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Sunday September 24th, 2023

Sri Lanka’s shares down on potential delays in DDR and DDO

ECONOMYNEXT – Sri Lanka shares closed lower on Monday as selling pressure increased following lack of improvement and obscure direction on domestic debt restructuring and optimization, an analyst said.

“The market is down on the lack of direction in domestic debt restructuring and debt optimization,” an analyst said.

The main All Share Price Index (ASPI) was down 1.40 percent or 121.96 points at 8,575.11, while the most liquid index, S&P SL20, was down 2.09 percent or 51.84 points at 2,428.92.

“The market is seeing more selling pressures as investors are taking a stance until more clarity is given on domestic debt restructuring assurances and interest rates are high,” an analyst said.

Sri Lanka’s government is to disclose the stance on domestic debt restructuring towards the end of May, which is why investors have adopted a wait and see approach.

Analysts said the low volumes seen in the market are due to the debt restructuring concerns, and investors are waiting for the monetary policy review for the next month.

Sri Lanka’s banks said assurances have been received that the stability of the sector cannot be risked in a planned domestic debt overhaul, to make the defaulted debt sustainable under a program with the International Monetary Fund.

Sri Lanka’s banks have sought clarity on a proposed domestic debt restructure, questioning whether there is a non-voluntary element in the plan, and have also called for transparent discussions with all banks.

A news article circulating says, non-agreement on the percentage of haircut that the external creditors would take in Sri Lanka’s debt restructuring has taken the Central Bank to the drawing board which has led to the delay in announcing the debt restructuring strategy. 

Further the government plans to lift import controls on 100 items that were banned during forex shortages in the past two years, which had been hurting small and medium-sized industries, State Minister for Finance Shehan Semasinghe said.

“Stocks went down due to selling pressures resulting from relaxed import restrictions, which are expected to reduce the monopolistic powers held by domestic retailers,” an analyst said.

The main reason for the market’s negative sentiment is the loss of monopoly as import restrictions ease, an analyst said.

The top losers during trading were Commercial Bank, Sampath Bank and Hatton National Bank. 

Sri Lanka’s central bank has terminated the cash margin requirement on import letters of credit that was imposed over the previous 12 months to limit imports, as liquidity injection triggered forex shortages and a currency collapse.

In an order issued under the monetary law, the central bank imposed a 100 percent cash deposit margin on 843 imports on May 19, 2022, and February 16, 2023, to discourage imports.

Sri Lanka had controlled imports of 3,000 items denoted by HS codes out of a total of 8,000 during the past two years.

The controls were then brought down to 1,000 as they were hurting small and medium-sized industries that depended on inputs.

“By the beginning of next month, we will be able to lift controls on another 100 items,” Minister Semasinghe told parliament.

The market generated revenue of 518 million rupees, while the daily average turnover was 1.2 billion rupees.

The market generated a foreign inflow of 31 million rupee and the net foreign outflow was 20 million rupees. (Colombo/May 29, 2023)

 

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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)

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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)

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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)

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