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Monday February 6th, 2023

Sri Lanka stx at over 5-mth high after IMF statement: market sees foreign inflow for 14th session

ECONOMYNEXT – Sri Lanka stocks rose on Friday (02) for the fourth session to end at more than a five-month high on Friday (02) with renewed buying interests after investor appetite for risky assets boosted following an IMF staff level deal was finalized a day before, brokers said.

The main All Share Price Index (ASPI) shot up 0.67% or 61.64 points to 9,316.45, its highest since March
29.

The market generated 4.2 billion rupees in turnover, higher than this year’s average daily turnover of
3.14 billion rupees.

The market saw a net foreign inflow was 525.7 million rupees on Friday. The bourse has seen a net
foreign inflow of 1.2 billion rupees so far this year after a 2.6 billion rupees of net inflow in the last 14 straight sessions.

The IMF announced that it has reached staff level agreement with Sri Lanka on Thursday (01), with
possible a 48-month 2.9 billion dollars in Extended Fund Facility (EFF) once the debt restructuring is
done.

This facility is subjects to many conditions and the agreement needs to be approved by IMF
management and the Executive Board.

Sri Lanka’s parliament passed a reform oriented interim budget for 2022.

The budget is aimed at almost doubling the tax-to-GDP ratio to 15 percent by 2025 from 8.2 percent at
the end of 2021. President Ranil Wickremesinghe, who is also the island nation’s finance minister,  raised the value added tax to 15 percent with effect from Thursday from 12 percent. The increase comes after he raised the VAT to 12 percent on May 31 from an earlier 8%.

A new monetary law was also presented in the budget reading to prevent money printing and political
interference in the Central Bank.

Sri Lanka defaulted on its foreign debt on April 12 and deepened an economic collapse into a political
crisis. Sri Lanka is facing its worst fuel and economic crisis in its post-independence era. The economy is
expected to contract more than 8 percent this year.

The more liquid S&P SL20 index ended 0.14% or 4.29 points up at 3,009.61.

The main index ASPI has gained 17.3 percent in August after gaining 5.3 percent in July. It lost 9.3
percent in June, 23 percent in April, and 14.5 percent in March.

The index has lost 24.3 percent so far this year after being one of the world’s best stock markets with an
80 percent return last year when large volumes of money were printed.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

LOLC Finance pushed the index up, closing 18.7 percent higher at 8.9 rupees a share.

Senkadagala Finance closed 21.9 percent up at 445.3 rupees a share and Browns Investments gained
6.5 percent to 8.2 rupees. (Colombo/Sept02/2022)

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Sri Lanka to address SME tax problems at first opportunity: State Minister

ECONOMYNEXT – Problems faced by Sri Lanka’s small and medium enterprises from recent tax changes will be addressed at the first opportunity, State Minister for Finance Ranjith Siyambalapitiya said.

Business chambers had raised questions about hikes in Value Added Tax, Corporate Income Tax and the Social Security Contribution Levy (SSCL) that’s been imposed.

It should be explored on how to amend the Inland Revenue Act, Siyamabalapitiya said, adding that the future months should be considered as a period where the country is being stabilized.

Both the VAT and SSCL are effectively paid by customers, but the SSCL is a cascading tax that makes running businesses difficult.

In Sri Lanka SMEs make up a large part of the economy, accounting for 80 per cent of all businesses according to according to the island’s National Human Resources and Employment Policy.

(Colombo/ Feb 05/2023)

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Sri Lanka revenues Rs158.7bn in Jan 2023 up 51-pct

ECONOMYNEXT – Sri Lanka’s government revenues were 158.7 billion rupees in January 2023 but expenditure and debt service remained high, Cabinet spokesman Minister Bandula Gunawardana said.

In January 2022 total revenues were Rs104.5 billion according to central bank data.

Sri Lanka’s tax revenues have risen sharply amid an inflationary blow off which had boosted nominal GDP while President Ranil Wickremesinghe has also raised taxes.

Departing from a previous strategy advocated by the IMF expanding the state and not cutting expenses, called revenue based fiscal consolidation, he is attempting to do classical fiscal consolidation with spending restraint.

President Ranil Wickremesinghe has presented a note to cabinet requesting state expenditure to be controlled, Gunawardana told reporters.

State Salaries cost 87.4 billion rupees.

Pensions and income supplements (Samurdhi program) were29.5 billion rupees.

Other expenses were 10.8 billion rupees.

Capital spending was   21 billion rupees.

Debt service was 377.6 billion rupees for January which has to be done with borrowings from Treasury bills, bonds and a central bank provisional advance of 100 billion rupees, Gunawardana said.

Interest costs were not separately given. (Colombo/Feb05/2023)

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Sri Lanka’s Ceylon Tea prices down for second week

ECONOMYNEXT – Sri Lanka’s Ceylon Tea prices fell for the second week at an auction on January 31, with teas from all elevations seeing a decline, data showed.

“In retrospect, the decline in prices would be a price correction owing to the overall product quality and less interest from some key importers due to the arrival of cargo at destinations ahead of schedule,” Forbes and Walker tea brokers said.

The weekly sale average fell from 1475.79 rupees to 1465.40 rupees from a week ago, according to data from Ceylon Tea Brokers.

The tea prices are down for two weeks in a row.

High Growns

The High Grown sale average was down by 20.90 rupees to 1380.23 rupees, Ceylon Tea Brokers said.

High grown BOP and BOPF was down about 100 rupees.

“Ex-Estate offerings which totalled 0.75 M/Kg saw a slight decline in quality over the previous week” Forbes and Walker said.

OP/OPA’s in general were steady to marginally down.

Low Growns

In Low Grown Teas, FBOP 1 was down by 100 rupees and FBOP was down by 50 rupees while PEK was up by 150 rupees.

The Low Growns sale average was down by 8.55 rupees to 1547.93 rupees.

A few select Best BOP1s along with Below Best varieties maintained.

OP1                     Select Best OP1’s were steady, whilst improved/clean Below Best varieties maintained.   Others and poorer sorts were easier.

PEKOE                 Well- made PEK/PEK1s in general were steady, whilst others and poorer sorts were down.

Leafy and Semi Leafy catalogues met with fair demand,” Forbes and Walker brokers said.

“However, the Small Leaf and Premium catalogues continued to decline.

“Shippers to Iran were very selective, whilst shippers to Türkiye and Russia were fairly active.”

This week  2.2 million Kilograms of Low Growns were sold.

Medium Growns

Medium Grown BOP and BOPF fell by around 100 rupees

The Medium Growns sale average was down by 33.40 rupees to 1199.4 rupees.

“Medium CTC teas in the higher price bracket witnessed a similar trend, whilst teas at the lower end were somewhat maintained subject to quality,” Forbes and Walker brokers said.

“Improved activity from the local trade and perhaps South Africa helped to stabilize prices to some extent.”

OP/OPA grades were steady while PEKOE/PEKOE1 were firm, while some gained 50-100 rupees at times.

Well-made FBOP/FBOPF1’s were down by 50-100 rupees per kg and more at times.

(Colombo/Feb 5/2023)

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