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Wednesday December 6th, 2023

Sri Lanka’s external debt restructure ‘progress’ decision by IMF exec board

ECONOMYNEXT – The executive board of the International Monetary Fund will decide on the adequacy of the ‘progress’ that is required in restructuring Sri Lanka’s foreign debt, in order to complete the first review of the island’s program with the agency, an official said.

An IMF mission concluded a visit to Sri Lanka on the review Wednesday, without reaching a formal staff level agreement detailing the next set of quantitative targets and reforms.

To conclude the review and get board approval Sri Lanka has to jump two hurdles.

First, reach an understanding on the staff level agreement hardening performance criteria, which include the domestic primary deficit, reserve collection, inflation as well as reform timelines, and then make progress on restructuring external debt according to the parameters set in an IMF framework.

Though Sri Lanka met June key performance targets, an indicative target on revenues fell short, raising concerns over the future tax take, for which solutions will be detailed in the next staff level agreement.

“And we are very confident that we will be able to do that with a little bit more time to continue the discussions,” Peter Breur, Senior Mission Chief for Sri Lanka told reporters Wednesday.

“And then the second leg that needs to be completed is the discussions on the debt. Essentially, what we need is a clear path towards restoring debt sustainability.”

Sri Lanka has concluded domestic debt restructuring, but has to go some way towards restructuring debt of Paris Club, China and private creditors.

Paris Club, which has years of experience in working with the IMF on countries with bad central banks that default, has a well oiled framework to restructure debt.

In the case of Sri Lanka about 18 percent of the central government foreign debt is held by China which is not in the Paris Club.

“On the question of what’s needed on the debt, really what we need is we conduct something called a Financing Assurances Review,” Breuer told reporters.

“This is a process that we have that applies in the case of Sri Lanka to both official creditors, meaning other countries that have lent to Sri Lanka on a bilateral basis as well as commercial creditors, for example, bond holders.

“And as you know, the government is in discussions with all of these groups. In Sri Lanka’s case, the debt is spread around quite a bit externally and domestically.

“And so what we look for in order to be able to move forward in this debt restructuring case is adequate progress in the negotiations with the creditors that would give us confidence that this process will be concluded in a timely manner and in line with the program’s debt targets.

“So that’s really what we’re looking for, and it is the executive board’s decision at the end of whether and when the IMF will be able to move ahead.”

After the new agreement on targets and policies have been agreed, the IMF team has to prepare a staff report to be submitted to the board, which also takes some time.

Related Sri Lanka to expects to complete IMF review, debt restructuring Oct/Nov

Sri Lanka’s IMF agreement is prepared with a set of reforms, which are also supported by budget support loans from the World Bank and the Asian Development Bank.

Sri Lanka officials have generally expressed hope that the review could be concluded by October/November. However Breuer said there was no ‘fixed timeline.”

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Sri Lanka rupee closes stronger at 327.40/90 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 327.40/90 to the US dollar on Tuesday, from 328.10/30 the previous day, dealers said.

Bond yields were stable.

A bond maturing on 01.06.2025 closed at 13.60/70 percent from 13.70/14.00 percent.

A bond maturing on 01.08.2026 closed at 13.90/14.00 percent from 13.90/14.10 percent.

A bond maturing on 15.01.2027 closed at 14.00/15 percent from 14.00/14.10 percent.

A bond maturing on 01.07.2028 closed at 14.10/20 percent from 14.20/35 percent.

A bond maturing on 15.05.2030 closed at 14.20/35 percent, from 14.25/45 percent.

A bond maturing on 01.07.2032 closed at 14.10/35 percent, from 14.05/40 percent. (Colombo/Dec5/2023)

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Sri Lanka stocks close down as investor sentiment dips

ECONOMYNEXT – The Colombo Stock Exchange closed down on Tuesday, CSE data showed.

The All Share Price Index was down 0.40 percent, or 43.50 points, at 10,700.09.

The S&P SL20 index was up 0.43 percent, or 13.32 points, at 3,054.41.

Turnover was at 711 million. The capital goods sector contributed 172 million, the food, beverage and tobacco sector contributed 140 million, and banks 113 million of this.

Top positive contributors to the ASPI in the day were John Keells Holdings Plc (up at 193.00), Richard Pieris And Company Plc (up at 19.80), and Nation Lanka Finance Plc, (up at 0.40).

Negative contributors were Commercial Bank of Ceylon Plc (down at 89.70), Sampath Bank Plc (down at 71.00), and Central Finance Company Plc, (down at 106.00). (Colombo/Dec5/2023).

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Sri Lanka plans to reduce number of school grades from 13 to 12

ECONOMYNEXT – The Ministry of Education proposes to reduce the number of school grades from 13 to 12, according to a government information department statement.

“Every child will be given the opportunity to finish school in 17 years through the proposed new education reforms,” education officials were quoted as saying after a discussion on budget allocations.

Under the proposed system, pre-school education will be at the age of 4 years, the primary section between grades 1-5, junior section between grades 6-8, and senior section between grades 9-12.

The General Certificate of Education Ordinary Level Exam (GCE O/L) is proposed to be conducted in grade 10, and the Advanced Level Examination in grade 12.

It has also been decided to reduce the number of mandatory subjects at the GCE O/L Exam from 9 to 7.

Three new subjects, information and communication technology (ICT), technical and professional skills, and religion and values will be made mandatory and included in those 7 subjects. (Colombo/Dec5/2023)

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