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Sri Lanka Equity Forum » Stock Market & Forum Help » Economic Analysis » Sri Lankan Economy - "Post-Covid19"

Sri Lankan Economy - "Post-Covid19"

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1Sri Lankan Economy - "Post-Covid19"  Empty Sri Lankan Economy - "Post-Covid19" on Thu Mar 26, 2020 1:53 pm

Quibit

Quibit
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Sri Lankan Economy - "Post-Covid19"  48621810
Ajith Nivard Cabraal

"කොවිඩ්-19 ව්‍යසනයට පසු" වකවානුව සඳහා නව ගෝලීය ආර්ථික පදනමක් සහ ව්‍යුහයක් සකස් කොට ගොඩනැගීමට අවශ්‍ය වනු ඇත.
එම ව්‍යසනයෙන් මතුවන අභියෝගවලට සහ ප්‍රශ්න වලට මුහුණදීමට ශක්තියක් ලබා ගත හැකි ආර්ථික පදනමක් ශ්‍රී ලංකාවේද, ජාත්‍යන්තරවද, ගොඩ නැගීමට අවශ්‍ය වනු ඇත.
එම නව අභියෝගවලට මුහුණ දීම සඳහා ජාත්‍යන්තරව සහ දේශීයව දියත් කළ යුතු ඉදිරි වැඩ සටහන්, ඒ පිළිබඳව සාකච්ඡාවක් ගොඩනැඟීම සඳහා, ඊළඟ සතිය තුලදී ඉදිරිපත් කිරීමට මා බලාපොරොත්තු වෙමි.

A new world economic structure will have to be developed to deal with the "post-Covid19" era. 
The Sri Lankan economy will also have to be re-shaped and re-structured to deal with the new global economic order and the challenges that would emerge.
I will unfold a "way-forward" strategy by the end of next week, for a global and local discussion.

Ajith Nivard Cabraal

2Sri Lankan Economy - "Post-Covid19"  Empty Re: Sri Lankan Economy - "Post-Covid19" on Fri Mar 27, 2020 10:29 am

God Father


Manager - Equity Analytics
Manager - Equity Analytics
A brief snapshot of the imminent economic impact to SL from the COVID -19 crisis
1. Budget deficit will be between 9-12%, fueled by negative to low growth, falling tax revenues and rise in austerity measures to support the most vulnerable population and businesses
2. Economy will most likely contract for the first time since 2001. The CBSL target rate of 3.5-4% growth would not happen.
3. Many companies including SME's will suffer losses and cash flow headaches, that will extend to April, some beyond. this will threaten sustenance and employment
4. Despite the fuel prices reducing import bill has not and significant reductions in imports required to balance the BOP and stabilize the depreciation in the Rupee
5. Unfortunately, this is a election year which will center around political economic policies that will deter the implementation of stringent fiscal measures
6. Closures in USA and Europe should spark the decline in export revenues, Eg: Apparal. Further, remittances would also be threatened with most migrant sourcing nations remaining on lock down.
7.Tourism Sector will be most impacted due to restricted travel
Next: Potential solutions for SL to come out of this crisis

3Sri Lankan Economy - "Post-Covid19"  Empty Re: Sri Lankan Economy - "Post-Covid19" on Fri Mar 27, 2020 12:57 pm

kasun_gimhana

kasun_gimhana
Manager - Equity Analytics
Manager - Equity Analytics
If the Government increases money supply this way, LKAS 29-Financial Reporting in Hyperinflationary Economies accounting will be applied for a financial statement.

4Sri Lankan Economy - "Post-Covid19"  Empty Re: Sri Lankan Economy - "Post-Covid19" on Sat Mar 28, 2020 10:41 am

God Father


Manager - Equity Analytics
Manager - Equity Analytics
27 March 2020 CIRCULAR No. 05 of 2020
RUPEES 50 BILLION, SIX-MONTH RE-FINANCING FACILITY TO SUPPORT COVID-19 HIT BUSINESSES INCLUDING
SELF EMPLOYMENT AND INDIVIDUALS

1. Introduction
(i) The Central Bank of Sri Lanka has decided to set up the above Re-financing Facility in order to implement the decisions taken by the Cabinet of Ministers on 20.03.2020 to introduce a wide range of fiscal and financial concessions for COVID-19 hit business activities including self-employment businesses and individuals. Among these concessions are debt moratorium (capital and interest) and a working capital loan at the interest rate of 4% p.a. for eligible customers.

(ii) The licensed commercial banks, licensed specialised banks, licensed finance companies and specialised leasing companies (hereinafter referred to as Financial Institutions) will be eligible to participate in this re-financing facility to support COVID-19 hit businesses including self-employment businesses and individuals commencing 25.03.2020.

(iii) This Circular is issued to supplement the Circular No. 04 of 2020 dated 24.03.2020 and sets out the operational guidelines to give effect to the re-financing facility.

2. General Terms and Conditions of the Financing Facility

(i) Eligible businesses/sectors:

(a) Tourism, direct and indirect export-related businesses including apparel, IT, tea, spices, plantation and related logistic suppliers that have been adversely affected by work disruption and overseas lockdowns resulting from COVID – 19.

(b) Small and Medium Enterprises (SMEs) engaged in business sectors such as manufacturing, services, agriculture (including processing), construction, value addition and trading businesses including authorised domestic pharmaceutical suppliers with turnover below Rs. 1 bn.

Self-employment businesses and individuals who have lost their jobs or income due to the outbreak of COVID-19.

Foreign currency earners (individuals and corporates) who have to repay loans in foreign currency and whose incomes/ businesses have been adversely affected due to the outbreak of COVID-19.

 (ii) For the avoidance of doubt, import facilities shall not be permitted under this re-finance facility, for imports other than pharmaceutical drugs, medical equipment, food, fertilizer and essential raw materials and machinery and equipment.

(iii) Credit facilities to be supported under this Financing Scheme shall be term loans, leasing facilities, pawning, overdrafts and trade finance facilities denominated in Rupees and foreign currency subject to the requirements specified.

(iv) Financial institutions shall offer concessions under this Scheme to all borrowers who have been affected by work disruption due to COVID – 19 and overseas lockdowns and requested relief through online facilities or other communication arrangements before 30.04.2020. 

The financial institutions shall complete processing of such requests within 45 days from the date of receipt of the request. Until the processing of requests is concluded recovery of loans from the respective applicants shall be suspended.

3. Concessions for Existing Performing Loans as at 25.03.2020

(i) Upon a communication by a borrower requesting concessions under this scheme on or before 30.04.2020, the financial institutions shall offer a debt moratorium for the period as given below in respect of all eligible Rupee and foreign currency term loans.

(a) A six-month debt moratorium on the leasing rentals of all three- wheelers, school vans, lorries, small goods transport vehicles and buses, and related assets such as motor bikes ans taxies operated by the self- employed/ owners.

A debt moratorium until 30.05.2020 on personal loans granted to all private sector non-executive employees.

A three-month debt moratorium for all personal loans and leasing rentals of value less than Rs. 1 million.

A six-month debt moratorium for affected industries in small & medium enterprises, tourism, apparel, plantation, IT and related logistic service providers.

A six-month debt moratorium for all other eligible businesses/sectors specified under 2 (i) above.

 (ii) Financial institutions shall extend the existing tenure of loans eligible for debt moratorium by the respective moratorium period.

(iii) Permanent Overdraft facilities falling due for settlement or maturing or are reviewed during the period up to 25.03.2020 shall be extended up to 30.09.2020. However, in the case of Temporary Overdraft facilities as at 25.03.2020, the expiry shall be extended by two months for eligible borrowers. Interest rate on such facilities will be capped at 13 percent during the extended period.

(iv) Eligible trade finance facilities falling due for settlement or maturing or were under review during the period up to 25.03.2020 shall be extended up to 30.09.2020.

(v) Pawing facilities falling due for settlement or maturing during the period up to 25.03.2020 shall be extended up to 30.09.2020.

4. Concessions for Existing Non-Performing Loans (NPLs) as at 25.03.2020

(i) The penal interest charged up to 25.03.2020 shall be waived off by the concerned financial institutions.

(ii) Rescheduling of loans and advances shall be as follows:

(a) Where the borrower has repaid 50% or more of the initial capital, 50% of the accumulated and unpaid interest (after waiver of penal interest referred to above) of the defaulted instalments up to the date of
consideration by the concerned financial institutions under this re- financing facility shall be deferred. 

The balance capital outstanding, balance portion of interest of the defaulted instalments and the future interest shall be rescheduled over a 3 year period. The deferred interest shall be waived by the financial institution, after the borrower settles the rescheduled loans in the manner provided in para (c) and (d) below. Where the borrower has repaid less than 50% of the initial capital, 25% of the accumulated and unpaid interest (after waiver of penal interest referred to above) of the defaulted instalments up to the date of consideration by the financial institution under this re-financing facility shall be deferred. The balance capital outstanding, balance portion of interest of the defaulted instalments and the future interest shall be rescheduled over a 3 year period. 

The deferred interest shall be waived by the financial institutions concerned, after the borrower settles the rescheduled loans in the manner provided in para (c) and (d) below. The balance capital outstanding referred to in paragraphs (a) and (b) above shall be rescheduled and repaid over a period of 3 years.

The balance portion of interest of the defaulted instalments and the future interest referred to in paragraphs (a) and (b) above shall be transferred to a suspense account and recovered over a period of 3 years. A moratorium up to 30.09.2020 shall be granted.

Licensed banks may reclassify NPLs under this Scheme as performing loans and advances provided that the borrower has serviced interest for six consecutive months during the debt moratorium period, if required. However, in the case of instalments in arrears before rescheduling the NPL facility is less than six months, upgrading to performing category shall be done only after the borrower has serviced interest for a period equal to instalments in arrears before rescheduling the NPL facility.
 
(iii) Suspension of recovery actions

(a) In the case of eligible borrowers who are in the NPL category as at the
date of this Circular, if financial institutions have commenced or given notice of recovery action under the provisions of the Recovery of Loans by Banks (Special Provisions) Act, No. 4 of 1990 or Mortgage Act No. 06 of 1949 as amended or Finance Leasing Act No. 56 of 2000, such recovery action will be suspended on condition that the concerned financial institution and the client reach a debt re-payment agreement.

(b) Financial institutions shall defer passing new resolutions under the above Acts, for recovery of loans and advances in respect of borrowers participating in this Scheme. In instances where resolutions for recovery have already been passed, auctioning of assets will be suspended until 30.09.2020 in respect of such borrowers who are participants in the Scheme.

(c) In instances where there are on-going litigations in courts relating to recovery, borrowers will be permitted to participate in the Scheme upon entering into an agreement by submission of affidavit to Courts agreeing to comply with the requirements set out in this Scheme.

(d) All financial institutions shall suspend legal action against non- performing borrowers who have been accepted under this Scheme.

5. New Working Capital or Investment Purpose Loan

(i) Financial institutions may grant an additional loan or a new loan facility in Rupees for working capital or investment purposes subject to the following conditions, provided that the borrower submits a credible business plan:

(a) The working capital purpose loan facility shall be granted to eligible performing and non-performing borrowers in Rupees not exceeding Rs. 25 mn per bank per borrower and Rs. 10 mn per other financial institutions per borrower or 2 months working capital requirement whichever is higher, based on the requirement for working capital cycle. Such loan shall be repaid over two years at an interest rate equal to 4% p.a. CBSL will subsidise interest cost up to 4% for licensed banks and up to 7% for other financial institutions as a rebate.

The investment purpose loan facility shall be granted only by banks and only for performing borrowers in Rupees not exceeding Rs. 300 mn per bank per borrower to expand business activities. Such loan shall be repaid over five years at an interest rate equal to maximum of AWPLR plus 1.5%.

 (ii) Financial institutions shall properly evaluate the funding requirement of the borrower and agree on the loan size.

(iii) A moratorium for a period 25.03.2020 to 30.09.2020 will be granted for both working capital loans and investment loans.

(iv) Financial institutions may obtain suitable collateral to mitigate the risk relating to any additional credit facilities granted under this re-finance facility.

6. Repayment of Capital by Banks under Refinance Schemes
The Government has indicated its willingness to defer capital repayments on refinance loans granted to licensed banks falling due from 01.01.2020 until 31.12.2020. However, banks are required to seek extension if required and enter into supplementary agreements with the relevant Government agency in this regard.

7. Reporting to the Credit Information Bureau (CRIB) of Sri Lanka

(i) Financial Institutions are expected to have a mechanism not to decline loan applications solely based on an adverse CRIB record.

(ii) Financial Institutions, in consultation with CRIB, shall develop a reporting modality in respect of the capital deferment granted under this scheme to performing borrowers, so that participation in the Scheme will not have an impact on the credit score of borrowers in the future, or be negatively reflected in future CRIB reports.

8. Financial institutions shall discontinue charging for cheque returns, stop payments, late payment fee on all credit cards and other credit facilities during the period up to 30.09.2020.

9. Reporting Requirement
Financial institutions shall report the details of moratorium availed by their borrowers to the Bank Supervision Department and the Department of Supervision of Non-bank Financial Institutions, as relevant, as at 15th and 30th of each month, within 5 working days, commencing from 01.05.2020.

5Sri Lankan Economy - "Post-Covid19"  Empty Re: Sri Lankan Economy - "Post-Covid19" on Sat Mar 28, 2020 5:07 pm

God Father


Manager - Equity Analytics
Manager - Equity Analytics
Former CB Governor Cabraal says an unconditional Refund of approximately 20% of the Member balances of the EPF, amounting to around Rs.500 billion would be an excellent stimulus to "kick start" the economy and lead to heightened economic activity in all parts of the country, in the aftermath of the Covid-19 pandemic: also says the initiative would be a viable alternative to the Government funded fiscal stimuli implemented in several advanced economies.

6Sri Lankan Economy - "Post-Covid19"  Empty Re: Sri Lankan Economy - "Post-Covid19" on Sun Mar 29, 2020 7:23 pm

God Father


Manager - Equity Analytics
Manager - Equity Analytics
[size=30]Sri Lanka should refund Rs500bn in EPF money holders after Covid-19 crisis: Cabraal
Sunday March 29, 2020 14:08:09[/size]

ECONOMYNEXT – Sri Lanka should return about 20 percent of Employees Provident Fund balance to holders after the Coronavirus pandemic ends as the island no longer had fiscal space to boost the economy after recent tax cuts, a top official said.
Sri Lanka had already given a ‘stimulus’ in the form of a tax cut in January and a debt moratorium after the new administration came to power.
The island did have the fiscal space to give the tax refunds and grants announced by advanced nations, Senior Advisor to the Finance Minister Mahinda Rajapaksa, Nivard Cabraal said. He was also a former central bank governor.
He suggests that 20 percent of each members EPF balances be returned, which will be 500 billion out of a total of 2500 billion in assets.
“This simple and uncomplicated return of capital could be a useful and viable alternative that could achieve the same outcome of serving as an economic stimulus, without any fiscal burden being placed on the Government,” Cabraal said.
“In addition, this newly created “equity” in the hands of around 2,500,000 individuals would expand further and perhaps even double, as many recipients are likely to leverage such funds with borrowings from lending institutions, which would provide a further boost to the economy.”
“By “unlocking” this vast pool of funds at the present time, and through the release of such finances which would be circulating amongst millions of people, many other “knock-on” benefits would also accrue to the people and the economy.”
Cabraal says the benefit would be as follows:
Among such benefits would be:
(1) enhanced economic growth being recorded in the economy due to the higher investment and consumption as a result of the funds infusion.

(2) many persons being able to settle their high interest debt which is presently crippling them.
(3) new business ventures being created as a result of persons with entrepreneurial ideas and abilities being able to embark on new business ventures.
(4) more opportunities opening out for the financial sector to lend, since persons who are embarking on new economic activity are likely to leverage their new equity with debt.
(5) business confidence being enhanced and optimism rekindled due to the higher level of economic activity as a result of investment of the newly released “locked” savings, in the wider economy.
(6) an upturn being recorded in the small-scale construction activity in all parts of the country, which is now at a standstill.
(7) enhanced employment opportunities arising in the Small and Medium Enterprises sector of the country, leading to lower social tensions.
(Cool Government tax revenues improving due to the rise of the level of economic activity throughout the economy.
The funds of the EPF are now held mostly in Sri Lanka government bonds. It is not clear what the effect will be if attempts were made to liquidate bonds.
Meanwhile Sri Lanka’s soft-peg with the rupee had come under severe pressure after a large liquidity injections were made by the Central Bank were made and premiums in the swap markets have disappeared. (Colombo/Mar29/2020)

7Sri Lankan Economy - "Post-Covid19"  Empty Re: Sri Lankan Economy - "Post-Covid19" on Mon Mar 30, 2020 4:43 pm

anges


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
there wont be an economy if this trend continues

8Sri Lankan Economy - "Post-Covid19"  Empty Re: Sri Lankan Economy - "Post-Covid19" on Mon Mar 30, 2020 7:29 pm

ChooBoy


Manager - Equity Analytics
Manager - Equity Analytics
Global economic community must unite amid COVID-19 pandemic, says Sri Lankan Senior Economic Expert.

COLOMBO, March 28 (Xinhua) -- Global communities and financial institutions must unite to put the world economy back in order amid the COVID-19 pandemic, a senior Sri Lankan economic expert said here Saturday.

Ajith Nivard Cabraal, Senior Economic Advisor to Prime Minister Mahinda Rajapaksa told Xinhua that developing countries like Sri Lanka could face unemployment, low economic growth and debt problems due to the COVID-19 pandemic.

"Sri Lanka is looking at an economic situation created by circumstances beyond our shores. The global community must therefore come together to provide a solution to put the world economy back in shape," Cabraal said.

Cabraal, who is a former Governor of the Central Bank of Sri Lanka, said that Sri Lanka would attempt to tide over businesses and keep the economy afloat amid precautions taken against the spread of COVID-19 in the country.

However, he noted that Sri Lanka's biggest foreign exchange earners include apparel manufacturing and tourism, both of which rely on external demand which has been contracting due to the impact of COVID-19 on developed economies in the West.

"No amount of stimulus packages by Sri Lanka can help resurrect these sectors if the global conditions are not right," Cabraal said.

Similarly, lower oil prices, while beneficial to Sri Lanka's import bill, could lead to job losses for Sri Lankan migrant workers in West Asia. The resulting loss in remittances could negate the benefit of low oil prices, Cabraal said.

"The current crisis will need an international response similar to the Bretton Woods system which was set up after World War II to promote reconstruction and recovery of demand," Cabraal said.

"We have to lobby institutions like the G20, IMF, World Bank and UN to create global policies to address these issues," he added.

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