Economic

The Colombo stock market yesterday broke through the benchmark All Share Price Index’s 9,500-point psychological barrier as investors began a fresh week with improved sentiment though turnover was relatively low.

Identifies debt and forex, financial sector and macroeconomic stability concerns as critical issues to be addressed in short to medium term
Says all these will need some clear policy responses from Govt. and CBSL
Unveils raft of bold, progressive and controversial measures
Lays onus of recovery and action by all stakeholders; comes up with ‘To-Do list’
Reveals forecast of $ 7 b in non-debt foreign inflows between October-December this year and $ 11 b in 1Q of next year
Separately fresh forex inflows and roll-overs expected from Govt. and Central Bank forecast at $ 5 b last quarter of 2021 and $ 6 b in 1Q of 2022
Governor Nivard Cabraal reiterates homegrown solution will take country to growth path

The Sri Lanka Association of Manufacturers and Exporters of Rubber Products (SLAMERP) yesterday in a statement expressed its deep concern over the Central Bank assertion that nearly $ 3 billion of earnings had not been repatriated back to the country.

CBSL requires mandatory repatriation and conversion of new export proceeds into rupee after deducting the permitted amounts of forex for intermediate and investment inputs
Export proceeds already accumulated in forex deposits with banks from 2020 onwards must be converted proportionately within 6 months
CBSL to introduce dedicated non-interest-bearing foreign currency accounts for export proceeds to encourage conversions
International Transaction Reporting System from 1 January 2022 to track banking sector forex inflows and outflows
3 major private sector lobby groups contest CBSL claims of exporters hoarding nearly $ 3 b of earnings overseas
Cabraal says current Rs. 199-203 band for US forex deals still provides a Rs. 32 per dollar advantage vis-à-vis a Real Effective Exchange Rate assessed based on implied exchange rate of 24 competitor countries

In categorically denying forex hoarding JAAF says CBSL has access to real-time data on export earnings and repatriation, hence shouldn’t quote incorrect, arbitrary data
Alleges CBSL has implicitly tarnished reputation of all exporters broadly, including all apparel exporters
Opines current forex crisis cannot be attributed primarily to practices of exporters broadly but foreign debt servicing and imports key causes too
Says global banks increasingly wary of discounting LCs to Lankan counterparts, resulting in already stretched supply chains facing even further difficulties
Counters CBSL saying Bangladesh, India, Indonesia, Malaysia, Nepal, Pakistan and Thailand are more lenient in repatriation rules than Sri Lanka
Within EPZs in India no conversion is required; says practice of cherry picking by CBSL is not right
Warns cost of $ 2.2 b imported raw materials rising owing to enforced currency conversions would impact the industry with serious macro and micro economic consequences
Says need of the hour is not rash rhetoric but a collaborative effort of working together to resolve these issues to ensure international investors, buyers and financiers’ confidence
The Joint Apparel Association Forum (JAAF) yesterday in a statement raised its objections to the article and ‘misleading’ comments contained therein published in the Daily FT on 28 September, titled ‘Exporters hoarding $ 2.76 b in earnings overseas: CB’.

Welcome opening of new PCR testing unit at BIA, but insist State should encourage greater Lankan private sector involvement
Say Govt. forging partnership with foreign company a surprise
Private sector labs carry out 60% of SL’s total PCR workload
Lament approval for additional private labs for testing not received yet

Financial institutions to immediately suspend parate execution, forced repossession of leased assets up to 31 March next year and cancel all penalties imposed
Debt moratorium since July 2020 worth Rs. 780 b slated to end this year
Banking sector additionally extended Rs. 165.5 b in concessionary working capital financing

The active S&P SL20 Index reaches all-time high; ASPI near 40% YTD return
Both indices end September with 5% gain
CSE’s star performer Expolanka peaks to Rs. 201.25 before settling up 3% at Rs. 198.25
Expo’s market cap soars to Rs. 389.5 b; almost double that of third placed JKH

Waives off immigration tax for 2 years, landing charges and parking fees for 4 years

Despite the widespread impact of the COVID-19 pandemic, the unemployment rate, surprisingly, has decreased to 5.1% in the second quarter of 2021 from 5.7% in the first quarter of 2021, according to the Central Bank’s latest provisional data released last week.

Imports dip to $ 1.48 b; trade deficit at $ 483 m lowest for Sept. since 2017

The Colombo stock market yesterday set a new benchmark as investors remained bullish for the second consecutive day with robust turnover though some profit-taking was evident.

Central Bank Governor Nivard Cabraal yesterday expressed confidence that the economy would grow by 5% in 2021 on the back of 8% growth in the first half.

The Central Bank of Sri Lanka (CBSL) has released $ 50 million to two State banks to enable the clearance of cargo carrying hundreds of essential goods, which have been stuck at the Colombo Port for weeks.

CB Governor Nivard Cabraal in conversation with private sector representatives on Friday during his meeting with the country’s exporters and importers. Soon after the meeting, Cabraal tweeted saying the exchange of views with the main importers and exporters in Sri Lanka was very helpful. “Their commitment to stabilise our economy is very encouraging. I look forward to working with them,” Cabraal added

The Central Bank’s short-term Road Map unveiled yesterday listed 20 specific initiatives in the next six months to stabilise the economy and boost growth. They are as follows:

The Sri Lanka Association of Inbound Tour Operators (SLAITO) together with the One Industry One Voice yesterday welcomed the initiative taken by the Government to relax health protocols keeping in mind the safety of the public and the tourist.

ASPI surpasses 9,000 points again to close at 3-week high thanks to biggest single-day gain in 7 months
Foreign selling spikes pushing YTD net foreign outflow to over Rs. 44 b