Sri Lanka shares post third weekly gain despite four-session fall
ECONOMYNEXT – Sri Lanka’s stock market posted a gain for the third straight week despite it saw four straight session losses through Friday (27), amid investors awaiting to see some political and economic stability amid crisis-hit island fears of tax hikes and job losses.
The week ended on May 27 saw new cabinet appointments, fuel price hike to a a record high level, and Sri Lankan officials concluding technical level negotiations with the International Monetary Fund while Prime Minister Ranil Wickremesinghe, who has been advocating sound economic policies was appointed as the finance minister.
Market analysts said investors expect a new budget with some tax hikes and new revenue measures under Wickremesinghe while the IMF deal to go through once the debt restructuring is done.
“Overall the market is moving on the IMF and budget news. Nothing is going to be positive in the budget. So we will see this until the budget and will be highly volatile,” a top market analyst said.
IMF at the end of the technical level discussions said that it needs sufficient assurance that the country will restore debt sustainability during the course of the debt-restructing process.
“The IMF comment did not assure anything so it dampened the sentiments,” the analyst said.
The All Share Price Index (ASPI) closed 0.05 percent or 4.03 points down at 8,315.55 on Friday, but it gained 0.6 percent on the week.
Analysts say investors had been moving to the sidelines throughout the week as more news on heavily taxed budgets circulated while some investors shifted their funds to fixed assets like government securities which are giving around 24 percent annual return.
This week also saw the country hiking it’s fuel prices to record levels yet again. Added to the worries, the central bank governor’s comment on the country’s growth contracting to record levels due to the economic crisis also dented the sentiment.
The most liquid index S&P SL20 fell 0.42 percent or 11.50 points to 2,733.04 on Friday.
The week saw an average daily turnover of 2 billion rupees, nearly a half of this year’s average daily turnover of 4.0 billion rupees.
Sri Lanka’s sovereign default has already led it to restricted/selective default rating by rating agencies and has been weighing on the investor sentiment. The 84.5 billion economy has already suspended foreign debt payments as it had run out of dollars.
Investors are also concerned over the steep fall in the rupee, which has fallen over 80 percent since it was allowed flexibility on March 7.
The market has gained 9 percent in May so far following a loss of 23 percent in April and 14.5 percent in March.
The market has lost 31.9 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year.
Foreign investors sold a net 104.2 million rupees worth of shares this week. The market has witnessed a total foreign outflow of 1.3 billion rupees so far this year.
On Friday, the ASPI was dragged down mainly by John Keells Holdings, which fell 2.7 percent to 125.50 rupees a share.
In addition to that, Sampath Bank fell 1.8 percent to 37.70 rupees a share while Hayleys slipped 2.8 percent to 69.00 rupees a share (Colombo/May28/2022)
Sri Lanka targeted by high priced renewables amid economic crisis
ECONOMYNEXT – Sri Lanka will give immediate provisional approval for renewable projects but their prices have been to be revised to ‘reasonable’ levels, Power and Energy Minister Kanchana Wijesekera has said.
Sri Lanka’s state-run Ceylon Electricity Board is one of the last state agencies to develop an evidence based planning but powerful lobbies (generally called mafia’s) undermine the plan with ad hoc expensive plants inserted outside competitive tendering.
Sri Lanka recently called for Expressions of Interests investors and there are proposals to locations where the cash strapped island’s grid does not have capacity to absorb the renewables, industry analysts say.
The CEB in its long term generation plans has identified locations to which renewable plants can be connected at no cost and while others are planned out to connect to locations were the grid is enhanced under in projects funded by multilateral lenders such as Asian Development Bank.
However ad hoc plants will require load the CEB to pay annuities for grid and also commit to pay high prices for up to 20 years to foreign investors, industry analysts said.
Analysts have likened the high priced long term renewable deals outside competitive tender in the midst of high global oil prices, to the way state-run SriLanka Airlines at one time bought Airbuses at high prices committing the airline to long term leases.
Minister Wijesekera however said prices will have to be revised to reasonable levels.
“Provisional approvals to be granted immediately for proposed projects,” Minister Wijesekera said.
“Revise rates to reasonable. After PA is issued, work with CEB, SEA and Investor for transmission line and grid capacity enhancement with the required investment coming from the project investor.”
Sri Lanka has a grid which is built for central distribution and has to be upgraded in stages. Renewables power is intermittent, cannot be dispatched and requires storage at addition cost – such as batteries – to be deployed at peak times.
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Sri Lanka generation plan renewable power share for 2030 equal to Germany: CEB engineers
To upgrade the grid to 400kV to reach a 70 percent target by 2030 from the 53 percent in the long term needs 1.7 billion US dollars at least and another 2.0 billion US dollars for batteries.
Minister Wijesekera said rooftop solar would also be encouraged in state agencies industries and hotels.
Current tariffs are expected to triple when prices are raised, he said.
The steep rupee depreciation as well as global inflation fired by the Fed has also pushed up renewable costs.
CEB has been encouraging renewables in recent long term generation plans as technology matured and Chinese industries in particular started to export ever cheaper solar panels and the efficiency of the panels also went up.
However the agency had come under fire from lobbies who wanted to connect projects without competitive tendering. (Colombo/May27/2022)
Identify cultivable lands in urban areas: PM
Sri Lanka listed firms to stop printing annual reports after forex...
ECONOMYNEXT – Sri Lanka’s listed companies can forego printing annual reports for the financial years ended 31st December 2021 and 31st March 2022 due to a paper shortage in the country as a result of dollar shortages.
“…waiver is to be granted regarding considering the limited availability of paper in the market at present to provide printed copies of the annual report,” the Colombo Stock Exchange (CSE) said in a statement.
However, the listed companies are required to publish their reports on CSE and company websites.
And in the event a shareholder requests for a printed annual report copy, the company must publish a statement in a national newspaper and on the CSE website that it is unable to print the annual report, the CSE said.
“It should also be noted in the AGM circular sent to the shareholders”, CSE said.
CSE also requires the listed company to designate a person to answer queries from shareholders relating to the circulation of the annual report.
For more details download the circular from here: WAIVER GRANTED TO LISTED COMPANIES ON CSE LISTING RULE 7.5(b)(i) REGARDING CIRCULATION OF THE ANNUAL REPORT IN PRINTED FORM
As early as February, the island’s publishers and writers complained that they were unable to import paper as prices had skyrocketed and most printers were pushed to close down their businesses.
The country had to postpone some of its secondary school exams too due to the paper shortage. (Colombo/May27/2022)
IMF says “require adequate assurances” on Sri Lanka’s debt sustainability restoration
ECONOMYNEXT – The International Monetary Fund (IMF) on Thursday said it needs sufficient assurance from Sri Lanka of restoring debt sustainability during the debt restructuring process which the island nation has started with appointing financial and legal advisors.
“The (INF) team welcomed the appointment of financial and legal advisors to engage in a
collaborative dialogue with their creditors as an important step towards restoring public debt
sustainability,” the IMF said in a statement after the end of technical level negotiations between Sri Lankan officials and the IMF team.
“Since Sri Lanka’s public debt is assessed as unsustainable, approval by the Executive Board of an IMF-supported program for Sri Lanka would require adequate assurances that debt sustainability will be restored.”
The global lender’s comments come as Sri Lanka is struggling to find a way out of its economic crisis with heavy foreign debts, no dollars to finance import, very lower government revenue, and excess money printing.
“Inflation has accelerated driven by many factors, including the shortages of goods, fuel price increases, and currency depreciation,” the IMF said.
“In this context, we are deeply concerned about the impact of the ongoing crisis on the people, particularly the poor and vulnerable groups.”
“The IMF team held technical discussions on a comprehensive reform package to restore
macroeconomic stability and debt sustainability. The team made good progress in assessing
the economic situation and in identifying policy priorities to be taken going forward.”
“The discussions focused on restoring fiscal sustainability while protecting the vulnerable and poor;
ensuring credibility of the monetary policy and exchange rate regimes; preserving financial
sector stability; and structural reforms to enhance growth and strengthen governance.”
The IMF comments also came as details of how Sri Lanka’s Monetary Board at the Central Bank and Finance Ministry last year failed to address the debt sustainability issue despite the global lender in April 2020 advising the island nation to go for debt restructuring. (Colombo/May 26/2022)
Sri Lanka stocks down for 3rd straight session amid tax hike...
ECONOMYNEXT – Sri Lanka stock market closed weaker on Thursday (26) for the third consecutive session as some investors shifted their funds to fixed assets while others stayed on the sidelines amid fears of tax hikes in the near future after Prime Minister Ranil Wickremesinghe was appointed as the new finance minister, dealers said.
“We saw selling pressure starting to enter the market while investors stayed on the sidelines as news of the new budget keeps coming,” a top market analyst said.
He expects the downward trend to accelerate in the next two weeks.
Another analysts said some investors are shifting their funds to fixed assets like government securities which are giving around 24 percent annual return.
Wickremesinghe was appointed as the new finance minister on Wednesday (25). He has promised to present a new budget soon and said the budget deficit for this year could be as high as 13 percent of the GDP, which is the highest since 1982.
The All Share Price Index (ASPI) closed 0.6 percent or 50.58 points down at 8,319.58.
Fuel hike, which is a deterrent to the economic growth, also weighed on the sentiment.
Added to the worries, the central bank governor’s comment on the country’s growth contracting to record levels due to the economic crisis also dented the sentiment.
The most liquid index S&P SL20 fell 1.28 percent or 35.49 points to 2,744.54.
The day’s turnover was 1.62 billion rupees, less than a half this year’s average daily turnover of 4.0 billion rupees.
Sri Lanka’s sovereign default has already led it to restricted/selective default rating by rating agencies. The 84.5 billion economy has already suspended foreign debt payments as it had run out of dollars.
Investors are also concerned over the steep fall in the rupee, which has fallen over 80 percent since it was allowed flexibility on March 7.
The market has gained 9.1 percent in May so far following a loss of 23 percent in April and 14.5 percent in March.
The market has lost 31.9 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year.
Foreign investors sold a net 47.1 million rupees worth of shares. The market has witnessed a total foreign outflow of 1.2 billion rupees so far this year.
The ASPI was dragged down mainly by Expolanka, which fell 2.5 percent to 223 rupees a share. In addition to that, Sampath Bank fell 2 percent to 38.40 rupees a share while John Keells Holdings slipped 1.3 percent to 129 rupees a share (Colombo/May26/2022)
Sri Lanka police app to monitor fuel hoarding amid shortage, long...
ECONOMYNEXT – Sri Lanka’s police have developed an app to monitor vehicles pump fuel more than once a day as the country still sees long queues for fuel amid reports of unscrupulous hoarding and a booming black market.
Kanchana Wijesekera, the island nation’s Minister of Power and Energy said the application developed by the police is being tested in several locations in the country on Thursday.
The number plate of the vehicle is entered into the app and is shared between the app users in real-time, he said.
Once the data is entered, the app will notify the fueling history of the vehicle and the station it has fueled from.
The minister did not elaborate the process in detail
1) An App developed to monitor vehicles at fuel stations and share real time data with fuel stations islandwide is been tested in multiple locations currently. The application was developed by SL Police IT Dept. Number plate details of the consumers at the pump will be entered.
— Kanchana Wijesekera (@kanchana_wij) May 26, 2022
However social media sleuths have pointed out many drawbacks and suggestions including privacy and confidentiality of vehicle movement, vehicles traveling long distance, corrupt practices at pumps, and automation of number plate reading.
Minister Wijesekera at the weekly Cabinet meeting on Tuesday warned that anyone who refuels their vehicles more than once will be arrested.
On Wednesday, police said 137 suspects have been arrested for hoarding and selling fuel at a higher price than the market price.
Sri Lanka’s economic crisis has forced it to seek credit line from neighbour India which has agreed to provide 700 million US dollar worth fuel under two credit lines. Sri Lanka also negotiating another 500 million US dollar loan to purchase fuel from India’s Exim Bank. (Colombo/May26/2022)
Sri Lanka’s Economy Measured in Endless Queues
Sri Lanka plastic recycler gets funding from USA
ECONOMYNEXT – Sri Lanka recycler BPPL said it had received 15 million US dollars from the US International Development Corporation to expand its polyester and monofilament yarn plant which uses waste plastic as the main raw material.
The loan provided by DFC has a 10-year tenure with a three-year grace period and is subject to regulatory approvals.
BPPL will use the funds to double the PET plastic bottle collection centres and increase the company’s bottle washing capacity.
It has 480 waste plastic collection centres now.
It also wants to increase the monofilament capacity by 40 percent and polyester yarn production by 55 percent per annum in the next 4-5 years.
“This serves as a timely boost, assisting BPPL to further enhance many key aspects of our operations. The development that will come about through this initiative will positively impact the country economically, socially and environmentally,” BPPL Holdings PLC Managing Director and Chief Executive Officer, Anush Amarasinghe said.
The company said the funding will increase the waste plastic collected in the country to approximately 6,000 tons per annum.
“DFC’s investment in BPPL will promote transformative and sustainable development in Sri Lanka,” said DFC Chief Climate Officer Jake Levine.
“Together, DFC’s financing and BPPL’s proven track record will boost economic growth while helping to advance a vision for a circular economy, which is ultimately a critical part of the work to address the climate crisis.” (Colombo/May26/2022)
Sri Lanka stocks edge down on tax hike worries after PM...
ECONOMYNEXT – Sri Lanka stock market closed weaker on Wednesday (25) as the market feared over tax hikes in the near future after Prime Minister Ranil Wickremesinghe was appointed as the the new finance minister, dealers said.
“The market did pick up on the new finance minister’s appointment, hype but it quickly fell down on worries that there will be a fiscal consolidation to face,” a top market analyst said.
“The overall market is gearing towards the downward trend due to this fiscal consolidation as the new budgets will be tax-based.”
Wickremesinghe was appointed as the new finance minister on Wednesday (25). He has promised to present a new budget soon and said the budget deficit for this year could be as high as 13 percent of the GDP, which is highest since 1982.
The All Share Price Index (ASPI) closed 0.28 percent or 23.31 points down at 8,370.16.
In the previous session, the market was brought down by the fuel price hike which analysts saw as a deterrent to the economic growth.
Added to this was the central bank governor’s comment on the country’s growth contracting to record levels due to the economic crisis.
The most liquid index S&P SL20 fell 1.41 percent or 39.75 points to 2,776.70.
The day’s turnover was 1.65 billion rupees, less than a half this year’s average daily turnover of 4.0 billion rupees.
Sri Lanka’s sovereign default has already led it to restricted/selective default rating by rating agencies. The 84.5 billion economy has already suspended foreign debt payments as it had run out of dollars.
Investors are also concerned over the steep fall in the rupee, which has fallen over 80 percent since it was allowed flexibility on March 7.
The market has gained 9.7 percent in May so far following a loss of 23 percent in April and 14.5 percent in March.
The market has lost 31.5 percent so far this year after being one of the world’s best stock markets with an 80 percent return last year.
Foreign investors bought a net 11.6 million rupees worth of shares. The market has witnessed a total foreign outflow of 1.2 billion rupees so far this year.
John Keells Holdings slipped 1.9 percent to 130.75 rupees a share, Expolanka was down 1.7 percent to 228.75 rupees a share, while Hayleys fell 2.6 percent to 72.30 rupees a share. (Colombo/May25/2022)