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Sri Lanka’s Foreign Reserves Surge in May 2023; Economic Recovery on the Horizon

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Sri Lanka’s Foreign Reserves Surge in May 2023; Economic Recovery on the Horizon

In a recent turn of events, Sri Lanka’s foreign reserve levels have shown a promising upward trajectory, reaching a notable milestone in May 2023. During that month, foreign reserves experienced a remarkable month-on-month (MoM) increase of 26%, soaring to an impressive USD 3.5 billion.

This positive trend continued, with reserves steadily improving through July 2023. However, there was a slight setback in August, as reserves dipped by 4% to USD 3.6 billion. This dip was attributed to the country’s settlement of a significant portion of the Bangladesh swap facility, as reported by Capital Research in their Pre-Policy Analysis report.

The growth in reserves can be largely attributed to substantial progress in key sectors, including a remarkable 43.1% year-on-year increase in tourism earnings and an impressive 78.0% year-on-year surge in worker remittances.

Furthermore, Sri Lanka’s Balance of Payments (BoP) remained in positive territory, bolstered by a narrowing trade deficit, which was recorded at USD -2.7 billion in July 2023, compared to USD -3.6 billion during the same period the previous year. Despite these positive signs, reserves are still below the required levels, and the gradual easing of import restrictions and challenges in the export sector, particularly in apparel, may hinder further reserve growth.

In regard to the country’s debt restructuring efforts, Sri Lanka successfully completed the Domestic Debt Restructuring in September 2023. However, the External Debt Restructuring process is ongoing, with expectations of a delay in the second tranche until December 2023, pending the completion of external debt restructuring.

Sri Lanka’s GDP for the second quarter of 2023 revealed a contraction of 3.1% year-on-year, aligning with the earlier forecast of -3.0% year-on-year by the Financial and Capital Research (FCR). This contraction represents a significant improvement compared to the 7.4% output decline observed in the second quarter of 2022. The deceleration in inflation and the anticipated stabilization of interest rates during the quarter contributed to this positive development.

Notably, inflation in Sri Lanka has been on a decelerating trend for the past 11 months. This trend indicates that tight monetary measures have effectively curbed demand pressures. Additionally, cost-push inflation appears to be easing as global commodity prices stabilize, and China’s reopening paves the way for a faster-than-expected economic recovery.

Commenting on the monetary policy outlook, experts believe there is a 60% probability that the Central Bank of Sri Lanka (CBSL) may consider relaxing policy rates in the upcoming policy review meeting, potentially adopting a dovish stance to stimulate economic growth and accelerate the decline in interest rates.

As economic indicators continue to stabilize and with expectations of a robust recovery in the latter part of the second half of 2023, it is anticipated that a substantial monetary relaxation may be necessary to further support the country’s economic revival.

The President to preside over tribute ceremony honouring senior journalist Edmond Ranasinghe today

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The President to preside over tribute ceremony honouring senior journalist Edmond Ranasinghe today

The tribute ceremony for senior journalist Edmund Ranasinghe, the founding editor and editorial director of the ‘Divaina’ newspaper and one of Sri Lanka’s most esteemed journalists, is scheduled for today (03) at 3:00 pm at the Presidential Secretariat.

President Ranil Wickremesinghe will preside over this event, which marks the initiation of a program conceptualized by President Ranil Wickremesinghe to honour senior journalists who have made significant contributions to journalism in the country.

In appreciation of Mr. Ranasinghe’s seven decades of dedicated work in the media, a book titled ‘Edmond’s Newspaper Revolution,’ compiled by the 93-year-old journalist himself, will be published.

The keynote speech at this tribute ceremony will be delivered by Mr. Upali Tennakoon, the former Editor-In-Chief of the Island and Rivira newspapers, currently residing in the United States of America.

Mr. Edmond Ranasinghe embarked on his media career as a journalist at the Lake House, ‘Daily News’ newspaper in 1952. In 1973, while serving as the News Editor and holding the title of Deputy Editor, he resigned from his position in protest of the government’s takeover of the Lake House.

In 1977, Mr. Ranasinghe was reappointed as the Editor of ‘Dinamina’ by invitation from Lake House and later he also took on the role of Editor at Silumina.

In 1981, he became the founding Editor of the ‘Divaina’ newspaper, revolutionizing journalism in Sri Lanka and elevating it to unprecedented popularity in a short span of time. In 2016, at the age of 86, Mr. Ranasinghe once again assumed the role of Editor at ‘Silumina,’ further showcasing his enduring commitment to journalism.

Vehicle revenue permits could be obtained from home commencing October 7th

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Vehicle revenue permits could be obtained from home commencing October 7th

Kanaka Herath, the Minister of State for Technology, announced that Sri Lanka will introduce the new motor vehicle revenue license system (eRL 2.0) on the 7th of this month. He emphasized that this program will be implemented in all provinces except for the Western Province.

Additionally, he highlighted that the new motor vehicle revenue licenses (eRL 2.0) can be conveniently obtained from home using this innovative system. State Minister Herath shared these details during a news conference held at the Presidential Media Centre Oct- (02), under the theme ‘Collective path to a stable country’.

State Minister Kanaka Herath who spoke further said:

To improve the efficiency of the public service in this country, as well as to reduce irregularities, the entire public service should be digitized. Therefore, President Ranil Wickremesinghe stated that all government institutions in Sri Lanka should be digitized through the 2023 budget statement.
Nine pilot projects are being implemented by selecting nine government institutions including Divisional Secretariat Divisions, Pradeshiya Sabha, Municipal Councils and District Secretariat Offices, under the digitization of the public service.

In addition to this, starting from the 7th of this month with the introduction of eRL 2.0, an opportunity arises to acquire vehicle revenue licenses through the online system, a program jointly executed by the State Ministry of Technology and the Information and Communication Technology Association of Sri Lanka. This initiative encompasses all eight provinces, excluding the Western Province. Concurrently, there are ongoing efforts to expand this program to encompass all government institutions and facilitate online payments by March of the coming year.

These endeavours are geared toward enhancing the efficiency and fortifying the public service throughout the entire country through digitization, with the ‘Digicon 2023-2030’ program having been initiated under the guidance of President Ranil Wickremesinghe to attain this objective.

Furthermore, a series of events, including technology exhibitions, conferences, and commendation ceremonies for young individuals, have been organized. Of particular note, the Digital Investment Conference aimed at kick-starting new businesses in the country is scheduled for October 13 at the Shangri-La Hotel in Colombo, with approximately 100 investors slated to participate. This event is poised to bolster the nation’s investments and aligns with the core objective of the Digicon program, which is to establish a comprehensive digital economy plan for the country. It is anticipated that this endeavour will enable the rapid accumulation of foreign exchange, thereby contributing to the overall strengthening of the country’s economy.

President Rejects Allegations in Channel 4 Documentary, Rules Out International Inquiry

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President Rejects Allegations in Channel 4 Documentary, Rules Out International Inquiry

President Ranil Wickremesinghe, in an interview with a German-based international broadcaster, Deutsche Welle, has strongly criticized the allegations made in a documentary recently aired by the British television network Channel 4.

During the interview, President Wickremesinghe made it clear that the Sri Lankan government is not inclined to conduct an international inquiry into any matter, including the Easter Sunday terror attacks. He emphasized that while some individuals may have called for such an international probe, it has not been endorsed by the country’s parliament.

This stance reflects the Sri Lankan government’s position on the matter and its commitment to handling domestic issues independently, without external intervention. The President’s remarks underscore the importance of maintaining sovereignty and national control over sensitive investigations and matters of national significance.

Sri Lankan Rupee Holds Steady Against US Dollar at Commercial Banks

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Sri Lankan Rupee Holds Steady Against US Dollar at Commercial Banks

As of today, October 3rd, the Sri Lankan Rupee has maintained its stability against the US Dollar at commercial banks in Sri Lanka, consistent with the rates observed on the previous Monday.

Here are the exchange rates at select banks:

  • At Peoples Bank, the buying and selling rates for the US Dollar remain consistent at Rs. 316.42 and Rs. 329.62, respectively.
  • Commercial Bank reports that the buying rate for the US Dollar remains unchanged at Rs. 316.71, with the selling rate also holding steady at Rs. 328.
  • Sampath Bank is also reporting no change, with the buying and selling rates for the US Dollar at Rs. 318 and Rs. 328, respectively.

This stability in exchange rates suggests a balanced foreign exchange market at the moment, providing some reassurance for businesses and individuals involved in international transactions.

Liquor Shops Temporarily Close in Observance of World Temperance Day

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Liquor Shops Temporarily Close in Observance of World Temperance Day

Kapila Kumarasinghe, the Additional Commissioner General of Excise, announced that all licensed liquor shops in Sri Lanka will remain closed today in commemoration of World Temperance Day.

This decision underscores the country’s commitment to promoting temperance and responsible drinking. World Temperance Day serves as a reminder of the importance of moderation and responsible consumption of alcoholic beverages. During this observance, Sri Lanka is taking a proactive step to encourage individuals to reflect on the impact of alcohol and to make responsible choices.

USAID and SLTA launch social media influencer campaign to boost tourism

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USAID and SLTA launch social media influencer campaign to boost tourism

By: Staff Writer

Colombo (LNW): The United States Agency for International Development (USAID) Indo Pacific Opportunity Project (IPOP) and Sri Lanka Tourism Alliance (SLTA) recently launched a social media influencer campaign to support efforts to increase Sri Lanka’s tourist arrivals and boost the tourism industry.

The campaign will be conducted by a team of 10 global influencers with followers from top tourism source markets, including: the UK, India, France, Germany, Poland, Scandinavia, Canada and the United States.

The team will travel to many exotic locations around the country to showcase a range of sustainable niche tourism products and experiential cultural attractions that Sri Lanka has to offer to attract more visitors to the country.

Sri Lanka is currently experiencing an encouraging surge in tourist arrivals and on Tuesday 26 September, crossed the crucial landmark of one million tourists for the year 2023 – easily surpassing the total of 720,000 recorded for the whole of 2022.

USSAID launched the Indo Pacific Opportunity Project (IPOP) tourism activity in July 2022 to support economic reforms and promote foreign direct investment in Sri Lanka.

 The two-year project is assisting the Sri Lanka Tourism Ministry to streamline and implement new policies and procedures to enable fast-tracking and attraction of foreign direct investment in the tourism sector.

The launch of this social media influencer campaign is another step forward in USAID-IPOP’s strategy to boost Sri Lanka’s tourism.

The landmark also coincided with the celebration of World Tourism Day on 27 September.“The increase in tourist arrivals this year in Sri Lanka is very encouraging,” said Chief Guest, Ambassador of the United States to Sri Lanka Julie Chung at the special launch event.

With the United States having worked side-by-side with Sri Lanka for 75 years, this is what a strong partnership looks like,” she added.

 Using social media influencer campaigns has become a popular strategy for brands and organisations globally to communicate their messages, products, or services to a broader and more engaged audience.

USAID has successfully sponsored social media influencer campaigns in Georgia and, most recently, Nepal. Theses campaigns are especially useful to target specific markets (e.g. UK, Germany, India, etc.) as well as certain interests (Adventure, Culture, Wellness etc.).

“This social media influencer campaign is a novel idea and very timely boost for tourism in Sri Lanka. said Sri Lanka Tourism Promotions Bureau Chairman Chalaka Gajabahu.

 By leveraging the power of social media through high-quality influencers, it is possible to increase the global awareness of the amazing tourism assets in Sri Lanka, positioning the country as a high-value destination.

Through captivating content, engaging storytelling, and strategic targeting, the campaign can generate demand, stimulate tourism growth, and contribute to the economic recovery of Sri Lanka’s tourism sector.

“In the tapestry of landscapes and cultures that cloak the island of Sri Lanka, there lies an abundance of singular and sustainable experiences and sights,” says Steller Co-Founder and CEO Pete Bryant. 

Former CB Governor Dr Indrajit clarifies elections and fiscal discipline

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Former CB Governor Dr Indrajit clarifies elections and fiscal discipline

By: Staff Writer

Colombo (LNW): Former Central Bank Governor Dr. Indrajit Coomaraswamy has set the record straight over remarks concerning elections and the need to uphold fiscal discipline.

“Certain remarks which he made during a recent webinar organised by Capital Alliance have been the subject of misinterpretation in press articles which are currently doing the rounds.  The gist of this is that he advocated the postponement of elections in Sri Lanka,” Dr. Coomaraswamy said.

Issuing a clarification he said that during some of the previous 16 IMF programs, progress was made in stabilising the economy, only for the approach of elections to result in the reversal of gains through indisciplined fiscal priming for narrow political gain.

“Significant progress has been made in stabilising the economy over the past 12 to 18 months.

In this context, he said that we should not allow elections to distract us, by which I meant that in the lead-up to any election, fiscal discipline should not be lost – as has happened time and again in the past, under multiple governments – and the long term macroeconomic program should be maintained.

“He noted that repetition of such fiscal indiscipline on this occasion would have much worse consequences than ever before, as the recent multiple crises have significantly eroded the resilience of both the economy and a large proportion of the population.

He said that he did not advocate the postponing of elections. Let me make it clear that I would under no circumstances advocate that the Constitution should be violated.  

“To summarise, what he said was: do not repeat the same mistake of having fiscal indiscipline as the elections approach.  The consequences this time will be much worse than anything we have known so far.  I said nothing about the timing of the elections.”

Meanwhile  it has been revealed that postponed local polls incurred Rs1 billion cost for state coffers  

The government has spent a massive sum of public money amounting to Rs1 billion for prelimineray activities of the postponed local government elections scheduled to be held on April 25 2023 finance ministry records showed.

The cost for the Election Commission to conduct the elections estimated at just over Rs. 9 billion and the printing cost alone was Rs.1.827 billion out of which a sum of Rs.1 billion has already been spent.

Executive director of PAFFREL Rohana Hettiarchchi said that the local government elections had been postponed indefinitely and the government is planning to cancel the nominations given to elections.  

A high Official of the Elections Commission stated that the deposits could be refunded only in the event the nominations submitted for the upcoming election are cancelled.

He further noted that in order for the nominations to be cancelled, the government is required to table a Bill in this regard before the Parliament, else, nominations will be cancelled only by way of a gazette notification.

Global Fashion Platform PDS eyes further expansion in Sri Lanka

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Global Fashion Platform PDS eyes further expansion in Sri Lanka

By: Staff Writer

Colombo (LNW): Global fashion infrastructure platform PDS Limited will be unveiling a centralized cutting plant in its Sri Lankan subsidiary Norlanka, located in Malwana.

With a fully digitalized and integrated system, starting from mill inspection to warehouse operations, fabric inspection and the cutting process, this initiative is a testament to how multinational companies can collaborate effectively with local manufacturers, by leveraging technology.

Founded over 24 years ago in Hong Kong, PDS has been growing steadily, creating a network that oversees the end-to-end manufacturing process of apparel.

Despite global economic challenges that have impacted apparel manufacturers worldwide, the Company generated US$ 2 Bn in Gross Merchandise Value and is poised to more than double its revenue in the next 4-5 years.

Priding itself as a global collaborative platform catering to over 300+ brands, the Company has expanded to over 22 countries, providing a global plug-and-play platform for entrepreneurs in the areas of designing, sourcing, manufacturing and brand management, serving leading global brands and retailers.

This unique business model not only operates in an asset-light manner, infusing scalability and robustness into the business, but also promotes a large entrepreneurial ecosystem throughout its entire value chain.

Executive Vice Chairman of PDS Pallak Seth says, “We are looking to further expand our manufacturing footprint to include Egypt and India, while also exploring other strategic locations.

Reflecting on the PDS journey when it established a presence in Sri Lanka over ten years ago to set up Norlanka, Seth observed that the country possessed the strength of a knowledgeable workforce and a rich vendor base.

“In just a few years, we generated a revenue of US$ 100 Mn by adopting a customised model designed specifically to meet consumer needs. We are now regarded as the preferred vendor for retailers who would otherwise find it challenging to manage and collaborate with smaller factories.

PDS is the conduit that ensures designs and financing are provided to factories. This leaves room for the factories to focus on manufacturing.”

In the world of global manufacturing, PDS views its subsidiary Norlanka as a thriving success story, poised for remarkable growth. The Company aspires to achieve a staggering revenue of US$ 120 Mn this year, with ambitions to double its business within the next 3-4 years.

In order to reach this target, PDS has several initiatives in the pipeline. The Company recently invested in a manufacturing base in Trincomalee for babywear and partnered with a further 2 to 3 factories to enhance its capacity.

The Company also established a centralized cutting plant in close proximity to the commercial capital Colombo, opening up capacity, adding value and creating further investment opportunities for vendors and customers.

BIZ Confidence Gains Ground amid multiple sensitivities

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BIZ Confidence Gains Ground amid multiple sensitivities

By: Staff Writer

Colombo (LNW): The ongoing evaluation – the first such review by the IMF – of the four year Extended Fund Facility (EFF) programme, the new Inland Revenue (Amendment) Bill, continuing disinflation, the domestic debt optimisation (DDO) framework, and the fluctuating price of fuel are having whirlwind effects in business circles.

The Central Bank of Sri Lanka says it is confident that policy measures adopted thus far along with well anchored inflation expectations will stabilise the Colombo Consumers Price Index (CCPI) around mid-single digit levels over the medium term.

Governor of the Central Bank Nandalal Weerasinghe reveals that “a sizeable and swift downward adjustment in market lending interest rates is expected in the near term.”Indeed, this assurance will be music to the ears of businesses of all sizes and shape.

Approval Ofcreditors will play a pivotal role in securing debt sustaina­bility. President Ranil Wickremesinghe has emphasised the importance of this to ensure debt sustainability, which is a critical requirement of the US$ 3 billion EFF, not to mention efforts to overcome bankruptcy and external debt default.

Meanwhile, the government announced that Sri Lanka Development Bonds (SLDBs) have been completed within the DDO framework.

This could enable the government to reduce its gross financing needs (GFN) so as to align it with the target specified in the Inter­national Monetary Fund’s EFF programme.

Amid these developments, the LMD-NielsenIQ Business Confidence Index (BCI) gained eight basis points in September to reach 81 – which is still seven notches shy of its average over the last 12 months (88).

The index is also a whopping 27 points below its high-water mark since October last year – i.e. 108 in April. For the record however, the baro­meter is five points higher than where it was a year ago (76).

Topping the list of sensitivities could well be the outcome of the IMF’s review of Sri Lanka’s progress in meeting the commitments made under the EFF agreement.

To this end, Verité Research recently reported that Sri Lanka has met “at least 38 of the 57 IMF commitments due by end-August.

In addition, the business community will soon factor in two forthcoming pronouncements – viz. first and imminently, the presentation of Budget 2024 in parliament in November, which could be followed by news on the election front.

 Meanwhile, OPEC has warned of a massive global crude inventory deficit of 3.3 million barrels per day (bpd) in the fourth quarter and this could have far-reaching impacts on prices across the globe in the new year.

PROJECTIONS NielsenIQ’s Market Leader – Sri Lanka Adrian Hakel says that “it remains to be seen how the recent price increases for gas and fuel will impact the index in October.”

And LMD continues to stand by its assertion in recent months that the index will remain in negative territory given the sensitivities that businesspeople will be mulling over in the near term.

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