising Wickremesinghe in bad faith. They claim that Premadasa and his party have forgotten or are pretending to have forgotten how the opposition leader was almost ambushed and attack by more violent elements within the protest movement on May 09.

Critics of the SJB also question the purported popularity of the party and its leadership with the public. Analysts question the party’s capacity to bring millions out on to the streets as claimed by the SJB leadership.

The party, however, is prepared to show its strength at an upcoming election, whichever one comes first.

The president, meanwhile, has said he has no plans to dissolve parliament anytime soon. A parliamentary election, according to him, may have to wait till Sri Lanka’s economy has sufficiently recovered.

The SJB and opposition parties have condemned this announcement as an undemocratic attempt at suppressing the people’s rights. (Colombo/No28/2022)

Comments (1)

Your email address will not be published. Required fields are marked *

  1. Adrian says:

    It appears that the whole of the political system in Sri Lanka is turning against each party. Yes, the whole process of the so called democracy in the island seems to be turned up-side-down to ministers and the peoples own advantage. However, it high time this government started to conduct their constitution with its laws in a RIGHT-NESS manner, instead of wrong-ness.
    This is bad news for the recovery of a beautiful country which has a lot of wealth in it to be explored. The financial situation here is diabolical and unfortunately it is the middle and lower class which suffer financial hardship. Furthermore, it is very sad to hear of the unrest and turmoil where the average person takes the law into their own hands and starts stealing to make their own ends meet.

View all comments (1)

Comments (1)

Cancel reply

Your email address will not be published. Required fields are marked *

  1. Adrian says:

    It appears that the whole of the political system in Sri Lanka is turning against each party. Yes, the whole process of the so called democracy in the island seems to be turned up-side-down to ministers and the peoples own advantage. However, it high time this government started to conduct their constitution with its laws in a RIGHT-NESS manner, instead of wrong-ness.
    This is bad news for the recovery of a beautiful country which has a lot of wealth in it to be explored. The financial situation here is diabolical and unfortunately it is the middle and lower class which suffer financial hardship. Furthermore, it is very sad to hear of the unrest and turmoil where the average person takes the law into their own hands and starts stealing to make their own ends meet.

Merchant Bank of Sri Lanka and Finance given ‘BBB+(lka)’ rating by Fitch

ECONOMYNEXT – Fitch Ratings said it assigned Merchant Bank of Sri Lanka and Finance Plc (MBSL) a first-time national long-term rating of ‘BBB+(lka)’.

“MBSL’s rating is driven by our view that the parent, BOC, would provide extraordinary support to MBSL, if required,” the rating agency said.

“We assess MBSL’s standalone credit profile as being weaker than its support-driven rating because of its small franchise with 1.8% market share of sector loans, evolving business model, and weak financial profile, which is reflected in its poor asset-quality metrics, weak profitability and high leverage.”

The full statement is reproduced below:

Fitch Ratings – Mumbai – 22 Feb 2024: Fitch Ratings has assigned Merchant Bank of Sri Lanka & Finance PLC (MBSL) a first-time National Long-Term Rating of ‘BBB+(lka)’.
The Outlook is Stable.

MBSL is 84.5% owned by Bank of Ceylon (BOC, A(lka)/Stable) and other BOC group entities. BOC is the largest banking group in the country.

Key Rating Drivers

Shareholder Support Drives Ratings: MBSL’s rating is driven by our view that the parent, BOC, would provide extraordinary support to MBSL, if required. BOC’s ability to support MBSL is reflected in its credit profile, which is underpinned by its standalone strength. We believe that any required support for MBSL would be manageable relative to BOC’s financial capacity.

Our support assessment also takes into consideration BOC’s majority shareholding in MBSL, increasing product offerings by MBSL that are complementary to those provided by BOC, the parent’s oversight of MBSL’s policies and strategy through board representation, and the usage of the BOC brand by MBSL in its business operations, which raises reputational risk for BOC should MBSL default.

Limited Importance to Parent: MBSL is rated two notches below BOC due to its limited importance to the group. MBSL mainly serves high-yielding, under-banked segments that have limited overlap with BOC’s core customer base, but this is partly offset by BOC’s focus on increasing merchant banking via MBSL to strengthen group feebased revenue. MBSL made up 0.8% of BOC’s consolidated assets at end-September 2023, and makes negligible contribution to group profitability. MBSL also has considerable management independence and there is limited operational integration between the entities.

Weak Standalone Profile: We assess MBSL’s standalone credit profile as being weaker than its support-driven rating because of its small franchise with 1.8% market share of sector loans, evolving business model, and weak financial profile, which is reflected in its poor asset-quality metrics, weak profitability and high leverage. MBSL focuses on vehicle leasing, and gold- and property-backed loans. It has a high risk profile stemming from its significant exposure to borrower segments that are highly susceptible to economic and interest rate cycles.

Stabilising Economic Outlook: We expect the operating environment for Sri Lankan finance and leasing companies (FLCs) to continue to stabilise following the inflation and interest-rate shocks over the past two years. Easing inflation and interest-rate pressures should provide steadier conditions for FLC sector performance. Some headwinds linger, as higher taxes will continue to weigh on household finances in 2024. Investor confidence will also take time to recover. Nonetheless, we expect economic activity in Sri Lanka to improve in the financial year ending March 2025 as GDP growth recovers.

Asset Quality Pressure: The company’s loans that are more than three months past due were high at 25.3% of total loans at end-September 2023 (end-2022: 24.3%) due to its high risk profile. Nonetheless, MBSL’s focus on bad debt recovery has resulted in a decline in the non-performing loan ratio from a much higher level in previous years. We expect a pick-up in borrowers’ business activity and declining interest rates to aid loan collections in the medium term.

Weaker Profitability: MBSL’s pre-tax profit/average asset ratio was low at 0.9% in 9M23 and -0.9% in 2022, primarily due to the sharp reduction in its net interest margin and increase in operating costs on lower business volumes. We expect MBSL’s profitability to improve in the near to medium term, though it will likely remain weaker than that of peers, as its lending operations pick up, borrowing costs decline, and bad debt recovery improves.

History of Capital Shortfalls: MBSL’s capital adequacy ratio (CAR) rose to 16.9% (equity Tier 1 ratio at 13.4%) by end-September 2023 from 12.3% (11.7%) at end-2022, and against the regulatory minimum CAR of 12.5%. MBSL suffered significant capital shortfalls in 2020, with CAR at end-2020 of 5.6% below the minimum required 10.5% due to losses. BOC injected equity into MBSL in 2021 to improve its capitalisation. The breaches resulted in the regulator limiting MBSL’s deposit and lending balances, which affected its business franchise. The caps were removed after its capital ratios increased.

The recent improvement in CAR was due to significant reduction in total gross loans, an increase in gold loans, which carry lower risk weights, in the lending mix, and an increase in Tier 2 capital. We expect capitalisation pressure to ease in the medium term due to improved profitability prospects.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

MBSL’s rating is sensitive to changes in BOC’s credit profile, as reflected in BOC’s National Long-Term Rating, as well as Fitch’s opinion around BOC’s ability and propensity to extend timely extraordinary support. Developments that could lead to a downgrade include:

– meaningful reduction in the parent’s ownership, control or influence that could weaken its propensity to support the subsidiary

– notable decline in MBSL’s capital buffers, indicating reduced timeliness in financial support to back growth or meet regulatory norms

– insufficient or delayed liquidity support from the parent relative to MBSL’s needs, which hinders MBSL’s ability to meet its obligations in a timely manner

– sustained weak performance of MBSL that we believe will weaken the parent’s propensity to support the subsidiary

– a material increase in size relative to the parent that makes extraordinary support more onerous for the parent.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

An upgrade is less likely in the near term. However, a significantly greater strategic role for MBSL within the BOC group, along with closer integration with BOC across broader functional areas and greater sharing of the BOC brand name besides the operational usage of brand, could be positive for the rating in the long term.

Date of Relevant Committee
19 February 2024

References For Substantially Material Source Cited As Key Driver Of Rating
The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings With Credit Linkage To Other Ratings
The rating is linked to rating on the parent, BOC.

This report was prepared by Fitch in English only. The company may prepare or arrange for translated versions of this report. In the event of any inconsistency between the English version and any translated version, the former shall always prevail. Fitch is not responsible for any translated version of this report.

Additional information is available on www.fitchratings.com

Continue Reading

Sri Lanka to get update on GSP+ cycle at EU joint commission meeting

ECONOMYNEXT – Sri Lanka will get an update on the GSP+ trade concessions at a Joint Commission meeting with the European Union, the Foreign Ministry said.

Three working groups on Governance, Rule of Law and Human Rights, Trade and Economic Cooperation, Development Cooperation will report to the Joint Commission.

“The European Union will also brief on the current developments in the EU including an update on new GSP Regulation and the new cycle of the EU GSP+ concessions,” the statement said.

The full statement is reproduced below:

The 26th session of the Joint Commission between Sri Lanka and the European Union will be convened on 22 February 2024 in Brussels. The meeting will be co-chaired by Secretary of the Ministry of Foreign Affairs of Sri Lanka Aruni Wijewardane and EU European External Action Service Deputy Managing Director for Asia Pacific Paola Pampaloni.

Sri Lanka delegation to the Joint Commission will comprise senior officials of the Ministry of Foreign Affairs, Attorney General’s Department and Ministry of Finance.

The EU- Sri Lanka Joint Commission serves as a platform for dialogue and cooperation between Sri Lanka and the European Union, covering a broad range of bilateral and multilateral issues of mutual interest inter alia trade and investments, development assistance, fisheries, education, counterterrorism, governance and human rights, Indo-pacific & maritime security and environment.

The outcome of the three Working Groups which reports to the Joint Commission, Governance, Rule of Law and Human Rights, Trade and Economic Cooperation, Development Cooperation will be presented to the Joint Commission.

The European Union will also brief on the current developments in the EU including an update on new GSP Regulation and the new cycle of the EU GSP+ concessions.

The previous session of the Joint Commission meeting was held in May 2023 in Colombo.

Continue Reading

India’s BAL Investment interested in land around aragalaya site

ECONOMYNEXT – India’s BAL Investment has expressed interest in a land in Colombo which was used as a popular people’s protest site in 2022.

“An acre of land at Baladaksha Mawatha was requested for a joint development project by Bal Investments,” Prasanna Ranatunga, Minister of Urban Development and Housing said in parliament on Thursday.

“They have deposited a fee of 10,000 dollars and signed a memorandum of understanding on 16 February 2024. We are waiting for the government’s assessment report. The project has not been approved, we are still considering it in keeping with all rules and regulations,” Ranatunga said in reply to a statement by National People’s Power MP Vijitha Herath. (Colombo/Feb22/2024)

Continue Reading