By: Staff Writer

Colombo (LNW): President Ranil Wickremesinghe has expressed confidence in Sri Lanka concluding the newly-launched debt restructuring talks by September or November at the latest.

He made these remarks during a discussion with Japanese Prime Minister Fumio Kishida in Tokyo, yesterday.

Wickremesinghe stressed that the negotiations with creditors had made remarkable progress so far.

Sri Lanka secured a $ 2.9 billion bailout from the International Monetary Fund (IMF) in March, but the country must set up a debt restructuring framework by September to carry forward the program or risk undermining a slow economic recovery.

In April, France, India and Japan unveiled a common platform for talks among bilateral creditors to co-ordinate restructuring of the debt.

Sri Lanka defaulted on its foreign debt for the first time in its history in April 2022, which led to the worst financial crisis since independence

Sri Lankan fiscal and monetary authorities have just started discussions with the bilateral creditors on debt restructuring of US$ 7.1 billion out of the total $25.9 billion owed to external creditors.

Sri Lanka is now holding debt restructuring talks with Paris Club members together with India, while discussing with China separately.

Three baseline restructuring scenarios” with six-year maturity extension for all of them and nominal haircuts ranging from 15 per cent to 30 per cent, with higher coupons corresponding to lower haircuts have already been proposed reliable official sources said.

Each of the three baseline scenarios also implies roughly equal net present value relief of 23-28 per cent at the IMF’s preferred 5 per cent discount rate.

Sri Lanka indebted $7.1 billion to bilateral creditors, according to official government data, with $3 billion owed to China, $2.4 billion to the Paris Club and $1.6 billion to India.

The government will present a comprehensive plan for treating foreign as well as local debt to creditors this Month (before end May) , a senior finance ministry official involved in IMF negotiations said.

The delay in the releasing of the plan shows the difficulty the Sri Lanka authority face in balancing the demands of its bondholders, he said, adding that this will be raising the risks associated with the IMF’s $3 billion Extended Fund Facility (EFF) program.

“Sri Lanka’s total debt is $ 83.6 billion. Foreign debt amounts to $ 41.5 billion. Domestic debt amounts to $ 42 billion.

It is expected the restructuring negotiations will delay and extend till December against the government deadline of completing it by September, he claimed.

Under the IMF staff baseline scenario, $17 billion in debt service reduction is required, including the arrears accumulated in 2022.

Foreign creditors now demand to include domestic debt in the restructuring, which some Sri Lankan banks opposing but the government seeks to avoid talks that include pre-conditions.

According to several financial analysts and former top officials of the Central Bank local banks and licensed financial institutions will experience significant capital and Forex short fall as a result of sovereign debt restructuring.

The superannuation funds such as the EPF, ETF, NSB and Insurance Corporation will also be heavily exposed by this procedure, they added.

However, the government will have to fulfill several commitments under the IMF approved economic reform program to extend the currently improving economic performance and secure long-term recovery.

It has to establish an online transparency platform as soon as possible to publish, on a semi-annual basis, with information related to all significant public procurement contracts, a list of all firms receiving tax exemptions through the Board of Investment, and a list of individuals and firms receiving tax exemptions on luxury vehicle imports.

Other commitments are Parliamentary approval of welfare benefit payment scheme (Enhanced Social Safety Nets) by end May , Cabinet approval of a comprehensive strategy to restructure the balance sheets of key SOEs, Parliamentary approval of new anti-corruption legislation and the Parliamentary approval of the new Central Banking Act by end June.

Submitting the Public Financial Management (PFM) Law to Parliament for approval and the full revision of the Banking Act approval during Q3 and Q4 -2023.

By: Staff Writer

Colombo (LNW): For the sixth time in its post-independent history, Sri Lanka has been able to record Rs.48 billion surplus in the primary balance of fiscal accounts during the first quarter of this year, State Minister of Finance Ranjith Siyambalapitiya revealed.

During the first quarter of this year, state revenue was Rs.894 billion while state expenditure stood at Rs.1.26 trillion.

However, Siyambalapitiya yesterday told parliament that Rs.637 billion of the expenditure was for interest payments and hence, he highlighted that the government was able to record Rs.48 billion surplus in the primary balance in the first quarter of this year.

Having an excess in the state revenue more than the entire state expenditure minus the interest payment is known as the surplus in primary balance.

The bigger-than-expected surplus was due mainly to a steep excess in the central government accounts and it had an increase in the collection of income taxes due in April and fall in expenditures of subsidies because of new government payment guidelines.

However Central Bank’s Governor Nandalal Weeerasinghe cannot rejoiced this time like former Governor Dr.Indrajith Coomraswamy as he was instrumental for the first time since 63 years rowrds achieving a record Rs.21.9 billion surplus in the primary balance of fiscal accounts during the first 10 months of 2017

The current surplus comes under the set up of a massive debt default declared by Nandalal in April 2022 suspending external dollar loan repayments and this surplus in the primary account is an eye wash.

The total value of non-payment of foreign loans during the period of April 2022 to April 2023 was US$.4.482 billion. The government has been able to import fuel, LP gas, coal and milk powder spending $ 4,205 during the same period. “Very Many Thanks’ to debt default.

Therefore Central Bank’s pandits including Nandalal cannot get credit for the present surplus in the primary balance of fiscal accounts.

Further Sri Lanka has been asked to achieve a primary surplus of 2.3% of the gross domestic product (GDP) by 2025 by the International Monetary Fund (IMF), and it is a massive task in a short time period.

Even with the surplus in April, the primary budget deficit in the accumulated previous 12 months rose to the equivalent of 2.33 percent of gross domestic product from 2.28 percent the previous month.

The country also outperformed the indicative primary balance target of Rs.56 billion deficit set by the International Monetary Fund (IMF) for the first quarter under the ongoing IMF programme.

After defaulting on its external debt last year, the government moved towards a revenue-based fiscal consolidation in consultations with the IMF. Accordingly, the government started to increase taxes including VAT and PAYE from the latter part of last year.

The country was also restricted from monetary financing (money printing) to finance expenditure except for debt servicing while external borrowings remained limited following the country’s default on external debt last year.

Consequently, the government was forced to cut capital expenditure while only maintaining essential recurrent expenditures including salary payments to public workers, welfare payments and fertilizer subsidies.

By: Staff Writer

Colombo (LNW):Sri Lanka export growth is likely to remain weak in 2023 as global growth slows, high inflation erodes the country’s competitiveness, and skilled workers emigrate, leaving for greener pastures due to skyrocketing cost of living, finance ministry sources said.

Sri Lanka’s merchandise exports decreased by 16.15 % to US$ 814.1 Million in April 2023 compared to April 2022. Moreover, it is a 0.5 % decrease when compared to April 2021.

Declining trend in merchandise exports continues due to the negative trends shown in major export products. i.e., Apparel & Textiles, Rubber & Rubber based products and Coconut & Coconut based products.

Export earnings from tea which made up 12% of merchandise exports, increased by 16.1 % y-o-y to US$ 93.39 Mn in April 2023 compared to April 2022. Earnings from export of Tea packets increased by 29.1 % to US$ 47.82 Mn.

In addition, export earnings from the Electrical & Electronics Components increased by 16.14 % y-o-y to US$ 40.01 Mn in April 2023 with strong performance in exports of Insulated wire (30.43%) and Other Electrical & Electronic Products (18.74 %).

Export earnings from Seafood increased by 17.1 % to US$ 24.76 Mn in April 2023 compared to April 2022. This increase was mainly due to the strong performance in export of Frozen fish (21.04 %), Fresh fish (47.9 %) and Shrimps (0.34%).

Moreover, export earnings from Ornamental fish increased by 105.83 % to US$ 2.12 Mn in April 2023 compared to April 2022.

Despite the decrease recorded in the Spices & Concentrates sector, earnings from export of Cinnamon increased by 8.41 % in April 2023 in comparison to April 2022.

The value of ICT exports is estimated to increase by 34.95 % to US$ 529 Mn in April 2023 compared to April 2022. In addition, the value of Construction and Financial services exports are estimated to increase by 15.71 % and 3.75 % respectively in April 2023 compared with April 2022.

Export earnings from Apparel & Textile have decreased by 23.1 % y-o-y to US$ 342.81 Million in April 2023 compared to April 2022.

In addition, Export earnings from Rubber and Rubber Finished products have decreased by 22.28 % y-o-y to US$ 55.4 Mn in April 2023, with poor performance in exports of Pneumatic & Retreated Rubber Tyres & Tubes (22.09 %) and Industrial & surgical gloves decreased by (24.32 %).

On monthly analysis, export earnings of kernel products ( -31.71 %), fiber products ( -16.18 %) and shell products ( -30.4 %) categorized under the Coconut based products decreased in April 2023 compared to April 2022 due to the poor performance in export of Liquid Coconut Milk (-22.53 %), Coconut Oil (-36.98 %), Desiccated Coconut (-47.17 %), Coco Peat, Fiber Pith & Moulded products (-14.30 % ) and Activated Carbon (- 29.18 % ).

Export earnings from Spices and Essential Oils decreased by 2.04 % to US$ 21.08 Mn in the month of April 2023 compared to the month of April 2022. Export earnings from pepper decreased by 41.65% to US$ 2.41 Mn in April 2023 compared to April 2022.

The value of Transport & Logistics exports is estimated to decrease by 9.17 % to US$ 40.25 Mn in April 2023 compared to April 2022.

By: Staff Writer

Colombo (LNW): Marijuana or cannabis cultivation for exports is a multibillion-dollar industry, and across the United States and now Sri Lanka about to join the bandwagon , legal markets are popping up like weeds as more states seek out the tax revenue and jobs the cash crop brings, official sources said.

Medical and recreational marijuana sales are projected to reach US $33.6 billion by the end of the year, a trend largely driven by the opening of new adult-use markets,

The implementation of the proposal of cannabis cultivation for the sole purpose of exportation can attract investments amounting to$ 2 billion a drop of the vast see like foreign cannabis market within 2023 alone several senior state officials said.

President Ranil Wickremesinghe during his 2023 Budget Speech revealed that a committee of specialists will be appointed to investigate the possibility of cultivating cannabis for the sole purpose of exports.

Under this set up , the Board of Investment of Sri Lanka has received the approval from an expert committee to embark on a pilot project to cultivate cannabis within a BOI zone.

This was revealed by Investment Promotion State Minister Dilum Amunugama during a media briefing at the BOI headquarters.

The pilot project is to kick-off soon in the Katunayake zone and discussions are underway with investors and experts to finalize the pilot project.

“We have been authorized as the experts committee report is out. It’s a ‘Yes’. We have got the instructions to go ahead with the pilot project,” said Dilum Amunugama.

“The investors who are interested in the project will have to grow the cannabis and manufacture a product out of it, which will be the income for the country,” he stated.

The State Minister proceeded to say that the Cabinet would have to be briefed as to how the project is to be implemented.

Further Sri Lanka has drawn up laws to grow cannabis for medicinal purposes which will be presented for Cabinet approval soon, Minister for Indigenous medicine Sirira Jayakody said.

“Canabis comes under the Ayurveda (Indigenous Medicine) Act,” Minister Jayakody told reporters. “It is a subject coming under the Department of Ayurveda.

Cannabis was widely used in South Asia for centuries, though it caused concern among British civil servants in the Caribbean who had little knowledge of the plant, when Indian workers started working in plantations.

Cannabis was included in 1925 Geneva International Convention on Narcotics Control and India at the time opposed it being included saying it was used since time immemorial and questioned the practicality of a prohibition being enforced.

However the British delegate signed the convention which was mostly concerns with opium. Geneva conventions were partly due US pressure. US had one time prohibited alcohol triggering the birth of massive criminal mafias (bootleggers).

In 1893, the Indian Hemp and Drugs Commission had already gone into the issue at the behest of UK activist and recommended that it be taxed rather than banned. But many European countries have since legalized cannabis including for recreational use.