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Tuesday April 23rd, 2024

Sri Lanka UDA to finalise investment for 22 development projects

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ECONOMYNEXT – Sri Lanka’s Urban Development Authority is to to finalise 22 mixed development, waterfront, residential, IT and tourism projects from 2024 onwards, with another 5 projects still in the process of clearance, Director of Real Estate Management and Development Anura Prasanna of the UDA said.

According to Prasanna, the 21 billion rupees in revenue that is to be gained from the investments into these properties is not the final value of the projects.

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Sri Lanka UDA hopes to earn Rs21bn from land sales over three years: report

“The 21 billion is not the value of the projects, that is the land value. You have to multiply the land value by five times,” he said, referring to the real estate additions and renovations the sites and lands are undergoing, and are proposed to undergo in the future.

“We have 27 projects. Some are bare lands, some are developed properties, like the Gafoor building in Pettah, the Galle Post Office, the Bogambara prison in Kandy, which are meant to be preserved for conservation purposes, but can also serve as valuable tourism properties,” Prasanna said speaking to Economy Next.

“Then we also have the land parcels in the main cities, owned by the UDA. So including all these properties, we plan to advertise these lands by this year.”

The current landmark investments include the Kankesanthurai Presidential Palace that is being converted into an information technology university in partnership with the Sri Lanka Institute of Information Technology (SLIIT) and a foreign private investment.

Two waterfront projects along the Beira Lake, along with the Ekala industrial park that is to encompass a 7-land parcel of the UDA and the Perahera Mawatha project in Kollupitiya are also highlights of the finalised UDA development project investments.

“Some go exactly by the PPP model, but for some we only allocated the land on the basis that infrastructure is brought in by the investor,” he said. “Then the investor pays the lease premium and develops the property.”

Prasanna said that the majority of the investors come from South East Asia, predominantly from China, Japan, and South Korea.

Unsolicited investment proposals from South Korea have proven to be lucrative offers for the UDA.

“The investment is nearly 15 billion, they are planning to develop housing projects,” Prasanna said.

Director General Prasad Ranaweera said that the development is vital due to the exchange and currency crisis. “The UDA can’t invest money, and the treasury is not granting money. So then we have to look out for an alternative. We as the UDA have a land bank, which we have to make use of with the private sector,” he said. (Colombo/Jan11/2024)

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Sri Lanka single borrower limits cut to 25-pct of bank capital, SOEs also included

ECONOMYNEXT – Sri Lanka’s central bank has issued directions limiting loans to a singe borrower or a group of connected customers to 25 percent of Tier I capital, with state enterprises which turned out to be the biggest borrowers, also included.

In a 2007 direction, banks were allowed to give loans up to 30 percent of capital for a single customer and 33 percent for a group but the rules were widely violated in the case of state enterprises, which were used as off-budget vehicles to give energy and other subsidies.

Banks will have to limit exposures to 25 percent starting from January 2026.

According to transitional provisions published in the direction seems to indicate that some banks may have single borrower exposures of 85 percent or more.

They will be required to bring exposures down to 60 percent by 2027 and 25 percent by 2028.

Download the direction from here Sri-Lanka-single-borrow-limit-direction-2024

Energy utilities were made to borrow from state banks to run off-budget subsidies under plan avoid a price formula during the Rajapaksa regimes.

Sri Lanka’s state banks ended up with large debts to Ceylon Petroleum Corporation partly due to flexible inflation targeting (printing money to cut rates as soon as inflation fall triggering forex shortages) even when fuel was market priced in 2018, analysts have shown.

When rates were cut with inflationary open market operations, triggering forex shortages, CPC was barred from buying dollars and forced to get suppliers’ credit denominated in dollars.

The suppliers’ credits were later converted to dollar loans from state bank loans, usually after the currency collapsed from the inflationary rate cuts or inflationary open market operations to sterilize interventions or both, analysts have shown.

The CPC loans have since been taken over by the government.

Banks have also funded roads and other state projects.

“Licensed banks shall gradually reduce the exposures to Public Corporations to meet the maximum limit,” by December 2030 according to the direction.

“Public corporation shall mean any corporation, board or other body which was or is established by or under any written law other than the Companies Act, with funds or capital wholly or partly provided by the Government.”

Many of the newer state enterprises however have been suddenly set up under the Companies Act, unlike earlier where a specific act was passed by the parliament to set up corporation or a statutory authority.

Borrowings of CPC and CEB eventually hit the financial stability of state banks while actual bad loans were under-reported. Now the bad loans are being covered with a state capital injection.

Under an International Monetary Fund and World Bank backed program, the so-called ‘sovereign bank nexus’ is being severed to protect the banking system.

Government securities, central bank sterilization securities, loans guaranteed by multilateral lenders or high rated foreign banks are excluded. (Colombo/Apr23/2024)

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Sri Lanka exceeds tax revenue target by 6% in first quarter

ECONOMYNEXT – Sri Lanka’s revenue collecting bodies have outperformed and exceeded tax revenue target by 6 percent for the first quarter ended on March 31, State Revenue Minister Ranjith Siyambalapitiya said.

“After many years of difficult challenges, it has been possible to exceed the expected state revenue in the first quarter of 2024,” he said in a statement.

The government expects a revenue collection of 4,106 billion rupees in 2024.

“The reason for the economic crisis in the past period was the reduction in the level of government revenue. Considering the achievement of higher than the target in the first quarter of this year and the revenue pattern, the 2024 will become a year in which the revenue targets can be achieved,” he said.

The three tax revenue collecting bodies – Sri Lankan Customs, Excise Department, and Inland Revenue Department have collected 834 billion Sri Lanka rupees in the first quarter.

“It is a 6% higher than the expected revenue target of 787 billion rupees,” Siyambalapitiya said.

He said the Inland Revenue Department exceeded its target by 13 percent to 430 billion rupees compared to the target of 381 billion rupees in the first quarter of 2024.

He also said Customs Department has managed to reach the target of 353 billion rupees and the Excise Department has also achieved 96% of the revenue requests and earned 51 billion rupees in the first quarter.

The island nation has raised Value Added Tax (VAT), imposed new taxes, and increased personal income taxes to boost the revenue under an International Monetary Fund-backed reforms in return of a $3 billion External Fund Facility.

People have started to grumble over the government’s higher taxes without reducing some of the state expenditures. The government has been in the process to privatize some key state-owned enterprises. However, that process faced delays amid gradually rising protests against the move. (Colombo/April 22/2024)

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Air Asia, SriLanka’s FITS, Hayleys bid for SriLankan Airlines

ECONOMYNEXT – Malaysia’s AirAsia group, FITS Aviattion of Sri Lanka and Hayleys are among bidders for state-run SriLankan Airlines, a statement from the State-owned Enterprises Restructuring Unit said.

Dharshaan Elite Investment Holding (Pvt) Ltd, . Sherisha Technologies Private Limited and Treasure Republic Guardians Limited are the other bidders.

The responses will be evaluated to choose qualified investors.

International Finance Corporation, as Transaction Advisors for the divestiture of SriLankan Airlines Limited, will continue to advise the government, the statement said. (Colombo/April22/2024)

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