Colombo (LNW): All government schools within the city limits of Kandy will be closed on August 28, 29 and 31, announced the Central Province Governor.
This is due to the traffic congestion for the Esala Perahera.
Kamil Kuthubdeen: Embracing Sri Lanka’s Economic Revival
Colombo (LNW): Amidst the challenges of rising interest rates and diminishing export demand that have dampened the post-COVID economic recovery across several Asian nations, Sri Lanka stands uniquely poised. As the sole country in the region to have grappled with a default on its official debt amidst the dual strains of the pandemic and the Ukraine conflict, Sri Lanka now finds itself basking in a brighter economic landscape. These days signal a newfound period of growth for Sri Lanka’s economy, setting it apart from its regional counterparts.
Sri Lanka’s economic landscape is experiencing a remarkable revival as its tourism revenue and remittances from overseas workers make a triumphant return. Overcoming a daunting inflation rate that soared to 70% September 2022, the nation has seen a remarkable drop in inflation to 6.3% by July this year. This impressive feat prompted the Central Bank of Sri Lanka to implement a 4.5 percentage point reduction in its benchmark interest rate since June.
The challenges of yesteryears, including the aftermath of the 2019 Easter Sunday incident that caused a dip in tourism earnings, compounded by the COVID-19 pandemic, have been overcome. Notable factors such as heavy external borrowing, unwarranted tax cuts, and internal political discord have collectively impacted investor sentiment and the nation’s macroeconomic stability.
The seismic tremors of the Ukraine war in the preceding year reverberated globally, dealing a crushing blow to Sri Lanka’s economy. Depleted foreign reserves coupled with surging costs of vital imports pushed the nation to a critical juncture. International capital markets remained elusive due to waning faith in repayment capacity amid escalating global interest rates.
In an economic cascade, the Central Bank of Sri Lanka resorted to printing money to bridge governmental deficits, triggering a harrowing freefall of the Sri Lankan rupee and an inflationary upsurge. As daily essentials became scarce and prices soared, a crescendo of public discontent destabilized the administration, culminating in the departure of President Gotabaya Rajapaksa in July 2022. Amidst this tempest, the fabric of Sri Lanka’s GDP and economic stability frayed.
“In assuming leadership after Gotabaya Rajapaksa, Ranil Wickremesinghe swiftly embarked on a strategic path to restore equilibrium to Sri Lanka’s economy. By initiating constructive dialogues with the International Monetary Fund for financial assistance and garnering interim backing from neighboring nations like India, he displayed adept crisis management. In a bid to secure the IMF’s endorsement, the administration undertook bold yet indispensable measures, encompassing hikes in fuel and electricity prices, tax rate adjustments, and tax base expansion,” Kamil Kuthubdeen Chairman of Global Business Trust LLC Dubai said.
“Notably, under the stewardship of a new central bank governor, a resolute tightening of benchmark interest rates by an impressive 8 percentage points throughout 2022 was undertaken, aimed at tempering inflationary pressures and ushering in a measure of macroeconomic stability, ultimately contributing to the revitalization of Sri Lanka’s GDP trajectory,” Kamil Kuthubdeen added.
The year’s outset witnessed an impressive upswing with tourism revenue nearing $1 billion and remittances soaring to $3 billion, benchmarks projected to hold strong in the latter half. While these figures still fall shy of pre-COVID levels, the nation’s trajectory back to its $4.4 billion tourism revenue and $7 billion remittance glory days appears attainable, vital for managing the current-account deficit and fostering macroeconomic stability and expansion.
In the wake of Sri Lanka’s economic resurgence, endorsed by the IMF’s pivotal support granted in March, projections indicate that the nation’s current-account deficit will stabilize at an approximately 1.5% of GDP from this juncture onward. This judicious ratio, particularly pertinent for emerging economies reliant on fuel and food imports, underscores the sustainable trajectory.
The successful domestic debt restructuring initiative executed by the government has effectively mitigated uncertainties, notably within the domestic banking landscape. Concurrently, discussions with external creditors to restructure external debt exemplify Colombo’s proactive stance. The reform momentum persists as the government kickstarts the privatization of key state-owned assets, including SriLankan Airlines and Sri Lanka Telecom.
Evidencing this positive turn, the rupee and the national stock market have emerged as global leaders in response to recent macroeconomic shifts, encapsulating a remarkable transformation on multiple fronts.With resilience in the face of escalating odds, Sri Lanka has steered its economy towards revival. As inflation recedes and interest rates follow suit, the resurgence of tourism breathes fresh life into the nation’s economic pulse.
The government’s unwavering commitment to reform sets a promising trajectory. Beyond the horizon, a potential reduction in benchmark interest rates could fuel the ongoing recovery, while strategic investment in tourism and logistics promises to fortify foreign exchange reserves. Amid historic hurdles, the stage is set for Sri Lanka to orchestrate a symphony of enduring prosperity with the support of global allies and astute policymaking.
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Approval for egg import extended
Colombo (LNW): The approval granted for the importation of eggs has been extended by a further period of three months, and the importation of eggs, therefore, will continue uninterrupted, Chairman of the Sri Lanka State Trading (General) Corporation Asiri Walisundara said.
The importation of one million eggs per day contributed to the controlling of the egg shortage in the market, he added.
CEB reviews progress of 6 large-scale renewable energy projects
By: Staff Writer
Colombo (LNW): The progress of 6 large-scale renewable energy projects was reviewed with the developers and the officials of Ceylon Electricity Board (CEB), Sri Lanka Sustainable Energy Authority (SLSEA) and Power & Energy Ministry on Friday (Aug. 26).
These projects aim to achieve the government’s policy of 70% renewable energy targets by 2030, Minister Kanchana Wijesekera says.
Issues related to approvals from the government, land acquisition, construction of transmission lines, grid concurrence, power purchasing agreements, financing, and implementation timelines of the projects were thus taken up for discussion.
Projects that were reviewed with the developers were:
1) 500 MW Wind project in Mannar & Pooneryn by Adani Green Energy – This project is planned to be completed by January 2025 with the construction of a 400Kv transmission line & necessary approvals and power purchasing agreements by end of september 2023.
2) 700+ MW Ground Mount Solar with battery storage in Poonakary – 134MW will be directly connected and operate with battery storage. To commence work in March 2024 with necessary approvals for transmission lines.
3) 150 MW Ground Mount Solar in Hambantota by a consortium of local developers – This will be built with transmission lines to be completed by December 2024. It can go up-to 300 MW with investment.
4) 100 MW Ground Mount Solar in Siyambalanduwa with Battery storage by the Consortium of Lakdhanavi Limited, Wind Force PLC and Blue Circle Pte. Ltd. to be completed by the end of 2025.
5) 100 MW Ground Mount Solar in Batticaloa by Solar Forge – This project is planned to be completed by 2025 with necessary construction of transmission line and approvals by October 2023.
6) 130 MW Ground Mount Solar in Sampur by the Joint Venture of CEB & NTPC of India – This project is expected to be completed in 2 stages with construction of 2 transmission lines and the first phase of 50 MW by 2025 funded by AIIB, NTPC and CEB.
ADB reaffirms its commitment to bolster the recovery of SMEs
By: Staff Writer
Colombo (LNW): The Asian Development Bank (ADB) reaffirmed its unwavering commitment to bolster the recovery of stressed small and medium enterprises (SMEs) and praised Sri Lanka’s steadfast dedication to rebound from the economic crisis.
The assurance was extended by ADB Country Director Takafumi Kadano yesterday during a meeting with State Minister of Finance Shehan Semasinghe held at the Finance Ministry.
Kadano shared insights into forthcoming projects in Sri Lanka, particularly in the power sector. Recognising Sri Lanka’s commendable efforts in steering clear of a crisis, he highlighted the potential for progress that often emerges from adversity and expressed optimism about the ability to transition towards a sustainable, long-term economic trajectory.
With an unequivocal commitment to sustained support, Kadano underscored that the ADB’s assistance would remain resolute, especially in alignment with the initiatives of the International Monetary Fund.
He reiterated the ADB’s keen interest in conducting an in-depth study of Sri Lanka’s SME sector to identify and implement effective support mechanisms.
State Minister Shehan Semasinghe also appreciated ADB for continued assistance throughout the crisis and subsequent recovery phases.
Shedding light on the segment most severely impacted by the crisis, he emphasised the vital role of SMEs in the economic fabric, urging their swift revitalisation. He highlighted the Government’s efforts in providing concessions to revive these enterprises and underlined the pressing need for additional support.
Sri Lanka is seeking the Asian Development Bank (ADB) aid to200 million he said adding that finnac ministry is discussing with ADB for a credit guarantee scheme worth $200 million, to support SMEs.
“This scheme will be established and implemented by the Ministry of Finance. The discussions are progressing well,” he disclosed.
He added that the government is very concerned about the SME sector and is keen to get them out of the rut. “The SME sector is hit the hardest by the pandemic, and the ensuing economic crisis.
We are looking at many avenues to emerge from the bad situation.” He also said the government is expecting the banks to pass on the benefits to the sector by lowering inflation rates and reducing interest rates.
“We do understand the banks’ constraints but with improving economic indicators, we expect the banking sector to help out the small and medium entrepreneurs.”
Sea water purification project to commence in Jaffna
By: Staff Writer
Colombo (LNW): The National Water Supply and Drainage Board (NWSDB) of Sri Lanka is set to launch a project that purifies seawater for the daily use of people in the Jaffna district.
The plant will provide safe drinking water to 300,000 people belonging to 60,000 families of the city of Jaffna and its surrounding urban and rural areas.
NWSDB adds that initial work of the project has begun, and will be completed early next year.
A cabinet paper has also been submitted for the calling for tenders related to pipelines for the project.
As soon as it is approved, tenders will be called to design, build and operate the first-ever desalination plant through sea water reverse osmosis in Jaffn
With a capacity of 24,000 m3, the facility, partly financed by the Asian Development Bank (ADB), will be designed-built over a period of two and half years,
The project is aimed to channel approximately 27,000 cubic meters per day (m3/day) of raw water approximately 50 kilometers (km) from Iranaimadu irrigation tank in Jaffna peninsula to treat and distribute drinking water to the water scarce Jaffna and nearby towns.
The farmers benefiting from the tank have raised concerns on the water adequacy in the tank to share with drinking water needs in the Jaffna peninsula.
However, considering the concerns of farmers, the water abstraction rate reduced from 50,000 to 27,000 cubic meters per day.
Nevertheless, some farmer organizations continued their protest against abstraction of water from Iranaimadu tank for the drinking water project. Severe drought experienced in Kilinochchi resulted in extremely low water level in the Iranaimadu tank, aggravating farmers concerns on water sharing.
Considering the urgent need of water supply facilities to Jaffna Peninsula and its suburbs,a mutual agreement has been reached with ADB to carry out a Rapid
Assessment on the feasibility of alternative water sources for JKWSSP mainly focusing on desalination of sea water.As a result of the rapid assessment study and their recommendations with regard to desalination, option will be suitable and changed the water source to surface water to sea water.
This project is developed to construct a seawater reverse osmosis (SWRO) plant to produce about 24, 000 cubic meters (m3) of fresh water per day.
Considering the proposed restructuring, the project meets the eligibility criteria for additional financing. 120 Mn USD approved by Asian Development Bank for the development of water supply infrastructure facilities.
Prefabricated terminal to be constructed at BIA to tackle congestion
By: Staff Writer
Colombo (LNW): In an effort to alleviate the current severe congestion at Katunayake Bandaranaike International Airport (BIA), which is experiencing nearly 25,000 passenger arrivals and departures a day, Airport and Aviation Services (Sri Lanka) (Private) Limited has opted to swiftly construct a prefabricated terminal.
This interim solution aims to mitigate the congestion, until the completion of the ongoing construction of the second terminal.
According to a statement from the Ports, Shipping and Aviation Ministry, the prefabricated terminal initiative is projected to cost approximately Rs.15 billion and is anticipated to be completed within a span of six months.
Following the completion of the second terminal’s construction at BIA, the prefabricated terminal will be repurposed for domestic flight operations.On August 23, 2023, Ports, Shipping and Aviation Minister Nimal Siripala de Silva conducted an on-site inspection of the construction site to oversee the progress firsthand.
Airport and Aviation Services (Sri Lanka) (Private) Limited Chairman Major General (Rtd.) G.A. Chandrasiri and several other officials also participated in the occasion.
De Silva said with the prefabricated terminal, Sir Lanka would be able to handle the surge in traffic to BIA, until the second terminal comes into operation.
He also said the funds to be utilised for the construction of prefabricated terminal would be borne by Airport and Aviation Services (Sri Lanka) (Private) Limited.
The construction of the prefabricated terminal building on a temporary basis will be done within six months, said Minister Nimal Siripala de Silva.
While the existing airlines flying to Colombo have added frequency, new airlines have added Colombo to their radar. With the winter season coming and Sri Lanka averaging over 125, 000 arrivals per month the airport needed to be expanded.
“This is why we are building a temporary terminal building as the original building on the pipeline would take time to be opened pointed out.”
A state-of-the-art passenger terminal building on par with global requirements was planned and is expected to be opened in late 2024.
He said this while participating as the chief guest in a conference held at Katunayake Airport on Tuesday on how to contribute to the research process of this sector to take Sri Lanka’s aviation industry towards sustainable development through digitization.
The Minister also disclosed that novel methods should be used for the practical training and knowledge development of new professionals entering the aviation sector in Sri Lanka.
Many countries in the world are already using the research process to boost the aviation industry and to boost Sri Lanka’s aviation industry, universities, academics and industry experts should look at this segment.
Central Bank orders all banks to reduce the interest rates on lending
By: Staff Writer
Colombo (LNW): Central Bank of Sri Lanka (CBSL) has issued an Order reducing the interest rates on lending products of all licensed commercial banks (LCBs) and licensed specialized banks (LSBs) with effect from August 25 (Friday).
Accordingly, the interest rates on pawning facilities, pre-arranged temporary overdrafts, credit card advances, and new and existing Sri Lankan Rupee (LKR)-denominated lending products are also reduced adequately.
This was mentioned in the Order issued by the CBSL on the maximum interest rates on LKR-denominated lending products issued on Friday.
In the recent past, the CBSL adopted several policy measures such as reduction of policy interest rates and the statutory reserve ratio, thereby facilitating a reduction in market interest rates.
Yet, despite the considerable easing of monetary conditions, the CBSL said interest rates on lending products of certain financial institutions continued to remain excessive and are not in line with the current monetary policy stance, posing challenges for individuals and businesses.
Accordingly, the CBSL’s Monetary Board issued an Order on the interest rates applicable on LKR-denominated lending products of licensed banks, directing them to reduce interest rate on pawning facilities to 18% per annum, pre-arranged temporary overdrafts to 23% per annum and credit card advances to 28% per annum commencing the next billing cycle.
The CBSL has directed all licensed banks to reduce the annual nominal interest rates applicable for all new and existing LKR-denominated lending products, excluding credit card facilities mentioned above and any other categories of lending products by at least 250 points by October 31, 2023 and further 100 basis points by December 31, 2023 in comparison to the interest rates that prevailed as at July 31, 2023.
However, if the annual nominal interest rate applicable to any LKR-denominated lending products as at August 25, or anytime thereafter is 13.5% or lower, the CBSL said it is not mandatory to give effect to the reduction required in the Order.
Further, in the cases where the applicable annual nominal interest rate as at the date of this Order or any time thereafter is 13.5% or less, the licensed banks are not supposed to increase the interest rates of such lending products from the level maintained as at August 25.
In addition, all licensed banks are instructed to reduce the penal interest rates charged on all lending products, including credit card facilities already granted, to a level not exceeding 200 basis points per annum, for the amount in excess of an approved limit or in arrears, during the overdue period, with immediate effect.
CID launches probe into Viranjith Thambugala’s assets
By: Isuru Parakrama
Colombo (LNW): The Criminal Investigation Department (CID) has reportedly launched a probe into the assets of Viranjith Thambugala, owner of ‘Aura Lanka Herbals’, and a self-proclaimed holistic medical practitioner, investor, entrepreneur, a philanthropist and an internet personality.
The probe has been launched by the Illicit Asset Investigation Division of the CID on the orders of the Inspector General of Police (IGP).
Thambugala was recently driven into controversy followed by a storm of social media allegations involving an aloe vera plantation project, claiming that he was engaging in illegal activities through the project.
It is in this backdrop where the IGP’s orders come in that a probe be launched into his businesses and the manner in which his assets were earned.
Sri Lanka Original Narrative Summary: 27/08
- Former CB Governor Ajith Nivard Cabraal says the present Govt and the Central Bank have “outsourced” the economic management of the country to the IMF: laments that the the most important macro-fundamental indicator of “Growth” is blatantly ignored by the present Govt at the behest of the IMF, and the people are seriously affected by the contracting economy.
- NPP & JVP Leader Anura Kumar Dissanayake says SL is now in the clutches of the IMF which functions under the USA, just as it was under British colonial rule where SL had no freedom or sovereignty to decide on its taxation or fiscal policies: asserts that when professionals questioned about the PAYE tax, the President and CB Governor admitted they couldn’t do anything about it and that the matter should be dealt with the IMF.
- Netherlands Ambassador Bonnie Horbach says around 3,000 items which were “collected” during the colonial period may be in museum vaults in the Netherlands: says that as a part of the recent policy of the Dutch Govt to return the stolen artefacts to their rightful owners, researchers from former colonies will be granted access to those collections: more than 13,000 items of value have been documented as being pillaged & stolen by Western Colonial Powers during 443 years of Colonial rule from 1505 to 1948.
- Karapitiya Teaching Hospital Consultant Psychiatrist Dr Rumi Ruban says there’s a risk of memory loss among children due to severe addiction to mobile phones and the internet.
- Agriculture Minister Mahinda Amaraweera says the poultry association has reduced the price of chicken by Rs.100 per kg: also says the import tax of Rs.75 per kg of maize has been reduced to Rs.25 by the Govt and that can be considered as the reason for the reduction.
- Ministry of Health says 50 more types of drugs that are in short supply will be imported within the next 2 weeks: currently, there is a shortage of 230 medicines in the medical supply sector.
- Finance State Minister Ranjith Siyambalapitiya says the review of the budget proposals will start from August 28: asserts the next budget will provide the necessary facilities to move the country’s economy from bankruptcy to positive: certain officials of the Govt & CB announced the country’s debt default on 12April’22.
- Asian Development Bank Country Director Takafumi Kadano reaffirms the ADB’s commitment to bolster the recovery of stressed SMEs: praises Sri Lanka’s dedication to rebound from the economic crisis: analysts point out that the Govt’s and IMF’s contractionary economic policies & debt default have severely crippled SMEs & more than 60% of the SMEs have already closed down or are facing imminent closure.
- State Minister for Primary Industries Chamara Sampath Dasanayake says gem and jewellery exports have recorded an income of USD 315 mn year-to-date, & recorded a growth of 34%, reaffirming its vital role in strengthening the economy.
- Tourism Development Authority says 109,954 tourists visited SL during the first 23 days of August’23, 191% higher than in August 22, in the immediate aftermath of the Aragalaya.