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Wednesday December 7th, 2022

Sri Lanka starts new payments services as online banking soars in Covid-19 lockdowns

ECONOMYNEXT – Sri Lanka’s interbank clearing house, Lanka Clear, is starting an easy-to-use mobile cash transfer and an automatic bill payment facility as internet banking use in the country soared during a Coronavirus crisis when curfews confined people to their homes, an official said.

Sri Lanka had seen a 600 percent growth in internet banking and a 200 percent growth in payments, during Covid-19 curfews, Channa de Silva, Chief Executive Officer of LankaClear (Pvt) Ltd, Sri Lanka’s interbank clearing house said.

Sri Lanka imposed strict curfews from later March, which were relaxed in May as part of successful efforts to curb the spread of Coronavirus.

Sri Lanka has confirmed 2,047 Coronavirus cases up to July 02, of which 947 were linked to a Navy camp. Another 787 were foreign returnees or foreigners and there were 313 cases from the community.

No new domestic cases outside of the Navy cluster had been found since April 30.

“What we realized in the last eventful three months is that the way forward is digital,” De Silva said.

“And the issue most banks face was to get the customers on board to adopt the technology.”

Lanka Clear (Pvt) Ltd had started a mobile phone cash transfer service with a nickname or payment exchange name (PEN) which is available with Sampath Bank and National Savings Bank as well as an automatic bill payment facility, or Direct Debit Authorization.

These initiatives were supposed to be launched in mid-March but due to the COVID lockdowns, it was postponed.

“Now we have a consumer base which is stretched, which is more towards digital,” De Silva said. “So now is the time we need to go and capture them because they have seen the benefits so they will stick to it.”

Nick Names linked to mobile phone number

Payment Exchange Name (PEN) is a real-time peer to peer (P2P) facility for to transfer cash from a mobile phone with an easy to remember nickname which is linked to their mobile phone number and an underlying bank account.

Banks will assign each account with a unique nickname that will be linked to the mobile number that is registered with them, but it could also be linked to the national identity card or driver’s license.

“In future, you will not need to know branch code, account number, all that,” Channa de Silva, Chief Executive Officer of LankaClear said.

“The receiver does not need to divulge any bank credentials. This also eliminates fund transfers to incorrect accounts”.

National Savings Bank and Sampath Bank are the first banks to offer the facility which allows payments of up to 500,000 rupees.

Under PEN only the sender will need to have a smartphone and not the receiver as money will go directly to a bank account, which will make it easier for people in the rural areas to receive payment.

De Silva said the PEN is a system similar to the Unified Payment Interface (UPI) in India. UPI in India has carried out 1.23 billion transactions with a value of 2.2 trillion Indian Rupees by May 2020.

He said less tech-savvy people could also use the system as it is based on nicknames.

Periodic payments with an upper limit

Lanka Pay also launched Direct Debit Authorization (DDA), which allows utility bills or installments to be paid automatically when they fall due like a standing order.

However, the customers could set a limit where only cash for bills below or up to the limit could be deducted by the service provider.

With DDA, customers would have the convenience of giving a mandate to the bank of a third party to pull up to a certain amount of funds from their bank account on a given date, without the customer having to initiate the payment, Lanka Clear said.

Electricity bills, water bills, telephone bills, or other payments like insurance premiums could be made using DDA.

These initiatives were supposed to be launched in mid-March but due to the COVID lockdowns, it was postponed.

Once all the banks come on board, banks, insurance companies, leasing companies, and utility companies would find it a useful feature to get their dues on time, De Silva said.

“For most people payment is not a problem but time is,” he said.

Peoples Bank, National Savings Bank, Standard Chartered Bank, Deutsche Bank, Public Bank, Seylan Bank, LOLC Finance, Commercial Leasing and Finance, and Citizens Development Finance PLC are providing DDA to their customers. (Colombo/July02/2020-sb)

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Crisis-hit Sri Lanka sees recovery in cruise ship tourism from zero

ECONOMYNEXT – Seventeen cruise ships are scheduled to arrive in Sri Lanka next year with
Queen Mary 2, one of the largest and popular ships, Colombo’s harbor master said, as the island nation is looking for alternative avenues to boost its faltered tourism sector.

The rise is expected to bring thousands of high end tourists with higher spending capacity after two years. The island nation saw a record high 54 ships in 2019, rising from the previous year’s 42, Nimal Silva, Colombo Port Harbor Master said.

“The 2019 was one of the best years and in 2020 there were more than 60 scheduled vessels to
call but with COVID pandemic all hell broke loose,” Silva told EconomyNext.

Fourteen cruise ships are scheduled to call from January-May next year and another three are scheduled to arrive in Colombo in November, when the peak tourism season begins.

Cruise tourism cycle begins in Sri Lanka from October to May with a dip during the monsoon

Sri Lanka welcomed two cruise ships in November after almost two years.

Three ships are scheduled to arrive in December and Azamara Quest, carrying at least 722 tourists, arrived in Colombo on December 3 and is now heading to Hambantota.

On December 18, Le Champion carrying 264 will arrive in Colombo and depart to Mumbai and the third vessel, Silver Spirit will arrive in Colombo on December 23 carrying up to 648 passengers.

There are two scheduled in January, one in February, and four in March next year, according to the harbormaster.

“Next year more ships could schedule, so far these are the confirmed ones now,” he said.

This also generates income for the port and the prices are charged according to the size of the

Silva said the first medium sized-cruise vessel, 229 meters long, generated about 14,000 dollars
for docking in the port for a day.

He said Queen Mary 2, a 325 meter long ship and one of the largest cruise ships in the world, is also
scheduled to call at Colombo in February. It can carry up to 3200 passengers.

Silva said almost all the ships that were scheduled have arrived on the island and therefore, he is
confident all the ships including Queen Mary 2 will arrive in Sri Lanka.

“Only one ship has been canceled thus far. There are no last minute cancellations if there were some they would have informed us by now,” Silva said. (Colombo/Dec07/2022)

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Sri Lanka President says 2015-2019 policy struggle was ‘warfare’

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe said his attempts to reverse the inward-looking protectionist policies and fix state finances during his last term as Prime Minister was opposed both by politicians and business interests.

“In the 4.5 years as prime minister it was an effort to take this economy out in a different direction,” President Wickremesinghe told an economic forum organized by Sri Lanka’s Ceylon Chamber of Commerce.

“We were able to get a surplus in the primary budget. But it was warfare.

“Politicians wanted to protect their power, businessmen wanted to protect their profits and many others wanted to see what the country would provide them free of charge.”

Wickremesinghe was unable to bring private investment to the port under apparent internal political opposition. Relations with President Maithripala Sirisena also soured and he appointed his own economic advisors.

Meanwhile Wickremesinghe’s free trade agenda was hit by monetary instability as the central bank printed money under flexible inflation targeting and triggered forex shortages which were followed by trade controls.


Sri Lanka controls imports in ‘Nixon-shock’ move to protect soft-pegged rupee

Sri Lanka President calls to expand Nixon shock as rupee falls

Wickremesinghe’s ‘Yahapalana’ administration also went on a spending spree called ‘100-day program’ in 2015 triggering a currency crisis in 2015/2016 as the central bank printed money to suppress rates.

The central bank however had already started injecting liquidity and losing reserves (by terminating term repo deals) from the fourth quarter of 2014 as domestic credit recovered from a 2012 currency crisis before his administration came to power.

The rupee fell from 131 to 152 and stabilization policies led to an output shock. The International Monetary Fund then taught the agency which had already depreciated the currency from 4.70 to 152 to the dollars seeking bailouts 16 times, how to calculate an output target.

Under Finance Minister Mangala Samaraweera taxes were raised and budget were fixed in 2018 to bring deficits back to pre-2015 levels, though state spending went up from 17 to around 20 percent of GDP under the spendthrift ‘revenue based fiscal consolidation’ where cost cutting was dropped.

The central bank then printed money by purchasing bonds from banks to target the yield curve, jettisoning a bills only policy established by ex-Central Bank Governor A S Jayewardena, through term reverse repo and overnight injections taking the rupee from 151 to 162 to the US dollar.

The central bank also created money by entering into a swap with the Treasury in 2018, a type of strategy used by speculators to bring down East Asian pegs putting, further pressure on the currency from around July 2018 onwards.


What went wrong; Sri Lanka’s illiberal economics and unsound money : Bellwether

Stabilization policies then led to another output shock. As forex shortages came Sri Lanka resorted to heavy external borrowing as it was unable to settle maturing loans with domestic borrowings.

After two currency crises and output shocks, macro-economists of the new administration cut taxes saying there was a ‘persistent output gap’ and printed even more money for stimulus (close the output gap). (Colombo/Dec07/2022)

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China calls for joint effort to ease Sri Lanka’s debt burden, no mention of restructure

ECONOMYNEXT — A top Chinese official has expressed hope that countries and multilaterals like the International Monetary Fund (IMF) work with Beijing to play a constructive role in easing Sri Lanka’s debt burden, stopping short of an assurance on debt restructuring.

Chinese Foreign Ministry spokesperson Mao Ning was quoted by international media as saying on Monday December 05 that China attaches high importance to Sri Lanka’s difficulties and challenges.

She was responding to a question on media reports that an IMF team will be in China this week to discuss faster progress on debt restructuring for countries including Sri Lanka, which is negotiating for an IMF bailout.

“On Sri Lanka’s debt issue, I’d like to stress that we support the financial institutions in working out ways with Sri Lanka to properly solve the issue,” said Ning.

“We also hope relevant countries and international financial institutions will work with China and continue to play a constructive role in helping Sri Lanka overcome the current difficulties, ease its debt burden and realise sustainable development,” she added.

She said China has long-standing sound cooperation with the IMF and other international economic and financial institutions.

The spokesperson avoided any mention of debt restructuring, a prerequisite for the IMF extended fund facility (EFF).

Nearly a fifth of Sri Lanka’s public external debt is held by China, according to one calculation. The emerging superpower has been generous in Sri Lanka’s time of need, extending much needed assistance in the form of rice, medicine and other commodities.

The latest arrival in the Colombo port from China was 2 billion Sri Lankan rupees worth of essential medicines and medical supplies, delivered on Tuesday.

However, critics say China is doing everything but what Sri Lanka really needs: agreeing to restructure its outstanding debt.

At least one Sri Lankan opposition MP has demanded that China agree to a restructure.


Sri Lanka debt restructuring: opposition MP warns of “China go home” protests

Tamil National Alliance (TNA) legislator Shanakiyan Rasamanickam, who had been on the warpath with Beijing over an apparent lethargy in helping the crisis-hit island nation restructure its debt, recently warned of a “China, go home” protest campaign similar to the “Gota, go home” protests that unseated the country’s powerful former president in July.

The MP told parliament last Friday December 02 that Sri Lanka owes 7.4 billion dollars to China, a nearly 20-trillion dollar economy, and if the latter was was a true friend, it would agree to either write off this debt or at least help restructure it.

Colombo has been vague at best on the status of ongoing restructure talks with Sri Lanka’s creditors, and opposition lawmakers and others have expressed concern over what seems to be a worrying delay. Rasamanickam and others have claimed that China, Sri Lanka’s largest bilateral creditor, is the reason for the apparent standstill. (Colombo/Dec06/2022)

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