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Monday December 11th, 2023

Sri Lanka solar projects of 200MW are not viable after currency collapse

ECONOMYNEXT – Around 200 MegaWatts of ground-mounted solar projects awarded before the latest collapse of Sri Lanka’s rupee have been halted as they can no longer be carried out at current costs, according to the Federation of Renewal Energy (FRED), an industry association.

Sri Lanka’s renewable generation costs plunged after competitive bidding was introduced in 2015 and new operators came in. Global renewable costs, especially in wind had also fallen in recent years with newer technology.

Renewable prices fell to as low as 12 rupees a unit under competitive bidding. However global renewable energy prices also went up as fuel prices went up last year.

FRED says after the tendering process was introduced in 2015 replacing a feed-in tariff (an administratively decided rate), the number of new projects slowed. Now non-competitive feed in tarriffs have been re-introduced.

There are close to 200MW of ground-mounted solar projects awarded in 2021 at competitive tariffs which are not viable under the current context, according to data released by FRED at a news conference.

In 2022, the rupee collapsed from 200 to 360 to the US dollar after two years of money printing to artificially keep down rates sharply pushing up the cost of solar panels and other materials.

Sri Lanka suffers forex shortages and the rupee collapses from time to time as the central bank prints money to mis-targets interest rates.

The power to mis-target rates and create forex shortages was given to economists and bureaucrats in 1950 through the creation of a soft-peg. Attempts by some economists to take the power to mis-target rates away and restore monetary stability has so far failed.

Since the hard peg was broken in 1950 the rupee has fallen from 4.70 to 360 to the US dollar. (Colombo/Oct05/2022)

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Sri Lanka rupee opens at 327.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee opened at 327.00/50 to the US dollar on Monday, from 327.00/30 Friday, dealers said.

On the Colombo Stock Exchange, both indices opened up: The All Share Price Index 0.28 percent at 10,823, and the S&P SL20 0.35 percent at 3,113.85.

Bond yields were up.

A bond maturing on 01.08.2026 was quoted at 14.05/20 percent from 14.05/15 percent.

A bond maturing on 15.01.2027 was quoted at 14.05/20 percent from 14.10/25 percent.

A bond maturing on 01.07.2028 was quoted at 14.20/50 percent from 14.20/35 percent.
(Colombo/Dec11/2023)

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Sri Lanka promoting Buddhist tourism from Vietnam, ASEAN

ECONOMYNEXT – Sri Lanka is planning to boost Buddhist tourism by linking temples in the country with those in East Asia, Foreign Minister Ali Sabry said after to welcoming a delegation of monks from Vietnam.

President Ranil Wickremesinghe, and Minister Sabry have initiated a temple-to-temple program where 100 Sri Lanka temples will be linked with counterparts in the Association of South East Asian Nations region.

“Tourism development will get a lot of growth with the temple-to-temple program,” Minister Ali Sabry said.

Along with the delegation of monks, five travel agents from Vietnam were also invited.

Under the first phase of the Temple-to-temple programs, several monks from Sri Lanka had received invitations from Indonesia, Malaysia, South Korea and Vietnam the Foreign Ministry said.

The Temple-to-Temple diplomacy program will be extended to Singapore, Japan, Thailand and Cambodia during the second phrase of the program.

Sri Lanka is targeting 2.3 million tourists in 2023, after getting about 1.5 million this year. (Colombo/Dec10/2023)

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ADB $200mn 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.”
(Colombo/Dec9/2023)

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