Business
Policy rates to hold steady amidst sweeping measures to insulate economy: First Capital
First Capital Research believes that the Central Bank of Sri Lanka (CBSL) will maintain same policy stance in its monetary policy review, but given the concerns around economic growth, the research arm also supposes that there is a probability – to a lesser extent – that CBSL is likely to further ease its policy rates.
” The CBSL either can choose to hold policy rates steady or cut by a 25bps or 50bps while, hike is off the table due to the lackluster economic growth. We believe that there is a 60% probability to hold rates due to the considerable improvement in high frequency indicators and with fiscal and monetary measures implemented so far. However, there is a 20% probability each for 25bps and 50bps rate cut to support economic growth,” First Capital Research said in its latest report.
At the previous policy meeting held on November 2020, CBSL maintained its monetary policy stance, emphasizing the fact that overall market lending rates have witnessed a reduction during 2020 and there is a need for a continued downward adjustment in lending rates to boost economic growth. Moreover, introduction of maximum interest rates on mortgage- backed housing loans is expected to provide additional stimulus to the economy.
The next CBSL’s monetary policy review is scheduled to be announced on 19th January 2021 at 07.30 am.
The research arm further stated that excess liquidity prevailing in the domestic market requires no change in current policy stance.
“As a response to the measures taken by the Government, market liquidity increased to an elevated level while recording a three-year high on 1 January 2021 amounting to Rs. 266.5 billion. Accordingly, this excess liquidity in the system is expected to retain market interest rates at single digit levels while inducing further credit expansion. This inquires the need of further policy easing at the upcoming review,” it said.
It further stated that there is gradual rebound in private credit to power economic growth.
“Private sector credit increased by LKR 41.0Bn in Nov 2020 recording a growth for the fourth consecutive month indicating a revival in gross loan disbursements up to pre-pandemic levels in Dec 2019. The continuous uptrend in private sector credit till Nov 2020 reflects that both businesses and individuals are accelerating their economic activities to make up for the lost opportunities during lockdowns in the first wave of COVID, which could power decent growth in 4Q2020 and onwards,”
In response to previous monetary easing measures implemented by CBSL, (including the lending caps) to bring down costs of borrowing of businesses and households, both market deposit and lending rates adjusted notably so far during 2020.
First Capital Research believes these measures will enable to maintain market interest rates at stable levels in 2021 while playing its aiding role amidst the pandemic driven economic contraction.
Meanwhile, the research arm estimates that Sri Lanka’s GDP would see its steepest contraction in history of -5.8% in 2020 and to see a gradual recovery of 2.8% in 2021.
“The current government’s key drive is the development oriented economic growth which was spelled out through the Budget 2021 and is in the process of changing gears of the economy from a “recovery phase to an expansion phase. Accordingly, Government plans to reach 6% and above GDP growth during the next 5 years commencing from 2021. As we believe a development oriented budget coupled with low interest rate environment can support the Govt.’s medium-term goals. Therefore, the need to accelerate the GDP growth can be considered as a major factor favouring further policy easing at the upcoming review,” it said.
“Government is more focused on domestic funding to finance the budget deficit. This is reflected by the improved domestic to foreign debt ratio to 55:45 by end Sep 2020 from the previous 51:49 as at end of 2019. In the midst of limited access to the international financial markets, Government opt to rely more on domestic borrowings to finance the budget deficit and hence easing rates at the upcoming policy meeting results in reduced funding cost favouring the government,” it added.
HNB Assurance PLC (HNBA) made a significant ascent in the latest LMD 100 rankings climbing 13 places to reach rank 64, cementing its position as one of Sri Lanka’s leading listed companies. Throughout the past few years, HNB Assurance has grown stronger, smarter and more united in its purpose, turning challenges into opportunities and refining every aspect of its operations.
The LMD 100 is a prestigious annual ranking that evaluates the financial and strategic performance of publicly listed companies in Sri Lanka. HNB Assurance has consistently climbed the ranks year after year in recent years, reflecting the company’s sustained growth. With 2025 underway, HNB Assurance is planning to leverage its strengths and growth momentum maintained over the past couple of years, as this year represents the penultimate step in its ambitious journey toward achieving the vision of “10% market share by 2026”, a transformative goal that aims to redefine, elevate and position the company as a trailblazer in the industry.
Sharing his thoughts on the company’s new ranking, Lasitha Wimalarathne, Chief Executive Officer of HNB Assurance PLC, stated, “Our upward trajectory in the LMD 100 rankings reflects the collective efforts of our incredible team, the trust our customers have placed in us and our ability to adapt to the dynamic business landscape. At HNB Assurance, we remain committed to strengthening our core business, embracing innovation and delivering sustainable value to all our stakeholders.”
“As we step into 2025, it is inspiring to reflect on our journey so far. By the end of Q3 2024, we achieved growth that was well above the industry average, a remarkable feat we’ve consistently maintained since 2022. This success has been driven by the exceptional efforts of our sales force both from the Advisor Distribution and Partnerships channels, alongside the support of all our teams. I must also add that our vision for ‘10 in 2026’ is not merely a corporate milestone, it embodies our broader aspiration to transform lives, uplift communities and set new benchmarks in the industry. As the countdown to this goal continues, we will maintain our growth, while continuing to stive and create a lasting impact on the lives of our policyholders.” added, Wimalaratne.
Sri Lanka Insurance further expands its presence in the Upper Western region with the opens its Naiwala Agency Business Development Center (ABDC) on the 12th of December at No.90/6/C, Airport Road, Naiwala junction, Veyangoda.
The occasion was graced by SLIC Life Chief Business Officer Namalee A. Silva, Deputy General Manager – National Sales (Life) Jagath Welgama, Upper Western regional management, Branch Management of Veyangoda representing Life and General categories. Distinguished invitees and customers of the area were also in attendance at the event.
Agency Business Development Centers (ABDC) allows SLIC to further enhance its reach, which provides convenience and speed of service delivery to its loyal customers in relation with their protection needs.
CEAT Kelani Holdings has introduced a new high-performance tractor tyre, the 13.6 – 28 PUDDLE XL TT 12PR, just in time for the harvest phase of the Maha cultivation season. Designed specifically for agricultural use, this innovative cross-ply tyre promises to enhance farming efficiency and tractor operations.
Compatible with leading tractor brands such as Sonalika, TAFE, John Deere, and Mahindra, the tyre features advanced design elements tailored for puddling operations. Its higher non-skid depth (NSD) ensures superior traction in wet and muddy conditions, while wide and angular lugs improve stability and grip. The tyre’s deep and open shoulders allow for effective self-cleaning, and reinforced carcass construction extends its lifespan, offering excellent value for farmers.
This is the sixth tractor tyre variant developed and manufactured locally by CEAT Kelani Holdings, showcasing the company’s dedication to the agriculture sector.
CEAT Kelani Chief Operating Officer Shamal Gunawardene noted that the tyre addresses the unique challenges faced during the harvest period. “It ensures improved performance, durability, and reliability, empowering farmers and operators to achieve better productivity,” he said.
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