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COLOMBO, Nov 24 (Reuters) - Sri Lanka's central bank on Thursday threatened administrative intervention to control high market interest rates that it regarded as out of line with the inflation outlook. Any such action, interpreted by economists as meaning it might push market rates down, would lower the government's high borrowing costs. However, it was unclear how the central bank could force investors to support public finances at lower rates than they expected. "If an appropriate downward adjustment in the market interest rates would not take place in line with the envisaged disinflation path, the central bank will be compelled to impose administrative measures to prevent any undue movements in market interest rates," CBSL said in a statement. "The statement was quite aggressive in saying they are prepared to use non-policy rate tools to nudge market rates, including deposit rates, lower," he added.
COLOMBO, Nov 24 (Reuters) - Sri Lanka's central bank held interest rates steady on Thursday, as widely expected, but said it expected a moderation in market interest rates in line with prevailing policy rates. The Standing Lending Facility (LKSLFR=ECI) rate was held steady at 15.50% while the Standing Deposit Facility Rate (LKSDFR=ECI) was kept unchanged at 14.50%. "If an appropriate downward adjustment in the market interest rates would not take place in line with the envisaged disinflation path, the central bank will be compelled to impose administrative measures to prevent any undue movements in market interest rates," it added. Thirteen out of 15 economists and analysts polled by Reuters had forecast the central bank's interest rates to remain unchanged as it waited to see effects of its earlier hikes to filter through to prices and the broader economy. Sri Lanka, which defaulted on its foreign debt repayments in May, secured a preliminary IMF deal for a $2.9 billion bailout in early September.
COLOMBO, Nov 22 (Reuters) - Sri Lanka's central bank is expected to keep rates steady as inflation shows signs of easing and as authorities focus on discussions to secure a $2.9 billion International Monetary Fund (IMF) bailout to stabilise its crisis-hit economy. If global economic stress starts to ease and if Sri Lanka secures an IMF deal before next March we can expect rate cuts in mid-2023," said Visaahan Arumainayagam, analyst for Colombo-based brokering firm Asha Securities. After hitting an annual peak of 68.9% in September with food inflation climbing to 93.7%, consumer inflation moderated slightly to 66% in October. read moreAn acute dollar shortage has left Sri Lanka struggling to pay for essential imports of food, fuel and medicine, with all eyes on the IMF bailout to try and stabilise the nation's perilous debt situation and finances. "Sri Lanka is in need of some deep economic reforms which are politically challenging, overcoming this will be difficult."
LONDON, Nov 21 (Reuters) - Sterling slipped against a strengthening U.S. dollar on Monday as global risk sentiment was dented by rising COVID-19 cases in China, which led to new restrictions in the world's second largest economy. Risk-sensitive sterling was down 0.6% to $1.1816, on track for its biggest daily decline against the U.S. dollar in almost two weeks as China battles numerous COVID flare ups. The pound is expected to weaken further this week with public finances data due on Tuesday and flash PMI numbers on Wednesday. "Weaker sentiment and worsening public finances suggest that the recent correction in real money sterling shorts is already fully valued," said Stretch. Bitcoin was down 2.1% against sterling on the day to 13.600, after briefly falling to the lowest level since December 2020.
"There's now a big push to get nature into sovereign debt markets," said Simon Zadek, executive director at NatureFinance, which advises governments on debt-for-nature swaps and other types of climate-focused finance. At that level, it would be the biggest debt-for-nature swap struck to date. The combined value of swap deals to date is $3.7 billion, according to the data. Securing the buy-in of development banks is usually key for the economics of a deal. The WWF has projects in Central and South America where they are monitoring deforestation by tracking jaguars, said Brenes, who has worked on debt-for-nature swaps for the last 25 years.
COLOMBO, Nov 14 (Reuters) - The crisis-hit Sri Lankan economy can turnaround by end of 2023 if budget policies, which are not limited to the International Monetary Fund's recommendations, are followed, President Ranil Wickremesinghe said in the budget speech on Monday. IMF recommendations have only been looked at to stabilise the economy, Wickremesinghe, who is also the country's finance minister, told parliament, delivering the first annual budget since he took office in July. The budget is likely to include specific measures aimed at reducing the government's deficit and persuading the International Monetary Fund to provide a desperately needed bailout package. Wickremesinghe said the government plans to reduce debt to less than 100% of GDP over the medium term and achieving economic growth of 7%. Reporting by Uditha Jayasinghe; Writing by Swati Bhat; Editing by Simon Cameron-MooreOur Standards: The Thomson Reuters Trust Principles.
President Ranil Wickremesinghe's first full-year budget to parliament will include measures aimed at helping Sri Lanka restructure its debt, increase revenues and trim spending as it works on the bailout with the International Monetary Fund, analysts say. "This is a budget that is being presented at a time Sri Lanka is facing an unprecedented crisis," said State Minister for Finance Ranjith Siyambalapitiya. The World Bank estimates Sri Lanka's economy will contract by 9.2% this year and 4.2% in 2023. Unable to pay for critical imports, Sri Lanka struggled to buy essentials such as fuel, and the public faced soaring inflation, a rapidly depreciating currency and sharply shrinking growth. Spending cuts will likely to be tricky, given Sri Lanka's large public workforce and high debt.
WASHINGTON, Nov 13 (Reuters) - The global economic outlook is even gloomier than projected last month, the International Monetary Fund said on Sunday, citing a steady worsening in purchasing manager surveys in recent months. The global lender last month cut its global growth forecast for 2023 to 2.7% from a previous forecast of 2.9%. In a blog prepared for a summit of G20 leaders in Indonesia, the IMF said recent high-frequency indicators "confirm that the outlook is gloomier," particularly in Europe. "The challenges that the global economy is facing are immense and weakening economic indicators point to further challenges ahead," the IMF said, adding that the current policy environment was "unusually uncertain." That in turn posed "increasing risks of a sovereign debt crisis for vulnerable economies," the IMF said.
"The IMF programme and economic reform agenda will reconstitute Sri Lanka's financial buffers," Weerasinghe said in the emailed statement. "I thank the official creditors for joining this productive meeting where we were able to discuss Sri Lanka's current financial position and progress on reforms." Sri Lanka defaulted on its foreign debt for the first time in May. Japan, India and China are Sri Lanka's largest bilateral creditors, while China's EximBank accounts for about $3.8 billion in loans extended to Colombo to fund large scale infrastructure projects. Earlier on Thursday, S&P Global Ratings lowered ratings on multiple Sri Lanka bonds to its lowest rating "D", from "CC", following missed interest payments on Sept. 14 and 28.
[1/3] Demonstrators shout at Sri Lankan police officers during an anti-government protest by trade unions, student movements, and civil organisations, including the main opposition parties, amid the country's economic crisis, in Colombo, Sri Lanka, November 2, 2022. We need solutions and we will keep fighting for them," Ceylon Teacher's Union Secretary Joseph Stalin said. Widespread protests in July resulted in former President Gotabaya Rajapaksa fleeing the country and resigning after protesters stormed his office and residence. read moreProtesters carrying national and black flags shouted slogans of "Ranil go home," during the march and called for new elections. They also accused the government of using draconian anti-terrorism legislation to crack down on protest leaders and jail two of them.
COLOMBO, Oct 21 (Reuters) - Sri Lanka's parliament on Friday passed a constitutional amendment aimed at trimming presidential powers, beefing up anti-corruption safeguards and helping to find a way out of the country's worst financial crisis since independence. Sri Lanka has struggled for months to find enough dollars to pay for essential imports such as fuel, food, cooking gas and medicine. Opposition parties and civil society representatives, however, have slammed the amendment as not far-reaching enough in promoting accountability and reducing government powers. "This is just tinkering with presidential powers and the amendment does not implement significant change," said Bhavani Fonseka, a senior researcher at the Centre for Policy Alternatives, a Colombo-based think tank. "The president still retains the power to prorogue parliament, to hold ministries and the constitutional council will still have mostly government appointees."
Annual food price inflation picked up to 85.8% from 84.6% in August, while prices of non-food items rose 62.8%. Sri Lanka's Central Bank Governor Nandalal Weerasinghe predicted earlier on Thursday that inflation in the island nation is peaking, with price rises likely to ease this month. read moreThe NCPI captures broader retail price inflation and isreleased with a lag of 21 days every month. The more closely monitored Colombo Consumer Price Index(CCPI) (LKCCPI=ECI), released at the end of each month, rose69.8% in August. It acts as a leading indicator for nationalprices and shows how inflation is evolving in Sri Lanka'sbiggest city.
COLOMBO, Oct 18 (Reuters) - Sri Lanka approved legislation on Tuesday to let companies from oil-producing nations import and sell fuel as it attempts to cope with a steep oil bill that deepened its worst financial crisis in decades. "Due to the country's financial situation we cannot afford to purchase the fuel that we need. Sri Lanka is in the middle of a serious energy crisis." State-run banks have also struggled to repay about $751 million it owes to suppliers, the minister said. The new legislation will liberalize the petroleum industry allowing international companies to directly import and sell fuel in Sri Lanka and reduce reliance on the country's meagre dollar supplies.
Register now for FREE unlimited access to Reuters.com Register"Sri Lanka will remain a middle-income country," the office said in a statement. "We will request the World Bank to grant the country eligibility to obtain loans offered by the International Development Association (IDA)." The local World Bank office in Colombo had no immediate comment on the Sri Lankan request. It said it would continue its discussions with Sri Lanka and that the "key priority" was to move ahead with debt restructuring and economic reforms to put the country's growth back on track. Sri Lanka reached a preliminary agreement with the International Monetary Fund (IMF) for a $2.9 billion bailout in September but has to put its debt on a sustainable path before the funds can be disbursed.
Sri Lanka cabinet approves downgrade to 'low income country'
  + stars: | 2022-10-11 | by ( ) www.reuters.com   time to read: +2 min
COLOMBO, Oct 11 (Reuters) - Sri Lanka's cabinet has approved a proposal to downgrade the island nation's economic status to "low income country", in order to get access to concessional funding from international organisations, the cabinet spokesman said on Tuesday. Sri Lanka's economy is in a deep slump, shrinking at an annual 8.4% in the June quarter in one of the steepest quarterly declines. Register now for FREE unlimited access to Reuters.com RegisterThe cabinet had decided to downgrade the island to "low income" on the World Bank list, said cabinet spokesman Bandula Gunawardane. "Given the serious financial crisis Sri Lanka is facing representatives of international organizations had informed us that if Sri Lanka was categorised as a low income country access to funding would be easier," Gunawardane said. The Central Bank of Sri Lanka, which held policy rates steady last week, is predicting an 8.7% gross domestic product contraction for 2022.
Sri Lanka looks to revive free trade deal with Singapore
  + stars: | 2022-09-27 | by ( ) www.reuters.com   time to read: +1 min
Register now for FREE unlimited access to Reuters.com RegisterSri Lanka's President Ranil Wickremesinghe looks on during an interview with Reuters at Presidential Secretariat, amid the country's economic crisis, in Colombo, Sri Lanka August 18, 2022. REUTERS/ Dinuka LiyanawatteCOLOMBO, Sept 27 (Reuters) - Sri Lanka will step up efforts to revive a stalled free trade pact with Singapore, President Ranil Wickremesinghe told the city state's premier on Tuesday, his office said in a statement. The free trade pact signed in January 2018 was suspended because of objections from Sri Lankan opposition parties and professional bodies. Sri Lanka proposed more than a dozen amendments in May 2021 but talks have largely stalled. Register now for FREE unlimited access to Reuters.com RegisterReporting by Uditha Jayasinghe; Writing by Shilpa Jamkhandikar; Editing by Clarence FernandezOur Standards: The Thomson Reuters Trust Principles.
Sri Lanka is struggling with its worst economic crisis in more than seven decades, which has led to shortages of essentials and the ouster of a president. BILATERAL DEBT TALKSSri Lanka also needs to renegotiate debt with bilateral creditors such as China, Japan and India. As a middle-income country, according to the World Bank, Sri Lanka is not able to engage in talks with bilateral creditors under the G20 common framework for debt treatments. Sri Lanka's total foreign currency debt of $38.7 billion amounts to 48.2% of GDP, the latest IMF report showed in March. The central bank governor said that the country has paid Sri Lanka Development Bonds in both dollar and local currency.
Reaching an agreement with creditors is key to Sri Lanka securing a $2.9 billion bailout package from the International Monetary Fund (IMF). "Japan stands by Sri Lanka in support of the debt restructuring negotiation process so that Sri Lanka can reach the final agreement with the IMF," Ambassador Hideaki Mizukoshi said in an interview. Although Japan will support the debt negotiation process, Mizukoshi said that talks on large infrastructure projects will only be resumed after Sri Lanka's economy recovers. Japanese firms have been investing in Sri Lanka since the 1970s, including in the electronics, ceramics and engineering sectors. "We hope that the environment for investment to Sri Lanka will improve."
Sri Lanka's President Ranil Wickremesinghe looks on during an interview with Reuters at Presidential Secretariat, amid the country's economic crisis, in Colombo, Sri Lanka August 18, 2022. The government has already held preliminary restructuring talks with neighbour India and diplomats based in Colombo. "Sri Lanka is focused on trying to get the IMF deal finalised by December or early next year." Sri Lanka's foreign currency debt was $47.3 billion as of end-2021 and local-currency debt at $53.6 billion, according to an update from the Ministry of Finance in August. The foreign currency debt includes $13 billion in international sovereign bonds held largely by private creditors, such as asset managers BlackRock (BLK.N) and Ashmore (ASHM.L).
WHY THE NEED TO RESTRUCTURE DEBT? That in turn requires negotiation with private creditors and two-way lenders. That includes $13 billion in international sovereign bonds held largely by private creditors, such as asset managers BlackRock (BLK.N) and Ashmore (ASHM.L). The Paris Club informal group of creditor nations that includes India and Japan holds $4.9 billion of Sri Lanka's debt, and China about $5 billion more. Sri Lanka is the first middle-income country to default after the COVID-19 pandemic.
Sri Lanka inflation rate surges to 70.2% in August
  + stars: | 2022-09-21 | by ( Uditha Jayasinghe | ) www.reuters.com   time to read: +2 min
Register now for FREE unlimited access to Reuters.com RegisterSri Lankan rupees are seen in a bowl at a vegetable vendor's shop amid the rampant food inflation, amid Sri Lanka's economic crisis, in Colombo, Sri Lanka, July 29 , 2022. REUTERS/Kim Kyung-HoonSept 21 (Reuters) - Consumer inflation in Sri Lanka accelerated to 70.2% in August,the statistics department said on Wednesday, as the island nation reels under its worst economic crisis in decades. Register now for FREE unlimited access to Reuters.com RegisterThe Central Bank of Sri Lanka (CBSL) said in August that the inflation rate would moderate after peaking at about 70% as the country's economy slowed. It acts as a leading indicator for national prices and shows how inflation is evolving in Sri Lanka's biggest city. An acute dollar shortage, caused by economic mismanagement and the impact of the COVID-19 pandemic, has left Sri Lanka struggling to pay for essential imports including food, fuel, fertiliser and medicine.
A man travels in a train as the Colombo harbour is seen, amid the country's economic crisis in Colombo, Sri Lanka, April 20, 2022. "The discussions held in a cordial atmosphere symbolise India's support to early conclusion and approval of a suitable IMF programme for Sri Lanka," the High Commission said. Reuters reported last week, citing sources, that India did not plan to provide fresh financial support to Sri Lanka, as the island's battered economy had begun to stabilise. read moreThe High Commission said India had ongoing development projects worth about $3.5 billion in Sri Lanka, whose president earlier this month asked his officials to resolve obstacles to projects backed by India. President Ranil Wickremesinghe has said Sri Lanka will turn a free trade agreement with India into a comprehensive economic and technological partnership.
India starts debt-restructuring talks with Sri Lanka
  + stars: | 2022-09-20 | by ( ) www.reuters.com   time to read: 1 min
Register now for FREE unlimited access to Reuters.com RegisterfFILE PHOTO: A Navy officer stands in front of India's and Sri Lanka's national flags as Indian Coast Guard Ship (ICGS) Shoor is in the Colombo port during its visit in Colombo, Sri Lanka April 2, 2018. REUTERS/Dinuka LiyanawatteNEW DELHI, Sept 20 (Reuters) - India said on Tuesday it had started bilateral discussions with Sri Lanka on restructuring the crisis-hit neighbour's debt. The first round was held on Sept. 16 "in a cordial atmosphere" that showed India's support for an early conclusion and approval of an International Monetary Fund loan programme for Sri Lanka, the Indian High Commission in Sri Lanka said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Uditha Jayasinghe; Writing by Krishna N. Das Editing by Louise HeavensOur Standards: The Thomson Reuters Trust Principles.
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