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Thursday June 1st, 2023

Sri Lanka shares fall on selling pressure

ECONOMYNEXT – Sri Lanka shares fell for the third straight session on Monday as investors await assurance on IMF fund.

“Selling interest is bringing the index down as Investors are not happy to invest until they see some solid assurance on IMF loan and the island’s debt restructure,” an analyst said.

During the early hours of trade, dealers said the market slipped following President Ranil Wickremesinghe comment that the IMF deal would take first half to stabilize instead of the anticipated first quarter.

Towards the end of the session market has got some buying interest on Softlogic companies on speculation of a merger.

The main All Share Price Index (ASPI) closed 0.52 percent or 43.51 points lower at 8,380.60.

ASPI lost 0.77 percent in the first week of trade after losing 1.8 percent in December.

Market has been falling since the year started due to the proposed 65 percent electricity tariff hike while the government also hiked various excise duties.

The more liquid index S&P SL20 closed 1.23 percent or 32.07 points lower at 2,580.87.

Colombo stocks ended 2022 losing 30.5 percent from 2021’s 80 percent gain.

First quarter of 2023 is expected to be negative with the taxations going in to effect from January 1st and there are talks of a hike in electricity tariffs.

Whereas the second quarter was expected to be more positive with the anticipation of IMF getting through and with the interest rates expected to ease as the taxes starts to generate funds.

The market witnessed a turnover of 2.3 billion rupees, slightly lower than 2022’s daily average turnover of 2.9 billion rupees.

The market saw a net foreign inflow of 12 million rupees. The net foreign inflow for the first week of January is 63 million rupees. The total foreign inflow of 2022 was 31 billion rupees.

Lanka IOC dragged the index down to close at 4.4 percent lower at 192 rupees.

LOLC fell 3.7 percent to close at 379.3 rupees and John Keells Holdings closed 1.6 percent lower at 135.8 rupees a share. (Colombo/Jan09/2023)

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Sri Lanka cuts policy rates 250 basis points

ECONOMYNEXT – Sri Lanka cuts policy rates 250 basis points lowering the rate at which liquidity is injected to markets to 14.0 percent to from 16.50 percent, saying inflation was falling faster than expected.

“The Board arrived at this decision with a view to easing monetary conditions in line with the faster than expected slowing of inflation, gradual dissipation of inflationary pressures and further anchoring of inflation expectations,” the central bank said in its May policy statement.

“The commencing of such monetary easing is expected to provide an impetus for the economy to rebound from the historic contraction of activity witnessed in 2022, while easing pressures in the financial markets.”

“Headline inflation (year-on-year), based on the Colombo Consumer Price Index (CCPI), continued the deceleration path, faster-than-projected earlier, supported by the lagged impact of tight monetary and fiscal policies, strengthening of the Sri Lanka rupee, reduction in fuel and gas prices, normalisation of food prices and the favourable impact of the statistical base effect.

“The full passthrough of the large appreciation of the exchange rate observed recently is yet to be
reflected in the price levels, and it would quicken the disinflation process, as the prices of
imported goods are expected to decline further in the period ahead.”

Sri Lanka’s balance of payments has been surplus for several months and the central bank has allowed rates the rupee to appreciate.

Market rates however has been high amid expectations of a domestic debt re-structuring and mainly government borrowings, with private credit negative and state enterprises also cutting losses.

“With greater macroeconomic stability being achieved through corrective policy measures, particularly in terms of faster-than-expected deceleration of inflation thus far during 2023 and the benign inflation outlook and the easing of the BOP pressures, the Monetary Board of the Central Bank of Sri Lanka, upon carefully assessing the current and expected developments, decided to relax the stance of monetary policy and reduce the policy interest rates.”

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Sri Lanka exports down in April, trade deficit up from March, rupee stronger

ECONOMYNEXT – Sri Lanka’s exports fell 12.6 percent from a year ago to 849 million US dollars in April 2023, amid weaker external demand, while imports were down 15.8 percent to 1,431 million Us dollars, central bank data showed.

Exports also fell 1,037 million dollars in March 2023, amid seasonal effects.

The trade deficit expanded to 583 million US dollars in April from 412 million US dollars in March 2023. Imports were at 1431 million US dollars in April from 1,450 million dollars in March.

Imports can pick as tourism, worker remittances and net inflows to government go up.

The rupee continued to appreciate.

“Exchange rate showed a notable appreciation during April 2023 with the continued improvement in liquidity in the domestic foreign exchange market, the discontinuation of the daily guidance on exchange rates,” the central bank said.

Up to April exports were down 9 percent to 3.8 billion rupees and imports were down 28 percent to 5.2 billion rupees and the trade deficit was 1.4 billion rupees.

Investment goods imports were down in April amid a contraction in credit.

“Almost all types of goods listed under the three main investment good categories, namely machinery and equipment, building material and transport equipment, recorded a decline,” the central bank said.

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Sri Lanka President discusses debt restructure, program progress with IMF

ECONOMYNEXT – Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

State Minister of Finance Shehan Semasinghe, Senior Advisor to the President on National Security and Chief of Presidential Staff Sagala Ratnayake was also in the meeting.

Secretary of the Ministry of Finance Mahinda Siriwardena, Central Bank Governor Nandalal Weerasinghe, Deputy Director of the International Monetary Fund Anne Marie Gulde, and Resident Representative IMF in Sri Lanka Sarwat Jahan, attended this event. (Colombo/June01/2023)

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