The Economy:

Government gazettes Domestic Debt Optimisation (DDO) – President Ranil Wickremesinghe in his capacity as the Minister of Finance, Economic Stabilization and National Policies published the Extraordinary Gazette on Registered Stock and Securities Ordinance (Chapter 420). The Extraordinary Gazette declares that all privileges, exemptions and immunities attaching by virtue of any written law in force in Sri Lanka to any stock or securities shall be deemed to be attached to any new registered stock or securities issued under this Ordinance in conversion or exchange, as the case may be.

Fitch says DDO is a significant step for resolving bank uncertainty – According to Fitch Ratings, the Sri Lankan Government’s method of handling domestic debt is a substantial step toward addressing questions about the impact of the sovereign’s debt restructuring on the local banking system. However, difficulties may occur due to a variety of variables.  For example, it is still unknown if Sri Lanka’s major foreign creditors have endorsed the government’s recommendations. If not, there is a chance of more domestic debt restructuring, which may make the banking industry even more unstable. The current DDO exempts banks from holding treasury securities denominated in Sri Lankan Rupees, which will lessen the strain on their already strained capital positions caused by declining loan quality and currency depreciation. 

Further, based on the most recent decision taken on the DDR/DDO, the Issuer Default Rating (IDR) for Sri Lanka’s Long-Term Local-Currency (LTLC) debt has been downgraded from ‘CC’ to ‘C’ by Fitch Ratings. Additionally, the issue ratings for local currency bonds have been lowered from ‘CC’ to ‘C’. The Long-Term Foreign-Currency (LTFC) IDR has been affirmed at ‘RD’ (Restricted Default) and the Country Ceiling at ‘B-‘. Fitch typically does not assign Outlooks to ratings of ‘CCC+’ or below.

Colombo Port City unveils revised Development Control Regulations (DCR) published via Extraordinary Gazette – With the publishing of the amended Development Control Regulations (DCR) in the Extraordinary Gazette No. 2334/47 on June 2, the Colombo Port City has made a significant advancement toward planned and sustainable urban growth. The DCR 2023’s publishing represents a significant turning point since it allows the Colombo Port City Economic Commission to consider development ideas. 

Sri Lanka gets first tranche of USD 250 million from World Bank (WB) – Sri Lanka was given the first tranche of USD 250 million of the World Bank’s USD 500 million financial support pledged last week. On June 28, the World Bank Board of Directors authorized USD 700 million in financing to assist Sri Lanka overcome its present economic crisis and provide assistance to the country’s most vulnerable and underprivileged citizens.

Imports grow in May for first time since February 2022 – Reflective of the economy’s steady recover, Sri Lanka’s imports increased modestly in May, the first year-over-year gain since February 2022. The Central Bank’s most recent figures show that imports rose to USD 1.4 billion in May, marking the first increase in 15 months. The Central Bank of Sri Lanka (CBSL) stated the increase in import expenditure was primarily driven by higher spending on consumer goods, offsetting the decline in expenditure on intermediate and investment goods imports.

Politics & Policy:

World Bank Group adopts new Country Partnership Framework (CPF) for Sri Lanka – The new Country Partnership Framework for Sri Lanka, which intends to assist in restoring economic and financial sector stability and establish a strong basis for a green, resilient, and inclusive recovery, was considered by the Board of Executive Directors of the World Bank Group. This CPF is being implemented at a time when the nation is dealing with a serious economic crisis impacting people’s lives and means of subsistence, necessitating significant reforms to stabilize the economy and safeguard the weak and vulnerable.

Public Utilities Commission Of Sri Lanka (PUCSL) approves 14.2 per cent cut in electricity tariff –With effect from July 1st, the Public Utilities Commission of Sri Lanka (PUCSL) has granted a general 14.2 per cent cut in the power rate, subject to certain restrictions. As a result, lower electricity users in the category of 0 – 30 units will receive a 65 per cent electricity tariff reduction, users in the category of 31 – 60 units will receive a 51.5 per cent reduction, users in the category of 61 – 90 units will receive a 24.5 per cent reduction.  The hotel sector will receive a 26.3 per cent reduction, the industry category 9 per cent, commercial buildings 5 per cent and religious establishments will gain 16 per cent overall reduction.

Tourist arrivals over 100,000 in June after 4 years – With the arrival of 100,388 visitors in June, Sri Lanka’s tourism sector marked a critical milestone, marking the first time arrivals reached this milestone in four years. Following a series of successful roadshows held across some cities in India over the previous several months, Indian tourists have been a major factor in the increase in arrivals. 


German Embassy provides funds for micro projects – The German Embassy in Colombo has signed two small-scale initiatives under its micro project programme as part of its efforts to boost community development and livelihoods. The Rajarata Janasahana Foundation and Mihintale, Ambathalagama and Thambuththegama Janajayagama initiative aims to uplift the impoverished residents in these two villages in the Anuradhapura District. 

Sri Lanka steadily investing in energy efficiency technology – According to ECO33 Sri Lanka, Sri Lanka’s business and public sectors are consistently making investments in energy-efficient technologies. Through its innovative business strategy, the company has been offering energy cost reduction strategies that safeguard operational costs and boost the bottom line for both commercial and public organizations. 

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.

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