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Commercial Banks Face Risks from Suspending SME Debt Recovery

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By: Staff Writer

November 12, Colombo (LNW): As Sri Lanka approaches the December 15 deadline for the temporary suspension of debt recovery under the Parate law, the government, Central Bank, and commercial banks are considering the impact of this move on small and medium enterprises (SMEs).

A recent meeting at the Presidential Secretariat discussed the challenges faced by SMEs in repaying loans, exploring potential actions to support these businesses before the suspension ends.

SMEs, which form the backbone of Sri Lanka’s economy, contributing 75-80% of total employment, are heavily reliant on loans from commercial banks.

However, the COVID-19 pandemic and subsequent economic crises have placed many of these businesses in a precarious financial situation, with difficulties in meeting their debt obligations.

In response, the Central Bank introduced loan moratoriums and restructuring options to ease the burden on SMEs. Despite these measures, many businesses continue to face significant financial strain.

At the recent meeting, officials from the Ministry of Finance, Central Bank, and the Sri Lanka Banks Association discussed ways to assist SMEs. They decided to compile a comprehensive report on SME loans, which will inform future relief efforts.

With outstanding loans to SMEs estimated at LKR 1.5 to 2 trillion (USD 4 to 6 billion), these loans form a major part of the banking sector’s exposure. The suspension of Parate execution, which allows banks to recover loans through foreclosure, has raised concerns about its long-term consequences for the financial system.

The Parate law serves as a safeguard for banks, allowing them to recover funds in cases of default. Without this legal tool, banks face a higher risk of non-repayment, potentially leading them to increase interest rates across the board.

This could make borrowing more expensive for SMEs, further contracting the economy during a period of financial instability. Additionally, the suspension of Parate execution may create moral hazard, encouraging borrowers to default on their loans, knowing that the banks have fewer legal options for recovery.

This situation also undermines businesses that continue to make loan payments despite financial hardship. These responsible borrowers may feel disincentivized, as they see no benefit in fulfilling their obligations when others may be able to default without consequence.

The risk of defaults may also have a negative impact on the banking sector, which is already grappling with rising Non-Performing Loan (NPL) ratios and exposure to sovereign debt restructuring.

The government has announced a bank recapitalization plan of LKR 450 billion in the 2024 budget to stabilize the banking sector. However, the suspension of Parate execution could undermine this effort by eroding depositor confidence. With the ability to recover loans compromised, depositors may become reluctant to place their funds in banks, further exacerbating the financial challenges.

The situation also complicates Sri Lanka’s relationship with international bodies such as the International Monetary Fund (IMF). The IMF had initially recommended a thorough assessment of the banking sector’s stability, and the suspension of Parate execution without consultation with banks may send the wrong signals during ongoing reviews.

Ultimately, the suspension of Parate law poses significant risks to both SMEs and the broader financial system. While it aims to provide short-term relief, it could have unintended long-term consequences, including higher borrowing costs, reduced loan recovery, and weakened depositor confidence. 

Fonterra Moves Forward with Divestment Plan to Focus on Sri Lanka Core Business

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By: Staff Writer

November 12, Colombo (LNW): Fonterra Co-operative Group Ltd has announced its decision to move forward with the divestment of its global Consumer business, alongside its integrated operations in Fonterra Oceania and Fonterra Sri Lanka. CEO Miles Hurrell outlined the company’s plan to streamline its operations, focusing more sharply on its core business of dairy ingredients and foodservice. This decision comes after an in-depth strategic review and a thorough scoping phase initiated in May 2024.

“We have been working closely with our advisors to assess all possible divestment options and determine the best course of action to maximize value for the Co-op,” said Hurrell. “Given our new strategic direction, we believe that selling our global Consumer business and associated operations aligns with our goals and will support a more focused and high-performing Fonterra.”

The Co-op is particularly looking to strengthen its position as a global leader in dairy ingredients by prioritizing its Ingredients and Foodservice divisions. Fonterra’s extensive portfolio of dairy products, including well-known brands like Anchor, Mainland, and Anlene, will no longer be at the center of its operations. Instead, the company aims to concentrate on supplying high-quality dairy ingredients to B2B markets, an area where it sees significant growth potential.

Fonterra has already received strong interest from potential buyers, signaling the strength and value of the businesses it is seeking to divest. The company is considering both a trade sale and an Initial Public Offering (IPO) as possible options for selling these assets. Hurrell emphasized that Fonterra would rigorously test both pathways to ensure the best possible return for the Co-op and its shareholders before proceeding with any final decision.

“We will engage with the market to evaluate the value of both options, and we will consult with our farmer shareholders through a vote before moving forward,” said Hurrell. “Our primary focus is to secure long-term value for the Co-op, ensuring that any divestment decision will contribute positively to our strategic goals.”

The divestment process is expected to take between 12 and 18 months. Fonterra’s goal is to generate significant capital returns for its farmer shareholders and unit holders following the sale of these non-core assets.

Chairman Peter McBride reinforced that the decision to divest aligns with Fonterra’s commitment to its core mission: to collect milk sustainably, process it efficiently, and deliver high-value dairy products to customers. “This is a strategic move to deepen Fonterra’s focus on dairy nutrition and ingredients, which will enhance our ability to generate value for our stakeholders,” McBride said.

With this shift in focus, Fonterra aims to create a simpler, more efficient Co-op that is better positioned to navigate the global dairy market. By reducing its exposure to consumer-facing operations, the company hopes to unlock greater value from its core business and invest more in its high-performing Ingredients and Foodservice segments.

In the coming months, Fonterra will provide updates as the divestment process unfolds, with a clear objective to secure the best possible outcome for the future of the Co-op and its members.

Government Plans New Passenger Support Unit at BIA amid Growing Traffic

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By: Staff Writer

November 12, Colombo (LNW): The Sri Lankan government is establishing a special unit at Bandaranaike International Airport (BIA) to improve passenger experiences during flight delays.

The new unit, designed to provide real-time flight updates and maximize passenger comfort, will operate 24/7.

This initiative follows complaints about delays, especially on SriLankan Airlines flights, which prompted Minister Vijitha Herath to visit the airport in Katunayake.

During his visit, the minister toured various airport sections and held discussions with staff to understand the challenges firsthand. He instructed authorities to take immediate action to minimize delays and improve services for travelers.

BIA is now gearing up for a busy winter season, is seeing a significant recovery in air traffic. The airport is on track to return to pre-pandemic levels, with 28 airlines currently operating scheduled services connecting BIA to 50 destinations across Asia, Europe, the Middle East, and Africa.

According to Dr. Sumith De Silva, Head of Marketing and Corporate Communications at Airport and Aviation Services (Sri Lanka) Ltd., BIA is rapidly rebuilding its global connectivity after a sharp decline in passenger numbers during the COVID-19 pandemic. In 2024, BIA has already registered 6.63 million passengers, marking a 20% increase compared to the previous year. Aircraft movements have risen by 22%, and cargo volume has grown by 25%.

To meet the rising demand, particularly during the winter months, BIA has introduced seasonal and charter flights.

Notable additions include Enter Air, offering three weekly flights from Poland; Edelweiss Air, launching weekly flights from Zurich through May 2025; and Azur Air, resuming services from five Russian cities to Colombo.

Additionally, new routes from Jetstar Asia and Centrum Air will strengthen connections to Singapore and Uzbekistan, with Jetstar’s Singapore service starting in November.

BIA’s expansion is supported by an extensive network of airlines, including Aeroflot, Emirates, Qatar Airways, Air India, and SriLankan Airlines, among others. These airlines offer seamless connections to major international cities like London, Paris, Sydney, and Dubai, reinforcing BIA’s status as one of the most well-connected airports in the region.

As BIA continues to recover and grow, Dr. De Silva emphasized the airport’s commitment to safety, adhering to international aviation standards to ensure passenger confidence.

With enhanced security, a growing network of flights, and improved services for travelers, BIA is poised to remain a key hub for international travel as it welcomes more global passengers this winter.

SLTB mobilises additional buses to meet increased demand during Election week

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November 12, Colombo (LNW): The Sri Lanka Transport Board (SLTB) has issued instructions for all depots to deploy their current bus fleets to ensure smooth transportation operations throughout the upcoming week, until Monday (18).

This move comes in response to the heightened demand for public transport during the election period and the long weekend that follows.

According to SLTB Chairman, Ramal Siriwardana, provincial depots have been directed to operate buses as per the existing schedules to facilitate passenger movement to and from Colombo.

In addition, the SLTB has made arrangements to deploy extra buses in key regions.

Today (12), an additional 70 buses will serve the Gampaha, Kalutara, and Colombo areas, while another 80 buses will be stationed at Colombo Fort tomorrow to address the increased passenger volume.

These extra buses are set to complement the regular bus schedules, ensuring that the public is well served during this busy period.

In parallel with these efforts, the SLTB has allocated 1,017 buses to transport election officials and ballot boxes to various locations across the island, ensuring that all logistical requirements for the election are met.

Another 290 buses have been designated for the transport of police personnel tasked with election duties.

These buses are being deployed on a payment basis, with the understanding that they will be available for public transport once the election-related duties are completed.

Given the long weekend, which coincides with the general election, provincial depots have also been instructed to schedule buses for travel to Colombo on Sunday (17) and Monday (18) to accommodate the public’s travel needs.

SL’s Meteorological Dept website undergoing restoration after cyber attack

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By: Isuru Parakrama

November 12, Colombo (LNW): The website of Sri Lanka’s Meteorological Department is undergoing restoration following a cyber attack that disrupted its services earlier this month.

The attack, which occurred on November 01, caused alterations to the department’s official site, prompting immediate action by the Sri Lanka Computer Emergency Readiness Team (SLCERT), the country’s principal cyber security authority.

Charuka Damunopola, Senior Information Officer at SLCERT, confirmed that the cyber attack had been swiftly reported, and initial investigations revealed that changes were made to the Meteorological Department’s website.

In response, SLCERT has been leading the recovery and mitigation efforts, working diligently to restore the website’s normal functionality.

Damunopola reassured the public that while the attack had impacted the website, no data breaches or theft of sensitive information had been detected.

He stressed that CERT’s team continues to monitor the situation rigorously to ensure the site’s full restoration, both in terms of its operation and security.

Preliminary measures have been implemented to recover the website, and further investigations are underway to determine the full extent of the attack.

The SLCERT team is collaborating closely with the Meteorological Department to assess any lasting effects and to bolster the security of the site against potential future threats.

Cyber attacks on web portals operated by public bodies in Sri Lanka had been prevalent during the consecutive years, but remained un-evident since April, 2024. The reemergence of the trend, however, raises grave concerns on data security and accessibility.

BOI promotes low-carbon, eco-friendly industries for sustainable development

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By: Isuru Parakrama

November 12, Colombo (LNW): The Sri Lanka Board of Investment (BOI) is prioritising the establishment and transformation of industries with low carbon emissions, with a strong emphasis on protecting the environment, BOI Director General Renuka M. Weerakoone revealed.

In an effort to promote environmentally responsible industrial practices, the BOI is committed to providing both training and expertise to professionals, aimed at building a future where industries are not only green but also reduce their environmental impact.

This includes assisting currently operating factories in converting to eco-friendly, low-carbon industries through modernisation and adoption of green technologies.

This initiative was unveiled during the recent presentation of research conducted by a team of interns at the BOI’s Environment Management Department (EMD), at the BOI Auditorium.

The interns, who were part of a training programme with the University of Sri Jayewardenepura’s Faculty of Technology, focused on enhancing knowledge and practical skills in environmental management within the industrial sector.

A number of the Investment Promotion Zones (IPZs) managed by the BOI have already started transitioning towards green industrial zones, setting an example for other sectors.

These zones are actively upgrading factory machinery to reduce carbon emissions and meet sustainable development standards.

The BOI has made it a priority to approve only machinery that adheres to environmental guidelines, ensuring that new technologies support the country’s green industrial goals.

As part of this effort, the BOI’s EMD has partnered with the University of Sri Jayewardenepura to offer internship opportunities for students in the field of Environmental Management.

These internships provide a combination of theoretical and hands-on experience, preparing the next generation of professionals to drive the shift towards greener industrial practices.

The internship programme was overseen by Asanka Welagedara, Director of the BOI’s EMD, along with Senior Lecturers from the Faculty of Technology. The students conducted extensive research, gaining insight into both the theoretical and practical aspects of environmental management in the industrial sector.

Their projects covered a variety of topics relevant to Sri Lanka’s industrial landscape, including sustainable fuel assessments for industrial boilers, the development of a green rating system for industrial zones, and the optimisation of water footprints in manufacturing processes.

Director General Renuka M. Weerakoone underscored the importance of the research and knowledge generated by these internships, highlighting that the fresh ideas and expertise brought by the interns are essential for the long-term sustainability of Sri Lanka’s industrial development.

She also expressed the intention to integrate these insights into the BOI’s operations to enhance future industrial policies.

The internship programme’s research focused on various pressing issues within the industrial sector, including the enhancement of the calorific value of biologically treated sludge for sustainable energy production, the reduction of carbon footprints in rubber mattress manufacturing, and the development of strategies to improve the sustainability of the organic latex mattress industry.

US special envoy for global youth issues to visit Sri Lanka

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November 12, Colombo (LNW): Abby Finkenauer, the United States State Department’s Special Envoy for Global Youth Issues, is set to visit Sri Lanka from November 12 to 15, 2024.

This visit underscores the US commitment to empowering youth across South Asia, with a particular focus on fostering civic engagement, enhancing youth leadership, and addressing critical issues like cultural preservation and community resilience.

During her visit, Finkenauer will experience firsthand the positive effects of the US-Sri Lanka partnership, especially through programmes that support education, leadership, and community engagement.

These initiatives are designed to empower young leaders and drive social and economic development in Sri Lanka.

Accompanied by US Ambassador Julie Chung, Finkenauer will meet with participants from the Embassy’s Youth Forum and alumni from the Emerging Leaders Academy, a USAID-backed programme aimed at promoting civic engagement and leadership skills, particularly amongst underrepresented groups.

The programme offers a platform for young people to develop leadership capabilities and contribute actively to their communities.

The Special Envoy will also engage with the Women in Motion initiative, a US Embassy-supported project that encourages young women to explore careers in creative industries.

Additionally, Finkenauer will visit young entrepreneurs whose success stories highlight the effectiveness of US-supported skills-building programmes in fostering innovation and business growth amongst the youth.

Through this visit, Finkenauer aims to strengthen relationships with youth leaders in Sri Lanka and across South Asia.

She will seek to deepen collaborative efforts on global issues affecting young people, from leadership development to the challenges of navigating an ever-evolving cultural and economic landscape.

EC outlines vote counting process for upcoming Polls

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By: Isuru Parakrama

November 12, Colombo (LNW): The Election Commission has laid out a clear and detailed process for the counting of votes in the forthcoming general election, scheduled for Thursday, November 14.

Addressing the media at a briefing, Election Commission Chairman R.M.A.L. Rathnayake outlined the procedures and timelines for how the vote counting will unfold on election day.

The counting of postal votes will commence at precisely 4:15 p.m. on the day of the election, Rathnayake confirmed.

Meanwhile, the counting of regular votes is anticipated to begin around 7:15 p.m., though this will be dependent on when the ballot boxes arrive at the designated counting centres.

The counting process will follow a systematic approach:

  1. Initial Count: The ballots in each box will first be counted individually.
  2. Party Vote Tally: Once the ballots have been counted, the votes for each political party or independent group will be tallied to determine the number of parliamentary seats allocated to each.
  3. Preferential Vote Count: After the party votes are tallied, the preferential votes for individual candidates will then be counted, with candidates receiving the highest number of preferential votes in their respective parties or groups being elected to Parliament.

The results from each district and voting area will only be publicly announced after they have been thoroughly reviewed and approved by the Election Secretariat, ensuring that all processes are accurate and transparent.

In addition to the procedures, the Election Commission has also issued a request to the public, urging them to refrain from gathering near the counting centres or in the surrounding areas during the counting process.

Rathnayake specifically emphasised the importance of avoiding unnecessary presence around these locations.

We urge the public not to congregate around the counting centres or on the roads in the vicinity for any reason,” he stressed, highlighting the need for a smooth and disturbance-free counting process.

Court orders swift probe into actress and businessman over alleged tax offenses

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November 12, Colombo (LNW): Colombo Additional Magistrate Bandara Ilangasinghe has instructed the Inland Revenue Department (IRD) to expedite its investigation into actress Piumi Hansamali and Viranjith Thambugala, Chairman of Aura Lanka, following a case filed under Section 190 of the Inland Revenue Act.

The investigation aims to determine whether the two individuals have committed any tax-related offences, as outlined by the Inland Revenue Act.

During the court proceedings held on November 11, the legal representative of the Inland Revenue Department informed the court that a search warrant had been obtained to examine documents at the residences of both Hansamali and Thambugala.

However, it was revealed that neither of the individuals was present at their respective homes when the searches were conducted.

The case has drawn significant public attention, as it involves two high-profile figures in Sri Lanka’s entertainment and business sectors.

With the court now pushing for a swift resolution, the IRD is under pressure to complete its investigation and determine whether any violations of tax laws have occurred.

The investigation, which centres on potential violations under Section 190 of the Inland Revenue Act, will scrutinise financial records and tax filings to ascertain if Hansamali and Thambugala have been involved in any form of tax evasion or fraudulent activity.

Should any wrongdoing be identified, the two individuals could face legal consequences in line with Sri Lanka’s strict tax laws.

The IRD has yet to provide further details on the specifics of the case or any evidence found during the initial searches.

However, the case highlights the government’s ongoing efforts to ensure compliance with tax regulations, particularly amongst prominent public figures and business leaders.

SL’s debt restructuring process on track for completion by December: President

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By: Isuru Parakrama

November 12, Colombo (LNW): President Anura Kumara Dissanayake has confirmed that the country’s ongoing debt restructuring process is expected to be completed by December, marking a significant milestone in efforts to restore financial stability.

Addressing supporters at a public rally in Gampaha yesterday (11), the President reassured the nation that the government’s plans to stabilise the economy were well under way, despite the ongoing challenges.

We are very close to finalising the restructuring process, with only a small portion left to be completed,” President Dissanayake said, providing an optimistic outlook for Sri Lanka’s economic recovery.

The President further outlined that, based on the current trajectory, Sri Lanka would be in a position to begin repaying its restructured debt by 2028. He emphasised that detailed calculations are already in place to manage these future repayment obligations, ensuring that the country remains on a sustainable path to economic growth.

In addition to the progress on debt restructuring, Dissanayake provided an update on Sri Lanka’s engagement with the International Monetary Fund (IMF). He revealed that an IMF delegation would be arriving in Sri Lanka shortly after the forthcoming general election to conduct the third review of the nation’s economic recovery programme.

This review, according to the President, is expected to be completed by the end of January or early February 2025.

With the IMF’s assessment, Dissanayake believes Sri Lanka will have the opportunity to establish a more robust economic foundation, positioning the country for long-term growth and stability.

He expressed confidence that the outcomes of this review would help further solidify the efforts made to stabilise the national economy and improve financial management.

The announcement comes at a critical time for Sri Lanka, as the nation continues to grapple with the economic fallout from previous crises.

Nevertheless, the government’s commitment to restructuring its debt and working alongside international partners like the IMF has generated a sense of optimism amongst economic experts and the public.