IMF completes second review, to disburse USD167.2 mln

July 18, 2017 (LBO) – The Executive Board of the International Monetary Fund (IMF) has completed the second review of Sri Lanka’s economic performance under the program supported by a three-year Extended Fund Facility (EFF) arrangement, a statement said.

“Completion of the review enables the disbursement of the equivalent of SDR 119.894 million (about US$ 167.2 million), bringing total disbursements under the arrangement to the equivalent of SDR 359.682 million (about US$ 501.5 million).”

“In completing the review, the Executive Board granted a waiver of nonobservance of the continuous performance criterion on accumulation of external arrears which was missed due to continued difficulties of establishing a payment platform and waivers of applicability of the performance criteria for end-June 2017 on floor of the central government primary balance and the program net official international reserves of the Central Bank of Sri Lanka, given the unavailability of the information necessary to assess observance.”

Sri Lanka’s three-year extended arrangement was approved on June 3, 2016 in the amount of about SDR 1.1 billion (US$1.45 billion, or 185 percent of quota in the IMF at that time of approval of the arrangement.)

The government’s reform program, supported by the IMF, aims to reduce the fiscal deficit, rebuild foreign exchange reserves, and introduce a simpler, more equitable tax system to restore macroeconomic stability and promote inclusive growth.

Following the Executive Board’s discussion of the review, Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director, said: “Sri Lanka’s performance under the Fund-supported program has been broadly satisfactory. Macroeconomic and financial conditions have been stable, despite severe weather events and global market volatility.”

“The authorities launched fundamental income tax reform, undertook meaningful corrective actions to achieve program targets on international reserves, and remain committed to the reform program. Going forward, the reform momentum should strengthen further with greater ownership, building on the progress made so far.

“Fiscal performance has been strong. Targets for the fiscal balance and tax revenue have been met. The new Inland Revenue Act, which has been submitted to parliament, will support fiscal consolidation, make the tax system more efficient and equitable, and generate resources for social and development programs. Nevertheless, Sri Lanka’s high debt burden and gross financing needs require further revenue-based consolidation. Timely progress in structural reforms, including tax administration and energy pricing, will strengthen the platform for durable consolidation.

“Inflation and credit growth remain on the high side. While monetary policy was tightened in March, further tightening is desirable until clear signs emerge that inflation pressures and credit expansion have subsided. While financial soundness indicators remain stable, banks’ capital adequacy ratio has declined due to rapid credit growth. Financial sector supervision should be strengthened, and macro-prudential measures could be deployed to rein in credit growth if needed.

“Continued international reserves accumulation and enhanced exchange rate flexibility, to which the authorities are committed, would reduce Sri Lanka’s external vulnerabilities.”

 

Read more ...

Sri Lanka stock market records 8-pct gain in 1H

July 18, 2017 (LBO) – The benchmark All Share Price Index of the Colombo Stock Exchange (CSE) recorded an 8.23 percent gain year-to-date, a noteworthy turnaround in the first half of this year, having started the year on the back of a slow-moving 2016.

The S&P SL 20 index, which features the CSE’s 20 largest and most liquid stocks, has also improved consistently, making an 11.03 percent gain year-to-date.

The CSE said the growth of the indices in 2017 reflects a reversal of the declining trend from a 9.66 percent and 5.54 percent decline in the benchmark ASPI in 2016 and 2015 respectively.

Overall trading activity has also improved in 2017, with the daily average turnover recorded for year-to-date marking an improvement to 911 million rupees from 737 million rupees in 2016.

The market in 2017 has also garnered a keen interest among foreign investors, with net foreign inflows for 24 consecutive weeks recorded from the first week of February onwards.

The foreign purchases figure recorded for the first half of 2016 (January – June) amounting to 31.5 billion rupees has doubled during the first half of 2017 to 62.6 billion rupees, an all-time high for foreign purchases in the first half of a calendar year.

2017 so far, has marked a net foreign inflow of 23 billion rupees, an improvement compared to previous years, which recorded an inflow of 383.5 million rupees in 2016 and an outflow of 5.3 billion in 2015.

“Growth in foreign activity is certainly encouraging and goes on to indicate that foreign investors have identified an opportunity in the Sri Lankan stock market,” CSE CEO Rajeeva Bandaranaike said.

“Such interest is an expression of confidence in the future potential and growth of our market and makes a strong case for improved involvement among local institutional and retail investors.”

Foreign investor contribution to total turnover in 2017 stands at 47 percent, an improvement in comparison with 42 percent in 2016 and 34 percent in 2015 and having crossed the 50 percent mark for the first time since 2008 in April this year.

The CSE said an attractive market valuation (P/E) compared to regional peers, growing corporate earnings among listed entities and a strong performance of the ASPI compared to leading indices are defining factors in attracting foreign investments to the Sri Lankan capital market.

January – June Foreign Activity Comparison 2008 – 2017

Jan – Jun	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017
Foreign Purchases	51.9	15.9	42.6	31.2	38.3	53.4	43.3	36.8	31.5	62.6
Foreign Sales	47.1	16.4	59.6	38.6	15.1	38.3	37.6	35.3	37.8	41.1
Net	4.7	-0.5	-16.9	-7.4	23.2	15.1	5.7	1.5	-6.3	21.5

 

Read more ...

Dumindra Ratnayaka appointed chairman of BOI: Reports

July 18, 2017 (LBO) – Dumindra Ratnayaka has been appointed as the chairman of the Board of Investment (BOI) of Sri Lanka, media reports said.

He is the only member from the previous board that has been reappointed to the new board. Others in the previous board were Upul Jayasuriya, Buddhi Keerthi Athauda, Manoj Cooray and M.A. Neeth Udesh.

Ratnayaka is the current Chairman of Martin & George limited and the former CEO of Etisalat Sri Lanka.

Media reports further said two new Directors have also been appointed to the Board of Investment.

Deputy Chairman of John Keells Group of Companies Ajith Goonawardene and former Secretary General of Ceylon Chamber of Commerce Mangala P.B. Yapa have been appointed as directors.

Last week the Chairman and Board of Directors of the BOI resigned for President Maithripala Sirisena to reconstitute the Board.

 

Read more ...

CHEVRON LUBRICANTS - DIVIDEND ANNOUNCEMENT

CHEVRON LUBRICANTS LANKA PLC Company ID: - LLUB Date of Announcement: - 18.Jul.2017 Rate of Dividend: - Rs. 2.00 per share / Second Interim Dividend Financial Year: - 2017 Shareholder Approval: - Not Required XD: - 27.Jul.2017 Payment: - 08.Aug.2017

 

Read more ...

Sri Lanka prepares for 7th session of FTA talks with China

July 17, 2017 (LBO) – Sri Lanka is preparing for a seventh session of talks with China on a Free Trade Agreement, the Ministry of Industry and Commerce said.

Minister Rishad Bathiudeen, speaking at the product exhibition by China’s Guangxi Zuang Autonomous Region at SLECC in Colombo, said FTA talks with China were progressing smoothly.

“The sixth round of talks were successfully concluded this March in Beijing. We are working for the seventh FTA round next.”

The ministry said 42 percent of Sri Lanka’s total imports in 2016 came from China at a value of 4.2 billion dollars, with bilateral trade with China at 4.4 billion dollars.

Sri Lanka’s exports to China last year were in Ceylon Tea, coconut, footwear parts, apparel, and rubber tyres, with growth shown in tea over the last five years.

Though Sri Lankan exports to China declined in 2016 to 199 million dollars from 293 million dollars in 2015, exports have been on an upward trend increasing from 35 million dollars in 2007.

Top imports from China last year were mobile phones, boats & vessels, handmade fabrics, and petroleum, the ministry said.

FTA negotiations on the Sri Lankan side were moving ahead with domestic stakeholder consultations, the ministry added.

The Guangxi Zuang Autonomous Region product exhibition in Colombo was attended by the Deputy DG of the Department of Commerce of Guangxi, Xiong Jiajun, a 40-person delegation including event exhibitors, and Charge d’affairs of Chinese Embassy in Sri Lanka Ms Pang Xunshie.

Autonomous Regions in China are administrative divisions with their own local government, more legislative rights, and higher population of a particular minority ethnic group.

China has five autonomous regions: Guangxi, Inner Mongolia, Ningxia, Tibet (Xizang) and Xinjiang.

 

Read more ...

New revenue Bill should be implemented from April 2018: Ceylon Chamber

July 17, 2017 (LBO) – Ceylon Chamber of Commerce says it is their view that the new Inland Revenue Bill, once enacted, should ideally be implemented from 1st April 2018.

The chamber says it will give a longer transitional period for both the tax payer and the Department of Inland Revenue to become fully conversant with the provisions of the law.

The new Inland Revenue Bill, which was gazetted on 16th June 2017, was tabled in Parliament on 05th July 2017. Once passed by Parliament, this Bill will replace the existing Inland Revenue Act No 10 of 2006.

The objective is to broaden the existing tax base, rationalize the existing tax structure, and simplify the language and to align the tax rules with international best practice.

“It is the view of the Ceylon Chamber that formulation of tax policy is the prerogative of the government with due consideration for different stakeholder views,” the chamber said in a statement.

The Ceylon Chamber was engaged in the drafting stages of the Bill and made several representations to the government on behalf of its members and the general tax paying public without compromising the government’s effort of increasing revenue collection.

Some of the key submissions made by the Chamber were to maintain the current law relating to taxing dividends, interest, and the business of life insurance and sale of shares in the CSE.

It also includes concessionary rate of tax for thrust industries such as agriculture, education and exports, simplify the capital allowances structure proposed in the new Bill and to maintain the same tax structure.

“We are happy to note that most submissions were accepted whilst the Chamber is yet negotiating with government to accept certain provisions to do with the practical implementation of the proposed law.”

To refer all submissions made by the chamber to the Finance Ministry during the preparation of the Bill, visit their website and ‘submissions to government’.

 

Read more ...

ORIENT FINANCE - DIVIDEND ANNOUNCEMENTS

ORIENT FINANCE PLC
Company ID: - BFN
Date of Announcement: - 17.Jul.2017
Rate of Dividend: - Rs. 0.25 per share / Final Dividend
Financial Year: - 2016/2017
Shareholder Approval: - Required
Dates to be notified.

Read more ...

Tax reforms would help SL rating outlook back to stable: Moody's

July 14, 2017 (LBO) – Evidence of effective implementation of reforms that leads to significant and lasting improvements in tax collection, and more stable external financing conditions, would support a return of Sri Lanka’s rating outlook to stable, Moody’s said.

Moody’s Investors Service said signs that planned fiscal consolidation measures are less effective than Moody’s currently expects or that the authorities’ commitment towards such steps has diminished would weigh on Sri Lanka’s rating, particularly if foreign-exchange reserves remain low while refinancing of market debt is challenging.

Moody’s, in mid last year changed Sri Lanka’s rating outlook to negative from stable, with an expectation that the government’s debt burden will increase further, from high levels, which could intensify external vulnerabilities and refinancing risks.

Moody’s Investors Service says that the Government of Sri Lanka’s B1 rating is currently supported by the economy’s robust medium-term GDP growth prospects, relatively large economy, and high income levels when compared with similarly rated sovereigns.

“At the same time, despite recent progress in fiscal consolidation, credit challenges include high general government debt, very low debt affordability and large borrowing requirements. Moreover, Sri Lanka’s external payments position also remains fragile,” Moody’s said.

Moody’s conclusions are contained in its just-released annual credit analysis, “Government of Sri Lanka — B1 Negative”.

This report elaborates on Sri Lanka’s credit profile in terms of Economic Strength, Moderate (+); Institutional Strength, Low (+); Fiscal Strength, Very Low (-); and Susceptibility to Event Risk, Moderate.

These are the four main analytic factors in Moody’s Sovereign Bond Rating Methodology.

In 2017, Moody’s expects real GDP growth of 4.6 percent, which reflects the temporary negative impact of adverse weather-related events during the first half of the year. They also expects GDP growth to average 5.2 percent per year in 2017-21, a robust growth rate.

Sri Lanka has progressed with some reforms under its three-year International Monetary Fund (IMF) Extended Fund Facility (EFF) program.

In particular, revenue measures aimed at increasing taxes, such as last year’s value-added tax (VAT) rate hike and this year’s pending new Inland Revenue Reform act, have the potential to sustainably increase government revenues.

“Sri Lanka’s low tax efficiency and tax collection provide significant scope to broaden the tax base and increase the tax revenue/GDP ratio, which was only 12.4% in 2016,” said William Foster, a Vice President and Senior Credit Officer at Moody’s.

Total government revenues are also very low, with a general government revenue/GDP ratio of 14.3 percent in 2016, one of the lowest among B-rated sovereigns.

Despite ongoing fiscal consolidation, Sri Lanka’s credit profile will remain constrained by its large debt burden and very low debt affordability, combined with contingent liability risks from state-owned enterprises.

Moody’s expects general government debt to decline only gradually to around 78 percent of GDP in 2018, from 79.3 percent in 2016, significantly higher than the median of 53 percent for B-rated sovereigns.

Progress on reducing external vulnerability has been slower. External and foreign currency debt account for about 43 percent of total government debt, giving rise to significant exposure to external financing conditions.

In particular, large volumes of external government debt maturing in 2019-22 will test government liquidity and external vulnerability.

Further measures to build foreign-exchange reserves would help establish buffers against external pressure, in particular ahead of 2019.

 

Read more ...