An Echelon Media Company
Sunday September 24th, 2023

Sri Lanka’s CPC owes almost billion dollars on India, Iran credit lines

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation owed 1,035 million dollars taken after transferring 2.44 billion US dollars borrowed from local banks during periods of monetary instability, official data showed.

The central government had taken over 1.34 billion US dollars of loans from Bank of Ceylon and 1.09 billion US dollars from People’s Bank, a Finance Ministry report said.

Over the years CPC had been forced to borrow from banks after forex shortages emerged from flexible monetary policy (flexible exchange rate/flexible inflation targeting and its peers) involving conflicting money and exchange policies.

The CPC had taken credit from oil suppliers as economists engaged in aggressive open market operations to suppress interest rates, triggering forex shortages in peacetime. The letters of credit had then been converted to loans at state banks.


Shock revelation on how Sri Lanka’s CPC ended up with billions of dollar debt

However more monetary instability borrowings remained.

The CPC owed 251 million US dollars on a loan taken by Sri Lanka from the National Iran Oil Company. The credit was taken decades ago during a forex crisis in the midst of a civil war, when the practice of borrowing excessively during forex shortages began.

The CPC also owed 697 million US dollars to the Treasury on a credit line from India taken during 2022 crisis, which was the worst in the history of the central bank.

Additionally, another 87 million US dollars was owed to the Bank of Ceylon. CPC was also owed money by the Ceylon Electricity Board (CEB) and Sri Lanka Airlines (SLA).

“The treatment of these residual liabilities and cross liabilities between the CEB, SLA, and CPC would be addressed in the Government’s overall strategy for restructuring the balance sheets of key SOEs,” the report said.

As the rupee collapsed the CPC was hit with a loss of 527 billion rupees.

Analysts and classical economist suggested that the power to mis-target rates through aggressive open market operations be taken away from the central bank so that forex shortages and depreciation is eliminated in the future.

A special economic zone at Colombo Port City would be dollarized, eliminating forex shortages from open market operations. (Colombo/June06/2023)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka India industrial zone around Trinco, maritime links mooted

ECONOMYNEXT – Sri Lanka’s Ports Minister Nimal Siripala de Silva had highlighted the desire of both the Governments to work closely to develop the industrial zone at Trincomalee, after accepting an invitation to participate in a maritime summit.

The Global Maritime India Summit (GMIS) will be held in India from October 17-19, 2023 at Mumbai where Sri Lanka has been invited at a partner country.

At a curtain raiser event on September 22, India’s High Commissioner in Colombo, Gopal Baglay had said both countries were working on enhancing sea connectivity according to a vision document launched during a recent visit of the President of Sri Lanka to India.

Minister de Silva will lead a delegation from Sri Lanka to the summit.

Secretary to the Ministry of Ports, Shipping and Waterways, Government of India, T K Ramachandran said the Global Maritime India Summit aims strengthen the Indian maritime economy by promoting global and regional partnerships and facilitating investments.

The event will give an opportunity to the Government of Sri Lanka to attracting greater investment from India in development of its maritime infrastructure, Ramachandran said.

It will also facilitate greater business to business interactions. (Colombo/Sept24/2023)

Continue Reading

Sri Lanka brings back import para tariff on milk

ECONOMYNEXT – Sri Lanka has brought back an import para tariff called the Ports and Airports Levy, to several grades of milk powder.

Milk powder has been removed from a list of PAL exemptions, making them liable for a 10 percent tax.

The PAL para tariffs are also a contentious issue in terms of export competitiveness, and the government has previously given undertakings that they will be eliminated.

Trade freedoms of the poor figure in an IMF/World bank reform program with the governments.

Milk is a protein rich food, in a country where children of poor families are facing stunting and malnutrition.

Economic nationalism is seen at high levels in food, with several businessmen are pushing for trade protection, amid an overall autarkist (self-sufficiency) ideology, going directly against policies followed in East Asia, which the same as hold up as examples.

Sri Lanka keeps dairy product prices up ostensibly to bring profits to a domestic dairy company and farmers.

Sri Lanka also keeps maize prices up, ostensibly to give profits to farmers and collectors. (Colombo/Sept22/2023)

Continue Reading

Sri Lanka govt warns liquor manufacturers: pay defaulted tax or lose licence

ECONOMYNEXT – Sri Lanka government which is struggling to raise the state revenue despite   higher taxes, has warned liquor manufacturers to pay defaulted taxes or lose their licence.

The government is now getting tough with past tax defaulters amid concerns over falling short of this year’s revenue target agreed with the International Monetary Fun (IMF).

“Liquor manufacturing firms owe us 660 crore rupees (6.6 billion rupees),” Siyambalapitiya told  reporters on Thursday (21).

“Most of this or around a third is the only excise tax amount to be paid. The rest is penalty. If a liquor manufacturer does not pay on time, we impose a penalty of 3 percent per month This means 36 percent (penalty) per annum,” he said.

“We have given them deadline to repay the basic excise taxes. If they don’t pay, we will cancel their licence.”

President Ranil Wickremesinghe’s government committed an ambitious revenue target among many other reforms to the International Monetary Fund (IMF) in return to a $3 billion loan package.

However, the revenue could face a short fall of 100 billion rupees, State Finance Minister Ranjith Siyambalapitiya has said.

A new Central Bank Act also has legally prevented the government of printing money at its discretion as  in the past.  (Colombo/September 24/2023)

Continue Reading