Business

Cabraal and Central Bank responds to debt default fears

Published

5 years ago

2021/02/28

Recent commentary on Sri Lanka’s credit outlook ignores the numerous policy initiatives of the Government of Sri Lanka, which have already started yielding results

The Government of Sri Lanka observes that the concerns expressed in the media in reference to recent reports on Sri Lanka’s ability to service its debt obligations by international banks are one sided, and do not take into consideration the numerous of policy measures that have been introduced to revive the economy and ensure macroeconomic stability. These innovative policy measures are not restricted to traditional debt-based solutions to service the current debt obligations. Measures to build resources through non-debt solutions, the preservation of foreign currency resources and the gradual phasing down of the relative share of foreign debt are already yielding desired results, with a high likelihood of harnessing further improvements during the remainder of the year and beyond.

Certain media reports published recently attempts to raise concerns about Sri Lanka’s ability to honour its debt service obligations, based on backward looking and linear assumptions, thus ignoring the expected outcome of the novel policy regime currently in place. While gross official reserves have moderated somewhat since end December 2020, such moderation is not expected to continue. When all relevant facts are considered, it becomes apparent that the fears raised in certain reports are, in fact, merely hypothetical. The Sri Lankan economy, which is over US dollars 80 billion, has major natural and regular sources of foreign exchange inflows, including merchandise and services exports, workers’ remittances, programme and project related inflows, equity investment, and other financial flows. Aided by the post-COVID revival of the economy, such foreign exchange inflows are projected at US dollars 32 billion in 2021, even without major forms of borrowings, such as floating International Sovereign Bonds (ISBs). These projected inflows are expected to increase by about US dollars 2-3 billion annually in the period ahead with the support of well targeted policies and strategies of the Government. At the same time, authorities will continue to take measures to build up official reserves with the help of measures already implemented and further measures as necessary in the period ahead. It is noteworthy that the Government has launched a major drive towards promoting real inflows of foreign exchange through actively facilitating various merchandise and services exports, in both traditional and non-traditional sectors. The import curtailment measures and the steady recovery in export earnings would continue to improve liquidity in the domestic foreign exchange market. Further, envisaged equity investment flows through the Colombo Port City and Industrial Zones and the reprioritisation of project financing would help reduce the share of foreign debt notably in the period ahead, thereby dispelling concerns about debt sustainability.

In this context, settling the maturing ISBs of US dollars 1.0-1.5 billion, per year, over the medium term, need not be viewed as a major source of concern, given the entire stock of outstanding ISBs account for only 16.7 per cent of Sri Lanka’s total government debt as of end February 2021. It is also stressed that lenders in the majority of 83.3 per cent of the debt stock have raised no concern whatsoever about Sri Lanka’s ability to honour debt obligations. The authorities remain committed to honoring all upcoming debt obligations, leaving zero probability of any form of default on any obligation, which would jeopardise the longstanding relations with stakeholders and the impeccable credit history of the country.

The engagement with the International Monetary Fund (IMF) continues at staff level and as a member state in technical exchanges of know-how. Exploration of liquidity facilitation arrangements with regional central banks is also continuing, with some discussions are at an advanced stage.

As indicated in the Budget 2021, the Government has adopted a novel approach in relation to foreign financing, while enhancing the effectiveness of already secured financing channels, aimed at reducing the share of foreign financing of the budget deficit over the medium term. Reflecting the impact of measures already put in place by the Government, the relative share of outstanding external debt has already declined notably. The Government aims to reduce its external debt over the medium term to around a third of the total debt, and already the share of external debt has declined to around 40 per cent by end 2020 from over 48 per cent at end 2019.

The measures introduced to manage non-essential imports helped ease trade deficit to USD 5,978 million in 2020 from USD 7,997 million in 2019. The trade deficit is further expected to shrink in 2021 to around USD 4 billion. Export facilitation is expected to continue through allowing intermediate goods imports unhindered and promoting domestic value chain improvements, which would result in export earnings of about USD 13 billion in 2021.

Additionally, despite the projections of downturn in workers’ remittances, Sri Lanka recorded an increase of over USD 400 million remittances in 2020 with an aggregate of USD 7.1 billion. The policy measures to further incentivise remittances flows were facilitated with the Budget 2021 announcement of an additional Rs. 2 for conversion of per USD remittance, and the banks were required to sell 10 per cent of such remittance conversion to the Central Bank. The Central Bank has already commenced such absorption of conversions into its foreign exchange reserve. Further arrangements to improve foreign currency liquidity have been introduced, including a mandatory conversion of ¼ of export proceeds.

The Government is also in the process of channeling in official credit sources, with priority being envisaged for policy loans with a significantly high liquidity component. In addition, the commercial external financing component of the already lined-up term financing facility and other market financing components are envisaged in line with Budget 2021.

Sri Lanka Development Bonds (SLDBs) and loans of Overseas Banking Units (OBUs) also remain sources of foreign currency financing mainly from domestic foreign currency earning entities. The recently introduced measures to entice foreign investors to the government securities market and the real economy through an attractive foreign exchange swap arrangement are also likely to help enhance foreign currency inflows in the near term.

Real investment flows to the country remain a promising source based on the Colombo Port City related developments. The land reclamation work had been completed and the required legislation is being finalised. In December 2020, the Sri Lankan conglomerate, LOLC Group, signed an agreement with the Port City developers for a Mixed Development Project valued at USD 1 billion, which is set to break ground in mid-2021.

In this context, the Government reiterates its utmost commitment on meeting its external debt obligations, which will be facilitated not only through direct and indirect financing arrangements but also through highlighted policy measures and the current work plan to increase non-debt creating forex inflows.

The Government wishes to reiterate that even in the midst of various concerns raised by many parties on Sri Lanka’s debt service capability at the height of the COVID-19 pandemic, the Government was able to service its total external debt of around USD 4.3 billion in 2020.

The recent research reports indicate different figures of external debt obligations for 2021. The external debt obligations of the Government for 2021 amount to around USD 3.7 billion including the amortisation payments of USD 2.5 billion. Of this amount, thus far in 2021, the Government has settled over USD 500 million.

Sri Lanka will engage freely with all its investment and development partners and implement the envisaged measures to build up reserves through non-debt creating inflows while reviewing closely the international capital market developments.

Investors are invited to approach the Sri Lankan policy authorities at the highest levels who always remain open for constructive dialogue and will welcome any one-on-one engagement or roadshow discussions, without being dissuaded by premature one-sided opinion expressed without factoring the ground realities and the actual outcomes of policy measures introduced by the Government of Sri Lanka.

All News Advertisement

Business

The government is taking steps to streamline trade facilitation, customs processes, investment approvals, and improving export facilities – Prime Minister

Published

27 mins ago

2025/12/13

Priyan

Prime Minister Dr. Harini Amarasuriya stated that the government is taking steps to strengthen local exporters by making trade facilitation, customs procedures, and investment approvals more efficient, and by improving export services.

The Prime Minister made these remarks while addressing the 27th Presidential Export Awards 2024/25 ceremony organized by the Ministry of Industries and Industrial Development together with the Export Development Board.

At this ceremony, which was held to recognize the best exporters of Sri Lanka for the financial year 2024/2025, a total of 107 awards including 15 overall awards and 92 sectoral awards for products and services were presented. Merit awards were also presented to eligible sectors based on applicants’ performance and their contribution to national economic development. Awardees were selected on several criteria such as export market diversification, job creation, growth in export revenue, repatriation of export income, environmental sustainability, institutional social responsibility, and value addition.

Institutions that demonstrated outstanding performance in the export sector were presented with the prestigious Presidential Export Awards for the year under the patronage of Prime Minister Dr. Harini Amarasuriya and Minister of Industries and Industrial Development, Mr. Sunil Hadunnetti.

Further expressing her views, the Prime Minister stated:

“The Presidential Awards Ceremony for exporters reminds us that Sri Lanka’s progress depends not merely on policies or administration, but on the ability to produce, to create value, and to compete internationally.

Over the past year, we faced numerous challenges. As a result, global markets and supply chains were disrupted. Economic uncertainty prevailed. We faced natural disasters. Despite this, many exporters had to adjust to these changes, reorganize production processes, diversify customers, and adopt digital technologies in order to remain competitive in the market.

The impact of the Ditwah cyclone also affected several industries within the export sector. Production facilities, storage facilities, and transportation routes in affected areas were damaged. Production chains and delivery schedules were disrupted.

Under such a difficult situation, some exporters experienced significant setbacks while trying to meet international export demands.

The government is taking steps to support exporters by assessing the damages they suffered due to the emergency situation, restoring their operations, and helping them recover. The government is also working to strengthen resilience against future natural disasters and to rebuild affected areas in a way that minimizes the risk of similar situations arising again.

Sri Lanka is currently undergoing a new economic transformation. For many years, instability, policy inconsistencies, and administrative inefficiencies hindered the progress of the country. This weakened investor confidence and made it difficult for businesses to plan ahead.

However, the present government is committed to governance based on stability, transparency, and accountability. This is not a short-term approach. It is a long-term process to ensure that the country does not fall back into uncertainty.

For this purpose, the government is implementing strong fiscal management, predictable policies, clear and simplified regulations, anti-corruption measures, major institutional reforms, measures that allow businesses to plan ahead, instill investor confidence, minimize unnecessary barriers, and support the development of the private sector.

For a long time, we relied heavily on international loans to sustain national expenditures. However, this is not leading a path toward a stable future. Our progress depends on our ability to earn through trade, innovation, and global engagement.

Your ability to take Sri Lankan expertise and creativity to the world is a strength for the entire nation. The government is ready to extend the necessary support to achieve this.

We understand that issues such as policy inconsistencies, delays that increase operational costs, limited access to competitive financing, gaps in infrastructure and technology, weaknesses in trade facilitation, and slow progress in expanding market access have impacted you. I would like to assure you that the government is directly addressing these challenges.

The focus of the government has drawn to build efficient, transparent, and predictable systems, streamlining trade facilitation, customs processes, and investment approvals, improving export facilities, and minimizing the gap between local businesses and global markets.”

This event was attended by Ministers Kumara Jayakody, Ramalingam Chandrasekaran, Sunil Kumara Gamage; Deputy Ministers Chathuranga Abesingha, Eranga Weerarathna, Arun Hemachandra, Nishantha Jayaweera, Muditha Hansaka Wijayamuni; Governor of the Central Bank Nandalal Weerasinghe; Secretary to the Ministry of Industries and Industrial Development Tilaka Jayasundara; Chairman of the Export Development Board Mangala Wijesinghe, along with ambassadors, foreign delegates, exporters, and a large gathering.

[Prime Minister’s Media Division]

Business

India unveils future of South Asia’s construction industry

Published

2 hours ago

2025/12/13

Thilina Walpola

Dignitaries at the launch of EXCON 2025

South Asia’s largest construction equipment exhibition began December 9 in Bangalore, India showcasing a broad range of next-generation machinery and technologies. Equipment and tools demonstrated improved productivity, advanced controls, energy-efficiency, telematics integration, IoT-enabled monitoring and predictive maintenance. These innovations support better project outcomes across roads, highways, rail, and metro. Sea ports. Airports, mining and development.

The event stands as a platform for collaboration, knowledge exchange and business engagement. It brings together stakeholders who are shaping India’s transition towards infrastructure that is smarter, greener and aligned with global standards.

“India continues to strengthen its position as one of the world’s most dynamic growth engines supported by decisive policy direction and a renewed national focus on infrastructure” said Rajiv Memani President Confederation of Indian Industry (CII) at the inauguration of EXCON 13th edition held at Bangalore International Exhibition Centre, Bengaluru. Memani further stated that as investment expands across transportation, logistics, urban development and manufacturing, EXCON 2025 becomes a vital platform to showcase how industry and innovation are shaping this momentum.

Speaking at the inauguration R Mukundan President designate CII and Chairman EXCON 2025 noted that ‘’India is on a historic growth trajectory aiming to become a $30 trillion economy by 2047 under the Viksit Bharat vision and Infrastructure will be the backbone of this transformation with INR 11.21 lakh crore allocated for Financial Year 2025/26. Projects such as Bharatmala, high-speed rail and Smart Cities under PM Gati Shakti are driving connectivity and urban development.” He said Excon supports this by bringing innovators, policymakers and industry leaders together to introduce automation, IoT, AI-driven machinery and green technologies to improve execution and competitiveness. He added, “Every edition sets benchmarks and will continue to empower stakeholders and drive modernisation.”

“EXCON 2025 stands as a testament to India’s growing engineering excellence and global aspirations. As we embrace new technologies and sustainable practices, the Indian construction industry is poised shape the infrastructure landscape of tomorrow” said Deepak Shetty, President ICEMA and CEO/MD JCB India Ltd.

“The exhibition brings together Industry leaders, policy makers and innovators of South Asia to highlight the crucial role of advanced technologies, manufacturing strength and green practices in shaping the national growth as we move in to a new era of infrastructure” said Chandrajith Banerjee, Director General, CII.

Over one million business visitors are expected during this period. Over 1250 exhibitors display a wide range of construction equipment from across the world with 7 country pavilions from China, France, Germany, Italy, South Korea, Turkey and the United Kingdome. They showcase a wide spectrum of global construction technologies and equipment solutions. The presence of these pavilions reinforces EXCON’s role as a bridge between global innovation and South India infrastructure goals.

OTR Lanka and Laugfs Corporation (Rubber) Ltd took part as trade partners from Sri Lanka.

Event was sponsored by well reputed brands such as; AJAX, BKT, CATERPILLAR, conmar, JCB, KOBELCO, KOMATSU, MRCRUSHING IT, PUZZOLONA, RMX, SANY, SCHWING Stetter, TATA HITACHI, VENUS, ACE, Apollo, ARX, Bobcat, EMERALD, HAIL STONE. HYUNDAI, MAHAVEER DISTRIBUTORS, Parker, VELVEX, walavoil, wipro and WIRTGEN GROUP.

by Claude Gunasekera

Business

CHEC South Asia & Southeast Asia completes emergency clearing of A5 Highway

Published

2 hours ago

2025/12/13

Thilina Walpola

China Harbour Engineering Company Ltd South Asia & Southeast Asia, working in close coordination with the Sri Lanka Army, the Road Development Authority (RDA), local authorities and surrounding communities, has recently completed the emergency clearing of the A5 highway, restoring a vital transportation link that had been severely obstructed by landslides and debris in the aftermath of Cyclone ‘Ditwah’. The work was carried out from 04th December to 10th December over a continuous seven-day period.

The A5 highway, a key route for community connectivity, emergency service access and the transport of essential supplies, became impassable after the cyclone triggered extensive damage across multiple regions. Responding to urgent requests from relevant authorities, China Harbour South Asia & Southeast Asia mobilised its specialised rescue teams, heavy machinery and technical expertise to accelerate the clearance process and support national recovery operations. China Harbour has been working in Sri Lanka since 1998, marking 27 years of partnership with the country. The company noted that it has also actively participated in rescue and relief efforts during major national disasters such as tsunamis, bomb attacks and the COVID-19 pandemic, underscoring its longstanding commitment to Sri Lanka during moments of crisis.

A coordinated ground operation involving rescue personnel, 24 land-clearing machines and 36 trained workers was deployed to the affected areas. Working through unstable terrain and challenging weather conditions, the team removed large volumes of earth, fallen trees, rocks and damaged structures, allowing authorities to safely reopen the highway for public use.

The restoration of the A5 highway forms an important component of the company’s broader relief efforts following Cyclone ‘Ditwah’. These efforts included early rescue deployments, the distribution of emergency supplies and coordinated financial support through the Chinese Chamber of Commerce in Sri Lanka (CCCSL), reaffirming China Harbour South Asia & Southeast Asia’s commitment to supporting the country during times of national need.