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ECONOMYNEXT – Sri Lanka has expanded state workers 11 percent from 2014 to 2021 after cost cutting was abandoned in 2015 under ‘revenue based fiscal consolidation’ while government spending as a share of also expanded by 3.7 percent of gross domestic product.

Sri Lanka went on an unusual strategy of abandoning ‘spending based fiscal consolidation’ which usually involve cutting costs and re-directing people’s taxes for best uses and instead taxing the people to maintain a bloated public service from 2015, under a strategy backed by the International Monetary Fund.

After the Greenspan-Bernanke bubble burst, Washington has come under grip of the anti-austerity brigade where spending was glorified, critics say.

Classical economists have called revenue based fiscal consolidation the ‘statistical’ method of balancing budgets which fails in democratic countries.

Statistical vs Economic Method

In 1966, when the central bank was printing money to create currency crises despite having revenues of 23 percent of GDP, classical economist B R Shenoy in a report to the Ceylon government said the “statistical alternative of balancing the Budget is to step up Revenue collections sufficiently and produce a large enough Revenue surplus to cover overall Budget deficits.”

“This alternative is beset with pitfalls,” Shenoy explained. ” Past experience in Ceylon, which is in line with experience in virtually all parts of the world, is that in a democratic set up political and other pressures are heavily on the side of more and more spending by the government.

“When Revenues increase, under the weight of these pressures, expenditures too increase to meet, or even exceed, Revenue collections.”

True to form, total government spending which was 17.3 percent of gross domestic product grew to 18.8 percent by 2018.

Monetary Instability

Meanwhile monetary instability ratcheted up even without a war as central bank policies became increasingly more aggressive under ‘flexible’ inflation targeting without floating exchange rate.

A high unstable reserve collecting peg (flexible exchange rate) was bombarded with increasingly aggressive monetary policy and quantity easing style activity (call money rate targeting, operations twists, jettisoning bills only policy in favour of yield curve targeting) creating currency crises in rapid succession.

Money was also printed to target an output gap (monetary stimulus). The IMF itself taught Sri Lanka, which was supposedly engaging in inflation targeting to calculate an output gap which was then invitingly dangling to target.

After two currency crises in 2016 and 2018 busted the currency from 131 to the US dollars to 182 to the US dollar as interest rates were mis-targeted with open market operations, growth slowed.

As the efforts were made to stabilize the economy after money printing to trigger currency crises, both growth and revenue slowed falling to 11.6 percent by 2019.

Tax cut to close output gap

After two currency crises in 2019 December taxes were cut by interventionist economists saying that there was a ‘persistent output gap’ and Treasury bond auctions were crippled with price controls triggering the biggest currency crisis in the history of the 72 year old central bank.

Taxation as a share of GDP which was 10.1 percent of GDP in 2014 (when the country was recovering from a 2012 currency crisis), fell to 7.7 percent of GDP in 2021.

Meanwhile consistent with ‘revenue based fiscal consolidation’ of expanding the state, the public service was bumped up 11 percent from 1.345 million workers in 2014 to 1.46 million in 2019 and 1.49 million in 2021 according to central bank survey data.

In 2022 then Finance Minister Basil Rajapaksa raised state salaries in a ‘relief package’ and raised the retirement age of state workers to 65.

In 2012 after two years of extraordinary money printing, Sri Lanka defaulted after running out of reserves.

Sri Lanka is now printing money to pay state worker salaries, despite forex shortages and attempting to operate a peg at 360 to the US dollar with dollars borrowed from India.

Sri Lanka now has to raise taxes steeply in a bid to stop money printing and further collapses of the currency and also squeeze private credit and re-direct money to the deficit. (Colombo/June21/2022)

ECONOMYNEXT – Sri Lanka stocks closed weaker on Monday (20) for the fifth consecutive session on weak sentiments as the country is going through its worst economic crisis as a dollar shortage wiped out the country’s fuel supply resulting in a standstill, dealers said.

The main All Share Price Index (ASPI) closed 0.6% or 47.83 points lower at 7,424.56, its lowest close since April 27.

The index plunged over 1.5 percent during the day, but recovered in the latter part of the trading.

“It was a volatile market and the trading opened with the usual negative sentiments, but recovered on the news of IMF discussions in Colombo,” a top market analyst said.

“Otherwise there was nothing much in the market today.”

An 10-member IMF team arrived in Sri Lanka and began discussions on policy corrections with Prime Minister Ranil Wickremesinghe.

However, Sri Lanka must show progress on debt restructuring before IMF lends any money.

Market analysts have said investors were heavily feeling the pinch of economic crisis as the country’s fuel bunkers have dried out with the the island nation was frantically looking for dollars to purchase fuel.

The public sector and the schools have moved to online for two weeks on government’s advice to reduce transport and save fuel.

Though a new prime minister and a new cabinet have been appointed, analysts see little progress on both the economical and political fronts. The country is struggling to ensure a continuous supply of fuel due to a shortage of US dollars.

The more liquid S&P SL20 index fell 0.16% or 3.73 points to 2,364.92

The day’s turnover was 822 million rupees, less than a quarter of  this year’s daily average of 3.6 billion rupees.

Foreign investors sold a net of 39.9 million rupees worth of shares on Monday. The market has witnessed a total foreign outflow of more than 1 billion rupees so far this year.

The market has so far lost 8.3% in June after gaining 6% in May. It lost 23% in April followed by 14.5% fall in March.

The market has lost 39.3% so far this year after being one of the world’s best stock markets with an 80% return last year when large volumes of money were printed.

Sri Lanka’s sovereign debt default has already led the country to be rated with restricted/selective default rating by rating agencies, which has weighed on investor sentiment.

Investors are also concerned over the steep fall of the rupee from 203 to 370 levels so far in 2022.

All Share Price Index was mainly dragged down by John Keells Holdings, which lost 0.8% to 120.00 rupees a share.

Dipped Products fell 5.4% to 26.30 rupees a share, while Central Finance slipped 4.3% to 55.80 rupees a share. (Colombo/June20/2022)

ECONOMYNEXT – Sri Lanka President Gotabaya Rajapaksa’s office on Monday said Chinese ambassador to Colombo has revealed that Beijing will operate three flights to Sri Lanka from this week while local carrier SriLankan also will reciprocate by increasing flights to Beijing.

It was not immediately clear why both countries want to boost the number of flights when there is no demand for air travels in the two countries. Most Sri Lankans are unable to go on business trips as earlier because dollar shortages while Chinese visitors, who who were the top in tourist arrival list cannot come because the Chinese government has not lifted a travel ban.

“It has been decided to increase the number of flights between China and Sri Lanka,” President’s Media Division (PMD) said in a statement,

“Accordingly, China will operate three flights to Sri Lanka from this week. SriLankan Airlines too offers
frequent flights to China,” it said.

“This was revealed by the Chinese Ambassador to Sri Lanka Qi Zhenhong when he paid a courtesy
call on President Gotabaya Rajapaksa at the President’s House in Colombo.”

The PMD said the Chinese Ambassador briefed the President on the economic and humanitarian assistance provided and
expected to be provided by the Chinese Government to Sri Lanka.

“Measures have been taken to provide opportunities for Sri Lankan medical students to return to China to continue their studies.
Further development of bilateral trade and economic activities were discussed at length,” the PMD said.

“President Rajapaksa commended China for its support to Sri Lanka as a friendly country during this
current economic crisis.”

Chinese Embassy in Colombo did not comment on the meeting. But on Thursday, the embassy in its official twitter page said Ambassador Qi Zhenhong went to the Presidential Palace and delivered the birthday congratulatory letter from President Xi Jinping to President Gotabaya Rajapaksa.

“The two sides also conducted friendly exchanges on China’s aid to Sri Lanka and the promotion of major economic cooperation projects.”

China, the largest bilateral commercial loan lender of Sri Lanka, has pledged 2.5 billion US dollars to overcome Colombo’s ongoing economic crisis. However, the loans have been delayed as Beijing has said it will wait until there are clarity on the IMF negotiations and debt restructuring.

Beijing has not been in favour of any debt restructuring. However, it has agreed to lend Sri Lanka further loan to repay its own past loans. (Colombo/June 20/2022)

ECONOMYNEXT – Sri Lanka Prime Minister Ranil Wickremesinghe met Australia’s Minister of Home Affairs Clare O’Neil in Colombo after her government assured 50 million US dollars in food and medicine aid, with O’Neil offering further assistance in restructuring the Customs Department.

At the meeting held Monday afternoon, O’Neil had offered Australia’s assistance in developing the Department of Customs, a statement from the Prime Minister’s office said on Monday June 20.

Earlier Monday, Australia said it will provide 50 million US dollars in official aid for Sri Lanka which is reeling from the worst currency crisis in its 72-year-old history of intermediate regime central bank.

“We will contribute an immediate $22 million to the World Food Programme for emergency food assistance to help three million people in Sri Lanka meet their daily nutritional needs,” Minister for Foreign Affairs Penny Wong said in a statement.

“Australia will also provide $23 million in development assistance to Sri Lanka in 2022-23.”

Related:

Australia gives Sri Lanka US$50mn in food, medicine aid

Minister O’Neil expressed Australia’s continued support for Sri Lanka and the Sri Lankan government’s efforts to stabilise the economy, Wickremesinghe’s office said.

“The Prime Minister explained that Sri Lanka was focussed on developing an export oriented economy which would be opened up to investments from overseas,” the statement said.

Minister O’Neil, meanwhile, had said that the Australian government was interested in promoting Australian investments in Sri Lanka, while also continuing to drive up Australian tourism to the island nation.

O’Neil had also explained her administration’s policy regarding maritime security and human smuggling, the PM’s office said.

Sri Lanka has seen a spike in attempts to flee the country by boat, as its economic crisis worsens.

Helping migrants leave, now called human-smuggling has become a booming business once again as many Sri Lankans want to leave the country due to a gloomy economic and political outlook, political analysts say.

Police sources said most of the desperate migrants Sri Lankan migrants are aiming to make it to Australia.

Related:

Sri Lanka sees more boat people events as economic crisis worsens

The Prime Minister stated that the Sri Lankan Government and its security forces remained committed to ensuring a halt to human smuggling, the statement said. (Colombo/Jun20/2022)

ECONOMYNEXT – Australia said the country will provide 50 million US dollars in official aid for Sri Lanka which is reeling from the worst currency crisis in the history of its 72 year old intermediate regime central bank.

“We will contribute an immediate $22 million to the World Food Programme for emergency food assistance to help three million people in Sri Lanka meet their daily nutritional needs,” Minister for Foreign Affairs Penny Wong said in a statement.

“Australia will also provide $23 million in development assistance to Sri Lanka in 2022-23.”

“This will support health services, and economic recovery, with a strong emphasis on protecting those at risk, especially women and girls.”

Sri Lanka’s soft-peg (flexible exchange rate) an dual anchor regime promoted to many third world countries collapsed in March from 200 to 360 to the US dollar after two year of money printed to mis-target interest rates.

Many lower income people can no longer afford to buy food which are rising daily with 12-month inflation officially at 39 percent.

ECONOMYNEXT – An International Monetary Fund mission who has arrived in Sri Lanka has met Prime Minister Ranil Wickremesinghe as part of a discussions to fashion policy corrections that will restore monetary stability and allow the country to repay debt.

“Prime Minister Ranil Wickremesinghe commenced discussions with the IMF team a short while ago at the Prime Minister’s Office,” his office said.

The IMF in person team will be in Sri Lanka till May 30.

The team will “continue discussions on an economic program that could be supported by an IMF lending arrangement, building on the progress made during the May 9-24 virtual mission,” the Washington based lender said.

“We reaffirm our commitment to support Sri Lanka at this difficult time, in line with the IMF’s policies.

Sri Lanka to show progress on debt re-structuring before the IMF will lend any money. IMF money goes to the Central Banks reserves and is usually invested in the US to helping finance the American deficit.

However IMF encourages policy corrections that will help halt and eventually reverse money printing (build up reserves by sterilizing inflows) restoring monetary stability.

An intermediate regime central bank (soft-pegged) will run down its reserves by either printing money for the budget deficit, or re-finance private sector activity (reserves for imports) all of which involves mis-targeting interest rates with money printing.

Following severe monetary instability coming from several years of money printing for stimulus (output gap targeting), which was topped up by tax cuts in 2019 and price controls on bond auction in 2020 leading to large scale money printing, Sri Lanka defaulted in April.

The IMF warned that Sri Lanka’s debt was unsustainable as the country ran out of reserves due to money printing and tax revenues fell due to the fiscal ‘stimulus’.

Sri Lanka and the IMF has to now determined a practical gross financing need (GFN) or the debt that can be raised each year based on a mutually agreeable debt sustainability analysis.

In order to bring the GFN down, Sri Lanka has to re-structure a part of its debt. The government in April defaulted on the debt of sovereign bond holders, bilateral lenders and commercial banks.

The IMF and Sri Lanka’s authorities have to agree on a path to raise taxes, cut spending, bring down the deficit before interest (interest rates have to stay up to reduce money printing and finance the deficit) so that money printing can stop and monetary stability can be restored.

Sri Lanka is still printing money and the country is facing shortages of fuel in particular.

Sri Lanka’s rupee collapsed from 200 to 360 to the US dollar in an attempt to float the currency botched with a surrender rule (forced sales of dollars to the central bank) and food prices have shot putting basic foods out of the reach of the less affluent in monetarily driven malnutrition.

Related

Sri Lanka chicken, egg production plunge 30-40-ct amid soft-peg collapse

Sri Lanka chicken and eggs in crisis as soft-peg hits feed

Fish prices have also soared as the price structure of the country adjusts to monetary instability.

(Colombo/June20/2022)

ECONOMYNEXT – Sri Lanka’s chicken meat production has collapsed 30 percent and egg output 40 percent as a currency collapse pushed up costs feed imports were blocked by foreign exchange shortages, an industry official said.

Sri Lanka is now going through the worst currency crises triggered by the island’s Latin America style intermediate regime central bank set up by a US money doctor in 1950.

“Small and medium farmers are leaving the business due to feed shortages and because big poultry companies are stopping buy back schemes,” Ajith Gunasekera, President of the All Island Poultry Association said.

Broiler meat output has fallen 30 percent to 12,000 metric tonnes a month from 18,000 metric and prices have shot up, he said.

A kilo of chicken is around 1,200 rupees from 460 rupee levels before economists started to print money to target an output gap by mis-targeting interest rates, and official inflation rose 39 percent in the year to May 2022.

Monetary Malnutrition

Sri Lanka’s central bank printed money for over two years to mis-target interest rates and collapsed the currency to 360 to the US dollar from 200, in a failed attempt to float the currency with a surrender requirement (forced sale of dollars to the central bank).

Though interest rates were raised in April forex shortages are continuing as attempts are made to enforce an unstable peg at 360 to the US dollar with borrowed dollars and money is printed to pay state worker salaries (Sri Lanka pegs rupee in both directions in May 2022 amid ‘float’).

The current economic problems come from applying floating rate monetary policy (liquidity injections or printing money from open market operations for stimulus) to a reserve collecting peg (flexible exchange rate).

Inflation and currency depreciation created by the central bank have put protein in particular out of reach of the less affluent pushing up malnutrition as had happened when the country’s economists who favour collapsing soft-pegs printed money in earlier occasions.

Basic starch in the form of rice has rise from 105 rupees a kilogram to 230 rupees a kilogram after the latest bout of money printing while people are losing jobs and wages are cut in the private sector.

Doctors at Lady Ridgeway, the country’s main children’s hospital have said they are seeing higher levels of malnutrition among children as the flexible exchange rate bites.

Sri Lanka’s economists have fiercely resisted changing the unstable soft-peg to a single anchor regimee such as a hard peg or a clean float with no reserves so that they could continue to intervene and depreciate the currency (REER targeting) to boost exports by destroying real salaries of workers.

The economists have destroyed the currency from 4.70 to US dollar in 1950 to 360 to the US dollar so far and have imposed trade and exchange control on the public who are net savers are unable to print money and cannot create monetary instability.

Of late expatriate workers are also being scapegoated for sending money to their families hit by inflation, outside official banking system linked to the non-credible pegged system.

Analysts have called for single anchor regime with strict laws to restrain the central bank’s independence to engage in ‘flexible’ policies maintain and monetary stability in the future. (Sri Lanka’s central bank needs accountability and restraint, not independence)

Eggs Production

Eggs which were around 18 to 25 rupees before the latest money printing bout have now shot up to 43 to 50 rupees.

Egg production has collapsed 40 percent, amid feed shortages.

Gunasekera said daily egg production which was around 700,000 to 800,000 and now fallen to around 400,000.

“Chicken are also laying fewer legs due to nutrition problems,” Gunasekera said “A chicken will usually lay about one egg a day but without proper feed they will lay fewer eggs.”

Egg prices are up partly due to high transport costs from Kuliyapititya where most of the large egg farms are located to Colombo, he said.

About 73 percent of the cost of raising broilers was feed.

Maize which was 40 to 45rupees a kilogram has now gone up to 80 to 90 rupees a kilogram but was there was no supply with the domestic Maha season harvest having failed due to a fertilizer ban.

Due to reduced paddy milling, rice polish is also not available.

Forex shortages from the non-credible peg has made it difficult to import maize or soya meal.

The industry is hoping to get some inputs from the Indian credit line. (Colombo/June18/2022)

ECONOMYNEXT- Sri Lanka’s protestors banded together in a human chain from Temple Trees, Prime Minister Ranil Wickremesinghe’s official residence to the iconic ‘Gota go Gama’ in front of President Gotabaya Rajapaksa’s office asking the two to step down as a currency crisis worsened.

Sri Lanka’s protests which reduced after Wickremesinghe was appointed are starting to gather pace as shortages continue with the central bank unable to restore monetary stability.

Protestors called for a ‘system change’ on Saturday as fuel queues lengthened and difficulties in paying for imported diesel, petrol and gas intensified amid continued money printing to pay salaries of state workers triggered forex shortages.

Sri Lanka went through three currency crises in rapid succession from 2015 under as money was printed under ‘flexible’ policies to boost growth (stimulus) and in 2019 taxes were also cut in a fiscal stimulus with state economists claiming that there was a ‘persistent output gap’ as growth fell from previous currency crises.

President Rajapaksa also banned chemical fertilizer imports to save 550 million US dollars in foreign exchange worsening the effects of the central bank crisis.

Failed President? Failed PM?

Saturday’s protest was largely focused on Prime Minister Wickremesinghe, under whom forex shortages have continued though interest rates have been raised by the central bank to smash economic activities which can reduce private credit and drive private savings to finance the budget deficit.

The central bank has again imposed a ‘guidance rate’ trying to enforce an exchange rate peg despite running out of reserves amid continued money printing.

The rupee fell 200 to the 360 to the US dollar in a botched attempt by the central bank to float the currency with a surrender requirement in place (forced sales of dollars to the central bank) and foods and basic essentials are now out of reach of the less affluent.

Malnutrition is also beginning to go up. A factory producing Triposha – a nutritional supplement aimed at combating malnutrition among children of low income families started in the 1970s when money printing and import controls were rife – is closed often without regular supplies of maize and soya beans.

Crisis cuts off vital food programme

Wickremesinghe was appointed Prime Minister after the President’s Rajapaksa’s brother was forced to step down from the post following widespread protest.

The appointment is said to have diluted protests somewhat, but after a month since the appointment and a fall from bad to worse, protestors are saying that he must step down, and the country must go for an election.

“Ranil was brought in ‘for the rescue’, but we know the cynical intentions behind all of that. It’s just politics as usual, and not the system change we are asking for,” said Chaminda Dias.

Dias was part of organizing the human chain, and an active protestor since the #GoHomeGota movement started.

International Approach

Many people waited for the Prime Minister’s more “diplomatic” and “international” approach to leadership in the hopes that he would help bring in much needed forex and international support to Sri Lanka.

However, the placards read different.

“Ranil is the International Face of the Rajapakshas” says one. “Ranil oyath fail” (Ranil you have failed too) says another.

“We cannot give up until Gotabaya goes with Ranil, because as long as these useless leaders [are here] we will not get any assistance…even [from] our own people (migrant workers) living overseas,” said social Activist Vishaka Thilakarathna.

Wickremesinghe, a six time Premier now, has not captured public confidence, and got into Parliament through the National List.

Protesters called his appointment “undemocratic” and demanded an election.

Liesha Lawrence, who had brought her sons along said “If we have billions to spend on defense and
other things, why can’t we spare five billion for an election?”

Youth at the Protests

“I brought my sons along today because this is their future we are standing up for and they need to know what’s going on,” said Lawrence.

“They need to be a part of the solution, they need to be a part of pressuring the government in the next steps that need to be done.”

Her sons, Aaron, Ethan, Kieran and their friend Abiru say that they are “angry with Gota” for his part in the crisis that is depriving them of education.

“Our school is closed a lot. We’re losing a whole year of our life because our O Levels are also getting postponed.”

Sri Lanka’s Covid lockdowns and power cuts severely impacted school children, who missed out on studies and interactions with friends.

Several schools and the country’s largest state university were recently shut down due as fuel shortages intensified.

Crisis-hit Sri Lanka’s fuel shortage forces closure of schools, largest state university 

The boys wanted to encourage more young people to participate in protests.

“Just come, just show up.”

Sri Lankan youth are continuing activism through social media, but the young protesters want more people to take to the street and physically show dissent.

“We’re living through a moment in history, come and do your part. You wanna be able to tell the future gen you did your part.”

Protesting is a Privilege

But showing up physically is not an option for many, who are stuck in Sri Lanka’s ever growing fuel lines, or simply struggling to survive.

Two people died in fuel queues on June 16, bringing the death toll in queues to 10. The protesters
who moved to Galle Face beachfront towards the evening observed one minutes silence in their memory.

“Gota how many more lives do you need to send home?” read one placard.

On June 15, a woman threw her child off a bridge in Wattala, and was prevented from taking her own life.

In March, a father of four died by suicide after struggling to pay off a loan of 10,000 rupees.

“People are dying on the streets. Mothers are throwing their children into the river because they don’t
want to face the indignity of begging for food,” says Dias.

“That is all [Gota’s] responsibility.”

Many protesters said they were taking part in the human chain in solidarity for those who could not make it.

Nigel Karunaratne was part of a crew of cyclists at the protest. He said that the movement might have “lost a little steam” but it was important to speak out.

“Whatever changes that have come are because of the protests at Galle Face. Without them we would still be with Mahinda, Basil and the other cronies.”

The organizers of the human chain however, were happy with the turnout considering the extreme difficulties of living in Sri Lanka at the moment. (Colombo/June19/2022)

Hyperglade was founded by Kalana Muthumuni, Lakshan De Silva, Dulitha Wijewantha, Malinda Muthumuni and Manujith Pallewatte, five experienced startup founders with years of experience in the Sri Lankan startup space, who lead a diverse team, from around the globe consisting of tech wizards, creators and fintech experts to make NFTs accessible and easier to use. But there is more to Hyperglade than a marketplace for NFTs, Kalana and Lakshan explain in this interview.

What was the opportunity that compelled you to conceive Hyperglade?

Hyperglade came up with a solution to a relevant problem that could make a difference and help us grow as a company. We identified a need to support a growing community of artists whose work is often underappreciated, without sustainable models to find the spotlight, monetize their work, and grow. A global platform for these artists and creators is a solution that will give them access to audiences across international markets and a sustainable business model.

Secondly, we wanted to venture into something that would help accelerate the underdeveloped domestic tech ecosystem closer to global standards. That was the challenge we took on with Hyperglade.

We made it possible for Sri Lankan artists to convert their artwork into NFTs to access bigger markets, get exposure and be rewarded for their work. Last year, for the first time in the region, we enabled credit card payments for an NFT auction, an option not even global players like Opensea provided. This feature boosted the engagement for our auction, especially in emerging markets, and several others soon followed our example, so we are quietly proud of the influence and impact we are creating so early in the journey.

Thirdly, unlike most Sri Lankan businesses that tend to follow global trends, albeit with a lag of several years, we wanted to be a pioneering startup from the get-go. That was one reason why we conceived Hyperglade as a product company at the forefront of the NFT revolution – blockchain, smart contracts and metaverse

Can you take us through Hyperglade’s journey thus far? But first, can you explain NFTs to us?

Non-fungible Tokens, in the simplest sense, are digital deeds stored on the blockchain that give ownership rights to the owner that cannot be forged in any way.

The lowest hanging fruit for NFTs was in art, solving two key pain points: first, enabling artists to seamlessly transact with consumers with provenance ensured, and second, earning the royalty on secondary sales.

This resulted in a massive growth cycle for NFTs, which meant that in 2021, the NFT industry grew 15,900%, valued at $40 billion. We then saw multiple use cases for NFTs emerging from community building to validating ownership and allocating assets. Even property is sold as NFTs. But this technology is still in its early stages. NFT also popularized the metaverse concept, which was created in the 90s, but only now being implemented.

Last year, we launched Sri Lanka’s first auction with Urban.lk and the main artwork of the auction was sold for $1,275. Following this, we took part in the BOV venture engine program and incorporated the company in Singapore. We built a regional partner network that spans multiple continents and was joined by brilliant Sri Lankan talents like Gamika Seneviratne. We raised funds at a valuation of $3.125 million (about Rs1.1 billion).

This year, we launched HealSriLanka, an NFT collection to raise funds to meet the rising medical shortages in the country. The collection comprises Sri Lankan art, songs, poetry, and more. Of the sales, 90% of the proceeds will fund the medical supplies, and 10% will go to the creators.

To provide an inclusive service in the NFT space, we have also diversified our business. Hyperglade’s business arm focuses on helping any NFT project to conceptualize, develop, market and launch.

Meanwhile, the services arm complements the products in the Hyperglade marketplace. The marketplace allows you to buy, sell and trade NFTs without a third party crypto NFT wallet or cryptocurrency.

The Hyperglade marketplace is easily accessible through your email and contact number, and you can make payments using credit or debit cards as well as cryptocurrency. We also launched an education wing to inculcate more knowledge in this evolving field.

In terms of our clientele, they are not limited to Sri Lanka, and we are currently expanding. We have projects in the Southeast and South Asian regions. We also have a network of regional partners helping us expand into the United States, India, Malaysia, Australia, Africa and South America.

What is your take on the unfolding economic crisis? How is Hyperglade responding to the challenges, and how do you propose to uncover new opportunities?

There is a global economic crisis brewing on falling food and fuel supplies, compounding the acute domestic political and economic crisis in Sri Lanka. As we understand it, there is a need to pivot towards crisis management, and that is where we can make a difference. For example, an NFT fundraiser for Ukraine brought results within a few days, whereas traditional fundraising would have taken months. Similarly, with HealSriLanka we will target the expat community to raise about a million US dollars for the Sri Lankan medical crisis.

Global startups are bracing for a long winter: investments are quickly freezing as investors look for safer options. That is forcing startups to think deeply about building sustainable business models. At Hyperglade, we are confident that we have a thoughtfully crafted business model that will create value for our stakeholders and the company through the unfolding crisis and beyond.

We are also contributing to uplifting the tech industry of Sri Lanka. It is a matter of playing the right cards and growing the talent pool and capacity sequentially. In our economy, 30% of the population is engaged in agriculture, and the agriculture sector contributes just 10% to the GDP of Sri Lanka, a clear misallocation of resources and lack of vision.

So we at Hyperglade have taken it upon ourselves to change this attitude and pave the way for everyone to box above their weight. We are working on a few projects with the LGBTQI and APAC communities. We are focused on our product, and we are confident we can make Hyperglade Sri Lanka’s first unicorn. We have partnered with leading corporations in Sri Lanka for funding.

NFT is an easier and the best way to reach out to a wider audience, not just traditional investors, angel investors, and VCs, but now you can directly go to the consumer who wants to be a part of your company.

Consumers can also have tangible ownership of the company they are interested in. An investor simply needs to buy an NFT to invest, and it is cheaper than the traditional investment methods too. This could be a great opportunity for Sri Lankan companies to raise funds amid a global and very severe internal economic crisis. We are rolling out a concept very soon which would enable this type of NFT based fundraising.

Our grand vision is to create a decentralized, community-driven NFT marketplace. Blockchain projects, in general, are decentralized, but a lot of NFT marketplaces are centralized. Therefore, we want to build a decentralized NFT marketplace governed, maintained, and moderated by the community in that marketplace. With this grand vision, we want to build an ecosystem that connects with other NFT projects, and the marketplace.

Iconic Developments Chairperson Rohan Parikh shares insights on Sri Lankan real estate prospects amidst an unfolding economic crisis. To thrive, real estate developers must execute well-managed, risk-free projects that deliver modern residences with superior value and appreciation potential; and that is what Iconic excels in doing.

Expressing the company’s commitment to the Sri Lankan real estate market, he aims the spotlight on Iconic Developments’ stellar performance and plans.

As the worst economic crisis unfolds in Sri Lanka, what is your outlook for the construction and real estate sector?

The short-term prospects of the real estate sector look very good from both the demand and supply perspectives. Investors are rushing to invest in real estate because it is an ideal asset to hold on to as an effective hedge against the hyperinflation Sri Lanka is now experiencing. Demand was strong during the pandemic as well. On the supply side, we expect a crunch as many projects stall due to rising costs and tight financing. There will also not be any new entries into the market because nobody will want to start a new project right now. So I think there will be a combination of a demand spike and a supply crunch, which in the short term, will mean that the real estate companies with outstanding inventory in the market will do well.

In the long run, as a real estate developer, we are bullish on Sri Lanka’s real estate prospects, provided there is stability, simply because there is a shortage of affordable quality housing. Factors such as the lowest urbanization rate in South Asia and the highest commute times for people working in Colombo mean that demand for housing infrastructure can only grow.

However, there is a caveat to our outlook. Real estate projects are longtail projects. Developers lock in prices and revenues today, spend over three years to get the project off the ground and then deliver the completed homes or apartments to investors. So, in an environment of economic stress, developers will be hesitant to commit to new projects, and the products that do start will carry an inherent risk. So the medium term will depend on how quickly Sri Lanka can stabilize the economy.

How is Iconic Developments geared to withstand the challenges ahead and unlock growth opportunities? What is your strategy around risk in a volatile market environment?

We have a simple strategy for dealing with volatility: we don’t deal with it. We never commit to a project unless we see a stable macroeconomic environment for the proceeding 24-36 months. In long-duration projects like real estate, and especially in smaller markets, like Sri Lanka, prone to frequent economic shocks, you are essentially taking a bet on the macroeconomy, so trying to gauge long-term stability is critical.

We contain risk exposure for our ongoing projects by spreading revenue flows throughout the project life cycle.

Most other developers try to sell out their inventory in advance and lock revenues and then get hit by escalating construction-related costs. But we don’t do that. Instead, we sell in phases throughout the project development cycle so that if we encounter spiking development costs, we can then adjust our revenue. Given the economic challenges in Sri Lanka, I believe real estate developers will soon switch to dollar pricing, and some have already done so. Sri Lanka will become a notionally dollarized real estate market with prices anchored to the US dollar rather than the rupee. That is the only way real estate developers and investors can undertake long-term projects without succumbing to cost volatility.

Can you tell us how Iconic is reassuring its stakeholders that the company will deliver the best possible outcomes?

At Iconic Developments, we remain committed to delivering the best possible outcomes to our stakeholders by acting on our promises and attracting investors to Sri Lanka while sustainably committing to a greener Colombo.

We proved our value proposition and commitment to this market with our previous projects, the 24-storeyed 110 Parliament Road and the 33-storeyed Iconic Galaxy, both at Rajagiriya, delivering modern apartments with incredible amenities. Our next project, Iconic Skye, will push the possibilities further.

We have a track record of delivering projects on time with the promised quality specs. If we take Iconic Galaxy, despite the 2019 terrorist attack, change in government, the Covid-19 pandemic and the unfolding economic crisis, we will still deliver everything as promised on time.

We can do that because of the intense planning, securing adequate financing, managing every aspect of the project well, and building the financial strength to withstand any threat from external factors. Because we are an engineering company, we understand what it means to plan projects around complex events. So when I say we will deliver stakeholders the best possible outcome, it means you get what you paid for at the quality you expect. And that is something that we’ve been able to ensure in all our projects. I think our clients will be a testament to that.

You are planning to launch Iconic Skye around this time. Tell us more about Iconic Skye and why is it a compelling option for investors?

We intend to embark on this project soon, signalling our deep commitment to this market.

Our success in the real estate market is primarily down to two things. One is offering an unbeatable price-to-value ratio. We’re not the cheapest in the market, and we don’t intend to be. However, any investor can compare our residences on a square-foot basis with anything else in the market and discover an unbeatable value proposition. The second is delivery. Iconic Developers is a financially conservative company. Every project is ring-fenced; we do not deploy funds intended for one project to finance another to ensure we never get into a situation where a project is halted or delayed for financial reasons.

So the fact that we have a high-quality proposition in pricing, timely delivery, and well-designed and optimally located projects meant that investors have always seen incredible appreciation in value. People who have come in at the start of projects have doubled their money or more, and those who have come in midway have seen a 50-60% appreciation after we hand over completed apartments.

Iconic Skye will have a similar value proposition on top of new innovative features. We are introducing the concept of affordable luxury duplexes that offer more space and privacy. Designed to be self-sustained and self-contained, packed with modern amenities, Iconic Skye residents can fulfil their shopping, entertainment and recreational needs without leaving the property, which will also have shared workspaces for those working remotely. Iconic Skye has everything from a swimming pool to a party area, food court, play area, business centre, movie theatre, mini-movie theatre, laundry point, boutique shops and mini-supermarket. You can spend four months in the building and never go outside, making Iconic Skye a high benchmark for unique modern living experiences in Sri Lanka.

I would gladly encourage anyone interested in availing themselves of an early investment opportunity in Iconic Skye to reach out to me directly at rohan.parikh@acresfoundation. org for any assistance.