Connect with us

Business

Sri Lanka financial institution ratings not affected by sovereign downgrade: Fitch Ratings

Published

on

Broader economic conditions ‘ remain challenging’ amid expected contraction of economy Near-term ‘downside risks’ to credit profiles from spill-over effects of remainder of DDO ‘Uncertainties’ prevail over the completion of foreign-currency sovereign debt restructuring

Sri Lanka bank ratings are unaffected by the downgrade of Sri Lanka’s Long-Term Local-Currency Issuer Default Rating to ‘RD’ from ‘C’, says Fitch Ratings.On 14 September 2023, Fitch downgraded the sovereign’s Long-Term Local Currency Issuer Default Rating following the completion of an exchange of treasury bonds for longer-dated ones, which forms a part of the broader domestic debt optimisation program. The exchange of treasury bills held by the Central Bank of Sri Lanka (CBSL) has yet to be completed.

“We do not believe the completion of the first phase of the restructuring of the sovereign’s local-currency obligations is likely to trigger a loss of depositor confidence in the banking system, leading to a widespread default within the financial system, including for non-bank financial institutions (NBFIs). Therefore, we expect the banks to continue to service their local-currency obligations, given their better funding and liquidity profiles relative to that of the sovereign”, Fitch says.

Fitch continues to maintain the Rating Watch Negative (RWN) on Sri Lanka banks and NBFI’s ratings to reflect the potential for deterioration in their creditworthiness relative to other entities on the Sri Lankan national ratings scale.

This reflects near-term downside risks to credit profiles from spill-over effects from the remainder of the sovereign’s debt restructuring, while access to wholesale foreign-currency funding remains constrained. Further clarity around the sovereign debt restructuring process, particularly on the foreign-currency debt, that points to a reduction in stresses that have affected the banking sector in the past several quarters, would result in a resolution of the RWN with affirmation of the bank ratings.

While the local banks have been spared from the rupee debt restructuring, we believe that the broader economic conditions remain challenging as reflected in the expected contraction of the economy and high volatility of economic variables. This may still place downward pressure on individual credit profiles, particularly for NBFIs, which tend to be more exposed to cyclically sensitive segments. We believe that the re-assessment of the sovereign credit profile following the completion of the debt exchange with CBSL will influence the ratings of the banks and NBFIs, given the high interconnectedness.

While the domestic debt optimisation programme is nearing completion, uncertainties prevail over the completion of the foreign-currency sovereign debt restructuring. Any doubts over this could weigh on the banking sector with spillover effects to the NBFIs, given the banks’ exposure to defaulted foreign currency sovereign bonds, albeit they make up a small share of sector assets (3.6% of assets at end-1H23).



Business

Needs of populace hit by Cyclone Ditwah seen as waiting to be addressed

Published

on

Lionel Bopage: ‘Recovery painfully slow.’

By Hiran H. Senewiratne

The government is yet to address fully the needs of the Cyclone Ditwah affected populace though one year has elapsed. The devastation cost the country more than US $ 4.1 billion, an Australia-based Chartered Engineer of Sri Lankan origin said.

‘Cyclone Ditwah affected more than 2.2 million people in 25 districts, which is considered to be one tenth of the population. However, only 39 percent of the allocated funds have been spent to date, the speaker, a one-time General Secretary of the JVP, now living in Australia Lionel Bopage said.

He made these comments at a Rotary Club Colombo South monthly meeting held at the Kingsbury Hotel, Colombo recently.

Bopage quoted from a Loughborough University research report published in February to the effect that Sri Lanka has under invested in prevention but over invested in recovery.

Bopage added: ‘The largest single economic category affected were not buildings but the agriculture sector which provides livelihoods for the majority of affected persons. Therefore agricultural livelihoods have been hit most.

‘More than 58,000 hectares of paddy lands were flooded in the Eastern districts alone, while 46 reservoirs reached critical spill level or failed outright following the disaster.

‘A rapid education sector assessment found that 1,682 schools were affected and more than 555,000 children were unable to attend schools. Further, 622 water supply schemes had been left non-functional and apart from that 11300 homes were damaged or destroyed. But reconstruction is happening at a very slow pace.

‘Tens of thousands of households in the hill country and in the East are still living in damaged properties and on unstable slopes drawing water from schemes that have not been restored.

‘ A Post Disaster Needs Assessment put the cost of resilience at US$ 3.4 billion but restoration work is happening at a slow pace even with foreign donor assistance.’

Continue Reading

Business

WB forecast buoys bourse but weak investor participation slows momentum

Published

on

By Hiran H. Senewiratne

The CSE yesterday kicked off on a positive note due to a World Bank forecast that Sri Lanka could achieve 4.4 percent economic growth this year but later lost momentum due to weak investor participation.

Amid those developments both indices moved upwards. The All Share Price Index went up by 132 points while S and P SL20 rose by 21.02 points.

Turnover stood at Rs 1.97 billion with three crossings. Those crossings were; Lanka IOC 2.7 million shares crossed to the tune of Rs 470 million; its shares traded at Rs 127, CCS 2.7 million shares crossed to the tune of Rs 315 million; its shares sold at Rs 118 and JKH five million shares crossed for Rs 91.5 million; its shares traded at Rs 18.30.

In the retail market companies that mainly contributed to the turnover were; Commercial Credit and Finance Rs 126 million (1.3 million shares traded), Lanka IOC Rs 98 million (775,000 shares traded), Asiri Surgical Hospitals Rs 77 million (7.6 million shares traded), Commercial Bank Rs 51.3 million (307,000 shares traded), Sampath Bank Rs 46 million (325,000 shares traded), HNB Rs 37 million (98000 shares traded) and Tokyo Cement Rs 31 million (393,000 shares traded). During the day 50 million share volumes changed hands in 14547 transactions.

It is said that the petroleum sector performed well, especially Lanka IOC, while in the banking sector counters, especially Commercial Bank and Sampath Bank performed well. In the manufacturing sector, JKH impressed.

TAL Lanka Hotels announced that it has scheduled an Extraordinary General Meeting on October 29 to obtain shareholder approval for a proposed Rs 1.87 billion rights issue. The proceeds will be utilized for the repayment of bank borrowings, part refurbishment of the Taj Samudra Hotel in Colombo, settlement of vendor liabilities, and general corporate requirements.

Yesterday the rupee was quoted at Rs 330.95/331.05 to the US dollar in the spot market, weaker from Rs 330.85/95 the previous day, while bond yields were quoted broadly steady, dealers said.

Continue Reading

Business

Huawei continues to showcase practical AI applications at Sri Lanka AI Week 2026

Published

on

Sri Lanka AI Week 2026 continued into its second day bringing together government, industry, academia and technology partners to explore practical applications of artificial intelligence. As the AI Technology Partner for the second consecutive year, Huawei showcased 18 use cases spanning government, education, finance, industry, green energy and everyday life, demonstrating how AI can be applied to real-world needs.

Prime Minister Dr. Harini Amarasuriya visited the Huawei exhibition together with officials from the Ministry of Education, Higher Education and Vocational Education, experiencing the Smart Classroom, AI in Education and MindGraph by Beijing Normal University demonstrations. The Smart Classroom demostration highlighted how connected technologies can bring teachers and students in different locations into a shared learning environment, while the AI in Education showcase demonstrated how AI can support teachers, enhance learning and enable more personalised education. The Prime Minister praised the efforts of the Ministry of Education, Higher Education and Vocational Education, Huawei and their partners to demonstrate practical applications of AI in education, noting the role of technology in supporting teachers, expanding learning opportunities, and advancing a more inclusive, equitable and future-ready education system.

Later in the day, Deputy Minister of Digital Economy Eng. Eranga Weeraratne, Deputy Minister of Industry and Entrepreneurship Development Chathuranga Abeysinghe, Secretary to the Ministry of Digital Economy Waruna Sri Dhanapala, and Chinese Ambassador Wei Huaxiang visited the Huawei exhibition and explored the AI Hands-On Classroom AI Empowering Industry, AI in Education and Smart Classroom demonstrations. Deputy Minister Weeraratne praised Huawei’s practical approach to showcasing AI applications, noting their relevance to Sri Lanka’s digital transformation across education, industry and skills development. The engagement also extended across the wider AI ecosystem, with industry professionals, technology partners, academics and other visitors engaging with the demonstrations and expressing appreciation for Huawei’s practical approach to applying AI across different areas of society and the economy.

Daniel Wu, CEO of Huawei Sri Lanka, said that Huawei will continue bringing global experience, technology and ecosystem resources to Sri Lanka, while working side by side with local partners to build local capabilities, develop local talent and create real value for the country. “I believe that by working together, we can make AI not only more intelligent, but also more local, more inclusive, and more meaningful for everyone,” he said.

Continue Reading

Trending