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Saturday March 2nd, 2024

Sri Lanka’s CPC loses Rs45 billion to April 2020 amid soft-peg collapse

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation lost 45.1 billion rupees in the four months to April 2020, as the rupee collapsed and triggering losses on its unhedged dollar loans, official data showed.

Ceylon Petroleum Corporation (Ceypetco) lost had lost 11.8 billion rupees in 2019 as the rupee remained stable after a collapse in 2018.

In 2018 the CPC lost 106 billion rupees including an 80 billion rupee loss from forex losses.

Ceylon Petroleum Corporation is forced run unhedged dollar positions whenever the rupee comes under pressure from money printing.

Total debt due to state-run People’s Bank and Bank of Ceylon had reached 592.7 billion rupees by end April from 566 billion rupees in December 2019.

In earlier years it was funding losses through dollar borrowings but in 2018 it borrowed dollars despite having rupee deposits from a price formula in a remarkable turn of events, which analysts have dubbed a Nick Leeson-style affair.


Nick Leeson-style losses at Sri Lanka’s CPC raise big questions: Bellwether

Sri Lanka’s CPC loses Rs104bn as dollar soft-peg collapses

In early 2020, the rupee fell to almost 200 to the US dollar from 182 to the Us dollar. As credit and imports fell the rupee has been allowed to appreciate to about 185 to the US dollar and the central bank has bought dollars in April to prevent further appreciation at that point.

Fuel sales had collapsed amid lockdowns with import prices also falling worldwide.

“CPC was in difficulty in reaping optimal benefits over the historically lower global oil price due to the reduction of demand of the petroleum products around by 18 percent to 1,790 million litres in first four months of 2020, compared to the demand of 2,117 million litres in the same period of 2019, the finance ministry said.

CPC has minimal dollar sales involving aviation fuel, but it is taking on billions of dollars in loans, which some observes suspect may be due to a Mercantilist belief involving exchange rates.

The CPC however had made an operational profit of 1.4 billion rupees in the first four months of the year, before forex losses, a finance ministry report said.

The Ceylon Electricity Board and SriLankan Airlines arrears had reached 148 billion rupees by end April 2020.

Total debt due to state-run People’s Bank and Bank of Ceylon had reached 592.7 billion rupees by end April from 566 billion rupees in December 2019. (Colombo/July14/2020)

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Sri Lanka eyes SOE law by May 2024 for better governance

ECONOMYNEXT – Sri Lanka is planning to pass a Public Commercial Business (PCB) Act improve governance of state-owned enterprise by May 2024 as part of an anti-corruption efforts following an International Monetary Fund assessment.

Sri Lanka’s state enterprises have been used by politicians to give ‘jobs of the boys’, appropriate vehicles for personal use, fill board of directors and key positions with henchmen and relatives, according to critics.

Meanwhile macro-economists working for the state also used them to give off-budget subsides or made energy utilities in particular borrow through supplier’s credits and state banks after forex shortages are triggered through inflationary rate cuts.

The government has taken billons of dollars of loans given to Ceylon Petroleum Corporation from state banks.

There have also been high profile procurement scandals connected to SOEs.

An SOE Reform Policy was approved by Sri Lanka’s cabinet of ministers in May 2023.

The Public Commercial Business (PCB) Act has now been drafted.

A holding company to own the SOEs will be incorporated and an Advisory Committee and Board of Directors will be appointed after the PCB law is approved, the statement said. (Colombo/Mar01/2024)

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Sri Lanka rupee closes at 308.80/90 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 308.80/90 to the US dollar Friday, from 309.50/70 on Thursday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.02.2026 closed at 10.65/75 percent up from 10.50/70 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent from 11.90/12.10 percent.

A bond maturing on 01.07.2028 closed at 12.15/35 percent down from 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent up from 12.30/45 percent.

A bond maturing on 15.05.2030 closed at 12.30/45 percent down from 12.35/50 percent.

A bond maturing on 01.07.2032 closed at 12.50/13.00 percent from 12.55/13.00 percent. (Colombo/Mar1/2024)

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Sri Lanka stocks close up 0.37-pct, Expo to de-list

ECONOMYNEXT – The Colombo Stock Exchange closed up 0.37 percent on Friday, and SG Holdings, the parent company of Expolanka Holdings Plc, said it was taking the company private.

Expolanka is the largest listed company on the Colombo Stock Exchange.

“Expolanka Holdings PLC has, at the Board Meeting held on 1st March 2024, considered a request from its principal shareholder and resolved to initiate the de-listing of the Company’s shares from the Official List of the Colombo Stock Exchange subject to obtaining necessary shareholder approval and regulatory approvals,” the company said in a stock exchange filing.

As per arrangements with SG Holdings Global Pte Ltd, the Company’s majority shareholder, it will purchase its shares from shareholders who may wish to divest their shareholding in the Company at a purchase price of Rs 185.00 per share. The share closed up at 150.50.

The broader All Share Index closed up 0.37 percent, or 39.47 points, at 10,691; while the S&P SL20 Index closed down 0.64 percent, or 19.59 points, at 3,037.

Turnover stayed above the 1 billion mark for the sixth consecutive day, registering 1.4 billion.

Crossings in Melstarcorp Plc (135mn) up at 89.50, Hatton National Bank Plc (64mn) up at 158.00, Hemas Holdings Plc (53mn) up at 75.00 and Central Finance Company Plc (26mn) up at 103.50, added significantly to the day’s turnover.

“The upward trend is continuing, with more retail buying also coming in, the number of trades was more than 10,000 today,” a market participant said. “Investors are looking for undervalued stocks and buying in quantities.” (Colombo/Mar1/2024).

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