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Private creditor debt restructuring to be completed by March

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Dr. P. K. G. Harischandra

From June to November 2023, the Central Bank had reduced the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by about 6.5 percent, Assistant Governor of the Central Bank of Sri Lanka, Dr. P. K. G. Harischandra said.

That move had been made in response to the successful management of inflation, prompting the Central Bank to ease its previously tight monetary policy.

“Simultaneously, there was a gradual decrease in interest rates; however, this decline occurred at a measured pace. The transmission of policy rate adjustments to the money market is not instantaneous, requiring a certain period for full effect. During the Monetary Policy Board meeting conducted on January 22, 2024, the Central Bank of Sri Lanka opted to maintain the existing policy interest rates. This decision was based on the belief that additional time was needed for the money market to fully incorporate the earlier 6.5 percent reduction in interest rates, thus influencing a more comprehensive adjustment.,” he said.

Harischandra mentioned a decline in both lending rates and interest rates associated with Treasury bills. The Assistant Governor further indicated that forthcoming adjustments would involve a reduction in both lending rates and deposit interest rates.

“In December 2023, the inflation rate stood at approximately four percent. Interest rates for deposits persist in the range of nine to 10 percent, providing depositors with continued value for their savings. With the ongoing economic recovery, there is an opportunity to bolster it by lowering lending rates. This, in turn, would facilitate more accessible borrowing and encourage increased investment. Notably, the fourth quarter of 2023 marked a positive turn, breaking a streak of six consecutive quarters of negative growth, signaling encouraging economic progress.,” he said.

Harischandra emphasized the necessity of reducing lending rates to sustain the current positive economic momentum. He noted that the Central Bank of Sri Lanka aims to keep inflation at approximately five percent, enabling interest rates to range between eight and 10 percent. This strategy aims to provide depositors with the benefit of seeing an appreciation in their funds, while simultaneously offering entrepreneurs the opportunity to borrow at more affordable rates.

Harischandra said in late 2022, inflation was at 70 percent. In January 2024, inflation will be around seven percent because of the hike in the Value Added Tax (VAT). Inflation can happen because of supply-side and demand-side pressures.

“There is no inflationary pressure stemming from demand because the purchasing power of the population remains low. Over the course of 2022 and 2023, the prices of goods experienced a considerable increase of about 70 percent. While the value of the rupee saw a substantial 45 percent decline in 2022, it only appreciated by 12 percent in 2023. Currently, exchange rates are stable, and there is no inflationary pressure arising from that aspect. Additionally, with the price of crude oil staying below 80 dollars per barrel, we are confident that even if inflation reaches seven percent in January, it will likely be a temporary spike,” he said.

The Assistant Governor noted that an inflation rate of approximately five percent is considered typical in emerging markets and is viewed as an indicator of economic well-being. Nevertheless, the growth of purchasing power among the populace will require some time.

He further said, “a considerable number of individuals are opting to leave the country, prompting many companies to increase salaries. This adjustment has become necessary to retain the essential labour force for their operations. However, it’s important to clarify that these salary hikes may not be deemed sufficient.”

Harischandra said they had restructured domestic debt. International debt comes in two categories, i.e., international sovereign bonds and bilateral debt. Significant progress has been made in restructuring bilateral debt..

“Paris Club, China and India have agreed to help us. We now have to deal with the international sovereign bonds. We are working with the IMF and debt advisors. Furthermore, we hope to come to preliminary agreements by the end of this quarter,” he said.



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Review of progress in reforms and modernisation of key state revenue-collecting institutions

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A progress review meeting on reforms and modernisation initiatives at Sri Lanka’s key state revenue-collecting institutions was held on Thursday  (15) at the Presidential Secretariat, chaired by Secretary to the President Dr Nandika Sanath Kumanayake, with the participation of representatives of the International Monetary Fund (IMF) and officials of the Revenue Administration, Reform and Modernisation Bureau (RARMB) of the Presidential Secretariat.

At the meeting, the IMF representatives commended the revenue collection efficiency of the Department of Inland Revenue, Sri Lanka Customs and the Department of Excise, the country’s three leading state revenue-collecting institutions. Extensive discussions were also held on the progress of the reform and modernisation programmes being implemented at these institutions.

Secretary to the President Dr Nandika Sanath Kumanayake outlined the progress achieved by the three institutions to date and the reforms planned for implementation in the future.

The IMF representatives also highlighted the importance of strengthening risk management, developing human resources and ensuring the efficient operation of computer systems at the respective institutions.

Senior Additional Secretary to the President Seevali Arukgoda also attended the meeting. The IMF was represented by Cindy Negus, Senior Economist in Revenue Administration for the Asia and Pacific, Europe, Middle East and Central Asia regions; Alison Lister, Revenue Administration Adviser; and Gregory Toppin, Resident Revenue Adviser in Sri Lanka. A group of senior officials from the Revenue Administration, Reform and Modernisation Bureau of the Presidential Secretariat also participated.

(President’s Media Division)

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Cut power bills by 3-5%, don’t hike them, consumers demand

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By Anuradha Hiripitiyage

Electricity tariffs should be reduced by between 3 and 5 percent instead of being increased by 2.88 percent in the fourth quarter, as proposed by the National System Operator (NSO), Electricity Consumers’ Association Secretary Sanjeewa Dhammika said.

Addressing a media briefing in Maradagahamula, Divulapitiya, Gampaha, yesterday (16), Dhammika said a proper assessment of electricity generation costs, including the contribution of hydropower, could justify a reduction in tariffs.

He said the NSO had sought approval from the Public Utilities Commission of Sri Lanka (PUCSL) for a 2.88 percent tariff increase, which was expected to generate an additional Rs. 4,438 million.

However, the Commission had indicated that an increase of only 1.46 percent was warranted, amounting to Rs. 2,245 million, he said, adding that even this increase was unnecessary.

Dhammika alleged that the proposed revision sought to pass on to electricity consumers the financial burden arising from the non-arrival of five coal shipments and failed tenders.

“The Government had said that the burden of coal-related losses would not be passed on to the public. It is therefore unjust to make consumers bear these costs,” he said.

He pointed out that the PUCSL had forecast that hydropower would account for 32.34 percent of total electricity generation in the coming quarter, while the cost of such generation would represent only 3.45 percent of the overall cost of electricity production.

Consumers should benefit from the lower cost of hydropower generation rather than bear the burden of more expensive thermal power generation, he said.

Dhammika also questioned the inclusion of Rs. 669 million in capacity charges that had not been approved by the PUCSL, as well as a further Rs. 1,069 million to repay loans relating to incomplete projects.

Including such charges in the proposed tariff revision was unjustifiable, he said.

The PUCSL has given the public until October 30 to submit their views on the proposed tariff revision.

Dhammika said the possibility of increased hydropower generation in the coming weeks, as reservoir levels rise, should also be taken into account when determining electricity tariffs.

He maintained that tariffs could be reduced by 3 to 5 percent if hydropower generation was properly assessed and coal-related losses and unapproved charges were excluded from the calculations.

He further claimed that electricity tariffs could be reduced by as much as 10 percent through the promotion of renewable energy and the effective use of solar power and battery storage systems.

The Electricity Consumers’ Association urged the Government to withdraw the proposed tariff increase, insisting that consumers should not be made to bear costs arising from coal supply problems and other disputed charges.

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Asgiri Mahanayake calls for immediate release of Gnanasara Thera

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Most Ven. Warakagoda Sri Gnanaratana Mahanayake Thera

By S.K. Samaranayake

Most Ven. Warakagoda Sri Gnanaratana Mahanayake Thera of the Asgiri Chapter has called for the immediate release of Ven. Galagodaaththe Gnanasara Thera, who is currently serving a prison sentence, following a court ruling.

The Asgiri Mahanayake made the appeal when a delegation of senior prison officials, including Assistant Commissioner of Prisons and Director of Operations Senaka Pallegedara, called on him on the 16th.

During the meeting, the prelate warned that the continued incarceration of Ven. Gnanasara Thera could lead to a volatile situation and cause public agitation.

Responding to the appeal, the prison officials informed the Mahanayake Thera that the authority to order the release of Ven. Gnanasara Thera did not rest with the Prisons Department but with the President.

Other senior prison officials, including Rajeev Srimal Silva, Sampath Warnakulasooriya and Mangala Welivita, were also present at the meeting.

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