Sri Lanka business heads are looking at pros and cons in order to make sustainable business plans considering the economic situation under barricade, the latest edition of leading business magazine LMD observed.

Sri Lanka’s economic confidence was around the same levels in February 2023 as in October 2022, while government approval was also unchanged at a 10 percent, level, a survey has found.

A “Mood of the Nation” poll was conducted in early February 2023 by Verité Research, a Colombo-based think tank among a sample of 1,000 respondents found that economic confidence was a negative -78, the same as October 2022, when it recovered from June low.

In February 2023 0.3 percent had rated the economic conditions as excellent, 6.0 percent rated it as good; and 6.3 percent had rated it as getting better.

Sri Lanka’s external sector had stabilized by February 2023, with some prices falling absolutely, but taxes have been raised and utility prices are up. Manufacturing and retail is also under pressure

NielsenIQ’s Director – Consumer Insights Therica Miyanadeniya notes in the magazine: “The optimism that was evident towards the end of last year seems to be waning. Once again riding high as the most pressing national issue is the economy.

” LMD reports that a notable majority (77%) of executives responding to the unique LMD-NielsenIQ Business Confidence Index (BCI) monthly survey believe the economy “will get worse” in the 12 months ahead. The poll was carried out in the first week of February, a spokesperson for LMD claimed

The magazine states: “The outcome of the February poll is a reflection of what Miyanadeniya alludes to, as this degree of pessimism was expressed by only two-thirds of those who spoke to the pollsters in the preceding month.”

“It is also the highest point of economic pessimism in the last six months,” it adds. LMD also reports that “pessimism continues to be the overarching disposition in business circles,” as regards expectations regarding sales volumes in the 12 months ahead with 46% of poll respondents fearing the numbers will “get worse”

“Executive opinion in regard to sales volumes compared to the same time last year has also waned considerably with a mere 12% saying they have recorded higher numbers. And more than two-thirds (68%) now say their numbers have fallen, compared to 56% a month ago.

Media Services, LMD’s publisher, says the latest edition of the magazine has been released. Its digital edition is also available on WhatsApp and the publisher’s social media platforms.

The magazine’s Cover Story features interviews with six leading business people representing the export sector with the forex crunch at the centre of LMD’s focus.

Sri Lanka is set to secure financing support from the IMF after the fund’s Executive Board fixed a date of 20 March to review the US$2.9 billion staff-level agreement that the country signed with the IMF in September 2022.

IMF funding should improve Sri Lanka’s external liquidity, but the timing of any debt restructuring agreement with official and private creditors remains uncertain.

The announcement of a date for the Executive Board review was an indication that the IMF regards the financing assurances it has received from key official creditors as sufficiently credible to move forward, finance ministry sources revealed.

Sri Lanka’s president Ranil Wickremasinghe on 7 March indicated that China had provided its support, following earlier assurances from India and Paris Club official creditors.

The president also indicated that Sri Lanka had completed all prior actions required under the IMF programme, although the IMF Board will make its own assessment on this in deciding whether to approve the package.

Board approval of the programme would release IMF funding and should unlock additional financing from multilateral creditors.

This would bolster official foreign-exchange reserves, which have already risen 30% from their trough in October 2022. Nonetheless, reserves remain very low, at US$2.2 billion in February, equivalent to around one month of imports.

Two groups of private creditors are now ready to hold international sovereign bond (ISB) debt restructuring negotiations with Sri Lankan authorities, as the Finance Ministry and the Central Bank have almost completed their debt treatment discussions with bilateral creditors.

Although the total government external debt amounts to US$ 36.73 billion as at end of 2022, only bilateral debt is considered at present for the debt restructuring process to obtain the $2.9 billion International Monetary Fund (IMF) Extended Fund Facility.

The IMF called for ‘timely and orderly processes’ under a common framework with regards to Sri Lanka’s debt resolution. The island nation faced a severe economic crisis which resulted in high debt.

Sri Lanka has already fulfilled filled around 15 commitments made to IMF and put forward a debt treatment from work with proposal of immediately restructuring bilateral debt of US, India ,China ,Japan,and Paris club member and non member countries amounting to US$10.81 billion to gain $2.9 billion IMF bail out loan soon.

A group of overseas private creditors announced recently that it is ready to hold complex debt restructuring talks with Sri Lanka consistent with the IMF programme, Finance ministry sources said.

The total ISB debt stock with arrears as at end of 2022 was $14.286 billion with different maturity periods and varied interest rates, the Ministry’s latest data shows.

It was categorized as commercial debt and most of ISB’s maturity periods will fall on 2024, 2025, 2026, 2027, 2028 and 2029. Each and every ISB has different dates of maturity and varied interest rates.

The only issue at hand is the repayment of $1.25 billion ISB on April 18 this year. The government is servicing other multilateral loans including from the World Bank and ADB amounting to $9.499 billion.

Sri Lanka’s private bondholders have told the IMF that they are prepared to negotiate with Sri Lankan authorities in debt restructuring talks consistent with the parameters of the global lender’s programme.

The Asian Development Bank (ADB), World Bank (WB), USAID and JICA have assured their assistance for the restructuring process of the Ceylon Electricity Board (CEB), Power and Energy Minister Kanchana Wijesekara said.

The Minister tweeted that “Progress on the restructuring of CEB was discussed yesterday and these four international agencies have communicated on the assistance they can offer.

Roadmap and timeline will be submitted to the Cabinet. Reforms that can be implemented before the final Act, will be initiated next week”.

Sri Lanka’s Ministry of Power & Energy has held talks on the progress of restructuring the state-run Ceylon Electricity Board (CEB) with a number of multilateral and other development agencies communicating on the assistance they can offer.

Successive governments had tried to introduce power sector reforms following recommendations of international agencies the World Bank (WB), ADB and JICA after conducting comprehensive feasibility studies spending millions of dollars from time to time during the past two decades.

As a last ditch attempt , Energy Ministry has been directed by President Ranil Wickremasinghe to expedite the restructuring process of unbundling the CEB by setting up of state owned companies jointly with the private sector management to take over the generation, transmission, distribution and other functions.

There will be one joint venture each for generation and transmission and three or more for distribution, according to the CEB cabinet memorandum.

It has also been proposed to form separate power generation joint venture companies to undertake functions of the CEB relating to hydro electricity, thermal electricity, coal power and non renewable power generation, distribution, and other activities as well as Lanka Electricity Company (LECO).

These companies will serve as independent power producers (IPP) and will have to sell the energy they generate to the transmission company, along with other IPPs.

On Friday, the Ministry of Power & Energy entered collective agreements with trade unions of the two state-owned enterprises (SOEs) for a 25-percent salary increment every three years minus annual bonuses, allowances and other benefits.

Minister Wijesekara said that the bonuses, allowances and other benefits will not be continued or renewed.

The government will be implementing power sector reforms to restructure Ceylon Electricity Board (CEB) to make it a profitable entity serving the people.

In the first eight months of 2022, the CEB has suffered a loss of Rs 108.6 billion rupees, and It anticipates a loss of RS.108 billion rupees in the fourth quarter despite electricity tariff reforms that were implemented in August, Minister Wijesekera said

Explaining the reasons for the long-running losses of the CEB, the minister noted that a delay in imposing cost-reflective pricing was the main reason for the utility provider to make losses.

He disclosed the CEB achieved an additional income of Rs.15 billion following tariff revisions in August this year.

The CEB with a staff of 23 000 members consisting of over 1400 professionals has become a liability to the government due to its massive losses since 2016 as it has been selling electricity to its consumers below cost price which is around Rs 20 per unit.

CEB has massive hidden costs due to its inefficiencies in supply and administration, including over compensation and overstaffing, which are covered through subsidies by large-scale industrial and commercial clients and government guarantees.