SRI LANKA UPDATE | 29 SEPTEMBER – 05 OCTOBER 2023
The Economy:
Government awaits favourable response from International Monetary Fund (IMF) for second tranche of Extended Fund Facility (EFF) this week – The Government expressed optimism for a favourable response for the second tranche of the USD 2.9 billion EFF from the IMF this week. Cabinet co-spokesman stated that while the IMF mission had commended some restructuring efforts and stringent reforms, there were still concerns about three significant areas: government revenue generation, managing foreign assets and reserves and implementation of the Anti- Corruption Bill. The process to evaluate the progress made is a complex procedure and the IMF Mission will take a few days to present details of Sri Lanka’s progress to the IMF Board.
World Bank states revenue mobilisation key for Sri Lanka’s sustainable fiscal path – The World Bank reaffirmed the importance of increasing and improving revenue mobilisation for Sri Lanka’s sustainable budgetary approach. In its most recent report, “The Sri Lanka Development Update, Mobilising Tax Revenue for a Better Future,” the multilateral donor stated that Sri Lanka has one of the lowest tax-to-GDP ratios in the world and by 2022, the tax system had low, many, and constantly changing rates, a constricting base, a heavy tax burden on labour income as opposed to capital income, an excessive reliance on indirect taxes and a sub-standard administration with subpar compliance results. The report states that the system is now complex, ineffective and unfair due to these features.
Sri Lanka ranks 136 in the 2023 Economic Freedom of the World Index – With a score of 52.2, Sri Lanka was placed 136 in the Economic Freedom of the World Index for 2023, getting 1.1 points lower than last year. In the Asia-Pacific region, Sri Lanka is rated 28th out of 39 nations, with its performance still behind global and regional averages. The rankings mentioned that difficulties facing Sri Lanka’s economic independence was significant during a time of instability and uncertainty, particularly with regard to bolstering fundamentals. An ineffective judicial system that is vulnerable to corruption and political interference undercuts property rights and that extensive state involvement in the economy hinders the growth of the private sector.
Sri Lanka’s foreign reserves decline USD 3.5 billion in September – According to the Central Bank of Sri Lanka (CBSL), Sri Lanka’s official foreign reserves decreased from USD 3.6 billion in August to USD 3.5 billion in September. The Bank covered short bets on Sri Lanka Development Bonds after they were redeemed in rupees, and a swap with Bangladesh was refunded, among other one-time events. The resolution of the bilateral currency swap with Bangladesh Bank and some US dollar sales following the domestic debt restructuring when Sri Lanka Development Bonds were repaid in rupees, were also one-off factors in September that impacted foreign reserves.
Politics & Policy:
United States Agency for International Development (USAID) and Sri Lanka Sustainable Energy Authority (SLSEA) partner to empower businesses with innovative energy efficiency solutions- Through its Sri Lanka Energy Programme, USAID collaborated with SLSEA to launch the National Energy Benchmarking Portal (NEBP). By promoting effective practices and energy-saving techniques, this cutting-edge platform is intended to help businesses reduce electricity use and combat challenges faced due to rising energy prices. The introduction of the NEBP represents a
big step for companies in Sri Lanka to move towards a more sustainable and energy-efficient future. SLSEA will be the central repository for energy consumption data from all industrial, commercial and public sector institutions in Sri Lanka.
Opposition files Fundamental Rights Petition against Online Safety Bill – A group of opposition MPs submitted a Fundamental Rights Petition against the disputed Online Safety Bill. The petitioners assert that specific Bill provisions including the appointment of a Commission by the President infringes on fundamental rights. This clause would allow for the arbitrary use of executive authority and give the Commission sweeping powers to undertake inquiries, by-passing the legal system. The Petition requested the court to rule that the Bill must receive a two-thirds majority vote in Parliament and go through a referendum to become law.
Government approves comprehensive consumer protection programme to expedite complaint resolution – The Cabinet of Ministers accepted a comprehensive plan presented by the Minister of Trade, Commerce and Food Security to protect consumer rights and streamline the grievance redress procedure. The establishment of a National Operations Centre, a hub tasked with collaborating to plan and implement exceptional raids, is the cornerstone of this plan. The project intends to drastically reduce the time and work required to look into and resolve consumer complaints. Its essential elements include training programmes aimed at both consumers and producers, emphasizing the promotion of fair-trade principles and increasing knowledge of consumer rights.
August trade gap expands amid sluggish apparel exports – Due to a continued decline in apparel exports, Sri Lanka’s trade balance increased in August. In contrast, imports were moderate throughout the month. The trade gap increased to USD 307 million in August from USD 260 million YoY. However, the total deficit in the trade account from January to August 2023 decreased from the USD 3,889 million reported during the same period in 2022 to USD 2,964 million as a result of a bigger reduction in imports that partially offset the decline in exports.
Disclaimer – This advisory is intended for circulation among JAAF stakeholders only. Please do not circulate or share on social media.
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