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Cabraal and Central Bank responds to debt default fears

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Recent commentary on Sri Lanka’s credit outlook ignores the numerous policy initiatives of the Government of Sri Lanka, which have already started yielding results

The Government of Sri Lanka observes that the concerns expressed in the media in reference to recent reports on Sri Lanka’s ability to service its debt obligations by international banks are one sided, and do not take into consideration the numerous of policy measures that have been introduced to revive the economy and ensure macroeconomic stability. These innovative policy measures are not restricted to traditional debt-based solutions to service the current debt obligations. Measures to build resources through non-debt solutions, the preservation of foreign currency resources and the gradual phasing down of the relative share of foreign debt are already yielding desired results, with a high likelihood of harnessing further improvements during the remainder of the year and beyond.

Certain media reports published recently attempts to raise concerns about Sri Lanka’s ability to honour its debt service obligations, based on backward looking and linear assumptions, thus ignoring the expected outcome of the novel policy regime currently in place. While gross official reserves have moderated somewhat since end December 2020, such moderation is not expected to continue. When all relevant facts are considered, it becomes apparent that the fears raised in certain reports are, in fact, merely hypothetical. The Sri Lankan economy, which is over US dollars 80 billion, has major natural and regular sources of foreign exchange inflows, including merchandise and services exports, workers’ remittances, programme and project related inflows, equity investment, and other financial flows. Aided by the post-COVID revival of the economy, such foreign exchange inflows are projected at US dollars 32 billion in 2021, even without major forms of borrowings, such as floating International Sovereign Bonds (ISBs). These projected inflows are expected to increase by about US dollars 2-3 billion annually in the period ahead with the support of well targeted policies and strategies of the Government. At the same time, authorities will continue to take measures to build up official reserves with the help of measures already implemented and further measures as necessary in the period ahead. It is noteworthy that the Government has launched a major drive towards promoting real inflows of foreign exchange through actively facilitating various merchandise and services exports, in both traditional and non-traditional sectors. The import curtailment measures and the steady recovery in export earnings would continue to improve liquidity in the domestic foreign exchange market. Further, envisaged equity investment flows through the Colombo Port City and Industrial Zones and the reprioritisation of project financing would help reduce the share of foreign debt notably in the period ahead, thereby dispelling concerns about debt sustainability.

In this context, settling the maturing ISBs of US dollars 1.0-1.5 billion, per year, over the medium term, need not be viewed as a major source of concern, given the entire stock of outstanding ISBs account for only 16.7 per cent of Sri Lanka’s total government debt as of end February 2021. It is also stressed that lenders in the majority of 83.3 per cent of the debt stock have raised no concern whatsoever about Sri Lanka’s ability to honour debt obligations. The authorities remain committed to honoring all upcoming debt obligations, leaving zero probability of any form of default on any obligation, which would jeopardise the longstanding relations with stakeholders and the impeccable credit history of the country.

The engagement with the International Monetary Fund (IMF) continues at staff level and as a member state in technical exchanges of know-how. Exploration of liquidity facilitation arrangements with regional central banks is also continuing, with some discussions are at an advanced stage.

As indicated in the Budget 2021, the Government has adopted a novel approach in relation to foreign financing, while enhancing the effectiveness of already secured financing channels, aimed at reducing the share of foreign financing of the budget deficit over the medium term. Reflecting the impact of measures already put in place by the Government, the relative share of outstanding external debt has already declined notably. The Government aims to reduce its external debt over the medium term to around a third of the total debt, and already the share of external debt has declined to around 40 per cent by end 2020 from over 48 per cent at end 2019.

The measures introduced to manage non-essential imports helped ease trade deficit to USD 5,978 million in 2020 from USD 7,997 million in 2019. The trade deficit is further expected to shrink in 2021 to around USD 4 billion. Export facilitation is expected to continue through allowing intermediate goods imports unhindered and promoting domestic value chain improvements, which would result in export earnings of about USD 13 billion in 2021.

Additionally, despite the projections of downturn in workers’ remittances, Sri Lanka recorded an increase of over USD 400 million remittances in 2020 with an aggregate of USD 7.1 billion. The policy measures to further incentivise remittances flows were facilitated with the Budget 2021 announcement of an additional Rs. 2 for conversion of per USD remittance, and the banks were required to sell 10 per cent of such remittance conversion to the Central Bank. The Central Bank has already commenced such absorption of conversions into its foreign exchange reserve. Further arrangements to improve foreign currency liquidity have been introduced, including a mandatory conversion of ¼ of export proceeds.

The Government is also in the process of channeling in official credit sources, with priority being envisaged for policy loans with a significantly high liquidity component. In addition, the commercial external financing component of the already lined-up term financing facility and other market financing components are envisaged in line with Budget 2021.

Sri Lanka Development Bonds (SLDBs) and loans of Overseas Banking Units (OBUs) also remain sources of foreign currency financing mainly from domestic foreign currency earning entities. The recently introduced measures to entice foreign investors to the government securities market and the real economy through an attractive foreign exchange swap arrangement are also likely to help enhance foreign currency inflows in the near term.

Real investment flows to the country remain a promising source based on the Colombo Port City related developments. The land reclamation work had been completed and the required legislation is being finalised. In December 2020, the Sri Lankan conglomerate, LOLC Group, signed an agreement with the Port City developers for a Mixed Development Project valued at USD 1 billion, which is set to break ground in mid-2021.

In this context, the Government reiterates its utmost commitment on meeting its external debt obligations, which will be facilitated not only through direct and indirect financing arrangements but also through highlighted policy measures and the current work plan to increase non-debt creating forex inflows.

The Government wishes to reiterate that even in the midst of various concerns raised by many parties on Sri Lanka’s debt service capability at the height of the COVID-19 pandemic, the Government was able to service its total external debt of around USD 4.3 billion in 2020.

The recent research reports indicate different figures of external debt obligations for 2021. The external debt obligations of the Government for 2021 amount to around USD 3.7 billion including the amortisation payments of USD 2.5 billion. Of this amount, thus far in 2021, the Government has settled over USD 500 million.

Sri Lanka will engage freely with all its investment and development partners and implement the envisaged measures to build up reserves through non-debt creating inflows while reviewing closely the international capital market developments.

Investors are invited to approach the Sri Lankan policy authorities at the highest levels who always remain open for constructive dialogue and will welcome any one-on-one engagement or roadshow discussions, without being dissuaded by premature one-sided opinion expressed without factoring the ground realities and the actual outcomes of policy measures introduced by the Government of Sri Lanka.



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2021 HUAWEI Women Developers Summit: Her Contributions

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HUAWEI Women Developers Summit was successfully closed recently, in which women from different fields and at different career development stages joined together and showed their empowerment. At the summit, several outstanding women representatives from science and technology were invited to share their technical knowledge, work experience, and personal stories, aiming to encourage more women to play a valuable role in science and technology in an active way.

HUAWEI Women Developers (HWD), the holder of this summit, empowers women developers to create world-changing apps and tools and encourages more women to join in with technological innovation by providing them with more resources, opportunities, and platforms for learning, communication, and self-expression, with the goal of building a more multiple ecosystem.

There are still many spaces and opportunities for women to develop themselves in science and technology. To eliminate the digital gender gap, Huawei has launched digital technology enablement programs for women in Ireland, Argentina, Bangladesh, Kenya, South Africa, and other countries or regions. The Operations Director of Huawei Consumer Cloud Service Developer Alliance gave a speech at the summit in which she said: “We really hope that more women can play a leading role in technological innovation with their own talents, values, and strengths.” As such, HWD will continuously provide more opportunities and support for women in tech.

Tang Wenjie, co-founder of Ladies Who Tech, participated in the topic Tech Has No Gender. She put forward her belief that the development of science and technology requires teams with gender diversity and more inclusiveness. Faced with existing gender stereotypes and strong prejudices, women need to be more courageous in designing and creating technological or digital products.

In the era of women’s startups, how women in tech balance the challenges and difficulties when starting up with a firm yet positive attitude has gained a lot of attention. Liu Yi, the co-founder of QIchat, encouraged women in tech to innovate and promote the advancement of science and technology by sharing her own experiences in the affordable and universal education domain.

Both the Product Director of HUAWEI Ads and User Experience Designer of Huawei 2012 Laboratories also discussed how women developers play a more important role in cross-technology fields from the perspectives of business thinking and technical practice. They insisted that women should attempt to make more contributions to the technology industry in different ways with an uncompromising and confident spirit.

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Innovative pipe borne LPG to Sri Lanka

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In the global energy landscape, LPG is considered the safest and the most environmentally sound choice suitable for a variety of functions – from household requirements to industrial consumption, LPG is increasingly emerging as the world’s preferred clean and green energy.

Although in house LPG cylinders have been used in Sri Lanka for a considerable period of time, the safest and the most modern option that is operational worldwide is pipe borne LPG that provides a safe and an easy accessible LPG solution, says Anil Koswatte, chairman & CEO of Litro Gas Lanka Limited & Litro Gas Terminal Lanka (Private) Limited, Sri Lanka’s national LPG provider.

As a measure of upscaling the LPG availability in Sri Lanka, Litro Gas Lanka will be introducing pipe borne LPG supply to households and consumers in Sri Lanka, giving them access to world class energy solutions, he adds.

“Litro Gas Lanka believes in delivering innovative and safe LPG solutions to our customers. Introducing the pipe borne LPG is a step towards ensuring the highest safety protocols in LPG supply – while also ensuring an easy and convenient way of delivery LPG to your home or work place. The LPG provided will be measured in litres, in keeping with global standards.”

Backed by a unique legacy that goes back 150 years, Litro Gas Lanka possesses a heritage that is rich with industry firsts; a part of that legacy was the network of gas pipes that delivered gas to households as far back as a century ago, installed by Ceylon Gas & Water Co, precursor of Litro Gas Lanka.

Today, as energy industry dynamics change with consumer demand, the company remains firmly committed to infusing change and transformation needed to meet changing requirements.

“We are taking the concept of LPG supply beyond that of bringing a cylinder home and stocking it in your kitchen. This will take the LPG availability to the next level, by giving our customers safe & easy accessibility to the energy they need on demand.”

“In keeping with the development goals for the energy sector outlined in H.E The President’s “Vistas of Prosperity & Splendour” economic vision, we believe that the Litro Gas Lanka LPG Pipeline Project would add value to customer proposition and enhance energy efficiency for all”, Koswatte adds.

Commenting on the project, Jayantha Basnayake, Director – Health, Safety & Environment/Professional Business – Litro Gas Lanka Limited says that the new project will optimize safety and improve convenience for the consumers – “LPG supply via a pipeline is the standard procedure for global LPG operations – we are introducing the same safety and ease of operations procedure to Sri Lanka with this.”

“As a Company engaged in the handling highly inflammable LPG as the core product, safety is a key value for us and for our customers. This process will rule out any compromises on safety given the fact that the installation is safely placed outside the living areas. We will be ensuring a 24/7 support service while also ensuring maximum safety levels”, he points out.

Litro Gas Lanka is a member of The World LPG Association (WLPGA); while adhering in all operational protocols to the global standards and parameters stipulated for the LPG industry, the Company will be deploying industry specific equipment, accessories and installations for its pipe line operation.

Litro Gas Lanka has obtained and following local and global standards of ISO (International Organization for Standardization), NFPA (National Fire Protection Association), BS (British Standard), ASTM (American Society for Testing and Materials) and SLS (Sri Lanka Standards Institute) along with other safety protocols required by local authorities.

Janaka Pathirathna, Director – Sales & Marketing at Litro Gas Lanka says that on demand model of LPG supply ensures an uninterrupted supply, while giving customers a hassle free, doorstep service that is convenient and easy to obtain.

“It promises to be a unique and a world class product that comes with international standards in safety and customer experience. There will be several product categories & packages that will offer various benefits to customers, based on their specific needs. We will also introduce attractive payment methods for the convenience of customers, “he adds.

Litro Gas Lanka plays a pivotal role in the country’s energy sector with a 75% market share and a network of 42 distributors, over 14,000 points-of-sale, 1,500 home delivery hubs and a seamless supply of LPG throughout Sri Lanka. The Company maintains a strong market presence with their Litro Gas Home Delivery Mobile App and a dedicated 1311 customer care hotline.

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Ceylinco Life donates High Flow Nasal Cannula

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Ceylinco Life recently donated High Flow Nasal Cannula (HFNC) equipment to the Colombo South Teaching Hospital at Kalubowila, responding to an urgent need to enhance the non-invasive ventilator facilities for patients with severe hypoxic respiratory failure.

The HFNC equipment donated by the company will be used at the four-bed surgical High Dependency Unit (HDU) previously donated by Ceylinco Life to Ward 24 of the hospital. The High Flow Nasal Cannula is used by the medical team to bridge patients being weaned from invasive ventilation.

Ceylinco Life has built, equipped and donated High Dependency Units to the Colombo South Teaching Hospital, Kalubowila, the National Hospital, Colombo, the Lady Ridgeway Children’s Hospital and the Jaffna Teaching Hospital. HDUs are needed to upgrade a patient from normal care or as a step down from intensive care, helping release beds in the intensive care units. These units are used for post-surgery care, before transferring patients to the wards, or to treat an intensive disease.

Pictured here at the donation of High Flow Nasal Cannula equipment to the Colombo South Teaching Hospital, Kalubowila are Ceylinco Life’s Senior Assistant General Manager – Alternative Channels & Emerging Business Lakshika Keragala (extreme left), the hospital’s Consultant Surgeon Dr Malith Nandasena, and medical and nursing staff of the hospital.

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