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Saturday June 3rd, 2023

Sri Lanka will grow old before getting rich

ECONOMYNEXT- Sri Lanka will become old before getting rich as the country’s population declines from 2030, dragging down growth, an Asian Development Bank (ADB) report said.

“Sri Lanka is facing a changing population structure, with the share of the working-age population in the total population expected to decline, followed by an absolute decline in the working-age population. These demographic changes will have manifold effects on the economy,” ADB said.

“The falling share of working-age population and an aging population can be a drag on growth.”

Sri Lanka’s demographic dividends which began in the 1990s will end in 2030 as the workforce declines, ADB said.

The multilateral lender said Sri Lanka is likely to become old before it gets rich.

Sri Lanka in 2019 became an upper middle income country with per capita income of around 4,000 US dollars, but will need to triple the number to just over 12,000 US dollars to be considered a high income state.

ADB said Sri Lanka’s productivity might fall as the population ages, reducing both physical and cognitive capabilities.

Sri Lanka is experiencing this demographic transition at an earlier stage, when compared with other developing economies, at a lower level of per capita income.

The share of elderly (aged over 65) in the economy will grow from 9.4 percent in 2015 to 21 percent by 2045 and 35.6 percent by 2100, ADB said.

However, the retirement age for the public sector is 60 years, while for the private sector, persons can draw out their Employees’ Provident Fund savings by 50 for females and 55 for males.

Sri Lanka will see higher dependency ratios in the future as both the share of elderly and children grow, ADB said.

While older Sri Lankans would dip into savings, younger generations may save more as they anticipate longer retirements, and such decisions would affect investments in the economy, ADB said.

The development bank recommended early action by the government, companies and individuals.

“… preparing for an aging society, a transition that—barring any major natural catastrophe or policy change—is certain to happen, requires early planning, policy changes, and actions from across the age spectrum.”

Sri Lanka may have to trade off other public investments due to higher fiscal spending on pension, long-term care and public health costs. However, the existing pension and healthcare systems need to be evaluated, ADB said.

The country’s labour force participation needs to be improved, especially among women, to unlock further growth as the population ages, the Manila-based lender said.

ADB said some developed Asian countries and Australia have found success providing subsidized lifelong learning via skill upgrades for older workers through improved education and training systems, which could serve as lessons for Sri Lanka.

More efficient capital markets will allow those ageing to channel savings into long-term investments to derive income during retirement, ADB said.

Further, improved capital markets will allow easier access to finances for investment as consumption-saving behavior changes with an aging population, the lender said. (Colombo/Feb09/2020)

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Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

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.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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