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Tuesday June 18th, 2024

Sri Lanka seeks UAE help in buying oil

ECONOMYNEXT – Sri Lanka has requested the United Arab Emirates for concessionary arrangements to buy oil, the foreign ministry said, as the island nation faces a foreign exchange shortage and its state-owned oil retailer Ceylon Petroleum Corporation (CPC) struggles to pay past dollar debts.

Foreign Minister G L Peiris’ made the request when he met UAE Industry and Advanced Technology Minister Sultan Al Jaber on the sidelines of the 76th session of the United Nations General Assembly (UNGA) in New York.

“[Minister Pieris] focused in particular on the country’s requirement of oil, and requested concessionary arrangements from the UAE,” the foreign ministry said in a statement.

“Minister Al Jaber, responding positively, said that the UAE would be happy to assist, and proposed the establishment of a strategic framework to take the process forward.”

Sri Lanka is also in discussion with the Indian government for a 500 million US dollar credit line to buy fuel and delay payments.

Related:  Sri Lanka in talks with India for $500mn credit line for oil: Jayasundera

The move comes amid an import bans and restrictions that have been imposed to preserve foreign currency due to a shortage as the country’s tourism industry, one of the key foreign exchange revenue sectors, has come to a standstill due to the pandemic.

Remittances, Sri Lanka’s top foreign exchange revenue earner, have also started to decline.

The state-run CPC, meanwhile, owes nearly 3.3 billion US dollars to the two main state banks, almost equal to Sri Lanka’s current foreign exchange reserves, in loans taken during periods when there was pressure on the currency.

The state oil distributors import crude from the Middle East and refined products from other countries including Singapore. A unit of the Indian Oil Corporation (OIC) also imports and distributes refined oil.

Sri Lanka’s CPC had borrowed dollars from state banks to pay import bills instead of buying dollars from the forex market whenever the central bank printed money and created forex shortages, analysts have said.

In 2019, the CPC borrowed around 900 million US dollars taking the total loans under Treasury guarantees to 1.8 billion US dollars despite market pricing oil, as money was printed to target a call money rate and close an ‘output gap’.

The price hike in global oil prices has forced the island nation to spend more on oil imports this year. The country’s oil bill has jumped 41.5 percent to 2 billion US dollars in the first seven months of this year, compared to last year. (Colombo/Sep24/2021)

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Sri Lanka telecommunications bill some clauses ruled unconstitutional by SC: Speaker

ECONOMYNEXT – Sri Lanka’s Supreme Court has found a number of clauses in a proposed amendment to the Telecom Telecommunications Amendment bill unconstitutional, speaker Mahinda Yapa Abeywardana said.

“Clause No 8, proposed section 9A 2 of the bill is inconsistent with Article 12 1 of the constitution, however this inconsistency shall cease if word ‘may’ will be replaced with word ‘shall’ as set out in the determination of the supreme court.”

“Clause No 9 is inconsistent with Article 12 1 of the constitution and only can be passed with special majority required under paragraph 2 of the Article 84. However, the inconsistency shall cease if clause is amended as set out in the determination of the supreme court.

Clause No 12, proposed section 17 10 of the bill is inconsistent with Article 12 1 of the constitution and can only be passed with special parliament majority required under Article 84 paragraph 2. However, the inconsistency shall cease if clause is amended as set out in the determination of the supreme court.”

Sections of clauses 13, 18, 20, 33 and 35 were also in violation of the constitution, and could only be passed by a special majority of parliament. (Colombo/Jun18/2024)

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Sri Lanka to exempt one house from imputed rent wealth tax: President

ECONOMYNEXT – Sri Lanka will exempt one house from a proposed wealth tax outlined in an International Monetary Fund program, President Ranil Wickremesinghe said.

About 90 percent of the people’s houses are likely to be exempt from the proposed tax, he said.

“[O]ne house will be exempt from this,” President Wickremesinghe told parliament Monday.

“It is going to have a very high threshold and I do not think the vast majority of the people in this country should even be worried about their house

“Don’t worry your house will be safe.”

The IMF program document however did not mention an exempt on one house, but did mention a threshold.

Taxing houses and thrift in general could have detrimental effects on people’s well-being housing stock and their willingness to remain in the country without migrating, critics say.

Related Sri Lanka to tax imaginary rents on houses under IMF deal

The mechanism of imputed rents was used because rates on houses was assigned to provincial councils and courts could strike it down.

Opposition legislator Harsha de Silva said the Samagi Jana Balwegaya welcomed President Wickremesinghe’s statement. (Colombo/June18/2024)

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Sri Lanka rupee opens weaker at 304.30/55 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee opened at 304.30/55 to the US dollar on Tuesday, while bond yields were broadly stable, and stocks opened 0.02 percent up, dealers said.

The rupee closed at 304.00/15 to the greenback on Friday, before the long weekend.

In equities, Colombo’s All Share Price Index opened 2.06 points higher at 12,312 while the S&P SL20 of more liquid stocks opened down 0.07 percent or 2.63 points to 3,642.

The market turnover was 3.3 million rupees.

In the secondary market, yields were broadly stable, dealers said.

A bond maturing on 15.12.2026 was quoted at 10.10/30, up from 10.05/30 percent.

A bond maturing on 01.07.2028 was quoted at 11.05/30 percent, up from 11.05/20 percent.

A bond maturing on 15.09.2029 was quoted stable at 11.80/85 percent.

A bond maturing on 01.10.2032 was quoted at 11.95/12.10 percent, down from 12.00/10 percent.
(Colombo/Jun18/2024)

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