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Monday June 3rd, 2024

Sri Lanka bad loans grow to 4.8-pct in June after soft-peg collapse

ECONOMYNEXT – Bad loan in Sri Lanka banking system grew to 4.8 percent of gross loans by June 2019, up from 4.2 percent in March, though the credit system has gone through much worse levels of non-performing loans in the past Central Bank Governor Indrajit Coomarasamy said.

"Clearly it is something we have to be cautious about and monitor very carefully," Governor Coomaraswamy said.

"It is not at crisis levels, we have had higher levels in the past. What we have to do is get growth growing again. We are trying to push lending rates down and push liquidity in to the system."

Bad loans spiked after the central bank triggered a currency collapse by printing money just as growth picked up in 2019 which left the rupee at 182 to the US dollar by end 2018 from 153 at the beginning of the year.

Monetary instability kills consumption, which hits revenues of companies, whose loans then go bad.

At the beginning of 2018, bad loans were at 3.0 percent, as tighter accounting rules forced banks to disclose bad loans early.

After the 2008 soft-peg crisis and capital flight bad loans peaked at 8.8 percent. After spiking during the 2015/2016 soft-peg crisis, bad loans fell to a low of 2.5 percent by the end of 2017.

The 2018 soft-peg crisis came quickly on top of a 2015/2015 crisis, but the currency fall is deeper, and liquidity shortages were prolonged.

Amber Light

Gross non-performing loans had grown to 323 billion rupees by the end of the first quarter of 2019, from 200 billion rupees a year earlier, according to central bank data, under tighter accounting rules.

"I do not think we are at the point where red lights are flashing." Governor Coomaraswamy said.

"It is probably in the amber light stage."

Sri Lanka is also considering giving a moratorium for about 100 billion rupees of tourism loans. Banks will not have to provide for loans suspended after the moratorium was announced. However the sector is expected to recover next year.

At the moment banks are well capitalized, with ratios generally above required levels, Deputy Governor Nandalal Weerasinghe said.

"If NPLs are rising banks will have to provide. That will have an impact on capital. At the moment capital is above even after making provisions NPLs."

But loans at finance companies were at 7.8 percent by March 2019. In March 2018 bad loans were at 5.82 percent of gross loans.

However in the finance company sector, there are several legacy companies dating back to the 2008 soft-peg crisis which ended a bubble which grew for several years.

At the time the central bank was battling fiscal dominance, with the Treasury apparently vetoeing attempts to raise policy rates. (Colombo/July15/2019)

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Water levels rising in Sri Lanka Kalu, Nilwala river basins: Irrigation Department

Sri Lanka Navy assisting in rescue operations (Pic courtesy SL Navy)

ECONOMYNEXT – Sri Lanka’s Irrigation Department has issued warnings that water levels in the Kalu and Nilwala river basins are rising and major flooding is possible due to the continuous rain. People living in close proximity are advised to take precautions.

“There is a high possibility of slowly increasing prevailing flood lowline areas of Kiriella, Millaniya, Ingiriya, Horana, Dodangoda, Bulathsinhala, Palinda Nuwara and Madurawala D/S divisions of Ratnapura and Kalutara Districts, up to next 48 hours,” it said issuing a warning.

“In addition, flood situation prevailing at upstream lowline areas of Ratnapura district will further be prevailing with a slight decrease.

“The residents and vehicle drivers running through those area are requested to pay high attention in this regard.

“Disaster Management Authorities are requested to take adequate precautions in this regard.”

The island is in the midst of south western monsoon.

DMC reported that 11,864 people belonging to 3,727 families have been affected due to the weather in Rathnapura, Kegalle, Kilinochchi, Jaffna, Mullaitivu, Kalutara, Gampaha, Colombo, Galle, Matara, Hambantota, Puttalam, Kurunegala, Kandy, Nuwara Eliya, Anuradhapura, Polonnaruwa, Badulla, Moneragala, and Trincomalee districts.

Meanwhile, the Meteorology Department stated that showers are expected on most parts of the island today.(Colombo/June3/2024)

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UNP gen secy defends call for postponing Sri Lanka poll, claims opposition silent

The UNP party headquarters in Pitakotte/EconomyNext

ECONOMYNEXT — United National Party (UNP) General Secretary Palitha Range Bandara has defended his call for postponing Sri Lanka’s presidential election by two years, claiming that his proposal was not undemocratic nor unconstitutional.

Speaking to reporters at the UNP headquarters Monday June 03 morning, Bandara also claimed that neither opposition leader Sajith Premadasa nor National People’s Power (NPP) leader Anura Kumara Dissanayake have spoken against his proposal.

“I have made no statement that’s undemocratic. My statement was in line with provisions of the constitution,” the former UNP parliamentarian said.

He quoted Section 86 of Chapter XIII of the constitution which says: “The President may, subject to the provisions of Article 85, submit to the People by Referendum any matter which in the opinion of the President is of national importance.”

Sections 87.1, 87.2 also elaborates on the matter and describes the parliament’s role, said Bandara.

“I spoke of a referendum and parliament’s duty. Neither of this is antidemocratic or unconstitutional. As per the constitution, priority should be given to ensuring people’s right to life,” he said.

“Some parties may be against what I proposed. They may criticse me. But what I ask them is to come to one position as political parties and make a statement on whether they’re ready to continue the ongoing economic programme,” he added.

Bandara claimed that, though thee has been much criticism of his proposal for a postponement of the presidential election, President Wickremesinghe’s rivals Premadasa and Dissanayake have yet to remark on the matter.

“I suggested that [Premadasa] make this proposal in parliament and for [Dissanayake] to second it. But I don’t see that either Premadasa nor Dissanayake is opposed to it. To date, I have not seen nor heard either of them utter a word against this. I believe they have no objection to my proposal which was made for the betterment of the country,” he said. (Colombo/Jun03/2024)

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300 of 100,000 trees in Colombo considered high risk: state minister

ECONOMYNEXT – Trees in Sri Lanka’s capital Colombo are being monitored by the municipal council, Army and Civil Defense Force as the severe weather conditions continue, State Minister for Defense Premitha Bandara Tennakoon said.

“Within the Colombo Municipal Council city limits, there are 100,000 trees. Of these, around 300 are considered high risk,” Tennakoon told reporters at a media conference to raise awareness about the current disaster management situation.

Not all trees required to be cut down he said. “We can trim some of the branches and retain them.”

The problem was that buildings in the vicinity of the tree had cut branches on one side, causing it to become unbalanced, the minister said.

New laws would be brought in so provincial/municipal institutions could strengthen enforcement of building codes.

“We don’t have a single institution that can issue a warning about a tree. Not one to tell us what trees can or cannot be planted near a road.

“Trees should be suitable for the area. Some trees have roots that spread and damage roads, buildings. When the roots can’t go deep, they tend to topple over.

“Now Environment Day is coming up, and anyone can go plant a tree by the road. We have to take a decision about this. We have to enforce laws strongly in future.” (Colombo/June3/2024)

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