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Tuesday April 23rd, 2024

Sri Lanka pledges to co-oporate with UN on labour issues – MFA

FILE PHOTO – United Nations Human Rights Council/UNHRC.org

ECONOMYNEXT – Sri Lanka has pledged to corporate with the United Nations system to protect vulnerable labour groups while the island nation was appraised by the global body on the progress it has made with regard to making the country a ‘child labour free zone’, Ministry of Foreign Affairs (MFA) said on Wednesday (01).

United Nations Special Rapporteur on contemporary forms of slavery Tomoya Obokata is in Sri Lanka on a seven-day visit to examine labour conditions in various sectors and industries including apparel, tea plantations, tourism, and domestic work.

“The Foreign Minister outlined that Sri Lanka was conscious of protecting vulnerable labour groups and emphasized that Sri Lanka will continue to cooperate with the United Nations system,” the ministry said in a statement on the meeting held last Friday (26).

“During the meeting, the Foreign Minister discussed Sri Lanka’s progress related to labour welfare and the constructive steps taken by the government to eradicate child labour.”

Foreign Minister G L Peiris also elaborated on steps taken to bring our labour laws in line with international standards in a number of areas including child labour, migrant workers and debt bondage.

“The Special Rapporteur commended Sri Lanka on the progress made with regard to making Sri Lanka a ‘child labour free zone’.”

The Special Rapporteur is expected to assess the implementation of laws and policies and systemic barriers that hamper access to decent work, including for migrant workers in Sri Lanka, the UN said in a statement.

Obokata is also scheduled to assess the government’s commitment and its measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, including recruitment and use of child soldiers, and by 2025 end child labour in all its forms to achieve Sustainable Development Goals.

The move comes as Sri Lanka is facing a risk of losing access to the Generalised Scheme of Preferences plus (GSP+), a lucrative trade concession worth over 500 million US dollars from the European Union, next April due to the island nation’s failure to fulfil some of the 27 international conventions it had agreed to with the EU.

The EU’s special incentive arrangement for sustainable development and good governance also involves issues of human rights which President Gotabaya Rakalaksa’s government has been asked to address by both the EU and the United Nations Human Rights Council (UNHRC).

The government, which had earlier vehemently refused to heed the EU’s and UN’s calls, has now slowly started to address some of their concerns as the 81 billion US dollar economy faces an unprecedented debt and foreign exchange crisis.

The government has also started to engage with many Western nations following its repeated reluctance to build stronger tie, charging that Western nations have been backing an agenda to divide the country.

The Special Rapporteur will present a report on his visit from at the 51st session of the UNHRC to be held in September 2022. (Colombo/Dec 1/2021)

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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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Air Asia, SriLanka’s FITS, Hayleys bid for SriLankan Airlines

ECONOMYNEXT – Malaysia’s AirAsia group, FITS Aviattion of Sri Lanka and Hayleys are among bidders for state-run SriLankan Airlines, a statement from the State-owned Enterprises Restructuring Unit said.

Dharshaan Elite Investment Holding (Pvt) Ltd, . Sherisha Technologies Private Limited and Treasure Republic Guardians Limited are the other bidders.

The responses will be evaluated to choose qualified investors.

International Finance Corporation, as Transaction Advisors for the divestiture of SriLankan Airlines Limited, will continue to advise the government, the statement said. (Colombo/April22/2024)

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