SRI LANKA UPDATE | 22 – 28 SEPTEMBER 2023
The Economy:
The International Monetary Fund (IMF) states Sri Lanka showing tentative signs of stabilisation – Although Sri Lanka is exhibiting tentative signs of stabilization, the IMF emphasized that coordinated measures are still necessary to guide the nation toward a full economic recovery. This observation comes after the conclusion of an IMF staff mission team trip to Colombo from September 14–27 to discuss economic and financial policies to support the approval of the first review of the programme under the USD 2.9 billion Extended Fund Facility (EFF). Peter Breuer, Senior Mission Chief for Sri Lanka at the IMF noted that the people of Sri Lanka had demonstrated incredible fortitude in the face of formidable obstacles and that the nation had achieved remarkable progress in executing the necessary actions to move towards economic stabilisation.
According to Peter Breuer, there is no set schedule for the distribution of the second tranche of the IMF’s EFF to Sri Lanka but two conditions must be met for the matter to be resolved. Breuer also stated that having an agreement on these policies is one of the most important prerequisites. He mentioned that some revenue shortfall in one area is being discussed to address and compensate for it.
Sri Lanka’s export earnings top USD 1 billion in Aug 2023 – The Export Development Board (EDB) stated that Sri Lanka’s merchandise exports climbed by 6.98 per cent to USD 1,091.6 million in August 2023 compared to July 2023. However, the EDB noted that this represents a 10.91 per cent decline from the figure recorded in August 2022, citing provisional data made available by Sri Lanka Customs. The fall in export demand, particularly in industries like apparel and textiles, rubber and products derived from rubber, and coconut and products derived from coconut, is the cause of the decline in merchandise exports.
The Colombo Consumer Price Index (CCPI) eases further in September – The CCPI annual change (Y-o-Y), which measures headline inflation, dropped from 4 per cent in August 2023 to 1.3 per cent in September. Much of the decrease in headline inflation is in line with predictions made by the Central Bank of Sri Lanka (CBSL) in July 2023. For the third month in a row, food prices decreased YoY, increasing to 5.2 per cent in September from 4.8 per cent in August 2023. Non- food inflation YoY decreased further, from 8.7 per cent in August 2023 to 4.7 per cent in September.
The Colombo Port City Economic Commission releases Comprehensive Progress Report – The Comprehensive Progress Report authored by the Colombo Port City Economic Commission details significant developments in the Colombo Port City’s development as well as the completion of the legal frameworks for the Colombo Port City Special Economic Zone (SEZ). The report covers the period from January to August 2023. These developments highlight the project’s status as a top location for investment and a developing “Gateway to South Asia.” As the Single Window Investment Facilitator, the Commission has been persistently committed to streamlining processes and fostering a climate favourable for business for both investors and Sri Lankans.
Politics & Policy:
Cabinet approves Appropriation Bill for 2024 – Following the Cabinet’s approval, the Government declared that the Appropriation Bill for 2024 would be introduced in Parliament in November. President Ranil Wickremesinghe proposed to the Cabinet that the Draft Bill be published in the Government Gazette after receiving approval from the Attorney General and then introduced to the Parliament for approval. Further, the State Minister of Finance stated that the 2024 Budget Speech will begin on November 13, 2023, and the 2024 Appropriation Bill will be submitted to Parliament in the second week of October.
Israel-Asia Chamber of Commerce explores trade expansion with Sri Lanka – Chairman of the EDB, President of the Israel-Asia Chamber of Commerce and Israel-Sri Lanka Chamber of Commerce had discussions on improving trade and economic ties between Israel and Sri Lanka. The discussions were in line with the Sri Lankan Embassy’s initiatives in Israel to maximize prospects for Sri Lanka’s burgeoning private sector and foster an export-friendly environment.
Cabinet approves drafting of State Loan Management Act – To increase budgetary efficiency and transparency, the Cabinet of Ministers agreed to instruct the Legal Draftsman to prepare the State Loan Management Act Bill. In his resolution, the acting Minister of Finance, Economic stabilization and National policies reaffirmed the Government’s commitment to financial sector institutional reforms. The construction of a State Loan Management Institute has been highlighted as a key component of institutional reform in the supplemental Budget for 2022. This project highlights enhancing Sri Lanka’s financial framework’s transparency and debt management procedures.
Sri Lanka initiates discussions with Asian Development Bank (ADB) for USD 400 m loans to fuel economic reforms – President Wickremesinghe made the above recommendation to the Cabinet of Ministers in his capacity as Minister of Finance, Economic Stabilization and National Policies. Under the first sub-programme, a concentrated effort is being made to hasten fundamental reforms aimed at strengthening the conflict management framework and stabilizing the finance sector. These loans are designed to support the implementation of two crucial sub-programme. The establishment of a strong and comprehensive resilient financial system is the second sub- programme. The approved proposal permits Sri Lanka to enter into a loan agreement with the ADB, paving the way to receive USD 200 million with a 25-year repayment schedule that includes a five-year grace period, and an annual interest rate of 2 per cent.
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This Advisory, written for our partners interested in developments in Sri Lanka against the backdrop of the current crisis, is an update on the one issued last week. This document summaries developments covering significant political and economic events. The Advisory includes economic, political, social and governance perspectives. It draws on news reports, analyses, Government announcements and documents, and from other sources that we may be in contact with or have access to.
This Advisory was prepared by the Strategic Communications Unit of Adfactors PR Lanka. For inquiries, contact pumudika.amarasekara@adfactorspr.com