Central Bank aware of identify of ‘Sri Lankan names” in Panama Papers leak - Governor

The Central Bank has the names of Sri Lankans identified in the Panama Papers leak but no details wouldn't be revealed until a proper investigation is undertaken, the governor said on Tuesday.

Mr. Arjuna Mahendran told reporters that the bank’s Financial Investigation Unit (FIU) is carrying out an investigation into some of those papers that they have received and was also requesting information from other central banks and other investigative arms globally.

He said that as they were unable to give details as - according to preliminary investigations carried out - there seems to be some doubt regarding the authenticity of the documents.

Mr. Mahendran noted that there are millions of pages of documents and the doubts regarding authenticity was mostly because of the fact that the information had come from third parties who themselves were likely to have even planted names of individuals.

“I find it difficult (to believe) that so much money has left (Sri Lanka). I find it difficult to believe those large numbers,” the governor said referring to the large numbers mentioned in the media concerning monies that would have left the country.

The Panama papers are an unprecedented leak of 11.5 million files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The documents indicate the manner in which some of the richest people exploiting secretive offshore tax regimes with the names of 12 national leaders among 143 politicians, their families and close associates from around the world who have used offshore tax havens. (SD)

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Sri Lanka’s Janashakthi Insurance appoints Husein Esufally as Chairman

(LBO) – Sri Lanka’s Janashakthi Insurance announced the appointment of Husein Esufally,

as the new Chairman of its Board, following the retirement of W. T. Ellawala, a statemet said.

Esufally, prior to the appointment, held the position of Deputy Chairman of the Board of Janashakthi Insurance and its subsidiary Janashakthi General Insurance.

He is presently the Chairman of Hemas Holdings PLC., where he served as Chief Executive Officer from January 2001 – March 2014.

“Esufally has been instrumental in transforming Hemas from a private company to one of the leading blue chips on the Colombo Stock Exchange,” it said.

The Board of Directors of Janashakthi Insurance now comprises Husein Esufally–Chairman, Prakash Schaffter, Managing Director, Jude Fernando, Director/ Chief Executive Officer, L. C. R. de C. Wijetunge, Manjula Mathews, Ramesh Schaffter, Eardley Perera and Anushya Coomaraswamy

Sri Lanka needs to raise US$ 2.5 billion this year for government expenses

Sri Lanka needs to raise US$ 2.5 billion this year for government funding requirement, Governor of Central Bank Arjuna Mahendran said today.

The Governor, speaking at a press conference held on Tuesday on the state of the economy, said the discussions with the International Monetary Fund (IMF) to obtain a loan facility have been positive but it is not yet a "done deal".

"So far the discussions (with the IMF) have gone very positively, so we hope to get some form of IMF assistance in the next couple of weeks. But it's still not a done deal. We have lot of further negotiations to be held," Mahendran said.

The Sri Lankan team attending the spring meeting of the IMF and the World Bank in Washington from April 12-17, including the Finance Minister Ravi Karunanayake, the Governor, and Treasury Secretary Dr. RHS Samaratunga, will continue the discussions with the IMF, Mahendran said.

Mahendran said Sri Lanka needs to raise around US$ 2.5 billion for its government funding requirement this year, and would look at Chinese renminbi bonds as well as dollar bonds in coming months.

He said the economic situation is going according to the plan. Imports, funded by high bank credits, were high last year but now showing signs of plateauing with the tight monetary policy.

"The rate of growth (of imports) I think has been arrested, which is desirable," he said adding that the lending by the banks were very high last year and early this year growing at about over 25 percent which is clearly undesirable as it would increase inflation.

The Central Bank started tightening the monetary policy to discourage imports and keep the inflation low and it has begun to yield the desired effects, he said.

He said the IMF has suggested continuing the tightening of monetary policy but it is not necessary if the economy continues to achieve a "soft landing" as planned and the Central Bank remains hopeful that there won't be a need to hike interest rates. Controlling inflation remains a main objective of the economic plan, he said.

I would say that that is not necessary if the economy continues to achieve a soft landing, if the economy goes according to plan. The Central Bank however reserves the right to increase rates, he said.

He said that on a positive note, the economic outlook is strong although the economy grew only 2.5 percent in the fourth quarter of 2015. He attributed the low figure to the "base effect" compared to the 10.4 percent growth in the fourth quarter of 2014.

Overall, Sri Lanka's economy grew at 4.8 percent in 2015 versus 4.9 percent in 2014, according to the Central Bank.

The Governor said on a conservative basis the economy is expected to grow 5-5.5 percent this year, adding that if the Chinese investments negotiated by the Prime Minister during his recent visit to China come to fruition in the second half of the year, a higher growth can be expected.

According to the Governor if IMF assistance is secured in the next two weeks that will also give confidence to the investors. Mahendran said he was hopeful of obtaining around US$ 1 billion to US$ 1.25 billion support from the IMF.

He said the government has decided not to borrow excessively and the thrust of economic activity in going forward will be private investments. All infrastructure projects in future will be done with public-private partnerships, he added.

The IMF concluding a review mission on Monday, said it has made significant progress toward a staff level agreement with the government of Sri Lanka on an economic program that could be supported by a 36-month Extended Fund Facility (EFF) and it could get approval within the next two weeks.

Ceylon Dollar Bond Fund records 8.82 percent dollar return

(LBO) – The Ceylon Dollar Bond Fund (CDBF) that invests in Sri Lanka Dollar Sovereign Bonds and Bank Bonds has recorded an 8.82 percent per annum annualized return (10.60 percent in Rupee terms) during the first quarter of 2016, its managers said.

The dollar denominated fund in Sri Lanka is managed by Ceylon Asset Management, while Deutsche Bank is Trustee and Custodian of the fund. The fund has been awarded a B+ rating by Fitch Ratings that mirrors Sri Lanka’s country dollar rating.

“The tax exempted Unit Trust is operated out of Colombo and Singapore. The fund is open to investment exclusively for Sri Lankans living or working overseas, BOI companies and all foreign nationals and companies. The fund is open to retail investors from US$ 1,000 upwards, as well as institutional investors who can invest via Singapore or Colombo,” a statement said.

“The open-ended fund structure enables investor’s easy exit whenever they please, without being locked-in for a fixed deposit. The fund has invested in dollar denominated Sovereign Bonds issued by the Government of Sri Lanka, and Dollar Bonds issued by Bank of Ceylon, National Savings Bank and DFCC Bank.”

Ceylon Asset Management’s Economic Advisor and Director, Rainer Michael Preiss in Singapore says “The CDBF has been able to capitalize on high interest rates available in Sri Lankan bonds following the US Federal Reserve raising interest rates last December, and Sri Lanka’s rating downgrade.”

Preiss went on to note that as Sri Lanka’s economy gains momentum, the high interest rates will decline as the country’s rating is potentially upgraded once again.

“The Fed is unlikely to raise interest rates again in the near future. Therefore, investors should take advantage of the current interest rate scenario and a strong US dollar by investing in the CDBF sooner than later.”

“The returns on the Ceylon Dollar Bonds are attractive, compared to regional and international fund returns” Preiss said, upbeat on Sri Lankan government plans to increasingly engage in international Capital Markets. “The fund will surely attract foreign investor capital into Sri Lanka bonds,” he said.

Managing Director of Ceylon Asset Management, Dulindra Fernando says “the Ceylon Dollar Bond Fund has the potential to begin what Non-Resident Indians have done for Indian capital markets”.

“We believe it is time for Sri Lankan Diaspora as well as Lankans living abroad, to begin investing in Sri Lankan capital markets due to attractive valuations available,” said Fernando.

The Ceylon Dollar Bond Fund has been approved for investment by the Central Bank of Sri Lanka, while it is the first dollar denominated Unit Trust licensed by the Securities and Exchange Commission of Sri Lanka. Ceylon Asset Management is an associate company of Sri Lanka Insurance Corporation Ltd and Commercial Credit & Finance PLC.

Sri Lanka’s Hilton gets new board

(LBO) – Krishantha Cooray has been appointed Chairman and Non Executive Director of Hotel Developers Lanka (Hilton Hotel), a statement said.

Following Non-Executive Directors too have been appointed: Athula Senanayake, Tehani S. Mathew, Dinouk Colombage, Sonali Liyanamana, Dhanushka R. Samarasinghe and M.Shezmin Manzoor, according to a filing to the Stock Exchange.

Sri Lanka VAT raised to 15-pct from May 2, proposed income tax cuts suspended

ECONOMYNEXT – Sri Lanka’s finance ministry said value added tax (VAT) would be increased to 15 percent from 11 percent with effect from 02 May 2016 while the Nation Building Tax (NBT) would remain unchanged at 2-percent.

Deputy Secretary to the Treasury S R Attygalle said the changes were in accordance with that announced by Prime Minister Ranil Wickremesinghe last month in parliament.

The changes are a key to increasing revenue, reducing domestic borowing and money printing which will help eventually stabilize the credit system and the rupee.

The finance ministry statement also announced the re-imposition of the 0.3 percent share transaction levy.

It said the threshold for registration for VAT shall be 03 million rupees per quarter or 12 million rupees a year.

Wholesale and retail trade (other than by a manufacturer or importer) shall be liable for VAT and the tax shall be charged only on liable supplies.

The restriction on exempt supplies (deemed VAT) will be removed.

Supplies which are currently exempted shall be liable for VAT.

These are telecommunication services, import or supply of telecom equipment or machinery, high tech equipment including copper cables for telecom industry, telco licenses, healthcare services and supply of goods or services to any specified projects other than housing.

The finance ministry said the threshold for the Nation Building Tax (NBT) will be reduced to 03 million rupees per quarter from 25 million rupees, except for any locally procured agricultural produce in the preparation for sale.

It removed present exemptions on telecommunication services, electricity supply, lubricants and supply of goods or services to any specified projects other than housing.

Another Treasury circular said banks, finance and insurance companies will be charged income tax at 28 percent. Lottery, betting and gaming will be at 40 percent from the year starting April 2016. All other companies to be taxed at 17.5 percent.

Pay-as-you-earn tax will be at a maximum of 16 percent on the same slabs as earlier. The employer will no longer be able to pay tax on behalf of the employee. Witholding tax on interest at 2.5 percent will be continued.

Sri Lanka to re-impose 0.3-pct share transaction levy from April 15

ECONOMYNEXT – The Colombo Stock Exchange said it will re-impose the share transaction levy at the rate of 0.3 percent from Friday, 15 April, 2016.

The levy would be charged from every buyer and seller on the turnover of every share trading transaction done on the CSE, it said in a note to brokers.

The share transaction levy was removed from January 1 this year in accordance with a proposal in the Sri Lankan government budget for 2016 announced last year.

It is being re-imposed after a capital gains tax proposed in the budget was differed following opposition from investors.