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Tuesday November 29th, 2022

Sri Lanka’s Mercantile Shipping to sell ships for Rs1.8bn to repay debt


ECONOMYNEXT-Sri Lanka’s Mercantile Shipping Company is to sell two cargo ships owned by a subsidiary, Mercantile Emerald Shipping (Private) Limited’s (MESL), for a total of 1.8 billion rupees.

The sale of the ships to a buyer has been agreed with the German bank to which Mercantile Emerald Shipping has been unable to repay loans amid mounting losses.

A stock exchange filing said auditors Ernst & Young had agreed that the going concern matter they had raised over Mercantile Emerald Shipping has now been resolved and the subsidiary is to be wound up.

Mercantile Shipping’s two ships, Mercs Uva and Mercs Uhana, had been mortgaged to Bremer Landesbank-Germany, now merged with Norddeutsche Landesbank, from which MESL had borrowed.

The two ships are to be sold for 4.5 million euro each – about 1.8 billion rupees in total – and proceeds to be used to settle the mortgage loan, overdraft and related interest owed to Bremers Landbank of 4.7 billion rupees

MESL would then be liquidated as the ship sale would leave it without enough resources to settle remaining debt.

Bremer Landesbank has now discharged Mercantile Shipping of its liabilities concerning MESL with the contract to sell the two ships signed and sale to be completed within a year.

 (COLOMBO, 20 September, 2019)

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Sri Lanka rubber farmers to get boost from France, Michellin

ECONOMYNEXT – Sri Lanka will start a project supported by France and Michellin group to support 6,000 rubber farmers, cabinet spokesman Minister Bandula Gunawardena said.

Rubber farmers in Badalgama and Medagama in the Moneragala district will be supported improve their capacity and supply chains at a cost of 726,700 Euros.

Financial support will be provided by France’s Michellin group which has a subsidiary in Sri Lanka and the government of France.

The project will be implemented by France’s Ksapa group under the guidance of Ministry of Industries.

The cabinet of ministers had cleared a proposal by the Plantations Industries Minister to enter into an agreement to implement the project. (Colombo/Nov29/2022)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a twitter.com message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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