www.combank.lk

1. Economic Capsule
August 2023
Research & Development Unit
319thIssue

2. CONTENTS
BANKING & FINANCE
 CBC Results 30.06.2023 (Bank)
 ComBank ranked Most Respected Bank in Sri Lanka for 19th successive year
 Combank.lk crowned best website in Sri Lanka
ECONOMY, BUSINESS & DEVELOPMENT
 Sri Lanka – Fiscal performance (Jan-May 2023)
 IMF first review from September 14 to 27
 China’s Sinopec to begin operations on September 20
 Performance of CCPI sub groups Feb-Jul 2023 (YoY %)
 Sri Lanka eyes FTA talks with Malaysia and Vietnam
 Sri Lanka behind least developed countries in trade facilitation: Verité Research
 News Snippets
GLOBAL UPDATE
 Moody’s warns it could cut credit ratings of 6 big US banks
 Singapore narrows 2023 growth forecast on ‘weak’ external demand
 India broadens access to 'vostro' accounts to facilitate rupee trade
 Russia’s ruble hits a 17-month low to the dollar as the Ukraine war bites
 Saudi Arabia, Russia extend oil cuts
 Global News Snippets
Research & Development Unit

3. Banking &
Finance

4. Research & Development Unit
CBC Results 30.06.2023 (Bank)

5. Research & Development Unit
ComBank ranked Most Respected Bank in Sri Lanka for
19th successive year
Weight
The Commercial Bank of Ceylon has been ranked the Most
Respected Bank in Sri Lanka and the fourth Most Respected
corporate entity in the country overall in the 2023 ‘Most
Respected Entities in Sri Lanka’ rankings published by the LMD
magazine.
The largest private sector bank in the country, Commercial Bank was also ranked second overall across all sectors
of business for Financial Performance and Honesty, and was ranked among the top five Sri Lankan corporates for
Vision, Management Profile, National Perspective and Corporate Culture.
This is the 19th consecutive year that Commercial Bank was ranked the Most Respected Bank in Sri Lanka. The
Bank has also been among the top five most respected entities in the country in every one of the annual surveys
conducted by LMD since the launch of the ranking in 2005, earning Commercial Bank the 4th place in the
magazine’s 2023 Hall of Fame of the country’s most respected entities.

6. Research & Development Unit
Combank.lk crowned best website in Sri Lanka
Weight
The corporate website of the Commercial Bank of
Ceylon won twin Gold awards as the ‘Overall
Winner’ and the ‘Best Banking & Finance website in
Sri Lanka’ at the 2023 BestWeb.lk competition
conducted by the LK Domain Registry.
This is the second consecutive year that Commercial Bank won
the top award in its category of business.
The extensive criteria used to grade websites for the
BestWeb.lk awards consider a wide array of technical aspects as
well as quality aspects that encompass functionality, ease of
use, conformance and compliance with industry standards and
protocols, performance efficiency, security and privacy, design
aesthetics, content quality and the quality of interaction with
users.

7. Economy, Business
& Development
News
Research & Development Unit

8. Research & Development Unit
Sri Lanka – Fiscal performance (Jan-May 2023)
Item (Rs Bn) 2023
Jan-May
2022
Jan-May
%
a) Revenue & Grants 1,122.4 812.7 38.1
b) Total Revenue 1,120.6 811.9 38.0
c) Tax revenue 1,029.4 710.6 44.9
d) Expenditure & lending minus repayments 2,137.1 1,449.4 47.4
e) Recurrent Expenditure 1,937.9 1,275.2 52.0
f) Interest payments 1,062.1 537.3 97.7
Revenue balance (b-e) -817.3 -463.3 -76.4
Primary balance [a-(d-f)] 47.4 -99.4 147.7
Overall balance (a-d) -1,014.7 -636.7 -59.4
Despite the 44.9% (YoY) increase in tax
revenue, the budget deficit has widened by
59.4% (YoY) due to the 47.4% (YoY) increase
in ‘expenditure and lending minus
repayments’.
In particular, recurrent expenditure has
recorded a 52% (YoY) increase.
This rise is partly due to the inflationary
effects on government spending and
difficulties in reducing such expenditure. Source: CBSL

9. Research & Development Unit
IMF first review from September 14 to 27
The first review of Sri Lanka’s USD 3bn Extended
Fund Facility (EFF) from the International Monetary
Fund (IMF) will be conducted between September 14
and 27.
Reviews and disbursements under the proposed four-year extended arrangement
Sri Lanka will be eligible for
SDR 254 (USD 338Mn approx)
as the second tranche upon
the completion of the 1st
review.

10. Research & Development Unit
China’s Sinopec to begin operations on September 20
Chinese oil major Sinopec expects to start operations in Sri
Lanka on Sept. 20 and will be allowed to sell fuel for less
than the maximum retail price set by the government, Sri
Lanka’s Power Minister said.
Sinopec’s entry into Sri Lanka will help reduce pressure on Sri
Lanka’s foreign exchange reserves, and SL expects two other
international fuel operators to start operations by October and
November.
Australia’s United Petroleum and U.S. firm RM Parks in collaboration with Shell are other two companies that have
received approval.
The entry of the new players will end a market duopoly of state-run Ceylon Petroleum Corp and Lanka IOC, a unit of
Indian Oil Corp.
Under the new deal, the Chinese firm will be given a 20-year license to operate 150 fuel stations and will also be
able to invest in 50 new fuel stations.

11. Research & Development Unit
Performance of CCPI sub groups Feb-Jul 2023 (YoY %)
1. CCPI index consists of 2 main groups
2. Performance of main two groups
Weight
Weight
Source: DCS

12. Research & Development Unit
Performance of CCPI sub groups Feb-Jul 2023 (YoY %)
3. Non food category consists of 11 sub groups
Source: DCS

13. Research & Development Unit
Performance of CCPI sub groups Feb-Jul 2023 (YoY %)
3. Non food category consists of 11 sub groups (Cont.)
Source: DCS

14. Sri Lanka eyes FTA talks with Malaysia andVietnam
Research & Development Unit
Sri Lanka is eyeing to ink free trade agreements
(FTA) with two more ASEAN members, Malaysia
and Vietnam, in line with the country’s plans to
join the Regional Comprehensive Economic
Partnership (RCEP) agreement.
After Sri Lanka signed its first comprehensive FTA with Singapore in 2018, Malaysia expressed its strong interest in
moving forward with an FTA with Sri Lanka.
Similarly, potential FTAs with other key ASEAN members such as Indonesia, and Vietnam were also considered at
that time in line with the ambition of joining the World’s largest trade pact, the Regional Comprehensive Economic
Partnership (RCEP). However, negotiations came into an abrupt halt following the change of government in late
2019.
Meanwhile, Sri Lanka-Thailand FTA negotiations are on track and authorities expect to conclude it in December
2023.

15. Research & Development Unit
Sri Lanka behind least developed countries in trade
facilitation:Verité Research
Sri Lanka ranks 104th out of 125 developing
and least developed countries (LDCs) in its
implementation of trade facilitation measures
over the last six years, a new study by Verité
Research has found
Alarmingly, 21 out of 35 LDCs have a higher successful
trade facilitation reform implementation rate than Sri
Lanka, which has progressed only marginally from a rate
of 29% in 2017 to 31.5% in June 2023.
Read More: https://www.veriteresearch.org/wp-content/uploads/2023/07/20230724_OSF02B_TradeFacilitation_BackgroundNote_F.pdf

16. News Snippets
Research & Development Unit
Sri Lanka targets at least USD 2bn from
gem and jewellery exports
During a recent discussion held to
address issues within the gem and
jewellery industry, the President
highlighted the importance of promptly
addressing challenges in the gem and
jewellery sector to boost the country’s
revenue from exports.
He stressed that progress toward this
year’s target growth in the industry has
not met expectations compared to the
previous year. As a result, he emphasized
the necessity of implementing a well-
structured strategy aimed at attaining an
annual export revenue of at least
USD 2bn.
Sri Lanka’s tea exports to Iran under barter deal set to
begin this month
Sri Lanka is hopeful of starting tea exports to Iran under the
barter deal from this month onwards with formalities
to operationalize the arrangement reaching completion.
Under the barter deal, Sri Lanka intends to export
approximately USD 5mn worth tea to Iran on a monthly
basis over a span of 48 months. This arrangement aims to
settle the outstanding oil bill owed to Iran, which amounts
to USD 251mn

17. Global
Update
Research & Development Unit

18. Moody’s warns it could cut credit ratings of 6 big US
banks
Research & Development Unit
Moody’s has put the credit ratings of six large US banks, including Bank of New York
Mellon, State Street and Northern Trust, under review for a possible downgrade.
The credit ratings agency said that its warning on the three banks reflected “ongoing
strain” in the US banking sector, including increased pressures on funding and potential
“weaknesses” in the amount of capital lenders are required to hold.
A lower credit rating could push funding costs for those banks even higher
Source: CNN

19. Singapore narrows 2023 growth forecast on ‘weak’
external demand
Research & Development Unit
Singapore narrowed its economic
growth forecast to a range of 0.5% and
1.5% for this year, citing sluggish
external demand amid a weak global
economy.
The growth forecast was trimmed from
an earlier range estimate of 0.5% to
2.5%, said the Ministry of Trade and
Industry.
Source: CNBC
Gross domestic product for the April to June quarter grew 0.5% year-on-year, falling
short of the government’s advance estimate of 0.7% announced in July.

20. India broadens access to 'vostro' accounts to facilitate
rupee trade
Research & Development Unit
India has allowed banks in 22 partner
countries, including Russia and the
United Kingdom, to open "vostro"
accounts in the country, the
government told, to help facilitate
trade in rupees. Vostro accounts are
accounts a domestic bank typically
holds on behalf of a foreign bank,
denominated in the currency of the
former.
India has been encouraging partner countries to promote trade denominated in
rupees, with a view to cutting transaction costs associated with currency conversions.
Source: Reuters

21. Russia’s ruble hits a 17-month low to the dollar as the
Ukraine war bites
Research & Development Unit
The ruble hit a 17-month low against the dollar on 14 August, highlighting the growing
squeeze on Russia’s economy from Western sanctions and a slump in export revenues.
The Russian currency has lost nearly 40% of its value this year, weakening past 100
rubles to the dollar, as Moscow’s war in Ukraine takes a heavy toll.
The fall in the ruble’s value is one of several negative indicators for the Russian
economy, even as President Vladimir Putin insists that Western sanctions are having a
limited effect.
Source: CNN

22. Saudi Arabia, Russia extend oil cuts
Research & Development Unit
Source: Reuters
Saudi Arabia will continue the 1 million b/d cut
that is holding crude production at a two-year low
of 9 million b/d, while Russia is tapering its
500,000 b/d export cut for August to 300,000 b/d
for September.
Brent prices have risen 12.3% since the beginning of July to hit USD 84.18/b on Aug. 3,
thanks in part to the Saudi cut, but only after two months of being range bound
between USD 70-80/b. Brent Crude price was around USD 85/b as of 16 August 2023.
In a statement, the Saudi energy ministry said the
kingdom's output could go even lower, if needed.
The Saudi and Russian measures come on top of
some 1.2 million b/d in collective OPEC+ voluntary
reductions that have been in force since May.

23. Global News Snippets
Research & Development Unit
Federal Reserve officials meet next month to determine whether to raise interest rates for the 12th
time to cool the economy or hold them steady. Some officials think the Fed has already raised its
benchmark lending rate enough to curb inflation, but others think it’s too soon to tap the brakes.
UK inflation eased to a 17-month low in July, official data showed, though it also revealed that prices of
services, such as haircuts, hotels and restaurants, increased at a faster pace than the previous month.
Consumer prices rose 6.8% in July compared with a year ago, according to the Office for National
Statistics.
The euro area annual inflation rate was 5.5% in June 2023, down from 6.1% in May. A year earlier, the rate was
8.6%.
China’s consumer-price index fell by 0.3% in July, year on year. The index of factory-gate prices slumped by 4.4%.
China had been teetering on the brink of deflation for months, as the rebound from lockdowns fizzled out. The
value of Chinese exports declined by 14.5% in July at an annual rate, the biggest drop since the start of the
pandemic.
Japan’s economic growth jumped at an annual pace of 6% in the April-June period, marking the third straight
quarter of growth as exports and inbound tourism recovered.

24. 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 not be 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 from the economic crisis…
In order to achieve sustainable growth, monetary policy measures alone will not
suffice. It is important to implement long overdue economic reforms as a matter of
highest priority.
“Efforts to strengthen governance and reduce corruption vulnerabilities should
continue. Renewed efforts are needed in relation to growth-enhancing structural
reforms, including increasing female labour force participation, reducing youth
unemployment, liberalizing trade, developing a wide-reaching and coherent
investment promotion strategy, and reforming price controls and state-owned
enterprises “ - Economic Reforms – IMF – March, 2022