October 16, Colombo (LNW): Senior Advisor to the President on Economic and Financial Affairs, Prof. Anil Jayantha, has refuted media reports suggesting that the government has engaged in extraordinary borrowing following the appointment of President Anura Kumara Dissanayake.

Addressing inquiries about allegations that local and foreign borrowings have surged since the new president took office, Prof. Jayantha clarified that the government is only conducting regular fundraising activities, such as selling treasury bills and bonds, to meet essential expenses and repay maturing debts.

“This is a standard process carried out by any government to ensure the smooth running of services and day-to-day operations,” he said. “There has been no special or unusual borrowing apart from the normal financial activities.”

Prof. Jayantha also pointed out that these fundraising operations, such as selling treasury instruments and collecting US dollars, have been in place prior to the current administration, and any claims of increased borrowings need to be carefully investigated.

He stressed that the Central Bank of Sri Lanka is responsible for maintaining the stability of the financial market, and its recent actions are part of the regular efforts to sustain economic balance. The professor reiterated that there is no basis for the claims of unusual financial activities and urged further scrutiny into the actual amounts borrowed from both local and foreign markets.

October 16, Colombo (LNW): In response to the increasing fuel prices and economic challenges faced by Sri Lanka’s fishing industry, the government has announced a fuel subsidy aimed at providing relief to fishermen. The decision, made during the Cabinet meeting on Monday evening at the Presidential Secretariat, will support fishing vessel owners by subsidizing fuel costs for both diesel and kerosene.

Under the scheme, vessel owners will receive an allowance of Rs. 25 per liter of diesel, capped at a maximum of Rs. 300,000 per month. For those using kerosene, an allowance of Rs. 25 per liter will be provided, limited to 15 liters per day for up to 25 working days per month. The subsidy ensures that fishermen receive a 7.5 percent concession on the market value for diesel and a 12.5 percent concession on kerosene.

The programme, set to begin on October 1, 2024, will be in effect for six months and is subject to price revisions based on the fuel price formula. The subsidies aim to alleviate the financial strain on small and medium-scale fishermen who have been severely impacted by fluctuating fuel costs, ensuring the continuity of the country’s vital fishing operations.

Approval of the subsidy is contingent on the Election Commission’s consent, and the Cabinet of Ministers has backed the proposal presented by President Anura Dissanayake, who also serves as the Minister of Agriculture, Land, Livestock, Irrigation, Fisheries, and Water Resources. This measure comes after a prior decision to address the adverse effects of fuel price hikes on the fishing industry, which had yet to be implemented.

October 16, Colombo (LNW): Sri Lanka is progressing towards significant economic reforms, despite facing numerous challenges, as part of the IMF-supported Extended Fund Facility program.

 U.S. Ambassador to Sri Lanka, Julie J. Chung, emphasized the importance of economic and governmental reforms for good governance during her address at the USA Business Council Annual General Meeting. 

She highlighted that Sri Lanka’s journey towards stability requires openness, transparency, and accountability from its leaders.

The United States has been actively supporting Sri Lanka’s efforts by collaborating with the Ministry of Finance to provide technical assistance in developing the National Trade Single Window. 

This initiative aims to streamline trade processes, enhancing efficiency and transparency. Additionally, U.S. efforts include support for the AccelerateHER program, which empowers women entrepreneurs, and the SPARK competitions that nurture the next generation of innovative entrepreneurs. 

These initiatives underline the U.S.’s commitment to fostering a thriving business environment in Sri Lanka.

In the area of trade, the U.S. has also played a crucial role in boosting cybersecurity resilience at Sri Lankan ports and supporting sustainable port planning. 

One of the significant contributions has been the investment of half a billion dollars in Colombo’s West Container Terminal port by the U.S. Development Finance Corporation, aimed at stimulating innovation through private sector funding rather than increasing government debt. This partnership signifies a robust commitment to helping Sri Lanka’s business community thrive.

Ambassador Chung highlighted the recent electoral changes in Sri Lanka, noting that the people’s call for change through the ballot box reflects their desire for a better future. 

She stressed that the responsibility for realizing this vision rests not only with the government but also with business leaders, academia, civil society, and the press. These groups are instrumental in ensuring that anti-corruption measures and governance practices are effectively implemented for sustainable economic development.

Business leaders were called upon to take an active role in shaping the country’s future by promoting good governance and transparency in trade and investment processes. Ambassador Chung emphasized that a predictable and stable governance system is essential for attracting foreign investment and driving economic growth. She also urged Sri Lankan businesses to embrace diversity and inclusion, particularly by empowering women and the next generation, which she believes will unlock the country’s full economic potential.The U.S. and Sri Lanka share a long-standing relationship based on mutual trust and shared values. For this partnership to flourish, the ambassador noted, Sri Lanka must continue to adhere to the IMF’s economic reforms, combat corruption, and create a stable business environment. By doing so, Sri Lanka can attract more investments, create jobs, and drive economic growth

October 16, Colombo (LNW): Sri Lanka is uniquely positioned as India’s closest maritime neighbor, presenting a significant opportunity to align with India’s dynamic growth and leverage this partnership for its own economic resurgence.

This perspective was highlighted by the Indian High Commissioner to Sri Lanka, Santosh Jha, during his address at the 45th National Conference of the Chartered Accountants of Sri Lanka. 

He emphasized the importance of a strong partnership between the two nations, underlining their shared history, geography, and a future that naturally binds them together.

High Commissioner Jha emphasized the evolving global dynamics, noting the shift from G7 to G20 as the principal forum for global discussions.

 He pointed out that traditional institutions like the United Nations, World Trade Organization (WTO), and World Health Organization (WHO) are becoming less effective in addressing current global challenges, indicating the need for new strategies and partnerships.

One of the key proposals from High Commissioner Jha was the creation of a connectivity corridor between India and Sri Lanka, aimed at enhancing access to global markets and fostering economic opportunities.

 He stressed India’s commitment to a people-centric foreign policy toward Sri Lanka, focusing on direct benefits to its people through investments, grants, and development projects rather than creating debt burdens.

 Jha noted that India’s development projects are currently active in all 25 districts of Sri Lanka, with a significant number already completed and more underway.

Highlighting the strategic importance of Sri Lanka’s economic revival, Jha reiterated India’s support for Sri Lanka’s debt restructuring and efforts to secure International Monetary Fund (IMF) assistance. 

He emphasized the necessity of both countries transcending past hesitations to work collaboratively towards shared goals for regional stability and prosperity.

Jha urged a transformation in the mindset of both nations, advocating for a proactive approach to embrace mutual goals. 

He remarked, “We are intertwined by our geography, history, and shared future, and attempts to create divisions would only harm our common aspirations.” 

His message stressed the importance of a united front to navigate the rapidly evolving geopolitical landscape, particularly in the Indo-Pacific region, which he described as the epicenter of global growth.

Looking ahead, Jha highlighted India’s ambitious economic targets, referencing predictions that India could become the world’s second-largest economy by 2050.

 He noted the goal set by India’s Prime Minister for the nation to achieve developed status by 2047, in line with its 100th year of independence.

 He concluded by underscoring India’s rising influence in the global economic arena, asserting its crucial role in shaping the future of the region.

This renewed focus on cooperation between Sri Lanka and India suggests a path forward that leverages shared strengths, with both nations standing to benefit from deeper economic ties and a collective vision for growth and development.

October 16, Colombo (LNW): Sri Lanka’s financial system is on the path to improvement, with expectations of enhanced asset quality and stronger capital buffers, according to the Central Bank of Sri Lanka (CBSL) in its Financial Stability Review 2024. 

As the economy stabilizes, despite lingering challenges, efforts to correct macrofinancial imbalances are showing results, driven by policy measures and reforms that support financial stability.

The CBSL praised the financial sector’s progress in managing the effects of the economic crisis but emphasized the importance of sustained efforts to ensure stability in the medium to long term. 

Since April 2022, Sri Lanka’s banking system, including the central bank, has repaid or built reserves of $7.39 billion, despite implementing deflationary policies and selective defaults on certain debts.

While challenges like high non-performing loan (NPL) ratios, deposit mobilization issues, and reduced net interest income persist, the CBSL highlighted the need for continued proactive risk management. 

It stressed the significance of maintaining balanced external demand, stable prices, and fiscal consolidation to foster sustained economic growth.

The completion of external debt restructuring is expected to pave the way for new financial resources, albeit with a cautious approach. 

As the credit cycle expands, the CBSL will closely monitor systemic risks, recommending measures to ensure ongoing financial stability and calling for commitment to reforms from all stakeholders.

However, as credit expands into the private sector, financial institutions will need to manage pressures on credit quality and capital adequacy, especially given high non-performing loan (NPL) ratios and caps on large exposures, CBSL cautioned.

Attracting deposits amid low rates remains a challenge, while falling lending rates could squeeze net interest income and profitability. Sovereign exposure, particularly in government securities, which generated significant returns recently, may also decline, the bank warned.

The CBSL added that adjustments in the external and fiscal sectors, including suppressed import demand and delays in meeting sovereign debt obligations, must be handled carefully to ensure financial stability.

Nevertheless, the completion of external debt restructuring will open the door to further external financial resources, albeit prudently.

“Challenges will persist as the benefits experienced through the recovery in macrofinancial conditions, supported by the favourable base effect, diminish,” the CBSL noted, adding that the outlook depends on sustained fiscal consolidation, balanced external demand, and stable prices to foster economic expansion.

With higher risk-taking expected during the credit cycle’s expansion, vulnerabilities may build, underscoring the need for proactive risk management, CBSL said.

As the macroprudential authority, the CBSL, along with the Financial System Oversight Committee, will continue to monitor systemic risks and recommend policy measures to ensure financial stability. It called on all stakeholders to remain committed to timely, well-sequenced reforms for sustained stability.

October 16, Colombo (LNW): Minister Vijitha Herath has announced that the government plans to resume vehicle imports under a carefully structured procedure, ensuring that the country’s foreign reserves are not strained, preventing a recurrence of the dollar crisis.

Herath emphasized that while the government acknowledges the growing demand for vehicle imports, it remains committed to doing so responsibly. “We are of the view that vehicle imports should be permitted,” he stated, adding that although a Cabinet decision was made earlier regarding the matter, no vehicles have been imported since the government took office, nor have any imports been allowed under tariff concessions.

The Minister reiterated that the government is still evaluating the best approach to vehicle imports, focusing on preserving economic stability and avoiding unnecessary pressure on foreign reserves.

October 16, Colombo (LNW): Cabinet Spokesperson Minister Vijitha Herath announced that government retirees will receive an additional Rs. 3,000 in their monthly pensions starting next month. This decision, approved by the Cabinet of Ministers, is part of an interim allowance aimed at providing immediate financial relief to pensioners.

Minister Herath acknowledged that although the additional allowance was not included in the pensions disbursed by October 10th, a special program is being implemented to ensure pensioners receive the Rs. 3,000 for October within the coming days. The Treasury has already released the necessary funds to facilitate this payment.

Herath also addressed the ongoing issue of wage disparity among pensioners, describing it as a complex challenge that the government is committed to resolving over time. In the meantime, this interim allowance offers some relief to retirees.

“Pensioners will receive this Rs. 3,000 allowance in the coming days for October, and starting next month, it will be added to their regular pension. This allowance will benefit all government pensioners,” Minister Herath assured.

October 16, Colombo (LNW):Addressing the Ministry of Energy’s progress review meeting this morning (15), President Anura Kumara Dissanayake emphasized the need to structure and expedite projects aimed at achieving the energy sector’s goals over the next three years.

The President highlighted the importance of the energy sector in Sri Lanka, likening its prominent role to that in other nations, and stressed that the Ministry of Energy is a significant revenue generator. He acknowledged societal discussions about potential irregularities due to the sector’s substantial earnings.

Dissanayake stated that the public had voted with high expectations during the recent presidential election, and he is committed to fulfilling the mandate entrusted to him. He noted that dissatisfaction with the old political culture, economic challenges, and inefficiencies in public service led to the public placing their trust in a new political tradition.

The President also expressed the public’s belief that corruption, fraud, and mismanagement have been major contributors to Sri Lanka’s economic collapse. He reaffirmed his commitment to eliminating these issues and urged public servants to fulfill their responsibilities with integrity.

He further emphasized that public wealth must be protected with the same reverence as religious property, stating that no one has the right to misuse it through fraud or corruption. Dissanayake underscored the necessity of a committed and accountable public service to achieve the goals of his administration, assuring that his political leadership team will provide the required guidance.

The President also made it clear that he supports all public actions taken in the national interest within official boundaries, and that any improper acts will be met with decisive action.

The meeting included a comprehensive review of ongoing and upcoming energy sector projects, with discussions focusing on how to meet targets over the next three years while providing both short-term and long-term relief to the public.

Key officials who participated in the meeting included Professor Udayanga Hemapala, Secretary of the Ministry of Energy; Dr. Tilak Siyambalapitiya, Chairman of the Ceylon Electricity Board; Engineer K.G.R.F. Comester, General Manager of the Ceylon Electricity Board; and Janaka Rajakaruna, Chairman of the Ceylon Petroleum Corporation and Ceylon Petroleum Storage Terminals Limited.