Bloomberg – After topping global currency rankings this year, analysts are predicting tough times ahead for the Sri Lankan rupee as the government eases import restrictions and debt repayments loom.

The rupee, which climbed 1.4% to 289.91 per dollar on Wednesday, is forecast to decline to 350 by the end of December, according to Standard Chartered Plc and BMI. The currency’s 27% gain this year has seen it capture the best spot returns globally, supported by rising tourist arrivals and inflows into the bond market.

Sri Lanka’s economy is slowly emerging from its worst crisis in more than seven decades, anchored by the International Monetary Fund’s $3 billion bailout that helped it regain investor confidence. As the government moves to loosen import controls and secure a debt restructuring deal, the rupee may come under pressure once more and set course for new lows.

“Once imports normalize with the relaxation of restrictions and demand picks up, we expect the rupee to depreciate,” said Dimantha Mathew, head of research at First Capital Holdings Plc in Colombo. “The rupee will be highly volatile as the economy picks up toward the second half of the year.”

The government plans to lift import controls on 100 items by the start of June, State Minister for Finance Shehan Semasinghe said last week. The number of items with import restrictions has already been reduced to 1,000 from a peak of 3,000, he said.

Visitors to the Asian nation have also risen, with tourism receipts estimated to have gained 18% to $696 million in January to April from a year ago, according to central bank data. Meanwhile, foreign holdings of local bonds have more than doubled since the end of March to $511 million.

The rupee may trade at 280 to 320 per dollar this quarter before weakening to as low as 405 per dollar in the second half of the year, according to First Capital. That would surpass its record-low 370 per dollar it reached in 2022. Dollar inflows have also allowed the central bank to replenish its foreign-exchange reserves, which climbed to a 15-month high in March.

“Upcoming external debt repayments, which we believe could start around the fourth quarter, alongside the need to build up reserves, will exert downside pressure on the rupee once again in the coming months,” said Raphael Mok, head of Asia country risk at BMI in Singapore.

Source: Bloomberg

By: Staff Writer

Colombo (LNW): In a bid to boost tourism Israel and Sri Lanka have agreed to launch direct flights soon, a top Minister confirmed.

The move follows successful discussions between the Embassy of Israel and the Tourism Ministry following the reopening of borders recently. The resumption of the direct flights are being implemented on the instructions of Tourism Minister Harin Fernando.

Flights between Israel and Sri Lanka are expected to attract around 2,000 and 5,000 Israeli tourists to Sri Lanka during the May to September travel season.

“At present we are in discussion with Israel to commence direct flights in the immediate future. We are also in discussions with few other countries to resume their direct flights to Sri Lanka,” the Tourism Minister said.

Prior to the COVID outbreak, around 35 airlines operated direct flights to Sri Lanka. However, post-COVID only Qatar Airways, Emirates, Etihad, Turkish Airlines, Kuwait Airways, Singapore Airlines, China Eastern, Ukraine Airlines, Air Astana and Oman Air have resumed flights to Sri Lanka.

Noting that countries are focusing on reviving the tourism industry by following health guidelines along with vaccination programs, Ranatunga said that Sri Lanka too is taking steps to resume flights as usual, focusing on achieving its tourism goals whilst adhering to the health protocols underlined by the health authorities.

The Cabinet of Ministers green-lighted to operate direct flights for Israeli Airline — Arkia, subject to conditions.

The airline will have to follow security protocol standards similar to that of Dubai and Bangkok when establishing its offices in Sri Lanka.

“Generally, the airline operates with two armed guards onboard and due to this fact the flight was not permitted to operate into Sri Lanka citing security concerns,” Tourism Minister Harin Fernando said.

He said Foreign Affairs Ministry should inform Israeli authorities that the authorities of the security personnel on board the flight are limited to security affairs inside the aircraft.

Despite the long overdue, Fernando was hopeful of attracting large numbers from Tel Aviv this year.

“Israeli tourists are high spenders and their arrival to Sri Lanka has been on the rise this year,” he added.

As per Sri Lanka Tourism Development Authority (SLTDA) data, Israel ranks 12 tourist source markets for Sri Lanka year-to-date with 2% or 8,034 arrivals.

The proposal to this effect submitted by Tourism Minister Fernando was approved by the Cabinet of Ministers at its meeting on Monday.

By: Staff Writer

Colombo (LNW): The Japanese funded Colombo Light Rail Transit (LRT) project, which was suspended by the Gotabaya Rajapaksa administration, is to resume shortly, Cabinet spokesperson Minister Bandula Gunawardena confirmed.

Cabinet spokesperson Minister Bandula Gunawardena said that President Ranil Wickremesinghe obtained Cabinet approval for resumption of the Colombo Light Rail Transit (LRT) project project.

He said that a decision was also taken to ensure future projects are terminated only with Parliament approval.

The project was suspended following a letter issued by the then-Secretary to the President on the 21st of September 2020, citing that the project was not the appropriate cost effective transport solution.

A special audit report by the Auditor General of Sri Lanka revealed that the decision to suspend the project cost the country Rs. 5.978 Billion.

President Ranil Wickremesinghe had recently expressed regret to Japanese Prime Minister Fumio Kishida over the decision taken to suspend the Japanese funded Colombo Light Rail Transit (LRT) project.

During an official meeting in Tokyo between President Ranil Wickremesinghe and Japanese Prime Minister Fumio Kishida, the President had emphasized the need for future legislation in the Parliament to ensure that bilateral large-scale projects cannot be halted or canceled without the agreement of both parties.

The new administration is set to renew the LRT project contract with JICA loan facility due to its favorable conditions including low interest rates and the grace period of 12 years which was completely ignored by the previous regime.

The Urban Development Authority (UDA) will call for expressions of interests soon from interested international firms or joint venture companies to build the necessary infrastructure and implement the project, Urban Development and Housing Minister Prasanna Ranatunge disclosed.

It has ben planned to operate the light rail transit service to complete the journey from Malabe to Colombo Fort in 30 minutes.

Light train is scheduled to arrive at a station every 4 minutes during peak hours and operate a train every 10 minutes during off peak hours, senior official of the Urban Development Authority (UDA) said.

On the advice of the then President Gotabaya Rajapaksa, Presidential Secretary Dr. P.B. Jayasundera had instructed the Ministry of Transport Services Management to review and terminate the project and close the project office with immediate effect at that time.

He cited the reason for this action and a subsequent cabinet decision in favour of it to the high cost incurred for the LRT project and it was not being the appropriate cost effective transport solution for the Urban Colombo transportation infrastructure.

The consultants started work in early 2019. Their seven-year contract was signed with the Ministry of Megapolis and covered detailed design and related engineering services, procurement assistance, construction supervision, testing and commissioning as well as defect liability check.

The Government has not yet settled a claim of around Rs 5 billion from the project consultants Oriental Consultants Global of Japan and Sri Lanka’s Consulting Engineers & Architects Associated for the work already done, expenses and loss of profit caused by the cancellation of the project in 2020.

By: Staff Writer

Colombo (LNW): Sri Lanka is set to harness the best potential for floating solar, with its diverse, large, distributed water bodies, both natural and man-made.

The Ceylon Electricity Board has selected the 25 largest reservoirs and the 30 largest lagoons of the country.

It assumed 15 percent of the area of reservoirs and 10 percent of the areas lagoons will be used, and estimated how much floating solar PV can be added to the grid. It is possible to install 1.8MWp of solar cells on a hectare of water surface, harnessing more than 2.5GWh of energy per year.

The size of Sri Lanka water bodies is significant – spanning to more than 5,000 ha in the case of our largest reservoirs and more than 10,000 ha in the case of the largest lagoons.

This presents a potential solar capacity of 34.8 GWp, which will give us an annual energy output of 55,000 GWh. The energy demand of the country in 2020, according to CEB Generation Plan, is 18,542 GWh. 55,000 GWh exceeds the national energy demand for 2044, 54,963 GWh, CEB sources claimed.

The peak demand by 2044 would only be 8,709MW. Therefore connecting bulk of this solar output to the national grid will not be possible if it remains synchronous (one that generates and consumes energy at the same time).

CEB would need battery storage to connect some of the capacity to the existing transmission nodes – but this is not an immediate requirement, energy engineers’ forum said.

The Ministry of Power and Energy yesterday (31 May) signed an agreement with the Korea Institute for Advancement of Technology (KIAT) to develop the first floating solar project in Sri Lanka.

Accordingly, a grant of US$ 5.2 million was extended by KIAT to the sustainable energy authority, in order to develop two floating solar projects of 1 MW each, Minister Kanchan Wijesekera said.

The project, set to be completed in December 2024, will be developed by Korean Engineering Companies on the ‘Chandrika Wewa’ and the ‘Kiri Ibban Wewa’ reservoirs in the Sabaragamuwa and Uva provinces, respectivel

Minister of Power and Energy Kanchana Wijesekera yesterday (30 May) held a meeting online with the International Monetary Fund (IMF), World Bank and the Ceylon Electricity Board (CEB).

Sri Lanka’s first floating solar plant (46 kW) was declared open asa pilot project on January 24, 2020 by the Norwegian Ambassador to Sri Lanka Trine Jøranli Eskedal, at the Kilinochchi premises of the University of Jaffna.

Current Solar AS, the Norwegian developer of floating PV solutions, designed the system based on the experience from their test site in Singapore.

The first floating system is established as an experimental plant in the pond with a depth of about 2 m. Floating pipes used in the design are made of high-density PolyEthylene in order to lift the solar panel sets, upon the water surface.