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Sri Lanka’s International Sovereign Bonds maturing in 2022 quoted at discounted prices, but volumes not available for purchase

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Information Series Note

As per the “6-month Road Map for Ensuring Macroeconomic and Financial System Stability” presented by the Central Bank of Sri Lanka on 01.10.2021, the International Sovereign Bond (ISB) exposure is to be gradually reduced to around 10 per cent of Gross Domestic Product (GDP) over the next 3 years. In line with this objective, having observed the discounted prices at which the upcoming January and July 2022 ISB maturities were trading during the month of September 2021, the Central Bank explored the possibility of executing a buy-back exercise in consulation with a number of International Banks and Lead Arrangers.

Nevertheless, based on market information, it was observed that there was no tangible interest from the bond holders to sell the January 2022 ISB maturities at the discounted price that prevailed during the latter part of September 2021, thereby indicating that buying back a significant volume in order to enjoy a reasonable cost benefit to the issuer would not be possible. The inquiries also revealed that not even 5 per cent of the outstanding January 2022 ISB maturity was available for sale at the discounted prices that were quoted.

Overall, the Central Bank observations on the attempted buy-back initiative are as follows:

• The volume of ISBs that would be sold by ISB investors at the discounted prices that prevailed towards the latter part of September 2021, is highly insignificant. Hence, any attempt by the issuer to buy the very small volume available will not be fair by the large number of ISB holders who wish to hold the ISBs to maturity.

• It is clear that the large majority of ISB holders are not ready to part with the above GOSL ISBs unless prices are at par or closer to par. Hence, a buy-back initiative will also not result in any significant price or coupon benefit to the issuer.

• The above mentioned investor behaviour signifies the continuing confidence of the ISB holders regarding the ability of the issuer (GOSL) to honour its obligations and maintain its unblemished record of debt servicing. Therefore, the concerns raised by certain quarters regarding a possible vulnerability in 2022 are clearly not reflected by this investor sentiment.

• The continuing investor preference seems to be to hold the above GOSL ISBs. Hence, the Central Bank’s initiative to proceed with a buy-back of the 2022 ISBs will not yield a successful outcome, given the appetite of ISB holders to hold the GOSL ISBs.



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ADB approves $100 million loan to boost skills development and jobs for youth in Sri Lanka

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The Asian Development Bank (ADB) has approved a $100 million results-based loan to help Sri Lanka transform its technical and vocational education and training (TVET) system, equip more young people with industry-relevant skills, and strengthen the country’s competitiveness and inclusive growth.

The Skills Development System Transformation Program will support the Government of Sri Lanka’s efforts in improving the quality and relevance of skills training, strengthening links between training providers and industries, and expanding employment opportunities for youth. The program will increase women’s employment opportunities in nontraditional jobs in fields including automotive technology, engineering, information and communications technology, construction, and renewable energy.

“A skilled workforce is essential to Sri Lanka’s long-term economic transformation and competitiveness,” said ADB Country Director for Sri Lanka Shannon Cowlin. “This program will help create stronger pathways from education to employment by making training more responsive to industry needs, expanding opportunities for young people and women, and ensuring that graduates have the skills required by a modern and evolving economy.”

Though Sri Lanka’s economy is recovering, it faces skills shortages in priority sectors, high youth unemployment, and low female labor force participation. Many employers report difficulty finding workers with the skills needed in a changing economy.

Aligned with the Government of Sri Lanka’s Technical and Vocational Education and Training Sector Strategic Framework 2026–2035, the nationwide program will be implemented from 2027 to 2031 and is expected to directly benefit more than 100,000 young people through improved access to quality, employment-oriented training.

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USD 40.84m pipeline to secure aviation fuel supplies to BIA

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By Ifham Nizam

The government has cleared a USD 40.84 million and Rs. 8,548.75 million contract to build a dedicated aviation fuel pipeline from Muthurajawela to Bandaranaike International Airport (BIA), alongside a massive new fuel storage facility with a capacity of 92,000 cubic metres.

Energy Minister Anura Karunatilaka said the project represented a major investment in strengthening the infrastructure underpinning Sri Lanka’s aviation fuel supply and ensuring more reliable fuel availability at the country’s main international airport.

‘This project will provide the infrastructure required to strengthen the reliability and continuity of aviation fuel supplies to Bandaranaike International Airport, Karunatilaka said.

The contract has been awarded to China Petroleum Pipeline Engineering Company Limited, following an international competitive procurement process in which three bids were received.

The project will see a new aviation fuel storage tank complex constructed at Muthurajawela, together with the associated infrastructure required for handling and transferring aviation fuel.

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CSE activity up, turnover weak at Rs. 1.4 billion

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By Hiran H Senewiratne 

Trading activity on the Colombo Stock Exchange (CSE) gathered pace yesterday as global fuel prices began to show signs of easing, according to market analysts.In this context, both indices moved upwards. All Share Price Index up by 67.97 points while S and P SL20 up by 8.30 points.

Turnover stood at Rs 1.4 billion with seven crossings. Those crossings were reported in Sampath Bank 1.7 million shares crossed to the tune of Rs 238 million and its share price traded at Rs 140, Access Engineering two million shares crossed to the tune of Rs 159 million and its share price traded at Rs 79.50, LOLC one million shares crossed to the tune of Rs 129 million and its share price traded at Rs 129, HNB 100,000 shares crossed to the tune of Rs 38.4 million and its share price traded at Rs 384, JKH 1.9 million shares crossed to the tune of Rs 35 million and its share price traded at Rs 18.60, Hayleys 100,000 shares crossed to the tune of Rs 22.50 million and its share price traded at Rs 225 and Richard Pieris 847,000 shares crossed to the tune of Rs 22 million and its share price traded at Rs 25.50.

In the retail market top seven companies that have mainly contributed to the turnover were Sampath Bank Rs 114 million (813,000 shares traded), JKH Rs 100 million (5.3 million shares traded) LB Finance Rs 49 million (325,000 shares traded), HNB Finance Rs 30 million (27 million shares traded), HNB Rs 27 million (70000 shares traded), NTB Rs 25 million (82000 shares traded ) and Lanka IOC Rs 21 million (666,000 shares traded). During the day 65 million shares volumes changed hands in 10433 transactions.

The Banking and manufacturing sector counters performed well.  In the banking sector Sampath Bank let the market while manufacturing sector especially JKH also significantly performed well. With the fuel revision Land IOC also a significant stock at the floor.

Meanwhile, First Capital Treasuries said that Ramesh Schaffter resigned as a Non-Independent Non-Executive Director with effect from October 1, to facilitate the restructuring of the company’s board.

Yesterday the Central Bank announced the US Dollar rate as against rupee. The rupee was quoted flat at Rs 330.65/80 to the US dollar in the spot market , while bond yields dropped, dealers said.

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