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Thursday June 8th, 2023

Sri Lanka sees tourism upturn from last minute bookings

ECONOMYNEXT – Sri Lanka is seeing a tourism upturn mostly from last minute bookings and forward bookings are just starting to pick up, industry officials said as the worst currency crisis triggered by the country’s intermediate regime central bank wanes.

Sri Lanka’s rupee collapsed in 2022 after two years of money printing to target an artificially low interest rates, triggering sovereign default, fuel and power shortages, social unrest and political instability, and dealing a blow to tourism.

Returning stability was too late for solid winter season bookings.

“The summer inquiries are coming up,” Salini Deerasooriya, Senior manager of Sales and Marketing, at The Argyle, an upmarket hotel in Hatton, Sri Lanka said

“After the crisis, there is a pick up around 45 pct – 50 pct and the inquiries are all last-minute bookings. It is not like those days.

“The trend has changed even though we can’t find a proper forecast for next month or the month after.”

Sri Lanka welcomed 194,506 tourists in December 2022 and January 2023, compared to 470,097 in December 2019 and January 2020, before the economic crisis and Coronavirus pandemic.

In the first 12 days of March 2023, Sri Lanka has welcomed 76,247 tourists.

Priantha Fernando, Chairman of the Sri Lanka Tourism Development Authority (SLTDA) said China will start picking up by next month.

“But the numbers are increasing as you can see from Europe, the percentage-wise they are contributing,” he said.

Sri Lanka got 67,855 passengers from Europe in January, and 72,957 in February.

Hoteliers say there is a drop in high end travellers.

“Even though the statics are there we see a drop in arrivals for our properties especially the high end ones,” Nadeera Fernando, Head of Sales at W15 Collection,

“Our arrivals from inbound travellers (high end travellers) has been less compared to last year,”

M. Shanthikumar, President of the Hotel Association of Sri Lanka says there is a slight increase in forward bookings.

“So we have to wait and see the materialisation depending on the country’s situation,” he said. “But as an industry we are positive that the tourist arrival will increase.”

Russia, India, Germany, UK and Israel had generated traffic, hoteliers said.

“Destination Management Companies (DMC) as per their feedback is trying to operate a few charter flights” Araliya, Cluster Director General Manager, Ruwan Kalugala said. (Colombo/March 24/2023)

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  1. Dr P Thilakawardhana says:

    I sincerely hope we see light at the end of the tunnel

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  1. Dr P Thilakawardhana says:

    I sincerely hope we see light at the end of the tunnel

Sri Lanka’s shares slip on profit taking and selling pressure

ECONOMYNEXT – Sri Lanka’s shares closed lower on Wednesday after four consecutive gains in previous sessions spiraled into selling interest and profit taking, an analyst said.

The main All Share Price Index was down 0.28 percent or 24.39 points to 8,722.06, this is the lowest the index has been since May 02, while the most liquid index S&P SL20 was down 0.40 percent or 9.92 points to 2,468.44.

“The market was gaining in the previous sessions and there is selling and profit taking present today, due to continuously being on green,” an analyst said.

In the previous sessions the market was seeing gains, due to lowered policy rates and low inflation stimulating buying interest and driving the sentiment up, an analyst said.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

“There are gradual improvements in the market sentiment, with positive sentiments coming in from lowered policy rates and inflation,” an analyst said.

The market generated foreign inflows of 12 million rupees and received a net foreign inflow of 18 million rupees, due to low share prices and discounted shares followed by a dividend announcement.

The market generated a revenue of 554 million rupees, this is the lowest the turnover has been since May 10, while the daily turnover average was 1 billion rupees. From the total generated revenue, the banking sector contributed 120 million rupees, Diversified Banks contributed 115 million rupees and the Capital Goods Industry generated 78 million rupees.

Top losers during trade were Sampath Bank, Commercial Bank and Aitken Spence. (Colombo/June06/2023)

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Sri Lanka Treasuries yields plunge, 12-month down 318bp

ECONOMYNEXT – Sri Lanka’s Treasuries yields plunged across maturities at Wednesday’s auction with the 12-month yield falling 318 basis points, in one of the biggest one day falls, data from the state debt office showed.

The 3-month yield fell 244 basis points to 23.21 percent.

The 6-mont yield fell 339 basis points to 21.90 percent, along with the 12 months to 19.10 percent.

The short-term yield curve is inverted.

The central bank last week cut its policy rate 250 basis points in a signaling move but is not printing money to enforce the rate cut.

The debt office sold all 140 billion rupees of offered securities. (Colombo/June07/2023)

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Sri Lanka forex reserves rise US$722mn in May 2023

ECONOMYNEXT – Sri Lanka’s foreign reserves grew 722 million US dollars to 3,483 million US dollars in May 2023 from 2,761 million US dollars in April, official data showed as deflationary policy and weak credit reduced ‘above the line’ outflows.

Sri Lanka lost almost all its reserve in over two years as the central bank sold reserves and printed money to keep rates down (sterilized reserves sales) including borrowed dollars from India.

Gross official reserves fell to a low of 1,705 million US dollars in September 2022.

Sri Lanka’s central bank hiked rates in April 2022 to slow credit and also stopped printing money after it ran out of borrowed Asian Clearing Union dollars from India.

Sri Lanka’s gross official reserves are made up of both monetary reserves of the central bank and any balances of the Treasury account from loans or grants it gets.

The central bank’s net foreign reserves are still negative after busting up borrowed reserves to suppress rates. By April (before the collection of reserves in May) the central bank’s net reserves were negative by 3.7 billion US dollars.

In May alone 662 million US dollars were bought from the market, Central Bank Governor Nandalal Weerasinghe said.


No pre-determined level to stop Sri Lanka rupee appreciation: CB Governor

Borrowing dollars through swaps and busting them up, was invented by the US Federal Reserve as it was printing money and breaking the Bretton Woods system in the early 1970s.

Sri Lanka received a 350 million US dollar tranche from the Asian Development Bank and 331 million US dollars from the IMF to the Treasury for budget support.

The loans can be sold to the central bank by the government to generate rupees and spend. However, since credit is weak, not all the inflows go out of the country particularly as the central bank is conducting deflationary open market operations on a net basis.

By allowing the rupee to appreciate unlike in previous episodes of recovery in an IMF program, after a bout of money printing, the central bank is bringing down inflation – in some cases absolute prices – and restoring confidence and easing the ‘pain’ of ‘monetary policy’ or stimulus.


Why is Sri Lanka’s rupee appreciating?

Though exports are falling, tourism revenues are also picking up.

The budget support loans, tourism receipts less the reserve collected will widen the trade deficit. Building foreign reserves involves lending money to the US or other western nations and is similar to repaying foreign debt. (Colombo/June07/2023)

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