Sri Lanka economy

By Isabel Stoker, Alaco

Sri Lanka is set to sign a major trade deal with India later this year, which it hopes will be the first step towards the island becoming a financial and business hub in the region. But the government of Ranil Wickremesinghe, prime minister, will have to work harder to win over domestic opponents of the Economic and Technological Cooperation Agreement (ETCA) who fear it will result in the country’s exploitation by Indian businesses.

Earlier this month Mr Wickremesinghe announced that the ETCA would be signed by the end of December. Sri Lanka has two other free trade agreements in the pipeline, with Singapore and China. The government began negotiations on the former in June and is expected to complete the latter by March 2017. Read more

The Chinese banks and companies that have bankrolled Sri Lanka’s recent infrastructure boom have much to lose from the recent change of government.

To prime Sri Lanka’s economy in the aftermath of the damaging Tamil separatist war, Mahinda Rajapaksa, the outgoing president, pursued a Chinese-style growth model of massive infrastructure investments in roads, energy projects, airports and sea ports. Much of this was bankrolled by loans and grants from Chinese state-owned banks: by last May, these totalled $3.8bn, according to the Sri Lankan government (the China peoples daily and Times of India last year put the total closer to $5bn). Read more

As Sri Lanka’s new president, Maithripala Sirisena, takes the reigns in Colombo, the focus is on his plans to overhaul politics on the island – to call a general election and return to parliamentary democracy.

It may be relatively straightforward to win support with those measures, as he takes over from Mahinda Rajapaksa, whose decade-long rule is remembered for nepotism and creeping authoritarianism. But matching the economic boom Sri Lanka saw under its former leader will be more difficult. Read more

When the government finally defeated separatist Tamil guerrillas in 2009 – bringing an end to a 25-year civil war – tourists began to swarm back to Sri Lanka.

The government of former president Mahinda Rajapaksa, who lost power in an election this month, was eager to draw foreign visitors who provide valuable foreign exchange. And groups like Jetwing, the hotels-to-agency tourism group, have felt the benefits. Read more

The streets of Colombo were strangely quiet in the hours after Mahinda Rajapaksa, the former Sri Lankan president, conceded defeat on Friday. The shutters were down at most shops and restaurants, the pavements were empty and the capital’s red tuk-tuks were hurtling around virtually empty streets.

The contrast with the cacophonous celebrations that greeted the result of India’s elections last year could hardly have been starker. There are, however, similarities between the two game-changing polls. Read more

Concern about the worst bout of communal fighting to hit Sri Lanka’s since the end of its civil war in 2009 deepened on Tuesday, after a second evening of clashes between Muslims and Buddhist groups resulted in at least one further death, despite an overnight curfew.

But while daylight appeared to bring relative calm to the streets of two southern towns that endured the worst of this weekend’s disturbances, any further upsurge in ethnic tensions is likely to have broader implications for one of Asia’s most vibrant frontier markets. Read more

Cabraal: optimist

Sri Lanka watched nervously as India’s rupee plunged, not least because it too suffers from the high current account and fiscal deficit mixture that turned investors sour on its larger neighbour.

Now India’s currency is recovering, and Sri Lanka seems emboldened too, as its central bank today shunned IMF advice and surprised forecasters by cutting rates by half a percentage point. But is it a cut too far? Read more

Count it again

Sri Lanka’s government says its economy will grow at a zippy 7.5 per cent this year, making it the self-styled fastest growing economy in south Asia.

Yet on Friday morning the central bank suddenly and unexpectedly brought interest rates down by half a percentage point, citing fears of a slowdown. Something doesn’t add up. Read more

It isn’t every day that a country cancels a plan to seek $1bn in emergency loans from the International Monetary Fund, just a few weeks after announcing it.

But having unveiled plans to go cap in hand for money earlier in the year, it seems this is just what Sri Lankan President Mahinda Rajapaksa is about to do, following a row with the IMF. So what exactly is going on? Read more

Central bank of Sri LankaHaving been forced into a dramatic interest rate hike earlier this year to fend off a balance of payments crisis, Sri Lanka’s central bank has made more small waves in the south Asian tourist island this morning, with a rate cut.

The move caught out local analysts, as there had been no hint of a change in policy in recent weeks. Read more