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A Rescue and Reset Plan for Sri Lanka

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by Sanath Nanayakkara

In the following interview given to The Island Financial Review, independent financial advisor and consultant Ranjith Wickremasinghe (Ranjith_@ymail.com) outlines what he describes as a Rescue and Reset Plan for Sri Lanka. Ranjith Wickremasinghe is a former chairman of the Sri Lanka Ports Authority and of the Ceylon Shipping Corporation.

What is the basic essence of your Rescue and Reset Plan for Sri Lanka – published on 14th April 2022 (ISBN 978-624-97686-5-9)?

Decades of fiscal deficits, trade deficits, balance of payment deficits, corruption, mismanagement, bad decisions, leakages, damage to our economic resources by pollution from SLiMDOE described below, and the loss of tourism income due to covid19 has caused the foreign debt to increase to US$ 60 billion from US$ 18 billion in 2009, leading to an untenable annual debt repayment US$7 billion.

In analyzing our strengths of the sea which is eight times bigger than our landmass, and our strategic location in the center of the Indian Ocean my research identified a hidden intrinsic asset which I have further researched, formulated, invented, monetized and published as the “Sri Lanka’s Multi-Billion Ocean-Air Expressway”, which I have named as SLiMDOE in my publication ISBN 978-624-97686-4-2 on 12th September 2021.

The carriage of 30% of world trade annually via 85,000 ocean and air crossings using the SLiMDOE short-cut across Sri Lanka and abutting the Dondra Head in the southern tip has enabled global economies to gain US$ 100 billion during the last decade whilst damaging our economy by an equal amount, which could be used as leverage to waive off our debt.

Basic Strategy of the Rescue and Reset Plan

1. Obtain a waiver on foreign debt repayments against the damage caused to our economic resources by pollution in using the SLiMDOE via a global initiative under the umbrella of the World Bank and UNDP. It is proposed that an interim waiver of debt repayments for 2022 and 2023 amounting to US$ 7 billion each are requested, pending discussions with the global economies and the creditors.

2. It is also imperative to obtain bridging finance of US$ 4 billion each for 2022 and 2023 needed to reset the stalled economy, from multilateral institutions and friendly countries.

3. Corresponding to the above “reset process” the GoSL is required to implement several other proposals to obtain a burst of development using the “South Sea of Sri Lanka”, to earn foreign exchange quickly, and to avert the present foreign exchange and the debt crisis. The full potential of export earnings could exceed US $ 20 billion per annum at full fruition enabling our economy to grow from US$ 84 billion in 2021 to over US$ 100 billion by 2026, detailed in my publication ISBN 978-624-97686-5-9.

These measures are expected to out wipe out the trade deficit of US$ Bn 8 to surplus of US$ Bn 2 by 2026 by increasing the exports from 2020 US$ Bn 10 to US$ 33 by 2026, and benefiting from the value addition, import substitution, and increased agricultural, fishery and livestock output, well over 100% by 2026.

Targets given are expected to turnaround the Sri Lankan economy to a GDP growth of 0.4 % in 2022, by 3% in 2023, 4% in 2024, 5% in 2025, 6% in 2026, and reduce the budget deficit from 11% in 2020 and 2021 to 6% of GDP by 2022, and to 3% by 2026, and substantially increase our external reserves and reduce our foreign debt. (As the relief measures are being delayed due to the present political impasse, this will cause a negative growth in 2022 than predicted above).

The UNDP recently proposed ‘debt-for-nature swaps’ to tackle Sri Lanka’s debt problem. This proposal from the UNDP came as Sri Lanka is getting ready to talk with its multiple creditors to restructure its debt. The International Rating Agency Moody’s has also expressed the view that it is wiser for Sri Lanka to explore this option. In another development, British Prime Minister Boris Johnson recently assured support to Sri Lanka for climate financing. In this context, do you think that Sri Lanka can leverage this opportunity to obtain such climate-related instruments to raise new funding as well as to forgo at least part of the country’s existing debt?

Yes, Sri Lanka can use my discovery, Sri Lanka’s Multi-Billion Dollar Ocean-air Expressway (SLiMDOE) as leverage to obtain a waiver on repayment of debt and obtain the bridging finance as per my concept published in September 2021, the principle of which has now has been reinforced by the UNDP and the British Prime Minister Boris Johnson.

Government tax revenue which recorded 12% in 2019 has fallen to 8% of GDP in 2020. It needs to be raised immediately and eased gradually as the economy grows as per your Plan. However, the private sector asks for a simplified tax structure and consistency in tax policy. The ordinary people want less indirect taxes and more direct taxes levied from the rich. How can we strike a balance between these two dynamics?

The President has stated that the reduction of taxes in 2020 was a mistake, and the new Prime Minister also holding the portfolio of Finance has already taken remedial aimed at correcting this situation. As the economy stabilizes during the tail end of the five-year period the corrections could be made appropriately to the ratio of direct to indirect tax.

According to your Rescue and Reset Plan for Sri Lanka, the government’s recurrent expenditure now standing at 17% of GDP needs to be brought down to 14% by end 2022, to help reduce the budget deficit now running at 11% of GDP. How can we do this in a sufficient and appropriate manner while protecting the country’s economic and public services interests?

Austerity has to start at the top, and has to percolate to the lower levels. We are a bankrupt nation; the carnival is over; we need to be lean and mean at the top and up to the bottom. We need to challenge every single item of expenditure based on “value for money” and lead by example. No more luxury living at the expense of the tax payer.Restructuring of SOEs is considered to be crucial for fiscal consolidation and Sri Lanka’s sustainable growth, but there’s a lot of resistance from trade unions to undermine such attempts. How can we achieve this against this backdrop?

All the CEO’s of SOE’s must be instructed to submit a five-year corporate plan and a financial plan immediately. All these plans must be evaluated by an expert committee who would give the policy direction. In this exercise the accounting and other professional bodies should be asked to volunteer their membership to assist in these evaluations to keep the costs to a bare minimum. All CEO, s must be given dividend targets.

Price of basic food and other essentials have increased from 30% to 80%. The poor has become poorer, and now have to skip meals. Do you think as a country running a twin deficit, Sri Lanka can provide relief to these vulnerable segments in the near future? If so, what’s the specific social safety net you propose?The dividends targets must be given to restructured SOE’s to finance the safety net of the poor.



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Dialog impacted by further forex losses in Q2, accumulated NPAT in 1H negative Rs28.3Bn

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Dialog Axiata PLC announced, Tuesday 09th August 2022, its consolidated financial results for the six months ended 30th June 2022. Financial results included those of Dialog Axiata PLC (the “Company”) and of the Dialog Axiata Group (the “Group”).

Sri Lanka continued to be battered by the socio-economic crisis in Q2 2022 which led to adverse movements in macro variables such as Sri Lankan Rupee (“LKR”) depreciating 23% against the United States Dollar (“USD”), Inflation rising to 54.6% (from 18.7% recorded by end Q1 2022), policy rates increasing by 8 percentage points and 12-month T-Bill rate increasing to 21% (from 12% recorded by end Q1 2022).

Despite the challenging environment witnessed in Q2 2022, the Group sustained its consistent performance to record strong Revenue growth across all business segments, namely, Mobile, Fixed Line, Digital Pay Television, International and Tele-infrastructure, relative to prior periods, namely, Year-to-Date (“YTD”) and Quarter-on-Quarter (“QoQ”). Accordingly, the Group recorded consolidated Revenue of Rs.81.6Bn for 1H 2022 and Rs43.3Bn for Q2 2022. However, driven by higher network spend and escalation in the cost base, Group Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) declined to Rs27.5Bn for 1H 2022 down by a moderate 1% YTD. On a QoQ basis EBITDA declined 14% to record Rs12.7Bn for Q2 2022.

The Group Net Profit After Tax (“NPAT”) was impacted by the forex losses amid continued depreciation of the Sri Lankan Rupee (“LKR”) against the United States Dollar (“USD”). The resulting forex losses reached Rs.14.2Bn for Q2 2022 and Rs.34.3Bn for 1H 2022. The forex losses were predominantly contributed by market-to-market translational losses from USD denominated borrowings.

Group NPAT recorded a loss of Rs28.3Bn for 1H 2022 and a loss of Rs12.5Bn for Q2 2022 amid forex losses. Normalised for the said forex losses, NPAT continued to decline albeit recording profits of Rs6.0Bn for 1H 2022 and Rs1.6Bn for Q2 2022.

Dialog Group continued to be a significant contributor to state revenues, remitting a total of Rs16.9Bn to the Government of Sri Lanka (GoSL) during the first six months of 2022. Total remittances included Direct Taxes and Levies amounting to Rs9.2Bn and Rs7.7Bn in Consumption Taxes collected on behalf of the GoSL. The total taxes paid increased 46% YTD and 56% QoQ. The Direct Taxes included Rs3.8Bn paid during the quarter in lieu of one-off Surcharge Tax of 25% applicable on PAT of FY2020.

The Group continued to support critical investments in 1H 2022 to provide seamless and consistent connectivity whilst meeting the surge in data demand. Accordingly, the Capital expenditure reached Rs22.4Bn for 1H 2022. Capital expenditure was directed towards investments in High-Speed Broadband infrastructure to further expand Dialog’s leadership in Sri Lanka’s Broadband sector. In line with the above Capex, the Group Operating Free Cash Flow (“OFCF”) declined to Rs2.8Bn for 1H 2022.

During the quarter the Dialog Group entered into loan agreement of up to USD150Mn with the International Finance Corporation (“IFC”) that is expected to help expand and improve the network capacity through the upgrading of existing sites and the deployment of new 4G sites. IFC will also ensure that Dialog adopts an enhanced environmental and social management system (ESMS) according to IFC Performance Standards for their mobile network deployment, in line with Dialog’s endeavors of pursuing green connectivity, supporting global climate action goals and achieving net-zero CO2 emission by 2050.

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Emirates invests over US$ 2 billion to take its on-board customer experience to new heights

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Priding itself on a brand promise of ‘Fly Better’, Emirates is investing over US$ 2 billion to enhance its inflight customer experience, including a massive programme to retrofit over 120 aircraft with the latest interiors, plus an array of other service improvements across all cabins starting in 2022.

Sir Tim Clark, President Emirates Airline said: “While others respond to industry pressures with cost cuts, Emirates is flying against the grain and investing to deliver ever better experiences to our customers. Through the pandemic we’ve continued to launch new services and initiatives to ensure our customers travel with the assurance and ease, including digital initiatives to improve customer experiences on the ground. Now we’re rolling out a series of intensive programmes to take Emirates’ signature inflight experiences to the next level.”

Some of Emirates’ latest initiatives include: elevated meal choices, a brand new vegan menu, a ‘cinema in the sky’ experience, cabin interior upgrades, sustainable choices and a generous approach to the little touches that make travel memorable.

Starting from August, Emirates’ passengers can look forward to:

New Inspirations, New Menus:  An award-winning team of chefs, a world-class catering team and a wide variety of suppliers have been assembled to design and deliver the best fine dining experience in the sky. New menus will be served on select Emirates routes in First Class, featuring dishes such as pan-fried salmon trout with moqueca sauce and creole rice, roasted duck breast with orange thyme jus, steamed broccolini and fondant potatoes. New menus will also be introduced to Business and Economy on the 1st of September.

Purposefully Vegan Choices: Emirates’ new vegan menu is carefully curated to cater to the growing numbers of customers pursuing this thoughtful lifestyle. Vegans, or anyone interested in a delicious and healthy plant-based meal, will enjoy handcrafted gourmet dishes such as pan-roasted king oyster mushrooms, flavoursome jackfruit biryani and sliced kohlrabi garnished with burnt orange. Desserts are a decadent affair with choices of chocolate truffle cake with hazelnut, pistachio and gold leaf, or green grape tart adorned with candied rose petals, vanilla custard, and berry compote glistening with yuzu pearls. Vegan dishes are available to pre-order in all cabin classes.

The Champagne and Caviar Experience: Emirates’ First Class experience, always a benchmark for service excellence, has been upped a notch in 2022. Customers can now savour unlimited portions of Persian caviar as part of the ‘dine on demand’ service, with an exquisite pairing of the world-renowned Dom Perignon vintage champagne. Emirates is the only airline with an exclusive agreement to offer the luxury brand on-board.

Cinema in the Sky: First Class customers can create a memorable movie moment on-board by ordering cinema snacks as they enjoy the 5,000 channels on Emirates’ ice inflight entertainment system. The cinema snack menu includes moreish classics such as lobster rolls, juicy sliders, edamame, and salted popcorn, and can be ordered on demand. All passengers can also curate their own ice experience before their flight, simply by browsing and pre-selecting movies or TV shows on the Emirates app, which can then be synced to ice the moment they board, maximising the seamless travel experience.

Farm to Fork – Sustainable Supply Chain: Emirates’ customers departing on flights from Dubai can begin crunching on fresh greens harvested from Bustanica, the world’s largest vertical farm and newly-opened US$40 million joint venture investment through Emirates Flight Catering. Emirates is continuing to invest in sustainable operations and supply chains, seeking local food suppliers and farms wherever possible to serve the freshest produce on board.

Specialised Hospitality Training for Cabin Crew: Emirates has partnered with Ecole hôtelière de Lausanne, one of the world’s top hospitality management schools, to craft the Emirates Hospitality strategy and encourage inspiring customer experiences. Emirates Cabin Crew have already begun engaging in intensive training programmes focused on delivering the four service pillars: Excellence, Attentiveness, Innovation and Passion.

Upgraded Cabin Interiors in all Classes: The most significant investment is an extensive and record-breaking refurbishment of the aircraft fleet interiors, where cabins will be retrofitted with new or reupholstered seats, new panelling, flooring and other cabin features. Benefitting all Emirates passengers, every cabin class will be refreshed and new Premium Economy cabins installed. After the retrofit, Emirates will have a total of 120 aircraft offering Premium Economy seats – the only airline in the region to offer this cabin class, and enhanced interiors and features across all other cabins. With its first aircraft scheduled to roll into the Emirates Engineering Centre for retrofitting in November, planning work and trials have begun in earnest.

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Janashakthi Life strengthens board with two new appointments

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Janashakthi Insurance PLC, one of the key players in Sri Lanka’s insurance industry, announced the appointments of Sivakrishnarajah Renganathan and Dr. Nishan de Mel as Independent Non-Executive Directors of the organization with effect from 27th July 2022.

“We are pleased to welcome S. Renganathan and Dr. Nishan de Mel to the Board of Janashakthi Insurance PLC, as we continue to accelerate the execution of our strategic priorities to expand our presence in the Life Insurance segment,” said Prakash Schaffter, Executive Deputy Chairman of Janashakthi Insurance PLC.

“Renganathan joins us with a rich tenure of 41 years in the banking sector and extensive financial and managerial experience which will provide valuable insights as we continue to pursue our growth journey. Dr. de Mel is an economist with extensive knowledge and experience in strategic planning, that will enable our growth strategy to drive transformation through effective strategic planning. We are confident that they will provide valuable perspectives and will create a new dynamic within the Board as we continue to transform the insurance industry to better serve our customers and communities”, he concluded.

Sivakrishnarajah Renganathan is the former Managing Director/ Chief Executive Officer of Commercial Bank of Ceylon PLC, Commercial Development Co., PLC and Deputy Chairman of Commercial Bank of Maldives. He had held several key positions in the Bank. He has led Commercial Bank’s acquisition of the banking operations of Credit Agricole Indosuez in Bangladesh. In addition, he has served among others, as a Member of the General Council of the Institute of Bankers of Bangladesh, Founder / President of the Sri Lanka Bangladesh Chamber of Commerce and Industry, Executive Member of the Foreign Investors Chamber of Commerce and Industry in Bangladesh.

Renganathan, a Fellow of the Chartered Institute of Management Accountants, UK (FCMA), Fellow of the Chartered Global Management Accountant (CGMA), Fellow of the London Institute of Banking & Finance, UK (FLIBF) and a Fellow of the Institute of Bankers Sri Lanka (FIB), had received extensive Leadership, Management and Banking training, both locally and overseas.

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