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Sunday December 10th, 2023

Sri Lanka Port City Economic Zone to have offshore banking, stock exchanges

ECONOMYNEXT – Sri Lanka’s Colombo Port City Special Economic Zone will have offshore banks for which regulations will be made by the President and licensed and also stock exchanges which will be regulated by an Economic Commission that will administer the area, according to a draft law.

Licenses for offshore banking will be issued Sri Lanka’s Banking Act by the Finance Minister with the concurrence of the of President on a recommendation of the Colombo Port City Economic Commission, which administers the special economic zone.

The concurrence of the Monetary Board of the central bank will also be sought.

The President will also make regulation for offshore banking in consultation with the Minister of Finance and Monetary Board.

The Commission may also revoke a license after hearing is granted to the licensee. The concurrency of the Monetary Board will be sought.

According to the draft law offshore banking businesses may:

a)accept savings, time and demand deposits from any authorised person or a non-resident in any
designated foreign currency;

(b) borrow any sum in a designated foreign currency from any non-resident;

(c) extend accommodation to any non-resident in any designated foreign currency;

(d) engage in any transaction in any designated foreign currency with any other offshore unit;

(e) engage in any other transaction in a designated foreign currency, with a non – resident;

(f) engage in any other transaction as may be envisaged under this Act;

(g) engage in any transaction permitted under the Foreign Exchange Act, No. 12 of 2017; or

(h) engage in any other transaction in any designated foreign currency, authorised by the Commission
with the concurrence of the Monetary Board.

The Colombo Port City will also regulate any stock exchange set up in the area using the Securities and Exchange Commission Act.

The SEC Act will remain in force until the Port City Commission issues its own regulations. Concurrence of the SEC will be sought to apply the rules.

The Colombo Port City will be fully dollarized and workers will be paid in foreign currency and get tax free salaries.

Unlike other financial centres such as Hong Kong (near orthodox currency board), Singapore modified currency board, Dubai (currency board like system), Cayman Islands (currency board like system) Sri Lanka itself has a highly unstable soft-peg which is frequently subject to currency crises.


Sri Lanka’s Port City Economic Commission to by-pass key laws, give own tax breaks

Sri Lanka Port City Special Economic Zone to be dollarized

Though Port City, will be fully dollarized and therefore incapable of running into currency crises, it is not clear what the effect will be on sovereign rating ceilings on entities operating within the area. (Colombo/Mar29/2021)

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ADB USD200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”

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Sri Lank in blackout as power grid hit by cascading failure

ECONOMYNEXT – Sri Lanka suffered a blackout as Saturday evening as the state-run Ceylon Electricity Board grid was hit by a cascading power failure.

The cascading failure is believed to have been triggered by the failure of the Kothmale-Biyagama transmission line.

“The Ceylon Electricity Board wishes to inform our customers that due to the failure of Kotmale – Biyagama main transmission line, an island wide power failure has occurred,” CEB Spokesman Noel Priyantha said.

“Step by step restorations are underway and it may take few hours to completely restore the power supply.”

With hydro plants running flat out, a outage of the line tends to create a big imbalance in the demand and supply, leading to tripping of more lines and generators.

Lines can trip due to lightening strikes, or equipment failures.

Sri Lanka last suffered a cascading failure in December 2021, due to the failure of the same transmission line.

RelatedSri Lanka power blackout as grid hit by cascading failure

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Sri Lanka to host regional Food and Agriculture Organization conference

ECONOMYNEXT – Sri Lanka will host the 37th session of the Asia Pacific Regional Conference (APRC) of the United Nations Food and Agriculture Organization (FAO), from February 19-22, 2024 in Colombo.

The Conference will bring together agriculture ministers and officials from 46 countries across the region to discuss challenges in food and agriculture.

“The 37th APRC will provide a vital platform for regional collaboration, benefitting the agricultural landscape, fisheries sector and environment of Sri Lanka,” Minister Mahinda Amaraweera said at a press briefing on Friday (8) to announce the conference.

FAO has had an active presence in Sri Lanka for over 40 years. “FAO has supported the country in the implementation of Good Agricultural Practices (GAP), and the development of the fisheries sector for growth and climate resilience,” Vimlendra Sharan, FAO Representative for Sri Lanka and the Maldives said.

“The APRC conference will be an opportunity to highlight the innovative approaches introduced in partnership with the government.”

By hosting APRC, Sri Lanka hopes to demonstrate the country’s dedication to the growth of sustainable agriculture, and showcase its commitment to sustainable agricultural development.

The APRC agenda will include a forum on agritourism, especially requested by the Sri Lankan government.

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