Commercial Bank Economic Capsule - April 2024

www.combank.lk

1. Economic Capsule
April 2024
Research & Development Unit
327
th
Issue

2. CONTENTS
BANKING & FINANCE NEWS
ComBank appoints new Chairman and Deputy Chairman
ComBank stimulates opportunities for SMEs with Trade Fair in Colombo
ComBank partners with IFC to develop Supply Chain Financing strategy
ComBank breaks new ground in Sri Lanka enabling AlipayQR payments for
merchants
‘ComBankDigital’ goes trilingual to enhance inclusivity
Awards and Accolades
ECONOMIC, BUSINESS & DEVELOPMENT NEWS
State revenue surpasses 1Q target by 6%
Sri Lanka -External Debt Optimization discussions
Purchasing Managers’ Index (PMI) –March 2024
Domestic growth and improving investor sentiments fuelling rupee gains:
BI
“Addressing gender inequality key priority for Sri Lanka”: ADB
ECONOMIC, BUSINESS & DEVELOPMENT NEWS (cont.)
Colombo skyline redefined with India's ITC Ratnadipa
News Snippets
GLOBAL UPDATE
IMF –World Economic Outlook : April 2024 edition
Climate change to cost world economy USD 38tn
“High global food prices may finally see a bottom in 2024”, Oxford
Economics
Indian election: The election in the world’s largest democracy
The EIU business environment rankings
Global Snippets
Research & Development Unit

3. Banking & Finance
News
Research & Development Unit

4. Research & Development Unit
ComBank appoints new Chairman and Deputy Chairman
Effective, 22nd April 2024
Chairman -MrSharhanMuhseen
MrSharhanMuhseenis a senior Investment Banker with extensive experience in the areas of Mergers
and Acquisitions, Corporate Finance and Capital Markets. He has served in senior capacities working
with company boards and senior leadership teams of financial institutions across Asia to help drive
their Strategic Corporate Agendas and Roadmaps. He previously worked in best-in-class global
investment banks, Credit Suisse, Bank of America Merrill Lynch and JPMorgan in leading regional
coverage roles. He was also an Associate Director of Deloitte.
Deputy Chairman -MrRaja Senanayake
An independent non-executive director of Commercial Bank since September 2020, MrRaja
Senanayakeis a Fellow Member of CA Sri Lanka with over 30 years of post-qualifying experience and
holds a B.Com(Special) degree from the University of Sri Jayewardenepura and a Postgraduate
Diploma in Business Management from the PIM of the University of Sri Jayewardenepura. He has also
undergone training on banking and finance with Euromoneyand on general management with the
National University of Singapore.
Read more: https://www.combank.lk/news/news-events/combank-appoints-new-chairman-and-deputy-chairman

5. Research & Development Unit
ComBank stimulates opportunities for SMEs with Trade
Fair in Colombo
Nearly 200 small and medium enterprises (SMEs)
from all over Sri Lanka were recently provided an
invaluable opportunity by the Commercial Bank
of Ceylon, to exhibit and sell their products and
services in Colombo, and to engage with
customers at a unique SME Trade Fair.
The two-day fair at the Sri Lanka Exhibition & Convention Centre
(SLECC), Colombo 1, saw the participation of SMEs from Jaffna,
Batticaloa, Puttalam, Anuradhapura, Badulla, Kurunegala, Kandy,
Ratnapura, Matara, Negombo, Kalutaraand Colombo, as well as
eight corporate entities that provide services to SMEs and the
country’s agriculture sector.

6. Research & Development Unit
ComBank partners with IFC to develop Supply Chain
Financing strategy
The Commercial Bank of Ceylon has announced a collaboration with the
International Finance Corporation (IFC) to build a Supply Chain Financing (SCF)
strategy that will enable the Bank to lend more to Small and Medium Enterprises
(SMEs) and establish itself as a leading SCF bank in Sri Lanka.

7. Research & Development Unit
ComBank breaks new ground in Sri Lanka enabling
AlipayQR payments for merchants
The Commercial Bank of Ceylon has
opened up a world of new opportunities
for Sri Lankan businesses, by becoming the
first bank in Sri Lanka to enable AlipayQR
Code payments under unified Lanka QR.
Alipaye-wallet holders, currently numbering over 1bn, can now scan the Commercial
Bank LankaPayunified QR code issued to Sri Lankan merchants to make payments
from anywhere in the world, as a result of this latest development.

8. Research & Development Unit
‘ComBankDigital’ goes trilingual to enhance inclusivity
‘ComBankDigital’ –Sri Lanka’s most-used
digital banking platform –has significantly
enhanced mass access by going trilingual,
promoting greater inclusivity and even higher
usage.
An integration of all online and mobile banking channels on a single omni-channel platform,
ComBank Digital is offered via a responsive web application and three native mobile
applications (iOS, Android and Huawei), enabling access across all devices such as desktop PCs,
laptop computers, tabs and smart phones.

9. Research & Development Unit
Awards and Accolades
ComBank voted ‘People’s Private Bank of the Year’ for
second successive year
The Commercial Bank of Ceylon has been voted the
‘People’s Private Bank of the Year’ at the SLIM Kantar
People’s Awards 2024, reaffirming the Bank’s status as
the most popular private sector bank in the country for
the second consecutive year.
ComBank crowned ‘Best Bank in Sri Lanka’ by Global Finance for 22nd year
The Commercial Bank of Ceylon has been named the ‘Best Bank in Sri Lanka’ for a remarkable 22nd
year in the ‘World's Best Banks 2024’ list released recently by the US-based Global Finance
magazine.

10. Economic, Business
& Development
News
Research & Development Unit

11. Research & Development Unit
State revenue surpasses 1Q target by 6%
State revenue surpassed the
target set for the first quarter of
the year ended in March by 6% to
Rs.834bn, Finance State Minister
said.
While the expected revenue
target for 1Q 2024 was Rs.787bn,
the government expects a
revenue collection of Rs.4,106bn
for the whole of 2024.
Source: The Government official news portal

12. Research & Development Unit
Sri Lanka -External Debt Optimization discussions
Sri Lanka, on 16 April announced about the discussions held over the past three weeks with nine members of the
steering committee who agreed to take part in the discussions of the “ad hoc group of bondholders –(group)” of its
International Sovereign Bonds.
The steering committee as a whole comprises ten of the largest members of the group, with the group
controlling approximately 50% of the aggregate outstanding amount of ISBs.
The two parties met during a two day working session in London on 27
th
and 28
th
March 2024 regarding the
group's debt treatment proposal, sent to Sri Lanka's advisors on 11 March 2024.
Prior to the meetings, on 25 March 2024, Sri Lanka had also sent, through its advisors, its own debt
treatment proposal to the group's advisors which was rejected by the steering committee.
During the Meetings, it was agreed that the primary basis for the discussions would be the group's March
Proposal. Sri Lanka articulated the main reservations it had in relation to the group's proposed *Macro-
Linked Bond ("MLB") –while members of the steering committee articulated the reasons why they
believed the terms of their MLB proposal were fair and reasonable.
*MLB –These bonds area new type of bond that link payouts to the evolution of Sri Lanka's USD nominal GDP.The goal of these bonds is to comply with the Debt Sustainability Analysis targets set
out in Sri Lanka's IMF Program

13. Research & Development Unit
Sri Lanka -External Debt Optimization discussions
(cont.)
1. Baseline Parameters: The baseline parameters for the MLB proposed by the Group were calibrated using their
"alternative baseline" rather than Sri Lanka's IMF-Supported Program baseline. This suggests a departure from
using the standard IMF baseline and indicates reliance on an alternative set of economic indicators or projections.
2. Balance of Risks: There's a concern about the balance of risks between Sri Lanka and holders of its International
Sovereign Bonds (ISBs). The MLB structure was updated by the Group to include a scenario where Sri Lanka might
underperform IMF-Supported Program GDP projections. Sri Lanka is urging the Group to consider a structure that
offers greater protections to Sri Lanka in such a scenario, indicating a desire to mitigate risks and potentially
safeguard the country's financial stability.
3. The test for triggering upward/downward adjustments in the MLB: Discussions are underway regarding the
criteria for triggering upward or downward adjustments in the MLB. This is crucial as it determines the conditions
under which adjustments to the MLB would occur based on economic performance or other relevant factors.
4. The share of additional value in an upward adjustment scenario-Sri Lanka invited the Group to consider lower
bondholder allocation in the scenario in which the country outperformed IMF-Supported Program GDP
projections and satisfied the upward adjustment test in the MLB.
Key Highlights of the discussion

14. Research & Development Unit
Sri Lanka -External Debt Optimization discussions
(cont.)
Both parties came closer to a meeting of minds on the first two points (1 and 2).
However, the steering committee agreed to the above two points subject to Sri Lanka agreeing to a consent fee -
a fee of 1.8% of the outstanding principal amount of the ISBs with a view to offsetting the Group's perceived
reduction of the market value of their proposal as result of such amendments and agreeing with the Group's
proposal on Items 3 and 4.
Following the meetings, the group also presented an updated proposal on 3
rd
April 2024 which addressed the
first two points.
The fresh proposal is included with "Governance linked bonds-GLBs”. Structured around two key performance
indicators (KPIs) -the tax revenue to GDP ratio and reforms outlined in the IMF program -the GLB aims to
incentivize fiscal responsibility and governance enhancements.
Read more : https://www.treasury.gov.lk/api/file/bdfd5073-3639-4c0b-bcda-a52d85e33daa
https://www.bloomberg.com/news/articles/2024-04-17/sri-lanka-poised-for-bondholder-deal-by-mid-may-stanchart-says
https://publicfinance.lk/en/topics/verit-research-mooted-governance-linked-bonds-figure-in-london-talks-1713322360

15. Research & Development Unit
Purchasing Managers’ Index (PMI) –March 2024
Sri Lanka Purchasing Managers’ Index for Manufacturing (PMI –
Manufacturing) recorded an index value of 62.5 in March 2024,
indicating an expansion in manufacturing activities.
This marks the highest PMI-Manufacturing that was
recorded in three years
The industry expectations for the next three months remain positive. However, most of them expect a natural decrease in production
during April following the end of seasonal peak.

16. Research & Development Unit
Purchasing Managers’ Index (PMI) –March 2024 (cont.)
Sri Lanka Purchasing Managers’ Index for Services (PMI –Services)
indicated a further expansion in services activities in March 2024 as
reflected by the Business Activity Index, which recorded an index
value of 67.7.
Expectations for Business Activities for the next three months continued to rise
supported by favorable macroeconomic conditions.
Source: CBSL

17. Research & Development Unit
Domestic growth and improving investor sentiments
fuelling rupee gains: BI
Sri Lanka’s strengthening recovery and improving
investor sentiments have been fuelling recent
rupee gains against USD in defying regional and
market trends, a report by Bloomberg Intelligence
(BI) said.
Source: Bloomberg Intelligence
Sri Lankan rupee rose 9.5% against USD since the
beginning of December, 2023 up to 17
th
April,
2024, and has become one of best performing
emerging market currencies in the world. Rupee
continued to make gains while emerging market
currencies recently hit a three month low.

18. Research & Development Unit
“Addressing gender inequality key priority for Sri Lanka”:
ADB
As Sri Lanka looks to reach higher growth aspirations, addressing gender inequality
is a key priority, the Asian Development Bank said.
“In an economically active population of 8.5mn in 2022, female labor force participation was only 32.1%, down from 33.6% in
2018 prior to the economic crisis.
Key reasons for this include a lack of safe and affordable childcare facilities, inadequate provision for flexible working hours,
onerous household responsibilities and care duties socially imposed on women, and public transport inadequacies for women.
While the private sector has addressed these shortcomings to some extent, the government can tackle gender inequality
through a more supportive framework for female labor participation by introducing flexible work hours and mandating equal
pay.
Reforming labor laws is also essential to formalize informal employment and protect workers from exploitation. Given the
absence of an employment-linked support system, a contributory unemployment insurance scheme and related laws may be
considered.“
ADB –Asian Development Outlook : Apr 2024
Read more:
https://www.adb.org/sites/default/files/publication/957856/asian-development-outlook-april-2024.pdf

19. Research & Development Unit
Colombo skyline redefined with India's ITC Ratnadipa
India’s luxury hotel giant launched its first ever international venture,
USD 500mn investment ITC Ratnadipain the iconic Colombo Galle Face
area.
ITC hotel group has over 130 properties in over 80 destinations in India.
ITC Ratnadipaalso marks the addition of the 16th Luxury Collection
Hotel in ITC Hotels portfolio.
This luxury destination draws inspiration from the national flower of Sri
Lanka, the floating water lily, which is a recurrent motif across the hotel.
The hotel offers 352 guest rooms, , suites and service apartments, each
adorned with private balconies with breathtaking waterfront views
The iconic structure of the hotel comprises of two stellar towers :ITC
RatnadipaHotel and the luxurious Sapphire Residences.
ITC announced plans to explore investment opportunities in Sri Lanka
beyond tourism. “We are open to exploring opportunities,” ITC Group
Chairman SanjeevPurisaid.
Apart from its own hotels, he noted that ITC is also open for management
contracts as well as property developments in the region in line with Prime
Minister Narendra Modi’sneighborhood firstvision statement.
As a diversified conglomerate, ITC has a strong presence in Consumer
Goods, Hotels, Paperboards & Packaging, AgriBusiness and Information
Technology. Hotel website: https://www.itchotels.com/in/en/itcratnadipa-colombo
Rooms
Suites
Service Residences

20. News Snippets
Research & Development Unit
SOE transactions to end by August:
Restructuring Unit
The State-Owned Enterprise Restructuring Unit
(SOERU) said it expects all transactions, other
than that of the national carrier to be concluded
by August 2024. The timeline for SriLankan
Airlines is likely to extend to end September
2024.
Govt. settles USD 2bn foreign debt
and interest
The government announced that it has
been successful in settling a total of
USD 1,909.7 million in foreign debt and
interest payments within a time-frame of
about 19 months.
From 21 July 2022, to February 2024, the
government has disbursed USD 1,338.8
million in multilateral loans and interest,
with no outstanding arrears in loan
installments or interest payments,
President’s Office Community Affairs
Director General said.
National Digital Economy Strategy
The Government has unveiled a comprehensive national digital strategy for
Sri Lanka titled “Digital Sri Lanka 2030” along with an implementation plan.
Improved interest in SL as brands rethink strategies: JAAF
Sri Lanka’s apparel sector is witnessing a resurgence of interest, as brands reassess
their purchasing strategies and are on the lookout for safe and secure homes to place
their orders.
The Joint Apparel Association Forum (JAAF) shared that the apparel manufacturers
have had several high-profile visits from brands, as buyers are returning to the
country to meet with the suppliers and to work on long-range plans with their
suppliers.
Furthermore, groundbreaking efforts are underway to modernize the Sri Lanka
apparel supply chain, where there is significant focus on enhancing the sampling
process. This is achieved with the introduction of sophisticated digital sampling
solutions.
Source:
https://mot.gov.lk/assets/files/National%20Digital%20Economy%20Strategy%202030%20Sri%20Lankabc77184e0b
6035d235cd0bb1ebf75707.pdf

21. Global
Update
Research & Development Unit

22. Research & Development Unit
The latest estimates from the IMF suggest that global
GDP is on track to grow by 3.2% this year.
The fund said the world economy “remains remarkably
resilient” and that there would be “less economic
scarring” than it had thought from the pandemic.
The biggest upgrades to its forecasts for the largest
economies it tracks were for America, where the IMF now
thinks GDP will expand by 2.7%, and Russia, projected to
grow by 3.2%.
Read more: https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024
IMF –World Economic Outlook : April 2024 edition

23. Research & Development Unit
The global annual damage caused by
climate change is estimated to be 38tn
dollars until the year 2050, a study by a
German research institute has found.
According to scientists at the Potsdam
Institute for Climate Impact Research
(PIK) ‘the world economy is already
committed to an income reduction of 19
percent until 2050, even if CO2 emissions
were to be drastically cut immediately.
Source: Reuters
South Asia and Africa are listed as regions that will experience the strongest income reductions due to
climate change. The damages will be primarily caused by impacts on agricultural yields, labour
productivity or infrastructure, the study further elaborated.
Climate change to cost world economy USD 38tn

24. “High global food prices may finally see a bottom in
2024”, Oxford Economics
Research & Development Unit
Rising food prices around the world may finally be seeing a bottom this year.
Source: CNBC
According to Oxford Economics, global food prices are expected to decline in 2024, offering some relief
for shoppers. “Our baseline forecast is for world food commodity prices to register an annual decline
this year, reducing pressure on food retail prices further downstream,” the economic advisory firm
said.
The key driving force behind the decline in food commodity prices is the “abundant supply” for many
important crops, especially wheat and maize.
Bumper harvests in recent months for both staple crops led to a steady decline in prices.Wheat
futureshave fallen almost 10% year-to-date, while maize futures lost about 6% over the same period,
according to FactSetdata.

25. Indian election: The election in the world’s largest
democracy
Research & Development Unit
A mammoth exercise in democracy is underway in India, where
nearly a billion people will go to the polls over the next six weeks to
vote in the world’s largest ever general election.
Prime Minister Narendra Modiof BharathiyaJanathaPaksha(BJP)
is standing for a rare third term in power, against an alliance of
opposition parties that are seeking to unseat him.
Indians will be voting for 543 seatsin
the 545-seat lower house of
parliament, called the LokSabha, with
two other seats nominated by the
country’s president.
The party that wins a majority will
appoint one of its winning candidates
as prime minister and form a ruling
government.
Voting began on Friday, April 19, and
will continue through June 1, with
results announced on June 4.
Contrasting fortunes of the two major political parties in India
Source: CNN
Source: Economist
Source: CNN

26. The EIU Business environment rankings
Research & Development Unit
Source: CNBC
Singapore, Denmark and U.S. are the best places in the
world to conduct business, according to the Economist
Intelligence Unit business environment ranking.
The EIU’s ranking assesses the attractiveness of doing
business across 82 countries and territories, and is
measured based on indicators such as inflation, cost of
living, economic growth, and fiscal policies.
Some notable “big improvers” that scored well in the
index were countries like Greece, Qatar and India.
Greece saw the biggest improvement in business climate
in the EIU’s index due to the reforms brought about by a
pro-business government, the report showed.
Free market reforms promised by Argentina’s President
Javier Milei, aimed at boosting private enterprise and
attract foreign investment, propelled the country’s sharp
improvement in rankings to the second most improved
business environment.

27. Global Snippets
Research & Development Unit
Euro zone inflation cools down but not in the US
Consumer price inflation in the euro zone slowed to 2.4% year on year in March. Inflation in the euro zone is
gradually converging towards the 2% target of the European Central Bank (ECB) on the back of declining energy
prices and slowing food price growth. This is positive news for the ECB, as it will help to pave the way for
expected policy rate cuts in June.
US consumer price index accelerated at a faster-than-expected pace in March to 3.5%, pushing inflation higher
and likely dashing hopes that the Federal Reserve will be able to cut interest rates anytime soon.
China’s surprise growth
China’s economy grew by a better-than-expected 5.3%in the first quarter of 2024, year on year, helped by a
6.1% rise in industrial production. Much of the growth came in January and February. In March retail sales
struggled, and the output of cement plummeted, highlighting the problems besetting the country’s property
market.
Zambia debt restructuring situation
Zambia is in talks to restructure USD 3.3 billion of commercial debt, after reaching a deal with overseas holders
of its sovereign bonds as the country seeks to emerge from a three-year default.
Sources: Economist, U.S. Bureau of Labor Statistics, ECB, CNN -Economy

28. The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain
accuracy/completeness of the information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should notbe held responsible, for providing the
information or for losses or damages, financial or otherwise, suffered in consequence of using such information for whatever purpose.
< Research & Development Unit >
Sri Lanka: Emerging fromthe economic crisis…
The three broad targets of Sri Lanka’s 17th IMF programme:
1. Achieve a primary budget surplus of 2.3% by 2025 and beyond.
2. Bring annual foreign currency debt service from 9.4% of gross domestic product
(GDP) in 2022 to 4.5% of GDP during 2027-2032. Reduce the government’s gross
financing needs, which was at 35% of GDP in 2022, down to below 13% from 2027-
2032.
3. Public debt, which was 128% to GDP, should be reduced to 95% by 2032.
-TalalRafi