Sinopec, the giant oil company with over 27,000 service stations in China, has entered into an agreement with the Beijing Sri Road Connection Trade Company Ltd., during the Shanghai CIIE, to import and market Sri Lanka Food and Beverage products at their convenience stores. The contract is worth over $ 0.8 million.

The fifth China International Import Expo (CIIE) in Shanghai was held from 5 to 10 November. There were two Sri Lankan pavilions; Food and Beverage and the Gems and Jewelry section.

The China – Sri Lanka Association for Trade and Economic Cooperation voluntarily took charge and organized the Sri Lanka pavilion with the support of the Embassy of Sri Lanka and member companies of the Association and others.

This is the fifth time that Sri Lanka has participated, maintaining a presence at the event. This presence is considered essential since companies which participated in the CIIE were able to achieve remarkable success with daily sales at the pavilion topping RMB 500,000 and over 160 trade inquiries.

The agreement between Sinopec and Beijing Sri Road will facilitate further expansion of Sri Lanka F&B products in the lucrative Chinese market. Beijing Sri Road Connection Trade Company CEO Chiranjaya Udumullage, and Sinopec International Sales Deputy Manager Wang Qian signed the agreement.

The CIIE is the largest trade Fair in China for global companies to access the biggest consumer market in the world; the Chinese market.

This connect with Sinopec is indeed special, as this year is a significant landmark for both Sri Lanka and China. The year commemorates the 65th Anniversary of establishing bilateral diplomatic relations between the two countries and the 70th Anniversary of the Rubber – Rice Pact.

Sinopec is likely to enter Sri Lankan market for importing, distributing and selling petroleum products, as Sri Lankan Cabinet Ministers in the month of June approved a proposal to allow more companies from oil-producing nations to import oil and start retail operations in Sri Lanka.

This recent decision to let the Chinese enter in Sri Lanka’s fuel retail operations is prompted by a severe foreign exchange shortage.

At present, 90 per cent of Sri Lanka’s fuel supply is through the State-owned Ceylon Petroleum Corporation, and the remaining 10 per cent by Lanka Indian Oil Corporation (IOC).Sinopec is already present at the Port of Hambantota where it operates an oil depot.

Fitch Ratings has further downgraded Sri Lanka’s Long-Term Local-Currency Issuer Default Rating (IDR) to ‘CC’, from ‘CCC’, and has affirmed the Long-Term Foreign-Currency IDR at ‘RD’ (Restricted Default). Fitch typically does not assign Outlooks to ratings of ‘CCC+’ or below.

Fitch has also removed the Long-Term Local-Currency IDR from Under Criteria Observation, on which it was placed on 14 July, following the publication of the updated Sovereign Rating Criteria.

Sri Lanka continues to service its local currency debt, but the downgrade of the Long-Term Local-Currency IDR reflects our view that a local-currency debt default is probable, in view of an untenably high domestic interest payment/revenue ratio, high interest costs, tight domestic financing conditions and rising local-currency debt/GDP in the context of high domestic fiscal financing requirements, which authorities forecast at about 8% of GDP in 2022.

According to authorities, domestic interest payments in 8M22 were Rs. 718.8 billion, taking the domestic interest/revenue ratio to an estimated 56% in 8M22; the highest among sovereigns rated ‘CCC+’ and below.

Reliance on Central Bank financing has increased, as domestic options are limited. Domestic debt rose to about 53% of Government debt by end-July 2022, according to official provisional data. Treasury bill issuance has been increasing.

Fitch expects a local debt restructuring would aim to maintain financial system stability, for example, by extending maturities or lowering coupon payments, rather than a reduction in face value. Sri Lanka continues to service its local-currency debt.

The sovereign remains in default on foreign-currency obligations and has initiated a debt restructuring arrangement with official and private external creditors.

The Ministry of Finance issued a statement on 12 April that it had suspended normal debt servicing of several categories of external debt, including bonds issued in international capital markets, foreign currency-denominated loan agreements and credit facilities with commercial banks and institutional lenders.

Fitch downgraded the Long-Term Foreign-Currency IDR to ‘RD’ following the expiry of the 30-day grace period on coupon payments that were due on 18 April 2022.

A Staff-Level Agreement with the IMF was reached on 1 September for $ 2.9 billion, for 48 months, under the Extended Fund Facility. The facility will not be approved until Sri Lanka has implemented agreed actions, financing assurances have been received from official creditors and good-faith efforts have been made to reach agreement with private creditors.

Banking Sector Faces Tight Liquidity: Sri Lankan banks’ access to foreign-currency funding is constrained by the sovereign default. Any local-currency debt restructuring would elevate funding and liquidity stress, given the predominance of local-currency funding, at 74% of the total, and large holdings of local currency-denominated Government securities.

A restructuring could necessitate recapitalization by the Government, though further regulatory forbearance measures could keep banks compliant with regulatory minimums on a reported basis, however, underlying capital positions could stay weak.

Another luxury cruise ship, Azamara Quest arrived at the Colombo Port yesterday carrying more than 600 passengers, mainly from the US the third luxury cruise with in 16 days from the arrival of the first such cruise liner signaling the revival of the country’s hospitality industry.

Tourism Ministry is planning to promote nautical tourism and the luxury passenger cruise ship arrivals harnessing the potential in the economic Development of Sri Lanka.

All ingredients already provided by nature, it is time, Sri Lanka is to take a special interest in emphasizing that Sri Lanka really concentrate on developing the Nautical Tourism as a special niche in its new phase of Tourism Development”.

Tourism Ministry also explores the possibility of partnering top blue-chip companies to enter the lucrative 40 billion dollar cruise line business that is estimated to carry 22.3 million passengers, with the market growing at 3.2% in volume.

Azamara Quest is an R-class cruise ship that entered service for Azamara Cruises on 24 October 2007. She was built in 2000 for Renaissance Cruises as R Seven.

The Azamara Quest carries about 710 passengers (double occupancy) plus 410 crew members (1:2 staff to guest ratio). The ship is in Colombo today and it will call at the Hambanthota port on Monday.

The previous luxury cruise ship carrying 2,000 visitors docked in Sri Lanka on Tuesday 29 November reviving tourism prospects on the island battered by the long-term effects of coronavirus lockdowns and months of political instability along with the economic crisis this year.

This Mein Schiff 5 arrived in Colombo five days ago after luxury cruise liner Viking Mars docked at the Colombo Port on on November 18, sparking hopes that the struggling tourism sector might finally be moving towards its pristine days.

Tourism Minister Harin Fernando said that it was “heart-warming” to see the luxury cruise in Colombo.

“Having a cruise ship in the country is similar to having 10 aircraft full of tourists,” the minister said.

Last week, the Norwegian luxury passenger cruise ship Viking Mars arrived on the island with some 1,000 people on board 16 days ago The minister said luxury cruise liners began to operate on the island after a six-month hiatus.

Sri Lanka suffered months of social unrest as deadly antigovernmental protests hit the island, with people angry over the alleged mismanagement of the economic crisis.

Minister Fernando said the country expected two to three more passenger ships in December. “The cruises will build a positive image of the country through word of mouth. That is what the country needs now,” he said.