Business
Relief package supports Sri Lanka’s economic recovery but compounds government’s fiscal challenge, says Moody’s
On 3 January, Sri Lanka’s government announced a fiscal relief package worth LKR229 billion ($1 billion, 1.6% of our 2022 GDP forecast) to support the economy and alleviate the impact of higher consumer prices on low-income households.
While the size of the package is moderate and will be fully funded via reallocations from the budget (6% of budget expenditure in 2022), it reduces the scope for fiscal and debt consolidation at a time when fiscal flexibility is already severely limited by the large share of interest payments in government revenue (60-70%).
Funding the package with reallocations from the budget in part reflects this limited fiscal space, which constrains the government’s ability to use fiscal policy to mitigate the impact of economic shocks.
Furthermore, the risk of fiscal slippage has increased with the emergence of the omicron variant of the coronavirus. Some countries have tightened activity and travel restrictions, and any reintroduction of measures domestically or a delay in the recovery of Sri Lanka’s tourism sector would intensify fiscal and external pressures.
Key features of the relief package include cash handouts of LKR1,000 to citizens receiving income support, agricultural subsidies, the removal of certain taxes on food and medicine and an increase in public-sector salaries (LKR5,000 a month from January). Such measures would support domestic demand and the economic recovery as surging prices – particularly for food – stemming from global supply chain-related disruptions and some import restrictions over 2020-21 reduce the purchasing power of households. Consumer price inflation rose to 8.3% year-over-year in October 2021 and accelerated to more than 11% in November, with food prices surging by 17%
We expect inflation-adjusted real GDP growth to pick up to around 5% in 2022 from around 4-5% in 2021, in part because of a lower base and because domestic economic activity has largely normalised, with international borders open to vaccinated tourists since October 2021. However, risks remain as the new omicron variant of the coronavirus could delay such a recovery, and several countries have reversed their easing of travel restrictions. Should such risks materialise, the recovery in government revenue would likely be delayed beyond our assumptions, with fiscal and debt metrics remaining very weak for longer.
We forecast that the fiscal deficit will narrow only slightly to around 9-10% of GDP in 2022 from around 11% in 2021, mainly reflecting our expectation for lower revenue growth than the budget envisages. Wide deficits will keep the government’s debt burden at higher levels for some time; we estimate that the debt burden will rise to around 108% of GDP by the end of 2022 from around 101% at the end of 2020 and 87% at the end of 2019, before stabilising at the elevated 2022 level thereafter, mainly reflecting the recovery in nominal GDP growth. Such levels are significantly above the Caa median and much higher than the government’s medium-term target of around 75% in 2025n addition, a delay in the recovery of tourism receipts would weigh on Sri Lanka’s precarious external liquidity position.
As of November 2021, the country had $1 billion in foreign-exchange reserves (which in our definition excludes gold and Special Drawing Rights), covering less than one month of imports. While the central bank indicated that reserves had risen as of the end of December with the disbursement of a $1.5 billion swap agreement with the People’s Bank of China, reserves adequacy remains very weak, with reserves at around $2-3 billion compared with $5-6 billion of foreign-currency obligations due annually through at least 2025.
The Delegation of German Industry and Commerce in Sri Lanka (AHK Sri Lanka) proudly facilitated the first-ever Sri Lankan delegation’s participation at Drupa 2024, the world’s largest trade fair for the printing industry and technology. Held after an eight-year hiatus, Drupa 2024 was a landmark event, marking significant advancements and opportunities in the global printing industry.
AHK Sri Lanka played a pivotal role in organising and supporting the delegation, which comprised 17 members from the Sri Lanka Association for Printers (SLAP), representing eight companies from the commercial, newspaper, stationery printing, and packaging industries. This pioneering effort by AHK Sri Lanka not only showcased the diverse capabilities of Sri Lanka’s printing sector but also facilitated vital bilateral discussions with key stakeholders from the German printing industry.
Business
Unveiling Ayugiri: Browns Hotels & Resorts sets the stage for a new era in luxury Ayurveda Wellness
In a captivating reimagining of luxury wellness tourism, Browns Hotels & Resorts proudly unveiled the exquisite Ayugiri Ayurveda Wellness Resort Sigiriya. This momentous occasion, celebrated amidst a vibrant and serene grand opening on the 6th of June, heralds a new chapter in the Ayurveda wellness tourism landscape in Sri Lanka. Nestled amidst 54 acres of unspoiled natural splendour, Ayugiri features 22 exclusive suites and stands out as the only luxury Ayurveda wellness resort in the country offering plunge pools in every room, rendering it truly one-of-a-kind.
The grand opening of Ayugiri Ayurveda Wellness Resort was an enchanting event, where guests were captivated by the melodies of flutists and violinists resonating through Sigiriya’s lush landscapes. As traditional drummers and dancers infused the air with vibrant energy, Browns Hotels & Resorts’ CEO, Eksath Wijeratne, Kotaro Katsuki, Acting Ambassador for the Embassy of Japan and General Manager, Buwaneka Bandara, unveiled the resort’s new logo, marking a significant moment witnessed by distinguished guests from the French Embassy, Ayurveda and wellness enthusiasts along with officials from the Sigiriya area, LOLC Holdings and Browns Group.
“Our strategic expansion into wellness tourism with Ayugiri Ayurveda Wellness Resort Sigiriya symbolises a significant milestone for Browns Hotels & Resorts. Wellness tourism has consistently outperformed the overall tourism industry for over a decade, reflecting a growing global interest in travel that goes beyond leisure to offer rejuvenation and holistic well-being. By integrating the timeless wisdom of Ayurveda with modern luxury, we aim to set a new standard in luxury wellness tourism in Sri Lanka. Whether your goal is prevention, healing, or a deeper connection to inner harmony, Ayugiri offers a sanctuary for holistic well-being” stated Eksath Wijeratne.
Ayugiri encapsulates the essence of life, inspired by the lotus flower held by the graceful queens of the infamous Sigiriya frescoes. Just as the lotus emerges from the murky depths, untainted and serene,
Ayugiri invites guests on a journey of purity and rejuvenation, harmonised with a balance of mind, body and spirit, the essence of nature, echoes of culture and the wisdom of ancient Ayurvedic healing.
HNB General Insurance, one of Sri Lanka’s leading general insurance providers, has been honored as the Best General Bancassurance Provider in Sri Lanka 2024 by the prestigious Global Banking and Finance Review – UK.
The esteemed accolade underscores HNB General Insurance’s unwavering commitment to excellence and its outstanding performance in the field of bancassurance. Through dedication and hard work, the HNB General Insurance team has continuously endeavored to deliver innovative insurance solutions, cultivate strong relationships with banking partners, and provide unparalleled service to customers nationwide. This recognition is a testament to the team’s dedication and relentless pursuit of excellence in the bancassurance business.
“We are honored to receive this prestigious award, which reflects our team’s tireless efforts and dedication to delivering value-added insurance solutions and exceptional service through our bancassurance partnerships,” said Sithumina Jayasundara, CEO of HNB General Insurance. “This recognition reaffirms our position as a trusted insurance provider in Sri Lanka and motivates us to continue striving for excellence in serving our customers and communities.”
US sports envoys to Lanka to champion youth development
Rahuman questions sudden cancellation of leave of CEB employees
