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IMF Mission disagrees with widespread notion of ‘IMF-imposed fiscal consolidation for Sri Lanka’



Masahiro Nozaki and Peter Breuer

By Sanath Nanayakkare

The International Monetary Fund (IMF) mission led by Peter Breuer and Masahiro Nozaki that conducted a staff visit to Colombo from May 11 to 23, 2023 took issue with the widespread notion of ‘IMF-imposed fiscal consolidation measures for Sri Lanka’ at a Newsline TV programme hosted by Sirasa TV on Tuesday.

Disagreeing with a query on whether ‘IMF-imposed’ fiscal consolidation measures made matters worse for Sri Lanka, Peter Breuer said,” I take slight issue with your mention of IMF-imposed fiscal consolidation measures for Sri Lanka because what was the alternative if there weren’t an IMF programme for Sri Lanka and we intervened in the crisis at the request of the government of Sri Lanka,” he said.

“The IMF provides financing to support the government to reduce the amount of money it needs to find in the market which leads to even higher interest rates. Or it needs to get it from the Central Bank which leads to ever-increasing inflation which everyone is already feeling at their purse strings. Or it needs to reduce its expenditure and consolidate on the expenditure side. All three of these options are not desirable options for Sri Lanka. And by providing some financing, the IMF has cushioned the blow this crisis is dealing to Sri Lanka. And at the same time, the IMF programme commits the government to a credible set of reforms that help the country emerge from this crisis in a sustainable way,” he argued.

When a follow-up query was posed at him saying,” So wasn’t it really IMF-imposed.? Didn’t the IMF tell the government if you want our money this is what you have to do. You make the decision if you want to take it or leave it,” to which Peter Breuer replied,” We don’t approach negotiations like that. We engage in a dialogue with the authorities. We listen to the constraints they have because they know about the Sri Lankan economy that we don’t know about. And at such conversations, beneficial solutions emerge with the input of all sides, namely; the IMF, the government of Sri Lanka, other experts and stakeholders whom we consult throughout our missions in Sri Lanka who bring to the table different perspectives and different ideas that matter for the programme.”

Further speaking Peter Breuer said:

“Why is there consolidation in such terrible crisis? Essentially when you are out of buffers, you have no other choice. There is nothing you can turn to get out of the crisis. You have very few options because accessing the capital markets when debt is not sustainable is impossible. So in order to gain back the confidence of the markets to lend to you again and to bridge such a difficult situation you need to take that first step and start restoring fiscal balance,”

“It’s unfortunate that people will only lend to you when things are looking better except for the IMF that is here to help Sri Lanka in the rest of the times .”

Sarwat Jahan

” When things start getting better, when creditworthiness of the country improves, it should then be a lot easier to access markets again to avoid an overly tightening fiscal situation which has harmful impact on the population.”

“There are plenty of examples for successful IMF programmes where countries committed themselves to the reforms that were supported by the IMF. I myself was resident representative in Ireland when they faced a crisis. I recognize the fact that it’s a different economy. But Ireland committed to very strong reforms and was very serious about ownership and implementation. Those were really key parts of the reform programme in Ireland. They stuck to an ‘under promise- over deliver’ reform framework that generated positive surprises. That really helped Ireland regain confidence of the markets and of the people which resulted in progressive outcomes. There are plenty of other examples of successful IMF-supported programmes in the world,” he said.

When asked about the checks and balances of the programme in Sri Lanka, he said,” There are regular reviews that take place twice a year. First review is to take place around September /October 2023 when we come back and formally consult with the authorities, At that point we will see how things are going relative to what has been agreed and there will be another review six months later. We are in constant contact with the authorities. Our resident director’s daily life is about that. We have continuous video conferences with the authorities. And periodically we come for visits that are not tied to the formal reviews, but in a more informal way of catching up with the authorities. That is the purpose of our current visit in Sri Lanka,” he said.

Sarwat Jahan, Resident Representative in Colombo noted that the IMF was there to clarify on what the Fund can do, but more so what Sri Lankans as a nation can do to put the country back on its track.

“This crisis is quite deep. It is a combination of economic crisis and a humanitarian crisis. Sri Lanka had never faced debt sustainability issues before. This is the first time Sri Lanka has announced a moratorium on its debt service. So the situation is actually quite grave and it is going to take quite a bit of effort on all stakeholders to bring Sri Lanka back to its growth potential. So, for Sri Lanka as a whole the main part is to recognize how deep the crisis is and then all Sri Lankans need to contribute to the recovery which means taking ownership of the deep reforms that are needed. These reforms include tax reforms, SOE reforms and structural reforms – things that can help build entities and institutions. In addition to it, ensuring the independence of the Central Bank and dealing with anti-corruption issues will be important. So in my view, Sri Lanka has to take a holistic approach in meeting key commitments under the Fund-supported programme,” she noted.

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Hela Apparel Holdings completes FY 2022/23 with resilience, amidst a challenging operating environment



The fourth quarter of FY 2022/23 marked the close of a challenging year for Hela Apparel Holdings PLC. While revenue of Rs. 20.5 Bn in Q4 represented a 40.6% increase in the same period of the previous year, this was primarily driven by the impact of the rupee depreciation. In US Dollar terms, quarterly revenue declined by 9.6% year-on-year. The drop in US Dollar revenue, however, is smaller than the 19.7% year-on-year decline recorded during Q3, as consumer demand in the Group’s key export markets remained relatively resilient.

The tentative stabilisation in demand conditions during the fourth quarter, alongside the proactive cost control measures taken by the organization contributed to an improvement in profit margins. The Group’s gross profit margin increased to 13.5% in Q4, compared to 10.0% in Q3, as capacity utilisation rates improved across the Group’s manufacturing facilities. Operating profit margins also improved, supported by greater optimisation of distribution and administration expenses. That said, elevated finance costs driven by the ongoing rise in global US Dollar interest rates were a significant drag on profitability. As a result, the Group recorded a post-tax loss of Rs. 257 Mn in the fourth quarter.

For the full year ended 31st March 2023, the Group’s revenue increased by 69.3% to Rs. 95.1 Bn. Nonetheless, the significant deterioration in market conditions during H2 eroded accumulated profits, and the Group closed the year with a post-tax loss of Rs. 1,038 Mn. Despite this, Hela’s balance sheet remained in a robust position with the Net-Debt-to-Equity ratio closing FY 2022/23 at 1.6, compared to 1.8 at the same point of the previous year, supported by improvements in the working capital cycle.

In a statement accompanying the financial results, the Company noted that it expects the challenging operating environment to continue into the first half of FY 2023/24 as consumers in its key export markets remain under pressure from high inflation. In this context, it will continue to focus on proactively strengthening its strategic customer partnerships based on its long-term value proposition as a leading global apparel supply chain solutions provider.

The organization also intends to remain agile in the evolving operating environment and consider additional proactive steps to manage costs and ensure a return to profitability. Several of the strategic initiatives taken during FY 2022/23, with a precise focus on process improvements, digital systems, and supply chain management are also expected to support the improvements in profit margins in the coming quarters.

Hela Apparel Holdings PLC is a social capital-focused company built on the principles of inclusivity, equity, and climate stability. With over three decades of industry experience, Hela focuses on building strategic partnerships with global brands to provide apparel supply chain solutions with distinctive advantages. The organisation has a global presence with 10 manufacturing facilities across Sri Lanka, Kenya, Ethiopia, and Egypt, as well as design centres in Sri Lanka, the US, the UK, and France, providing direct employment to over 20,000 people. Innovative, ethical, and sustainable apparel manufacturing is at the centre of Hela’s operations. With numerous accolades for sustainability, the organization was recently endorsed as a signatory to the UN Global Compact and was awarded the ISO 14064-1:2018 certification for quantification and reporting of greenhouse gas emissions across the Group for the second consecutive year.

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Calais Dentelles announces the sale of ‘NOYON’ – Noyon Lanka acquires 100 years of lace heritage



From left to right: Sébastien Bento Soares (Directeur Général - CEO of Calais Dentelles), Pascal Cochez (Chairman of Cochez group and Calais dentelles), Olivier Noyon (Shareholder - Noyon Lanka) and Ashiq Lafir (CEO - Noyon Lanka Pvt. Ltd.).

In groundbreaking industry news, Noyon Lanka (Pvt) Ltd., a subsidiary of MAS Holdings, and DESSEILLES CALAIS, a subsidiary of the CALAIS DENTELLES holding company, announced the sale of NOYON CALAIS’ IP rights and other intangible assets to Noyon Lanka.

NOYON CALAIS is a French lace manufacturer known for a 100+ years of heritage in the industry. This Intellectual Property (IP) acquisition now positions Noyon Lanka as an industry leader in lace manufacturing, combining the legacy and heritage of NOYON CALAIS SAS and MAS Holdings’ technical competency and manufacturing excellence. This sale gives the opportunity for the French business DESSEILLES CALAIS to focus on their main luxury core market.

The IP and other assets acquired enable Noyon Lanka to draw inspiration, create and commercialize lace products and manufacture lace products under the trademark ‘Noyon’. Additionally, Noyon Lanka will now be the owner of all ‘Noyon’ trademarks belonging to Noyon Calais and will own all their archives of sketches, drafts, and samples of lace and embroidery fabrics from the 19th and 20th centuries.

With the acquisition, Noyon Lanka enhances its ability to provide high-quality lace products to customers worldwide, drawing upon and preserving the rich history and heritage of lace manufacturing in France.

Noyon Lanka’s CEO, Ashiq Lafir, commenting on the acquisition, said, “This acquisition will enable us to expand our product design offerings and strengthen our leadership position in lace manufacturing globally. We are humbled and proud to take ownership of NOYON CALAIS’ remarkable legacy and combine it with our technical expertise to create beautiful, innovative lace products for our customers”.

Sébastien Bento Soares, the Directeur Général – CEO of CALAIS DENTELLES, the parent company of NOYON CALAIS, added that “This asset sale enables DESSEILLES CALAIS to focus on our core luxury market and ensures that the rich history and legacy of Noyon’s lace continues to effectively serve its long-time customers, who have come to rely on Noyon’s heritage in lace to provide some of the world foremost brands with the finest lace designs that their customers have adorned over many generations”.

Noyon Lanka was established in 2004 when Noyon Calais France, an industry expert in knitted and leavers lace, partnered with MAS Holdings. Today, Noyon’s lace creators and designers launch over 450 designs each year, with collections ranging from multi-way stretch, high tenacity lace to engineered lace for fabric.

In addition to its production facilities in Sri Lanka, the company has a global footprint with a manufacturing presence in Indonesia and China.

In the image from left to right: Sébastien Bento Soares (Directeur Général – CEO of Calais Dentelles), Pascal Cochez (Chairman of Cochez group and Calais dentelles), Olivier Noyon (Shareholder – Noyon Lanka) and Ashiq Lafir (CEO – Noyon Lanka Pvt. Ltd.).

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Nippon Paint Lanka sponsors painting of Sri Lanka’s tallest Buddha statue



Nippon Paint has donated the paint required to paint the tallest Buddha statue in Sri Lanka. Built by the Methsaviya Sansadaya, it is located at the Mahiyangana Purana Rajamaha Viharaya.

“History records Mahiyanganaya as the first place visited by the Lord Buddha nine months after receiving enlightenment,” said Vidyakeerthi Prof. Chandana Jayaratne, President of the Meth Saviya Sansadaya. “It is also recorded that the Lord Buddha donated a lock of hair to the leader of those who heard his preaching and embraced the noble path. This leader who was known as King Saman (Known today as Saman Deviyo), enshrined the relics and built the first Dagoba in Mahiyanganaya. This has been gradually increased in height during later years. On completion, this will be the tallest Buddha statue in Sri Lanka at 84-feet. The statue was unveiled on Sunday May, 28, 2023.”

Nemantha Abeysinghe, General Manager, Nippon Paint Lanka, said they were very happy to be associated in such a noble venture. “It is an honour for us to be able join the Meth Saviya Sansadaya to have the statue painted with high-quality, weather-resistant, and long-lasting Nippon Paint. Buddhism is the religion of the majority in Sri Lanka and we consider this as a contribution from Nippon Paint to the propagation of religion and culture in Sri Lanka.”

“We are deeply grateful to Nippon Paint Lanka for their noble gesture in donating not one but five coats of paint to withstand the heavy rains, winds and sunshine at this location,” Prof. Jayaratne said.

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