A CEO Forum organised by the CFA Society Sri Lanka (CFASSL) was held in Colombo recently with a focus on ‘Rebooting the Sri Lankan
Economy - Post-Domestic Debt Optimisation’.
The event was attended by regulators, senior government officials, business leaders, and CFA Charterholders. The forum was aimed at fostering a constructive dialogue among regulators and business leaders, towards exploring the opportunities and challenges created through the recently
announced domestic debt optimisation (DDO) programme, and focussing on the actions required from various stakeholders.
Delivering the welcome address, President of CFASSL Aruna Perera noted: “The topic of rebooting the Sri Lankan economy resonates deeply with the CFA Society Sri Lanka, as we recognise the critical role that sustainable economic growth plays in the overall prosperity of our nation. By organising this forum, we aim to not only address the challenges at hand but also emphasise the need for collaboration and strategic planning to unlock the immense potential our economy holds.”
Dr. Nandalal reaffirms CBSL’s commitment to establishing macroeconomic stability
The keynote address was delivered by Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe, who focussed on the rationale for the DDO (impact on debt sustainability andfinancial stability), expected positive outcomes and expectations from the private sector.
Speaking of the need for a DDO programme, he stated that given the restructuring of external/foreign debt as well, it was imperative for the country to bear the responsibility of sharing the debt burden with external debtholders and implement domestic debt restructuring accordingly.
The Central Bank Governor commented: “We’re seeking relief from external creditors who have invested their taxpayers’ and pensioners’ money, so our request must be credible, showing our commitment, and that we take all efforts to restore the situation [to normalcy].”
Furthermore, he affirmed CBSL’s commitment to establishing macroeconomic stability, fiscal consolidation, maintaining the stability of the banking system and assisting the government with necessary reforms, while working on the DDO programme.
The Central Bank Governor noted that with the DDO programme in place, government borrowings would decrease in the medium term, creating space for more private sector investments and impacting economic growth positively.
“In the past, the government absorbed a large amount of domestic resources, and as a result, there was a crowding out impact on the private sector. Going forward, we expect there to be more resources from the local banking system for the private sector, facilitating it to grow faster and contribute to economic growth. So far, the country has relied mainly on public sector investment growth. This needs to change going forward,” he asserted.
In addition, Dr. Weerasinghe referred to the Central Bank Act, which was passed recently, as a key positive for the country. He noted that the Act solidifies CBSL’s independence, in addition to spelling out both its responsibilities and accountability to the government and the
public in managing the financial system of the country and ensuring its stability.DDO programme a key turning point for Sri Lanka, asserts industry leaders.
The keynote speech was followed by a panel discussion featuring industry leaders including Dr. Weerasinghe, Jonathan Alles (Managing Director/Chief Executive Officer, HNB PLC), Suresh Shah (Chairman, SOE Reforms Unit of the Government of Sri Lanka), Vish Govindasamy (Group Managing Director, Sunshine Holdings Plc) and Maninda Wickramasinghe (Managing Director/CEO, Fitch Ratings Lanka Ltd.), and moderated by Senaka Kakiriwaragodage, CFA (Chairman, Employer Outreach Committee, CFASSL).
DDO programme a key turning point for Sri Lanka, asserts industry leaders
The keynote speech was followed by a panel discussion featuring industry leaders including Dr. Weerasinghe, Jonathan Alles (Managing Director/Chief Executive Officer, HNB PLC), Suresh Shah (Chairman, SOE Reforms Unit of the Government of Sri Lanka), Vish Govindasamy (Group Managing Director, Sunshine Holdings Plc) and Maninda Wickramasinghe (Managing Director/CEO, Fitch Ratings Lanka Ltd.), and moderated by Senaka Kakiriwaragodage, CFA (Chairman, Employer Outreach Committee, CFASSL).
It involved a robust conversation related to a number of topics including the role of the banking industry, support for small and medium-sized enterprises (SMEs), restructuring of state-owned enterprises (SOEs), country credit ratings and the role of the private sector.
Jonathan Alles remarked that given the record-high impairments within the local banking system, it was prudent of the Central Bank to exclude the banking sector from the DDO programme. He also noted that with interest rates on the decline, banks now have the opportunity to pass this benefit on to consumers. In particular, he was of the view that it is time to support business and revive the SME sector.
Responding to a query on how banks can further assist SMEs, he commented that “firstly, we need to maintain the rebate, refinance and guarantee programs that are in place. We must also continue to work with partners such as USAID, ADB, the other MLIs (multilateral institutions) and DFIs (development finance institutions) to provide financing. We’re
somewhat bullish that we can support them with better rates, and the necessary financial literacy and networks,” while adding that this should be coupled with accountability on the part of SMEs.
Maninda Wickramasinghe pointed out that the impact of the DDO programme announcement on the country’s credit ratings remained minimal due to the gradual rating downgrade over the past six years, causing the least amount of disruption. As for the short to medium-term rating outlook, he confirmed that both external and domestic restructuring
programmes need to be finalised, in order to take a new view on the rating.
“The highest rating Sri Lanka has received is a BB-, and we must aim to achieve much more. Countries in the region are at BBB+, with many of them having recovered from the Asian financial crisis,” Wickramasinghe added.
He believes that an upward rerating is inevitable, in the context of the International Monetary Fund (IMF) reform programme in place, although the time taken to achieve a B- rating at minimum depends on how diligently the nation sticks to its reform plans, and manages the domestic economy and external finances.
It is silly to think, much less speak, of “Rebooting” the debt driven corruption ridden pseudo economy geared to facilitate corruption and capital flight now locked into an accelerating collapse. As the end draws closer capital traders and investors battle to drain the last dregs of profit by playing on market sentiments driven by increasingly volatile explosions of fear and greed as banks desperately try to patch gaping holes by desperately hanging onto high interest rates for a few months more and the central bank sings virtues of “macro economic stability” while ignoring the fact that it will come at the cost of the micro economy with its debt driven patterns of consumption.
Attempts at “Rebooting” these transactions that all this while was allowed to pass as an economy are meaningless and will at best be ignored.
What will happen is that a new economy based on offshore banking and finance and global trade will be built on the island by global capital to which such an economy will be of use and which has the capacity to engage the advanced Human Resources required to construct and operate it. This is not an economy that the natives of this island can perceive or even conceptualize much less actually construct and operate.
At the micro levels of the new economy plantations may be sold and their practices and technologies upgraded and global tourist operators may build infrastructure required for large scale tourist operations while mining and selective manufacture may also play roles and the location may be used to house specialized education as well as advanced healthcare facilities serving the region but all of these will be dwarfed by the twin pillars of offshore banking and finance and global trade.
Regional geo strategic equations will generate an Indian Ocean Treaty Organization to ensure that the islands security is ensured
Those who find it difficult or impossible to perceive this developmental pathway had best join those seeking employment abroad