Connect with us

Business

Foreign investors urged not to be dissuaded by Moody’s erroneous stance on Sri Lanka

Published

on

In response to recent Moody’s ratings, the Central Bank of Sri Lanka issued the following statement.

We observe, with disappointment, the rating downgrade by Moody’s Investors Service and the recent release of an erroneous analysis by an international investment bank expressing concern s about Sri Lanka’s economic and financial strength and external debt service capacity.

This downgrade and the report failed to do justice to the ground reality of the ongoing rapid economic recovery backed by vastly improved business confidence arising from the return of political and policy stability after a lapse of five years. Such announcement is also unwarranted especially at a time when the new Government is about to announce its Budget for 2021, spelling out the policy framework proposed in the medium term.

While Sri Lanka too like many of its peers in the emerging market group, experienced initial capital outflows, exchange rate depreciation, slowdown in activity, and pressure on government finances, in response to the effects of COVID-19 pandemic, unlike many of its peers, the country has been able to decisively deal with the domestic spread of the pandemic, for which Sri Lanka is hailed as one of the few countries to have been able to do so. The swiftness with which decisions were taken followed. by the landslide vi story of the Government, Sri Lanka is now moving along a recovery path towards growth and stability.

Merchandise exports have returned to pre-COVID monthly avers ges of US dollars 1 billion. With the curtailment of non- essential imports, the trade deficit has improved notably. Although inbound tourist movements are not yet allowed, other services exports, including IT services and shipping, remain robust. Workers’ remittances have recorded a sharp increase in spite of the initial expectation of a slowdown. Amidst the COVID response the Government also initiated reforms in State Owned Enterprises (SOE) and the Impact of such actions can be seen already with some SOE’s showing positive results.

Foreign Direct Investments, which slowed in the first half of the year, appear promising looking ahead, particularly with the expected inflows to the Port City project and for new manufacturing projects. The expected finalization of new legislation for the Port City within a month will result in the realization of investment by those who have already completed due diligence on such investment. Other expected investments include import alternative industries as well as investments by international financial institutions. With regard to portfolio flows, foreign inflows to the government securities market have already shown signs of resumption. The stock market indices have improved to pre-COVJD levels.

The tourism sector has been supported by the flourishing domestic tourism. With increased emphasis on domestic agriculture, agro-based industries and resource-based industries, domestic economic activity has seen a remarkable turnaround with more opportunities being created for entrepreneurs to flourish, and available economic indicators point towards a promis ing recovery in the second half of the year, following the setback in the first half.

Given these developments, the exchange rate has sharply appreciated since mid-April, and remains stable at appreciated levels allowing the Central Bank to accumulate reserves through market purchases of foreign exchange. In fact, official reserves of the Central Bank increased to US dollars 7.4 billion by end August 2020, and the Government has repeatedly expressed its ability and willingness to meet all its debt obligations falling due in the period ahead. 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 likely to help enhance foreign currency inflows, in addition to the support of friendly countries, such as the swap arrangement with the Reserve Bank of India in July 2020 and the expected disbursement of the 21 1<1 tr anche of the Foreign Currency Term Financing Facility proceeds from the China Development Bank in October 2020.

Sri Lanka’s policy environment remains facilitative of enabling high economic growth beyond the recovery phase while preserving macroeconomic stability. On the back of over 11 years of well anchored mid-single dig it levels of inflation, the Central Bank has pursued an increasingly accommodative monetary policy stance. Fiscal policy, while remaining focused on supporting the economy, will return to a path of consolidation as envisaged in the Government’s policy framework, “Vistas of Prosperity and Splend our”. Hence, both fiscal and monetary policies have prioritized supporting people, businesses and thereby the economy, without jeopardizing the ma croeconomic balance of the country.

Given these circumstances, the Government of Sri Lanka wishes to reaffirm to foreign investors that ha ve put faith in Sri Lanka continuously over the past several years that Sri Lanka remains willing and able to meet its debt obligations, as it has done impeccably in the past. In fact, Sri Lanka is one of the few countries to have recognized the external sector pressures and decisively curtailed all non- essential imports with a view to prioritize external debt service obligations.

Furthermore, the press release added that all payment transactions for the repayment of the International Sovereign Bond of US dollars 1 billion maturing on 04 October 2020 have already been lined up and funds will be credited to the paying agent’s account on 02 October 2020. It is puzzling that Moody’s has downgraded Sri Lanka on the eve of this repayment, which seems similar to the previous premature and reckless downgrades by rating agencies in the immediate aftermath of the en d of the internal conflict in 2009 and during the political impasse at end 2018.

Accordingly, foreign investors are invited not to be dissuaded by the recent unwarranted rating downgrade and the erroneous analysis published recklessly, but to be guided by improving economic conditions as outlined above. As in the past, any investor can approach the Ministry of Finance, the State Ministry of Money and Capital Market and State Enterprise Reforms, and the Central Bank of Sri Lanka, and the highest level officials of these entities remain committed to facilitate any one-on-one or roadshow d is cussions with investors.

In addition, the Government will commence regular roadshows to strengthen investor relations following the announcement of the National Budget in November 2020, which will provide further clarity on the Government’s medium term fiscal and financing plans.



Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

An all-party government can’t fix the problem quickly, Harsha tells foreign media

Published

on

* IMF bailout is not coming any time soon

* Opposition is caught between a rock and a hard place

*  We have to fix the twin deficits

* Unless there is agreement across political parties, we can’t get it done

By Sanath Nanayakkare

Opposition Member of Parliament Dr. Harsha de Silva discussed the crises facing Sri Lanka with Bloomberg Market Asia recently where he said an all-party government would have legitimacy unlike the current administration and would give hope to the people of this country, but there is no guarantee that it can fix the problem quickly.

The interview he had with Bloomberg went as follows.

Q. How close is Sri Lanka to an IMF bailout?

The issue is not about an IMF bailout. It is about restructuring Sri Lanka’s debt. We have to restructure our debt with multiple parties such as official creditors, the republic of China, private creditors, international sovereign bond holders etc. So, unless we have either a debt restructuring deal or significant progress towards a restructuring deal, the IMF will not be able to release any money under an Extended Fund Facility even if there is a staff- level agreement any time soon.

Q. You are suggesting that the IMF bailout is not coming any time soon. How will that play out in the economy?

We have hired Lazard’s and Clifford Chance to help us deal with debt restructuring. They have not really started negotiating, and already one creditor- Hamilton Reserve Bank Ltd has filed a suit in a New York federal court against the government of Sri Lanka asking for its full payment of USD 250 million due on 25th July because we have a debt standstill. ‘Significant progress’ [perhaps referring to a term in the IMF end-of-mission statement regarding the outcome of the talks in Sri Lanka] is a subjective term. The IMF is not able to lend to us. So I am thinking perhaps this is going to take at least 5-6 months before any money would start to flow in.

Q. The economic crisis is turning into a political one. What is the Opposition doing right now to perhaps take the reins of power and make things better? What would you do if you were in power and what you want to be doing because the Opposition is going to be blamed for all hardships that are going to ensue from here?

Yes, we are caught between a rock and a hard place here. What the Opposition is going to do is try and get all Opposition parties together, which I hope will happen this week. The President isn’t willing to budge despite protests across the country asking him to step down. If that happens, it’s quite possible that an all-party government can take over and start running the country. There is no guarantee that an all-party government can fix the problem quickly, but at least there will be hope that there’s a government with legitimacy both internally and externally because right now there seems to be no legitimacy for this government. That’s what we are trying to do right now.

Q. So you like to see a government of national unity but the thing is; you will not get that for the time being. So what do you think should be at the top of the economic agenda to get things going? For instance; inflation is running at almost hyper-inflation level while there’s no fuel. It sounds like a terrible situation.

Yes, this is totally unprecedented. You know until recently Sri Lanka was an upper middle income country and today we have suddenly crashed to the bottom. For us, this is unbelievable. But in a way it was expected because over a long period of time economic reforms were postponed and postponed and postponed, and we were living beyond our means. The real breakdown happened when the President cut taxes and now we are running a massive hole in our fiscal budget and also a big hole in our current account and our Balance of Payments (BOP). We have to fix this. Without fixing these two things there is no way out. So the parliament will have to agree on undertaking large fiscal consolidation measures such as increasing taxes, rationalising subsidies/expenses and so on. So unless there is agreement across political parties, we can’t get it done and there is going to be a very difficult time negotiating the debt. Unless our debt is negotiated, we are not able to get money from the IMF. We are waiting for friendly countries and neighbours to help us but it won’t take us far.

Q. How is the Opposition assessing the proposed constitutional changes? Is it willing to vote for these reforms in parliament?

We are extremely disappointed. The President said on May 11 that he would take the country back to 19th Amendment which meant that powers he grabbed from parliament in 2020 would be restored to parliament. That’s what the people wanted because he himself admitted in public that he has not been successful in managing the country. People wanted that power to be restored to parliament and to democratise the country, but the President is not going to do that in the proposed 22nd Amendment. So we are disappointed. We want the new amendment to go through, but not this way. It should be done in the way it was pledged.

Continue Reading

Business

PM’s rising debt ratio statement hits share market; CSE drops by over 1 per cent

Published

on

By Hiran H.Senewiratne

The CSE dropped by over 1 per cent within the first hour of trading yesterday in the wake of selling pressure from local and foreign investors stemming from the country’s prevailing political and social uncertainties. The pall of gloom over the market was compounded by a statement in parliament by Prime Minister Ranil Wickremesinghe to the effect that Sri Lanka’s debt has shot up to 140 per cent of its gross domestic product.

Prime Minister Wickremesinghe said that Sri Lanka is making progress towards a 4- year Extended Fund Facility with the International Monetary Fund. “With the IMF we hope to reduce it (debt) to 95 per cent of GDP by 2032, Wickremesinghe said.

Sri Lanka’s government debt which was Rs17,580 billion by end 2021 rose to Rs21,969 billion in March 2022, he added.

Stock analysts said that Sri Lanka’s economic uncertainties are bound to be compounded by a potential global economic recession that would likely affect the US and Europe.

Amid those developments both indices showed a downward trend. The All- Share Price Index went down by 120.9 points and S and P SL20 declined by 55.6 points. Turnover stood at Rs 916 million, without any crossings.

In the retail market, top seven companies that mainly contributed to the turnover were, Lanka IOC Rs 330 million (four million shares traded), Expolanka Holdings Rs 121 million (740,000 shares traded), LOLC Holdings Rs 54.7 million (142,000 shares traded), Browns Investments Rs 47.3 million (6.8 million shares traded), HNB Rs 36.6 million (459,000 shares traded), Elpitiya Plantations Rs 26.2 million (334,000 shares traded) and LOLC Finance Rs 23.3 million (3.7 million shares traded). During the day 52.5 million share volumes changed hands in 15000 share transactions.

Yesterday the Central Bank announced the US dollar rate. Its buying rate was Rs 355.95 and the selling rate Rs 367.29.

A guidance peg announced by the Central Bank for interbank transactions was steady at Rs 359.79 against the US dollar unchanged from a day earlier. On July 04, the guidance peg rate dropped 24 cents to Rs 359.79 against the US dollar.

Sri Lanka commercial banks offered dollars for telegraphic transfers at rates between Rs 366.79 and Rs 370.00 for small transactions yesterday, unchanged from the previous day.

Continue Reading

Business

SLT-MOBITEL debuts ‘Traverse’ – Sri Lanka’s first Virtual City

Published

on

A vibrant marketplace for the digital economy

Recognising the strategic value of leveraging disruptive technologies and harnessing service offerings from a diverse supplier base, SLT-MOBITEL, the National ICT Solutions Provider debuted ‘Traverse’, Sri Lanka’s first Virtual City at the ‘Wyawasaya-2022’ Trade and Educational Exhibition held recently.

Fashioned as a city of the future, Traverse will function integrating physical and digital experiences, operating in the metaverse with matchless potential for global and borderless collaboration.

‘Traverse’ aims to provide remarkable opportunities for growth and a platform for innovation while helping Sri Lankan businesses to increase their relevance and value in the fast-expanding digital economy.

The rapid evolution of emerging and exciting technologies such as virtual reality, virtual marketplaces, digital assets and non-fungible tokens, or NFTs is providing an effective platform to deliver unique consumer experiences and drive local economic growth.

‘Traverse’ will include a shopping complex, Banks, Virtual exhibition Centre, Film Hall, Gaming zone, Government e-counters, Art gallery, etc. Business owners can purchase or rent business assets from the categories available in the virtual marketspace based on their requirements.

Adding greater value for the local business community, the Virtual City will help businesses unlock strategic partnerships and boost profitability through untapped revenue streams. Moreover, local businesses will be able to reach global audiences through cost-effective, scalable, and measurable techniques that require low investment and reduced maintenance costs. An added advantage of the Virtual City is creating a global marketplace for Sri Lankan products and services.

Recognised as a true differentiator steering digital transformation, SLT-MOBITEL is driving the country’s first experience of a virtual city by creating a crowded environment. Benefits include long-lasting exposure to an expansive market, facilitating real-time conversation using webinars and live chats, easy access on all platforms, flexibility to promote offerings together with access to trending analytics.

Unveiling the Virtual City, highlights SLT-MOBITEL’s role as an agile, innovative and digital-first provider of services, creating a dynamic roadmap with disruptive technologies driving the country’s first virtual marketplace forward.

SLT-MOBITEL invites stakeholders to collaborate and partner in this unique virtual space. For more details on ‘Traverse’ contact the hotline on 0112 389 389, WhatsApp 070 500 4000 or email: bizsolutions@slt.com.lk / Web: https://traverse.lk

Continue Reading

Trending