The fault at the Kelanitissa Power Plant has been resolved, revealed the Energy Ministry. Accordingly, there will be no need to make any power cuts as the plant generates enough electricity to meet the daily demand.
Contradictory to the Ministry’s comments was a notice stating that a power outage of one hour will occur at night today (12). A time table of controlled power cuts was also issued.
Despite the claim of making controlled power cuts from today, an outage of one hour had occurred last night as well.
As economists point out, a default would result in Sri Lanka facing higher interest rates and an even lower credit rating among creditors
The Governor of the Central Bank said last week, Sri Lanka has earmarked $ 500 million to repay a maturing sovereign bond on 18 January. However, several business leaders said Sri Lanka should take a rain check. Dr. Shanta Devarajan a former acting chief economist of the World Bank said honouring the maturing debt was reckless for two reasons.
Firstly, Dr. Devarajan noted, “Sri Lanka is facing an acute shortage of foreign exchange – people queue in long lines to buy cooking gas; there is no powdered milk; food prices are rising rapidly; power cuts are becoming frequent. This $ 500 million could enable people, especially poor people, to buy and cook food for themselves and their children. Instead, the Government is choosing to reimburse bondholders, who are hardly poor. Secondly, Dr. Devaraja noted, “Sri Lanka’s debt is unsustainable. Repaying maturing bonds in full today does not change that. It increases the chances that the country experiences an uncoordinated default in the near future. In this scenario, the country stops paying its bills because it cannot. The consequences of such a badly managed default can be devastating.”
Ceylon Chamber of Commerce Chairman Vish Govindasamy said in a release, “Sri Lanka’s debt and forex situation is affecting day-to-day livelihoods. Many restrictions have been imposed to preserve forex in order to service debt. However, it is best for GOSL to find a mechanism to restructure the debt and allow the use of inflows of forex to ease the general public’s difficulties in obtaining essentials. Further he noted, “Since the majority of GOSL comes from tourism, we cannot afford to send the world messages of food shortage in the country; it will only be counterproductive. COVID is a pandemic and GOSL does not have to blame itself for the issues created by it, we need to seek help from international organisations to resolve and restructure our debt.”
Finance Minister Basil Rajapaksa
Central Bank Governor Nivard Cabraal
Impact of a default
A sovereign default according to textbooks is the failure of a government to meet a principal or interest payment on
the due date. Argentina, Greece, Ecuador, Russia, Pakistan and Ukraine have defaulted in the past. So, if Sri Lanka decides to default, it is tantamount to a refusal to comply with a previous payment agreement. This will lead to a loss of confidence in Lankan businesses and the economy. Research suggests the European sovereign debt crisis was a period when several European economies experienced the collapse of financial institutions, high government debt, and rapidly rising bond yields. Therefore, a non-negotiated default will undermine the stability of the Lankan financial systems and will hugely impact economic growth as well as create economic turmoil.
Therefore, as economists point out, a default would result in Sri Lanka facing higher interest rates and an even lower credit rating among creditors. The world will also construe the default as a sovereign insolvency. Therefore, the bottom line must be – no default. The effects can linger for decades to come. Raising more ISBs would be nigh impossible, pushing SL into the clutches of the multilateral agencies and into bilateral deals, which always come with politically unpalatable conditions and high overall cost.
Options
Sri Lanka unfortunately as a result of years of overspending and grandiose projects using new debt to settle deficits by borrowing from domestic and international investors, has mortgaged the livelihoods of several generations yet unborn. It is time we hold those responsible accountable. Debt restructuring was certainly an option some months back, essentially that is renegotiating the outstanding debt to increase the payment terms, swap the outstanding debt in exchange for other terms. Unfortunately, this is not possible one week before a maturity. Sri Lanka since the pandemic has relied on short-term borrowings. This has created a mismatch between the short-term sovereign bond and the long-term value of assets/projects financed through forex debts.
Those who suggest a default or deferring must know the economic impact of a default on domestic banks’ balance sheets and their going concern. Especially, a massive-depreciation of the currency can have significant consequences for many private firms and banks. This could result in the country virtually shunned from accessing international capital markets. However, according to economists Rui Esteves, Seán Kenny, Jason Lennard an article titled ‘The aftermath of sovereign debt’ says, “On average, debt crises leave temporary, not permanent, economic scars. In this sense, default is not destiny. However, within this result hides a large heterogeneity. This has an obvious bearing on policy. Recognising that not all defaults are created alike can potentially improve the targeting of policy intervention; ex-post to smooth the impact of, or prevent, spillovers from a debt crisis.”
Conclusion
Therefore, of the 500 m, the foreign bondholders should be settled on maturity. We will then technically not be in default and that component is very low – probably 10%-20% or less. The rest are held by local banks, who profited from the sell-off and high yields, benefitting their financials and PATs and now need to take the pain of a GOSL mandated deferral on repayments. A rollover can be interpreted as default by international markets, but not a phased deferral of settlements. This would then address the valid concerns raised by several business leaders. The Government must therefore act professionally and do what is best for the 22 million people this time. In fact, as pointed out by several top economists, Sri Lanka should have sought the support of the IMF in Q1 of 2020. Whoever advised the Government not to do so must held accountable.
Top Foreign Investors are waiting to take advantage of Sri Lanka’s present dollar crisis if Sri Lanka fails to repay US$ 500 million International Sovereign Bond buy more bonds on maturity paying lee amount of money, international business and Finance news agencies reported.
A top emerging-market money manager who scooped up gains with Ecuador’s restructured bonds is now waiting for Sri Lanka to default to load up on the nation’s debt, Bloomberg news agency claimed.
Carlos de Sousa, who oversees a $ 3.8 billion developing-nation bond fund at Vontobel Asset management in Zurich, expects the South Asian country to run out of money to pay creditors by mid-year – even after the Central Bank vowed to meet this month’s obligations, it said.
The Venezuela-born investor already owns the bonds and is waiting for a default-led selloff to buy more, betting the average recovery value of the notes could top current prices.
Most of Sri Lanka’s external bonds have lost about half of their value since the beginning of the pandemic to trade around 50 cents on the dollar as foreign-exchange reserves dwindled.
Travel restrictions have hammered the tourism industry, which accounts for about 5% of the economy, while extended lockdowns hurt commerce and industry. The island nation is now mulling a bailout from the International Monetary Fund.
“Bonds are so cheap that the recovery value is above current prices,” de Sousa said. “The default probability is bigger than 50%.”
Sri Lanka has $ 15 billion in external bonds outstanding, with the next principal payment due on 18 Jan. On Wednesday, the Central Bank Governor tweeted that $ 500 million had been set aside to pay back holders on that day.
In July, the nation has another principal payment of $ 1 billion. Sri Lanka asked China on Sunday to consider restructuring the island nation’s debt repayments during a visit by Foreign Minister Wang Yi. The South Asian nation’s dollar bonds traded mixed on Monday.
Notes due March 2030 were 1% lower at 48.3 cents on the dollar while debt maturing in July 2022 was 0.4% higher at 71.3 cents.
Vontobel’s emerging-market debt fund, which de Sousa has helped oversee with Luc D’Hooge since the beginning of last year, beat 93% of peers over the last five years, according to data compiled by Bloomberg. In 2021, the fund outperformed 84% of its competitors.
The 34-year investor attributes part of the fund’s gains to a bet on Ecuador bonds ahead of the April Presidential Election.
The surprise victory of a former banker spurred a 20-cent rally in the notes in a matter of days, making them one of the best performers in the developing world just a year after the nation restructured $ 17.4 billion in international debt.
Vontobel’s fund had about 2.5% of its holdings in Ecuador bonds as of August, according to a company filing.
Wagers on a rebound in Colombian bonds after the nation was downgraded to junk and a position on Angolan debt, which also had double-digit returns last year, also contributed to that performance, de Sousa said.
Other frontier-market bonds rewarded investors with stellar returns last year. Zambia’s bonds soared over 30 cents in the week following the election of a market-friendly president, handing creditors returns that approached 50%. In Belize, a debt restructuring spurred double-digit gains for investors.
For this year, de Sousa’s highest-conviction trades include overweight positions in Argentina and Tunisia, where he expects deals with the IMF to materialise in 2022.
He’s also scooped up bonds from the Bahamas, a country he says is too rich to have a double-digit yield, as well as GDP warrants from Ukraine, dollar bonds from Petroleos Mexicanos, Egypt debt and euro-denominated notes from the Ivory Coast.
It has been decided to hold a condolence debate on the death of former Minister Mangala Samaraweera on the 21st. The decision was taken at a meeting of party leaders held yesterday.
It was earlier scheduled to be debated but could not be taken up due to the end of the parliamentary session.
Mangala Samaraweera, who was receiving treatment for covid infection, passed away on August 24.
The Governor of the Central Bank Ajith Nivard Cabraal states that despite various allegations that the country is in a state of bankruptcy, there is no such risk. Cabraal said that such a risk had been warned in 2020 as well, but no such situation had arisen so far.
He points out that the country has been declared to be bankrupt from time to time throughout history, but at no time has the country gone bankrupt.
He was speaking at a media briefing on ‘2022 Sri Lanka Economy: Challenges and Solutions’ currently being held at the Government Information Department.
Cabraal says that the repayment of foreign loans has also stabilized and there is no difficulty in repaying the loans. He said that at the beginning of 2021 they had only US $ 5 billion in reserves but by the end of the year, but they were able to repay 06 billion in loan installments.
Dudley Sirisena, a millionaire rice trader, says that the increase in rice prices is due to the decline in paddy production in the country and that he cannot take responsibility for it.
He said that the organic fertilizer program is a good one but the current situation has arisen due to mistakes made in the way it was implemented.
He also said that rice prices would not increase further and that this is the maximum price.
Dudley Sirisena was responding to a number of questions raised by journalists after attending a function in Galle yesterday (11).
These are the results of the organic fertilizer program. I can’t take responsibility for this – Dudley Sirisena (VIDEO)
Dudley Sirisena, a millionaire rice trader, says that the increase in rice prices is due to the decline in paddy production in the country and that he cannot take responsibility for it.
He said that the organic fertilizer program is a good one but the current situation has arisen due to mistakes made in the way it was implemented.
He also said that rice proces would not increase further and that this is the maximum price.
Dudley Sirisena was responding to a number of questions raised by journalists after attending a function in Galle yesterday (11).
Priyantha Amarasiri of the SLPP, who was removed from the post of Mayor of Badulla due to two consecutive defeats in the budget presented for the year 2022, has been re-elected as the Mayor with the assistance of the United National Party.
Twelve days ago, the Governor of the Uva Province issued an Extraordinary Gazette Notification to remove Priyantha Amarasiri from office and the election to elect a new Mayor was held yesterday (11).
The Sri Lanka Freedom Party had nominated its Deputy Mayor Asitha Nalinda for the post of Mayor while the United National Party had nominated former Mayor of the SLPP Priyantha Amarasiri.
Accordingly, the former mayor has recorded an easy victory by obtaining the votes of all but one member of the SLPP and all members of the United National Party. It received 15 out of 25 votes in the House.
The EXPO National Day of Sri Lanka was celebrated on 3 January 2022 at Al Wasl Plaza at the Expo 2020 in Dubai. A delegation headed by Foreign Minister of Sri Lanka Prof. G.L. Peiris attended the National Day official ceremony at Expo 2020 together with Minister of Tourism Prasanna Ranatunga,, State Minister of Gem and Jewellery Related Industries Lohan Ratwatte, Member of Parliament Madura Vithanage, Foreign Secretary Admiral Prof. Jayanath Colombage, and Consul General of Sri Lanka to Dubai and Northern Emirates Nalinda Wijerathna. The UAE delegation was headed by Minister of State of the United Arab Emirates Ahmed Ali Al Sayegh.
The official ceremony started with the flag hoisting and playing of National Anthems of both the UAE and Sri Lanka. In his opening remarks the Minister of State Ahmed Ali Al Sayegh,, warmly welcomed the Sri Lanka delegation and expressed the UAE government’s appreciation for Sri Lanka’s successful participation at Expo 2020.
Addressing the gathering Foreign Minister G.L. Peiris of Sri Lanka elaborated the timely importance of Sri Lanka’s participation at Expo 2020 to brand Sri Lanka not only as a tourist destination but also as a platform to promote exports, including value-added products, gems and jewelry as well as industrial and manufactured products. The official ceremony concluded with a colourful cultural performance by the Channa-Upuli dance troupe.
At the end of the official ceremony both the delegations visited the Sri Lanka Pavilion and UAE pavilion and the formal programme was concluded with the signing of the book of honour by the Foreign Minister.
A media conference chaired by Minister of Tourism Prasanna Ranatunga with the Consul General of Sri Lanka, and the Chairperson of the Sri Lanka Tourism was also held parallel to the official celebrations with the participation of international media representatives.
Vice Chairman of Airport and Aviation Services Rajiv Sooriyaarachchi, Chairman of Laksala, Lakmal Wickramarachchi, Chairman of Gem and Jewellery Authority Thilak Weerasinghe and a team of local media representatives also joined the Sri Lanka Day celebrations at Expo 2020 in Dubai at the invitation of the Sri Lanka Tourism Promotion Bureau.
Leading e-commerce solutions provider, ISM APAC announced its unification and transition with Sana Commerce Global, a leading Netherlands-based e-commerce company, as Sana Commerce Sri Lanka. This move comes after concluding seven successive years in the industry independently, primarily serving the Asia Pacific region and being one of the main development centers for its headquarters.
With over 180 employees, this number is only growing stronger as this transition can now allow it to expand its scope to cover a range of development services to a much wider audience. This also indicates that every individual will now be able to get a global exposure, not limiting just to the Sri Lankan context, and have a rich, diverse, and holistic experience including a multitude of knowledge, learning and training initiatives at Sana Commerce.
Sana Commerce is an e-commerce platform designed to help manufacturers, distributors and wholesalers to connect, manage and succeed in creating long-lasting relationships with customers who place their utmost trust in them. It focuses on improving the relationship cycle rather than mere transactions. Some of the recent recognitions Sana Commerce received include being named as a Strong Performer by Forrester, Winner of Best E-shop at the E-Commerce Germany Awards 2021, and Leader Mid-Market from G2.
‘‘Our development center based in Sri Lanka consist of a talented pool of professionals who has been instrumental in our success and innovation, taking a lead on numerous projects and never falling short of exceeding our expectations. With this alignment, we will only continue to grow in leaps and bounds,’’ said Michiel Schipperus, CEO & Managing Partner at Sana Commerce.
Sana Commerce Sri Lanka was ranked among the Best Workplaces in Sri Lanka for 2021, 2020, and 2017, and Best Small and Medium IT/ITes Workplaces in Sri Lanka last year by Great Place to Work Sri Lanka. The company’s culture is built on encouraging individual growth through active dialogue, creativity and knowledge-sharing initiatives both internally and externally including guest lectures at universities and sponsoring various hackathons particularly She Coderess, a Sri Lankans only all-female hackathon.
“We also started out as one of the main development centres for Sana Commerce, but with this transition, we can now reach all corners of the world, covering development, providing solutions and much more,” said Priyantha Bethmage, Managing Director at Sana Commerce Sri Lanka.
The company also strives to empower and help various communities through well-defined outreach projects spearheaded by its CSR Committee. Its ‘Sipsatharata Arunallak’ – ‘Helping hands for Education’ continues to play a pivotal role in helping underprivileged children gain access to quality education, one of its philanthropic goals.
With its new face, Sana Commerce Sri Lanka will open the doors to have a much more holistic and expansive international experience for the employees who were working in a bubble of the Sri Lankan context.
The Governor of the Central Bank said last week, Sri Lanka has earmarked $ 500 million to repay a maturing sovereign bond on 18 January. However, several business leaders said Sri Lanka should take a rain check. Dr. Shanta Devarajan a former acting chief economist of the World Bank said honouring the maturing debt was reckless for two reasons. 
