Rajaratnam...

Brand new cars accounted for 860 units in April down from 1,066 units in March and marginally up from 808 units 12 months ago.

Meanwhile small cars—the alternative of Sri Lanka’s middle-class for the lack of proper public transport system— dominated the motorcar segment with 87.2 percent share.

The current coalition came into power in 2015 promising a small car to every family in the country.

However, the situation has now gone out of hand and most of Colombo’s roads remain jammed even during offpeak hours. Some of the first time motorcar owners also pay scant regard to road rules, making the situation worse.

This adds to the unruly three-wheelers and both private and state-owned buses, who are a nightmare to law-abiding drivers on Sri Lankan roads.

Many opine that while proving his/her ability to drive a vehicle, it is now becoming extremely important that a driver should undergo a mental aptitude test so his/her roadworthiness could be ascertained.

Sri Lanka’s vehicle fleet more than doubled in just three years and now every one in three persons is estimated to own a vehicle. But the expansion of the road network has miserably failed to catch up with this pace.

But Sri Lanka’s free market thinkers cry foul over recent curbs on vehicle imports—which did very little to arrest the matter—arguing that those curbs violate the individual liberties of a one who aspires to own a three-wheeler.

Still Sri Lanka registers 1, 500 three-wheelers a month, down from closer to 15,000 units a month when the vehicle imports reached an all time high in 2015.

To put the numbers in to perspective there were close to 15,000 motorcars registered in September 2015 when the numbers reached an all time highs in a single month.

The new Finance Minister Mangala Samaraweera’s maiden budget, touted as green and eco-friendly, gave incentives to increase the fleet of electric vehicles in the country by gradually phasing out the gasoline-run fleet.

But it seems that much need to change as only nine electric cars were registered in April down from 14 units in March and 16 units 12 months ago.

Meanwhile, 189 units of premium branded cars were registered in April, down from 222 units in March and significantly up from 50 units recorded 12 months ago.

Sports Utility Vehicles (SUV) recorded 405 units, down from 544 units in March and marginally down from 426 units 12 months ago. The large number of high-end vehicles in Sri Lanka is a testament to massive inequality in the country although Sri Lanka’s has improved its poverty levels.

Sri Lanka’s economic growth hit a 16-year low of 3.1 percent in 2017 16-year mainly due to poor performance of the adverse weather-hit agriculture sector.

“Much needs to be done in terms of growth framework, it might be moving more slowly than it should be, however, we are moving on the right direction,” Coomaraswamy said

He noted that the rural development programmes such as “Gamperalaiya” where government is set to invest around Rs.80 billion over the next two years in developing rural infrastructure,would improve the growth outlook for the country.

He also emphasised that the proposed FTA with China and the proposed Economic and Technology Co-operation Agreement (ETCA) would be a key differentiator in attracting FDI to Sri Lanka for export oriented industries.

However, he noted that Sri Lanka needs to move fast to get things done.

When there’s an earth slip, the people are quick to point the finger at oil palm plantations. Most of our decisions have been based on emotions and that should not be the case.”

Speaking to Mirror Business, Planters Association Chairman Sunil Poholiyadde said RPCS have already planted palm oil in 11,000 hectares out of the permitted 20,000 hectares.

He noted that RPCS are currently following certain standards set by CRI in farming oil palm.

While urging RPCS to come with a set of guidelines to regulate the oil palm cultivation, the minister said that he would instruct the Coconut Research Institute (CRI) and, if required foreign experts will be brought to carry out studies on the impact of oil palm cultivation in Sri Lanka.

“We have to understand the science behind the plantation economy, plantations need an extra income.”

The profits from palm oil crop topped profits from tea and rubber due to low production cost.

However, several government officials have casted doubts on long-term prospects of oil palm, pointing out that local producers were able to maintain higher margins due to the commodity levies on palm oil imports.

“Deep down, you have the idea that oil palm can be a substitution for rubber. I don’t think you should come to that decision nor do we encourage that decision, because rubber is a fundamental crop in our country although the prices are down.

We, the policymakers, believe that rubber has a longterm future. Oil palm can be a supplement to your income, not a substitute for rubber,” the minister said.

He stressed that rubber trees not less than 30 years old should not be put down to plant oil palm.

The minister also said that he would brief the President on the current situation and the ministry’s stand on palm oil.

Dissanayake also announced that he has devolved the rubber sector decision making to the State Minister of Plantation Industries, which has been already gazetted.

He said he made the decision due to increasing responsibilities at the ministry as well as at the party level, where Dissanayake was recently appointed as UNP’S national organiser. 2015 and 2016 as they made hay with loans extended on consumption—personal loans, credit cards, vehicle leasing and housing to a certain degree—by lending money over and above the deposits they raised.

The party did not last long as defaults rose. Interest rates were increased and taxes were slapped making servicing loans a tough task.

During the process, many conglomerates, which had been accumulating cheap bank debt to fund major deals including mergers and acquisitions found themselves trapped in a web of debt as they were seen weighing heavily on their bottomlines with the rising cost of borrowing.

The economic growth slowed to 3.1 percent in 2017— lowest in 16 years— and the loan growth slowed to 16 percent in 2017 from 18 percent in 2016 and 21 percent in 2015.

Sector NPLS rose 13 percent in 2017, reversing from back-to-back contractions in the last three years and continued to rise in 1Q18 as reflected in the banks’ reported results, Fitch said in their banking sector dashboard authored by its two key banking sector analysts.

In a further deterioration of the banking sector asset quality, the gross NPL ratio ticked up to 3.0 percent from 2.5 percent in 2017 December-end, which marginally improved with some recoveries and/or write-offs in 4Q17.

Meanwhile, this weaker asset quality and higher credit costs stemming from the implementation of International Financial Reporting Standard 09, which increases the impairment provisions, will boil down to lower profits in the sector.

Some banks have already disclosed their estimated impact on incremental impairment provision to be between 35 percent and 45 percent, which is substantial.

Fitch also suspects the new levy imposed on the sector from the budget to dent the profit further should it come into effect.

Net profit growth was subdued at 10 percent in 2017 (2016: 25 percent) due to higher credit costs and the full- year impact of the higher financial VAT introduced in November 2016 – both of which resulted in stagnant sector return on assets, they said.

Meanwhile, the rating agency also expects the banking sector to remain fairly liquid in 2018 due to expectation of moderating in lending and healthy deposit growth.

Deposits were the main source of funding for Sri Lankan banks consisting of 80 percent of the funding mix.

However, the low-cost deposits have come under pressure recently due to current and savings account base depleting to 34 percent in 2017 from 36 percent due to term deposits increasing in response to higher interest rates.

In a special report released last week on the sector, Fitch said Sri Lanka’s large banks—mainly the state banks—face a Rs.19 billion capital shortfall in the run up to the higher capital ratios under the BASEL III regime coming into full effect in 2019.

But capital levels of the banks improved notably during 2017 and 2018 as banks made several capital calls to beef up their capital levels before the BASEL III full implementation.

However, the retail sector operating profits declined to Rs.226.5 million from Rs.320.4 million a year ago while the healthcare profits rose to Rs.638.4 million from Rs.586.9 million.

Softlogic has several projects in the pipeline, which are awaiting commercial operations during the next two years.

Odel is awaiting the opening of 51,000 square feet new mall in the Colombo City Centre this August while another mall with 100,000 square feet will open at One Galle Face at Shangri La in 2019.

The Odel Mall project, which is being constructed at Alexandra Place, will also be opened in 2020.

Meanwhile, the 180-bed Asiri Hospital in Kandy is also slated to open in early 2019.

The group also has interests in information technology, leisure and property, automobiles and financial services.

The group operating profits improved by 76 percent YOY to Rs.1.4 billion mainly due to cost discipline.

As part of their deleveraging, Softlogic raised Rs.3.1 billion from Samena Capital, a Middle Eastern investor via a private placement in return for a 19 percent stake.

In April the group raised another Rs.3.9 billion from a rights issue.

“There are other equity plans in the pipeline for the core verticals, and with this in mind, the group will make its footprint across its various businesses to become unrivalled in the industry”, Softlogic said in an earnings release.

Softlogic in March restructured its retail business under a new entity established Softlogic Retail Holdings Private Limited and brought in all its retail businesses including Odel and restaurants under the new entity.

Meanwhile, the group financial services sector comprising of Softlogic Life,softlogic Finance and the group’s stock broking business, made a top line of Rs.3.0 billion, up from Rs.2.2 billion, and an operating profit of Rs.417 million from Rs.110 million in the corresponding period last year.

The leisure and property segment, although the revenue was increased to Rs.846.4 million from Rs.543.2 million, the segment made an operating loss of Rs.116.1million.

Group’s Movenpick city hotel in Colombo completed one year in operations and the company said occupancy levels remained strong during Winter-peak and is outpacing growth of its counterpart in the city. “We reckon that many challenges need to be addressed in the macro economy for the leisure sector to benefit from its capital-intensive investment,”softlogic said.

Group’s information technology business revenue remained virtually flat across the two quarters at Rs.3.9 billion but the operating profit jumped to Rs.339.6 million from Rs.112 million a year earlier.

Meanwhile for the quarter, the group earned a net profit of 2 cents a share or Rs.14.4 million against a loss per share of 42 cents or Rs.324.9 million loss.

For the full year ended March 31, 2018, the group earned 41 cents a share against 3 cents a share from a total profit of Rs.321.3 million.

The total group revenues rose by 12 percent YOY to Rs.66 billion.

Ashok Pathirage, Softlogic group Chairman and Managing Director, owns 39.95 percent stake in the group. Rajaratnam, 60, is eligible for release in July 2021. The case is Rajaratnam v U.S., 2nd U.S. Circuit Court of Appeals, No. 17-1405.

With the new Inland Revenue Act introduced from April 1, the government has pledged to bring down the indirect tax contribution to 60 percent.

Public anger towards the present coalition government remains high, as they have miserably failed in so many fronts, while not being able to keep the election promises they made. The drubbing the coalition government political parities received at the local governments held early this year evidently showed this sentiment.

Also, due to the higher cost of living and taxes, many had to tighten their belts which the ruling class and their cronies are seeing enjoying the same or even better perks. For instance, President Sirisena is reportedly have told MPS that they don’t have to pay taxes as what they are getting as salaries and payments from taxpayers’ money amount to be honorariums. On top of that, these legislators get tax-free cars.

Meanwhile on June 1, the IMF Executive Board announced the conclusion 2018 Article IV consultation and the completion of fourth review under the EFF with Sri Lanka, which resulted in approving US $ 252 million disbursement.

The total disbursements under the three-year EFF arrangement of US $ 1.5 billion Sri Lanka entered with the IMF on June 2016, currently stands at little over a billion dollars.

Despite the general negative sentiment prevailing among the masses of the state of their economy, the IMF was upbeat about Sri Lanka’s economic progress driven by “landmark” structural reforms.

“Sri Lanka has made important progress under its Fund-supported programme. The authorities’ efforts to improve the policy mix through fiscal consolidation, prudent monetary policy, and landmark structural reforms are supporting the economic recovery, despite recent shocks.

Sustaining the reform momentum is critical to strengthen the country’s resilience to shocks, given the still sizable public debt and low external buffers, and to set the foundation for strong and inclusive growth,” following the Executive Board’s discussion of the review, Mitsuhiro Furusawa, Acting Chair and Deputy Managing Director of the IMF, said.

“Further progress with revenue-based fiscal consolidation, supported by the new Inland Revenue Act, is needed to help safeguard important social and infrastructure spending, including in response to natural disasters. Going forward, a robust fiscal rule and medium-term debt management strategy will help place debt firmly on downward path,” he added.

Meanwhile, Furusawa stressed the need for the Central Bank to continue to manage the monetary policy prudently in case of price shocks and market volatility.

He also said efforts to build up international reserves should be sustained, with exchange rate flexibility as the first line of defence in response to volatile global capital flows.

“Upgrading the Central Bank law will be instrumental for the new inflation-targeting framework. While financial soundness indicators remain stable, continued credit growth in the real estate sector warrants close monitoring. The authorities should step up implementation of structural reforms, with a focus on fostering gradual trade liberalization and the investment climate, developing a natural disaster risk financing framework, and promoting gender equality in the labour market together with well-targeted social safety nets,” Furusawa said.