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Monday June 3rd, 2024

Sri Lanka GDP to grow 3.7-pct in 2020, with limited hit from Coronavirus: IMF

ECONOMYNEXT – Sri Lanka’s gross domestic product growth is expected to increase to 3.7 percent in 2020, with a limited fallout from the Novel Coronanvirus expected, the International Monetary Fund said.

Sri Lanka’ economic growth was estimated to have slowed to 2.6 percent in 2019, in the aftermath of a currency collapse in 2018 and East Sunday attacks in April which hit tourism.

“The recovery is supported by a solid performance of the manufacturing sector and a rebound in tourism and related services in the second half of the year,” IMF Mission Chief Manuela Goretti said in a statement after ending a visit to the island on February 07.

“High frequency indicators continue to improve and growth is projected to rebound to 3.7 percent in 2020, on the back of the recovery in tourism, and assuming that the Novel Coronavirus will have only limited negative effect on tourism arrivals and other economic activities.”

Sri Lanka’s tourism arrivals have fallen about 5 percent in February with a sharp downturn in Chinese arrivals. Steeper falls in Chinese arrivals are expected in the coming months.

Sri Lanka has sharply cut taxes after a new administration was elected in November 2020, reversing a so-called ‘revenue based fiscal consolidation’ which not only raised value added tax, but also direct taxes, which reduces investible capital, future growth and jobs.

The tax, cuts however is expected to widen the deficit to 7.9 percent of GDP in 2020, the IMF has projected, with not just direct taxes being cut, but also value added tax.

There were also payment arrears from 2019, the IMF said.

“Given risks to debt sustainability and large refinancing needs over the medium term, renewed efforts to advance fiscal consolidation will be essential for macroeconomic stability,” Goretti said.

“Measures to improve efficiency in the public administration and strengthen revenue mobilization can help reduce the high public debt, while preserving space for critical social and investment needs.”

Sri Lanka’s highly unstable soft-peg, a chronic source of monetary instability for 70 years, collapsed in 2018 in the wake of rate cuts and liquidity injections as the credit system recovered from an earlier crisis analysts have said.

The corrective measures led to a credit contraction, which in turn drove a import contraction and overall slowdown.

Amid the threat of a higher deficit, the central bank cut rates on January 30 adding monetary measures to a fiscal stimulus.

In the past, liquidity injections made to enforce rate cuts, with or without increases in budget deficits, have led to renewed monetary instability, currency collapses, reserve losses and slow growth.

“The CBSL should continue to follow a prudent and data-dependent monetary policy and stand ready to adjust rates to evolving macroeconomic conditions,” Goretti said.

“Net International Reserves fell short of the end-December target under the EFF-supported program in 2019 by about $100 million amid market pressures after the Presidential elections and announced tax cuts.”

Sri Lanka has missed both deficit and forex reserve targets for December in a three year IMF program which is drawing to a close.

Reserves had fallen a slightly in January 2020, data showed.

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Sri Lanka misses 2019 budget deficit, forex reserve targets in IMF program

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Meanwhile the mission called for long term measures to boost growth.

“Ambitious structural and institutional reforms remain critical to raise the country’s growth potential and promote inclusiveness,” Goretti said.

“Concerted initiatives are needed to foster the business climate, promote trade openness and investment, and strengthen infrastructure sustainably, including to respond to the challenges from climate change. Sri Lanka stands to gain from greater female labor participation.” (Colombo/Feb10/2020)

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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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