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Monday February 6th, 2023

Sri Lanka opposition MP asks government to clarify “domestic creditors” for restructuring

MP Harsha de Silva (l) with President Ranil Wickremesinghe at the tea party hosted in parliament after the president’s throne speech. Image credit: President’s Media

ECONOMYNEXT – Sri Lanka’s opposition lawmaker Harsha De Silva asked the government to clarify “domestic creditors” in the debt restructuring amid a wait and see approach by markets.

Sri Lanka government has started discussions with its external creditors for debt restructuring, but some of the external debts are held by local investors as some local banks have bought international sovereign bonds (ISBs) and Sri Lanka Development Bonds (SLDBs).

Speaking at the Foreign Ministry’s budget debate in the parliament, De Silva, an economist by profession, citing a local paper report said there are conflicting reports in “domestic creditors”.

“One (report) where the governor of central bank Nanadalal (Weerasinghe) saying that Sri Lanka will be able to get IMF board approval by January 2023. And the second by Standard Chartered CEO Bingumal Thewarathanthri saying perhaps by March,” he told the parliament.

“And I quote ‘when there is clarity on the haircuts that is going to be borne by the foreign bond holders, bilateral creditors and domestic creditors’. Who does he (Thewarathanthri) referred to as domestic creditors? Local banks and individuals who have invested in ISBs and SLDBs or those who invested in LKR (Sri Lanka Rupees).”

“There has to be clarity on this. There are so many conflicting stories on how well the restructuring discussions are moving forward.”

Sri Lankan economists and financial experts have said a local debt restructuring could have adverse consequences in the economy including banking sector collapse and people coming to street against respective banks and government if they go for a hair cut.

Opposition parliamentarian Eran Wickremeratne said the country’s first priority should be to make sure the banking system stays stable. ‘

“I have taken the position that I’m against the local debt restructuring we have negotiated our way. I understand that there are gross financial requirements and issues. In the negotiation the time is going to be the issue,” he told EconomyNext on Friday.

“We won’t be able to push through some reforms as fast as we think. We may have to take more time if going to basically not allow an immediate local debt restructuring. What I mean by restructuring is restructuring is not the problem, but I’m not for a haircut.” (Colombo/Nov28/2022)

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Sri Lanka to address SME tax problems at first opportunity: State Minister

ECONOMYNEXT – Problems faced by Sri Lanka’s small and medium enterprises from recent tax changes will be addressed at the first opportunity, State Minister for Finance Ranjith Siyambalapitiya said.

Business chambers had raised questions about hikes in Value Added Tax, Corporate Income Tax and the Social Security Contribution Levy (SSCL) that’s been imposed.

It should be explored on how to amend the Inland Revenue Act, Siyamabalapitiya said, adding that the future months should be considered as a period where the country is being stabilized.

Both the VAT and SSCL are effectively paid by customers, but the SSCL is a cascading tax that makes running businesses difficult.

In Sri Lanka SMEs make up a large part of the economy, accounting for 80 per cent of all businesses according to according to the island’s National Human Resources and Employment Policy.

(Colombo/ Feb 05/2023)

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Sri Lanka revenues Rs158.7bn in Jan 2023 up 51-pct

ECONOMYNEXT – Sri Lanka’s government revenues were 158.7 billion rupees in January 2023 but expenditure and debt service remained high, Cabinet spokesman Minister Bandula Gunawardana said.

In January 2022 total revenues were Rs104.5 billion according to central bank data.

Sri Lanka’s tax revenues have risen sharply amid an inflationary blow off which had boosted nominal GDP while President Ranil Wickremesinghe has also raised taxes.

Departing from a previous strategy advocated by the IMF expanding the state and not cutting expenses, called revenue based fiscal consolidation, he is attempting to do classical fiscal consolidation with spending restraint.

President Ranil Wickremesinghe has presented a note to cabinet requesting state expenditure to be controlled, Gunawardana told reporters.

State Salaries cost 87.4 billion rupees.

Pensions and income supplements (Samurdhi program) were29.5 billion rupees.

Other expenses were 10.8 billion rupees.

Capital spending was   21 billion rupees.

Debt service was 377.6 billion rupees for January which has to be done with borrowings from Treasury bills, bonds and a central bank provisional advance of 100 billion rupees, Gunawardana said.

Interest costs were not separately given. (Colombo/Feb05/2023)

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Sri Lanka’s Ceylon Tea prices down for second week

ECONOMYNEXT – Sri Lanka’s Ceylon Tea prices fell for the second week at an auction on January 31, with teas from all elevations seeing a decline, data showed.

“In retrospect, the decline in prices would be a price correction owing to the overall product quality and less interest from some key importers due to the arrival of cargo at destinations ahead of schedule,” Forbes and Walker tea brokers said.

The weekly sale average fell from 1475.79 rupees to 1465.40 rupees from a week ago, according to data from Ceylon Tea Brokers.

The tea prices are down for two weeks in a row.

High Growns

The High Grown sale average was down by 20.90 rupees to 1380.23 rupees, Ceylon Tea Brokers said.

High grown BOP and BOPF was down about 100 rupees.

“Ex-Estate offerings which totalled 0.75 M/Kg saw a slight decline in quality over the previous week” Forbes and Walker said.

OP/OPA’s in general were steady to marginally down.

Low Growns

In Low Grown Teas, FBOP 1 was down by 100 rupees and FBOP was down by 50 rupees while PEK was up by 150 rupees.

The Low Growns sale average was down by 8.55 rupees to 1547.93 rupees.

A few select Best BOP1s along with Below Best varieties maintained.

OP1                     Select Best OP1’s were steady, whilst improved/clean Below Best varieties maintained.   Others and poorer sorts were easier.

PEKOE                 Well- made PEK/PEK1s in general were steady, whilst others and poorer sorts were down.

Leafy and Semi Leafy catalogues met with fair demand,” Forbes and Walker brokers said.

“However, the Small Leaf and Premium catalogues continued to decline.

“Shippers to Iran were very selective, whilst shippers to Türkiye and Russia were fairly active.”

This week  2.2 million Kilograms of Low Growns were sold.

Medium Growns

Medium Grown BOP and BOPF fell by around 100 rupees

The Medium Growns sale average was down by 33.40 rupees to 1199.4 rupees.

“Medium CTC teas in the higher price bracket witnessed a similar trend, whilst teas at the lower end were somewhat maintained subject to quality,” Forbes and Walker brokers said.

“Improved activity from the local trade and perhaps South Africa helped to stabilize prices to some extent.”

OP/OPA grades were steady while PEKOE/PEKOE1 were firm, while some gained 50-100 rupees at times.

Well-made FBOP/FBOPF1’s were down by 50-100 rupees per kg and more at times.

(Colombo/Feb 5/2023)

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