Business
Fitch Rating downgrade was due to govt failure to implement correct financial policies, says UNP
The UNP says that the Fitch Rating agency’s downgrading Sri Lanka to a rank of CC indicated an increased probability of a default event in coming months in light of the country’s worsening external liquidity position and drop in foreign-exchange reserves.
Addressing a press conference held at the party headquarters Sirikotha, UNP Chairman and former minister Wajira Abeywardena said that it could not accept the excuse given by the government that the downgrading was a consequence of the COVID-19 pandemic.
“During the same period, except for a few countries such as Sri Lanka, all other countries around the world have strengthened their dollar reserves. Therefore, it is not an excuse that could be accepted as the real cause for this problem. It is nothing but a failure to implement correct financial policies,” he said.
The UNP Chairman said that Fitch has downgraded Sri Lanka to ‘CC’ from ‘CCC’. They did so, stating that there was an increased probability of default as liquidity injections made to sterilize interventions and enforce a 6.0 percent policy rate continue to drain reserves and create forex shortages. This downgrade signals a probability of a default event in coming months in light of Sri Lanka’s worsening external liquidity position underscored by a drop in foreign-exchange reserves set against high external debt payments and limited financing inflows. “We are confronted with the danger of the collapse of the economy. We see the signs of economic collapse. These signs prevent investors coming to this country,” Abeywardena said.
He said that Fitch maintains issuer default ratings from AAA to D. The AAA ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. Ratings AA stands for very high credit quality denoting expectations of very low default risk. They indicate a very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. The ‘A’ ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. The BBB ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity. The ‘BB’ ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that supports the servicing of financial commitments. The ‘B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment. The ratings of CCC where Sri Lanka had been until last week denote substantial credit risk with very low margin for safety. Default is a real possibility at that stage. The CC is the current rating status of Sri Lanka with very high levels of credit risk and default of some kind appears probable. Hereafter we have three more ratings. The next worst could be ‘C’ ratings showing a near default. It is the stage where a default or default-like process has begun, or the issuer is in standstill, or for a closed funding vehicle, payment capacity is irrevocably impaired. Then comes RD ratings which indicate an issuer that in Fitch’s opinion has experienced an uncured payment default or distressed debt exchange on a bond, loan or other material financial obligation, but has not entered into bankruptcy filings, administration, receivership, liquidation, or other formal winding-up procedure, and has not otherwise ceased operating. At the bottom there is D ratings indicating an issuer that in Fitch’s opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure or that has otherwise ceased business.
Business
Affairs of Sri Lankan Airlines could be turned around using local expertise – former CAA chair
The financial affairs of national carrier Sri Lankan Airlines could be turned around along with the fortunes of Mattala Airport, using local management expertise without divesting these assets, former chairman CAA and veteran travel and tourism expert Upul Dharmadasa said.
“Sri Lanka has experts and knowledgeable persons to develop Sri Lankan Airlines into a viable entity. But when it comes to the debt restructuring process the government should absorb the losses to salvage our national carrier, former chairman Civil Aviation Authority Upul Dharmadasa told The Island Financial Review.
Speaking on Mattala Airport Dharmadasa said that during the Covid 19 pandemic he spearhead the airlines’ operations to bring more than 138,000 Sri Lankans back into the country. “At that time Mattala Airport functioned as a second international airport and it assisted the government in managing Covid patients in a more systematic way, he said.
Dharmadasa added: ‘Further, Mattala Airport’s 11 anniversary falls today. It falls on the government to develop it as the second international airport. It could attract large aircraft.
“We need to deploy proper and qualified persons to streamline the entire process.
“I have been in the airline industry for more than a decade. The number of airline arrivals in the country and departures from it have come down considerably after Covid 19 pandemic.
“In this scenario, Sri Lankan Airlines should focus on launching new flights to US and Canada. Together they account for more than 1.4 million Sri Lankan diaspora members who fly to Sri Lanka.
“Sri Lankan Airlines should resume Rome flights as well, which is a lucrative market. Apart from that Sri Lankan Airlines should focus on new destinations, wherein they could sell tickets and attract huge revenue to the airline.
“The airline should have 25 aircraft to offer uninterrupted services to air travelers but at present it has only 23 aircraft.”
By Hiran H Senewiratne
LOLC Al-Falaah, Sri Lanka’s leading provider of alternate financial solutions, proudly announces the launch of ‘Al-Falaah Wakalah Future-Cash’, a pioneering Shariah-compliant alternative for Factoring, Invoice & Cheques discounting facility, designed to transform business financing. This ground-breaking financial solution empowers businesses to elevate and realize future cash flows in real-time, while maintaining adherence to ethical financial principles. Setting a new benchmark in Sri Lanka’s Islamic financial services sector, this initiative strengthens LOLC Al-Falaah’s commitment to innovation and excellence in the alternate finance arena.
Unlike conventional Factoring, which relies on interest-based returns against receivables, LOLC Al-Falaah’s ‘Wakalah Future-Cash Today’ product is structured under the ‘Wakalah-Bil-Istithmar’ concept, ensuring full compliance with Islamic economic jurisprudence. Through this model, LOLC Al-Falaah provides capital infusion into business operations in exchange for a pre-determined Anticipated Profit Return (APR), eliminating interest-based transactions. Businesses are appointed as agents to deploy these funds within their operations, with surplus earnings allocated as a performance incentive. This structure enhances financial discipline, promotes transparency, and encourages ethical business practices.
The introduction of this pioneering facility is particularly timely as Sri Lanka transitions towards economic recovery and long-term stability. Shiraz Refai, Head of Alternate Financial Services at LOLC Al-Falaah, emphasized the significance of this initiative: “As Sri Lanka embarks on a path of economic resurgence, businesses require the right financial instruments to capitalize on emerging opportunities. As a trailblazer in the alternate financial services sector, LOLC Al-Falaah has identified a critical gap in the bills-discounting and factoring industry. The launch of LOLC Al-Falaah’s ‘Wakalah Future-Cash Today’ product presents a strategic solution that enhances liquidity and working capital efficiencies while adhering to Islamic financial principles.
City Cycle Industries Manufacturing (Pvt) Ltd, a leading provider of sustainable mobility solutions and renowned for its household brand Lumala, has been honored with the Best National Industry Brand award under the Large-Scale Other Industry Sector at the recent National Industry Brand Excellence Awards 2024.
Organized by the Sri Lanka Technical Development Board under the Ministry of Industry and Entrepreneurship Development, the award ceremony was held on 21 February at Eagle Lakeside and saw the participation of distinguished leaders from diverse industry sectors. The vent was graced by Prime Minister Harini Amarasuriya as the Chief Guest.
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