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Thursday February 29th, 2024

Sri Lanka private creditors said to be frustrated over lack of progress

ECONOMYNEXT – Some of Sri Lanka’s bondholders who were willing to negotiate a deal before a judgement was delivered in a case filed by holdout investor Hamilton Reserve, are frustrated at what is seen as no progress in discussions, sources familiar with their thinking said.

While Hamilton Reserve has gone to court claiming to represent a 250 million dollar or 25 percent share in a billion-dollar bond with a so-called ‘single series’ collective action clause, a large majority of bondholders who have other bonds, have formed a committee to negotiate with Sri Lanka.

Western governments including the US and France have asked that the court action be stayed until negotiations with other bondholders conclude, but prospects of a deal being concluded by the time the first deadline given by the court has now dimmed.

It is not clear yet whether a second extension could be obtained from court.

Lost Opportunity?

If Hamilton Reserve gets a court order in their favour, before an in-principle deal to re-structure sovereign bonds is reached, other investors who were willing to negotiate and take a haircut, would not be happy, the sources said.

If Sri Lanka concludes a deal with bondholders who are willing to negotiate, they could also support Sri Lanka to use other legal options including ‘exit consents‘ procedures with a super majority of 66.66 percent to weaken holdout bonds, the sources said.

For such a move, Sri Lankan banks who are also substantial owners of the bonds in question would have to get participate.

Sri Lanka has already rejected a proposal by the ad hoc committee formed by private investors to exchange a bond which will be tied to developments in gross domestic product, a so-called state contingent bond, which had substantially high coupons in the initial stages.

Related Sri Lanka bondholders propose up to 9.5-pct dollar-GDP linked downside bonds

After that, there had been no negotiations to arrive at a compromise or break the impasse, sources said.

Amid these developments, with the clock running, frustration is mounting at what is perceived to be a lack of interest on the part of Sri Lanka.

Tough Calls

A senior Sri Lankan official said there was definitely interest on the part of Sri Lanka to conclude a deal. Sri Lanka’s government and officials are fighting multiple battles.

Sri Lankan has publicly said there were exchanges were in progress between the respective advisors, though private investors have a different view.

As far as private investors are concerned, the last proper ‘working session’ took place in Morocco.

Amid these developments tough calls may be required in arriving at an an agreement deal.

Private investors had proposed the GDP linked security due to their belief that IMF growth projections were overly pessimistic which requires them to take a bigger loss due to a resultant smaller gross financing need number.

Unless Sri Lanka is willing to give some kind of state contingent instrument, or the IMF revises upwards its macro projections, the prospects of wrapping up a deal quickly is not very bright, according to the sources.

Following the local reaction to the approach taken to re-structure domestic bonds, which however is having the intended results in falling interest rates, giving upside bonds to foreign investors would also to be problematic.

There is also a view among some bondholders that the in-principle deal that was agreed with bilateral creditors and China Exim Bank, broad details of which had now been shared, is not comparable with what was asked from them, the sources said.

Bondholders had formally complained late last year that they were not initially informed of the details of the bilateral deal.

Related Sri Lanka bondholders seek official creditor deal terms, say slow progress on talks

If the bondholders had told the IMF before the review that Sri Lanka was not negotiating in ‘good faith’, the completion of the first review would have been in jeopardy, sources said.

The IMF had said that they expected Sri Lanka to have an in-principle deal by the next review with the private creditors without directly saying whether the review could pass without a deal.

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Sri Lanka’s RAMIS online tax collection system “not operatable”: IT Minister

ECONOMYNEXT – Sri Lanka’s online tax collection system RAMIS is “not operatable”, and the Ministry of Information Technology is ready to do for an independent audit to find the shortcomings, State IT Minister Kanaka Herath said.

The Revenue Administration Management Information System (RAMIS) was introduced to the Inland Revenue Department (IRD) when the island nation signed for its 16th International Monetary Fund (IMF) programme in 2016.

However, trade unions at the IRD protested the move, claiming that the system was malfunctioning despite billions being spent for it amid allegations that the new system was reducing the direct contacts between taxpayers and the IRD to reduce corruption.

The RAMIS had to be stopped after taxpayers faced massive penalties because of blunders made by heads of the IT division, computer operators and system errors at the IRD, government officials have said.

“The whole of Sri Lanka admits RAMIS is a failure. The annual fee is very high for that. This should be told in public,” Herath told reporters at a media briefing in Colombo on Thursday (29)

“In future, we want all the ministries to get the guidelines from our ministry when they go for ERP (Enterprise resource planning).”

President Ranil Wickremesinghe’s government said the RAMIS system will be operational from December last year.

However, the failure has delayed some tax collection which could have been paid via online.

“It is not under our ministry. It is under the finance ministry. We have no involvement with it, but still, it is not operatable,” Herath said.

“So, there are so many issues going on and I have no idea what the technical part of it. We can carry out an independent audit to find out the shortcomings of the software.”

Finance Ministry officials say IRD employees and trade unions had been resisting the RAMIS because it prevents direct interactions with taxpayers and possible bribes for defaulting or under paying taxes.

The crisis-hit island nation is struggling to boost its revenue in line with the target it has committed to the IMF in return for a 3 billion-dollar extended fund facility. (Colombo/Feb 29/2024) 

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Sri Lanka aims to boost SME with Sancharaka Udawa tourism expo

ECONOMYNEXT – Sri Lanka is hosting Sancharaka Udawa, a tourism industry exhibition which will bring together businesses ranging from hotels to travel agents and airlines, and will allow the small and medium sector build links with the rest of the industry, officials said.

There will be over 250 exhibitors, with the annual event held for the 11th time expected to draw around 10,000 visitors, the organizers said.

“SMEs play a big role, from homestays to under three-star categories,” Sri Lanka Tourism Promotion Bureau Chairman, Chalaka Gajabahu told reporters.

“It is very important that we develop those markets as well.”

The Sancharaka Udawa fair comes as the Indian Ocean island is experiencing a tourism revival.

Sri Lanka had welcomed 191,000 tourists up to February 25, compared to 107,639 in February 2023.

“We have been hitting back-to-back double centuries,” Gajabahu said. “January was over 200,000.”

The exhibition to be held on May 17-18, is organized by the Sri Lanka Association of Inbound Tour Operators.

It aims to establish a networking platform for small and medium sized service providers within the industry including the smallest sector.

“Homestays have been increasingly popular in areas such as Ella, Down South, Knuckles and Kandy,” SLAITO President, Nishad Wijethunga, said.

In the northern Jaffna peninsula, both domestic and international tourism was helping hotels.

A representative of the Northern Province Tourism Sector said that the Northern Province has 170 hotels, all of which have 60-70 percent occupancy.

Further, domestic airlines from Colombo to Palali and the inter-city train have been popular with local and international visitors, especially Indian tourists. (Colombo/Feb29/2024)

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Sri Lanka rupee closes at 309.50/70 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 309.50/70 to the US dollar Thursday, from 310.00/15 on Wednesday, dealers said.

Bond yields were slightly higher.

A bond maturing on 01.02.2026 closed at 10.50/70 percent down from 10.60/80 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.10 percent from 11.90/12.00 percent.

A bond maturing on 01.07.2028 closed at 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.30/45 percent up from 12.20/50 percent.

A bond maturing on 15.05.2030 closed at 12.35/50 percent up from 12.25/40 percent.

A bond maturing on 01.07.2032 closed at 12.55/13.00 percent up from 12.50/90 percent. (Colombo/Feb29/2024)

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