SL GETS SOUTH ASIA’S LARGEST PER CAPITA REMITTANCES
Sri Lanka is home to obtaining the largest per capita remittances in South Asia. On average the remittances per person in Sri Lanka were
US$131 compared with the average for South Asia of US$33, UNDP Resident Representative Neil Buhne said, which meant it was 8 times higher. This latest revelation was made when presenting the findings of the 2009 Human Development Report (HDR) held at the Lakshman
Kadirgamar Institute of International Relations in Colombo yesterday. Migration for employment mostly by females is high in Sri Lanka who work as domestic help workers in most Middle Eastern countries that has increasingly contributed towards the country’s remittances over the years. This year’s theme based on the concept of “Overcoming Barriers: Human mobility and development” showed that migration can have a significant impact on reducing poverty in a country. While migrants can contribute well towards developing economies, however it was pointed out that this is “not a substitute for development,” according to Mr. Buhne. Remittances are very significant for several nations in the region, most notably found to be in Nepal, Bangladesh, and Sri Lanka where they constitute about 16%, 10% and 8% of GDP respectively. In 2007, US$2,527 million in remittances were sent to Sri Lanka.
The report has found that the effect of migration on the destination country is positive while there are possibilities of creating jobs. On the other hand it is posed to have a negative impact on the lower skilled workers. It was observed that the migration needs to slow down even in developing countries. There was a fervent call to reduce the transaction costs for migrants to obtain employment in other countries at the presentation of the report for 2009.
(Daily Mirror, 13-Oct-2009)
Sri Lanka sovereign bond rated ‘B’ by S&P
Oct 14, 2009 (LBO) – Standard and Poor’s has give a ‘B’ rating to an upcoming 500 million US dollar sovereign bond by Sri Lanka maturing in 2015, with a ‘stable’ outlook citing a deal with the International Monetary Fund that has improved foreign reserves.
“The sovereign credit ratings on Sri Lanka take into account improving external liquidity and favorable growth prospects, given a resilient
economy and the positive impetus of the end of the country’s long civil conflict,” S&P said.
“These factors are balanced against prevailing fundamental fiscal weaknesses and attendant high level of public debt burden.”
Fitch said the economy has performed “relatively well” in a global slump, and economic growth is expected at 3.2 percent for 2009, with upside
In the medium term, growth is expected to rebound to 6 to 7 percent per year as consumption and investment benefit from lower domestic interest
rates, improved security, and stepped up public investment.
Rising demand for Sri Lanka’s exports as the global economy rights itself will also boost growth, S & P said.
S&P said foreign reserves are reported at 4.4 billion US dollars up from 1.3 billion US dollars in March 2009 following a stand by arrangement
(SBA) with the IMF.
But about half the about 50 percent of the increase in reserves has created an external liability and included volatile portfolio flows.
“This exposure represents a source of vulnerability in the balance of payments, but we believe that the central bank’s policy commitments under
the SBA will help maintain investor confidence and mitigate some of these risks,” S & P said.
The rating agency said “perennial large fiscal deficits” and a “high level of public debt” hurt Sri Lanka’s rating.
Budget deficits had averaged of 7.8 percent of gross domestic product (GDP) over the past decade and net general government debt was 80.3
percent of GDP at end 2008.
An estimated 33 percent of general government revenues were needed for interest payments.
“These metrics are well above the median for similarly rated sovereigns and remain a source of significant vulnerability to macroeconomic and
external stability,” S&P said.
“Standard & Poor’s believes that in trying to reduce these vulnerabilities, the IMF’s SBA will provide a policy anchor, while the present favorable
constellation of domestic political, economic, and external factors provides a unique opportunity for the administration to implement comprehensive
“However, in view of the difficult prospects for reforms of public expenditure in particular and some major public enterprises, Standard &
Poor’s expects only moderate and gradual fiscal improvement, with deficits remaining at 6 to 7 percent of GDP in the next few years.”
Sri Lanka central bank holds rates key interest amid low inflation
Worldwide inflation is expected to pick up moderately in the ensuing months with the base effects of last year’s high consumer prices driven by the commodity price bubble wearing out, as well as firming demand alongside the nascent recovery in global markets. Nevertheless, inflation in Sri Lanka is expected to be at subdued levels in the approaching months, with current inflation remaining at around 1 per cent during the four
months up to September 2009.
So far during the year, market interest rates have gradually declined in response to the monetary policy relaxation measures of the Central Bank, but are yet to adjust fully to such measures. Benchmark yield rates on Treasury bills have declined significantly by around 800 – 865 basis points since the end of last year, by the first week of October this year. The Central Bank expects the downward movement of the benchmark yield rates to permeate to other market interest rates over the coming weeks, further reducing the borrowing costs of economic agents.
This, together with the improved outlook for economic activity, is expected to underpin an expansion in credit utilisation of the private sector, thereby supporting enhanced economic performance.
Accordingly, the Monetary Board is of the view that the current levels of policy interest rates do not require any adjustment at the present time, since the policy measures adopted so far are still supportive of the desired outcome of gradual easing of the credit conditions in the country.