2. CONTENTS
BANKING & FINANCE
ComBank receives Global Finance ‘Best Bank in Sri Lanka’ award for 21st time
‘ComBank Digital’ adjudged ‘Best Mobile BankingApp’ in Sri Lanka by Global
Finance
ComBank wins two top awards at Daraz Payment Partner Awards 2023
ComBank’s ‘Vibe’ brings youth dreams to life via AI and wins WIM New
Generation award
ECONOMY, BUSINESS & DEVELOPMENT
IMF – Staff level agreement on the first review of SL’s EFF program
IMF identifies proposed “Property tax” as key additional revenue source for
govt. in 2025
Sri Lanka – External Debt Optimization latest..
Major players collaborateonColombo Port City phase 2 development
Sri Lanka’s newest mall – HavelockCity
News Snippets
Impact of the battle in the middle-east on SL
GLOBAL UPDATE
Globaleconomy – IMF
U.S. wraps up fiscal year with a budget deficit near USD 1.7trillion, up 23%
China restricts exports of graphite as it escalates a global tech war
China’s Xi announces over USD 100bn in new Belt and Road (BRI) funding
Egypt’s bonds spiral lower after Moody’s downgrade over economic woes
EconomistClaudia Goldin wins Nobel Prize for work on gender gap
News Snippets
Research & DevelopmentUnit
4. Research & DevelopmentUnit
ComBank receives Global Finance ‘Best Bank in Sri Lanka’ award
for 21st time
The Commercial Bank of Ceylon received the award
for the Best Bank in Sri Lanka in 2023 from the US-
based Global Finance magazine, at the 30th edition
of the magazine’s annual awards presentation.
This is the 21st occasion that Commercial Bank has
won this prestigious title. According to Global
Finance, the award-winning banks were those that
attended carefully to their customers’ needs in
difficult markets and accomplished strong results
while laying the foundations for future success.
In selecting the top banks, Global Finance considered factors that ranged from the quantitative objective
to the informed subjective. Objective criteria included: growth in assets, profitability, geographic reach,
strategic relationships, new business development and innovation in products. Subjective criteria
included the opinions of equity analysts, credit rating analysts, banking consultants and others involved
in the industry.
5. Research & DevelopmentUnit
‘ComBank Digital’ adjudged ‘Best Mobile Banking App’ in Sri
Lanka by Global Finance
‘ComBank Digital’ – Commercial Bank’s omni-channel digital banking platform has
been adjudged the ‘Best Mobile Banking App’ in Sri Lanka by Global Finance at the
2023 edition of the magazine’s World’s Best Digital Bank Awards presentation in
London.
6. Research & DevelopmentUnit
ComBank wins two top awards at Daraz Payment Partner Awards
2023
The Commercial Bank of Ceylon has won
two top awards at the 2023 Payment Partner
Performance Awards of Daraz, South Asia’s
largest ecommerce platform.
Sri Lanka’s largest private sector bank has
been adjudged the ‘The Best Engaging
Overall Cards Base’ for the fourth
consecutive year and has also been
recognised as the ‘Best Debit Card Base’ at
these awards, presented recently at the
Shangri-La Hotel Colombo. Commercial Bank
was the only bank to win two awards.
7. Research & DevelopmentUnit
ComBank’s ‘Vibe’ brings youth dreams to life via AI and winsWIM
New Generation award
A ground-breaking digital marketing campaign
powered by generative artificial intelligence (AI)
to promote the Vibe Youth Account of the
Commercial Bank of Ceylon has won the ‘Youth
Campaign of the Year’ award at the 2023 New
Generation Awards of Women in Management
(WIM) and the National Youth Services Council.
The stimulating ‘Tomorrow is Yours’ campaign by Vibe sought to reignite the passion young people
had for their lives and the future, by using AI to show them that the possibilities are endless.
With the help of AI, the campaign enabled them to not only develop a visual of themselves living
their dream, but also provided them guidance on what they could do to achieve those dreams.
9. Research & DevelopmentUnit
IMF – Staff level agreement on the first review of SL’s EFF
program
IMF staff and the Sri Lankan authorities reached a staff-level agreement on economic policies to conclude the first review of the
48-month EFF-supported program on 19 October 2023. Sri Lanka will have access to SDR 254 million (about USD 330mn) in
financing once the review is approved by IMF Management and IMF Executive Board.
Key takeaways
• The staff-level agreement is subject to the approval by IMF management and the IMF Executive Board in the period ahead,
contingent on:
(i) The implementation by the authorities of all prior actions
(ii) The completion of financing assurances reviews, which will include confirming whether adequate progress has been
made with debt restructuring to give confidence that the restructuring will be concluded in a timely manner and in line
with the program’s debt targets.
• IMF commends government’s reform efforts
• All quantitative performance criteria for end-June met, except the one on expenditure arrears.
• All indicative targets were also met except the one on tax revenues.
• Most structural benchmarks were either met or implemented with delay by end-September 2023. Notably, the authorities
published on time the Governance Diagnostic Report . Sri Lanka is the first country in Asia that has undergone the IMF
Governance Diagnostic exercise.
• Progress is still ongoing on the revenue measures to support the fiscal consolidation during 2024 in line with program
parameters.
Read more: https://www.imf.org/en/News/Articles/2023/10/19/pr23357-sri-lanka-imf-reaches-sla-on-the-review-of-sri-lanka-extended-fund-facility-arrangement
10. Research & DevelopmentUnit
IMF identifies proposed “Property tax” as key additional
revenue source for govt. in 2025
The International Monetary Fund (IMF) expects a property and inheritance tax that is currently in the
planning will be a key source of additional revenue for the government in the year 2025.
“-property tax is something that is in the program, but not quite yet, because it's
recognized that this is something that takes a lot of time to put into place, and it is,
in fact, important for the Sri Lankan authorities to make preparations for that. And,
in fact, the IMF is also providing some technical assistance in that regard. So, it's
important to get started with it. But it will take some time for that to become
effective. And it's envisaged that, in 2025, property tax would be a key source of
additional revenue in that year.”
– , IMF Senior Mission Chief for Sri Lanka Peter Breuer
Read more: https://www.imf.org/en/News/Articles/2023/10/22/tr102123-transcript-press-briefing-sri-lanka
11. Research & DevelopmentUnit
Sri Lanka – External Debt Optimization latest..
Sri Lanka reached an agreement on the key principles and indicative terms of a debt treatment with the Export-
Import Bank of China (“China Exim bank”). The agreement in principle covers approximately USD 4.2bn of
outstanding debt. It constitutes a key step towards restoring Sri Lanka’s long-term debt sustainability and will pave
the way to a prompt economic recovery.
Source: https://www.treasury.gov.lk/api/file/22bf7fd8-a834-4aec-9ce7-04c790eb09ec
China EXIM bank agrees on the key principles and indicative terms of a debt treatment
Ministry of Finance, in their statement invited the group to further engage with the country’s debt advisors to
progress the matter in a reasonable viable way.
Government responses to Ad hoc group of bondholders’ debt restructuring proposal
The Ad Hoc Group of Bondholders of Sri Lanka (The Group) submitted its own restructuring proposal relating to Sri
Lanka's outstanding international bonds. The proposal, which provided upfront debt relief, included a menu of new
securities that would be offered to the holders of the existing bonds, including a *Macro-Linked Bond ("MLB").
However, Ministry of Finance issued a statement on 18 October 2023 to the group stating that this proposal has not
received a favorable response from the government.
Source: https://www.treasury.gov.lk/api/file/8b9cf8b4-e22d-4e9a-9008-3a0065469692
*Macro Linked Bond or GDP linked bonds is an innovative new instrument that is designed to be liquid and index-eligible and whose payouts are linked to the evolution of Sri Lanka's gross
domestic product.
√
12. Major players collaborate on Colombo Port City phase 2
development
Research & DevelopmentUnit
A corporation framework agreement
worth USD 1.565bn was signed in Beijing
by the Port City Economic Commission,
China Harbour Engineering Company,
Browns Investments and Hunan
Construction Investment Group, for the
phase two development of the Colombo
Port City project.
This agreement encompasses the development of the Marina Project, Marina Hotel
Project and Colombo International Financial Centre Mixed Development Project.
13. Research & DevelopmentUnit
Sri Lanka’s newest mall – Havelock City
The highly anticipated Havelock City Mall announced its
grand opening on 19th of October 2023. This international
standard shopping mall promises to deliver an unparalleled
shopping and entertainment experience, creating an ideal
destination for the local community right in the heart of
Colombo.
Mall consists of:
• More than 130 retail outlets
• Vibrant food courts, cafes and sports bars
• Entertainment zones
Wet & Wild adventure zone
A jungle zone
An ocean zone
• Gaming Zone
Opening early next year is the Havelock City Mall’s 1,000-seat, six-screen multiplex, along with the first
and only premium, large format IMAX cinema in Sri Lanka.
14. News Snippets
Research & DevelopmentUnit
Credit card usage sees gradual recovery after price and rate
shocks
Credit card users were seen gradually swiping their cards, perhaps
in a sign of slow pickup in consumer spending after the inflation
eased, but others appear to have been dipping back into their
cards after their household incomes were nowhere near
adequate to meet their needs after the price shock last year.
The total outstanding credit card balance, a distant proxy for
overall consumer spending, rose by Rs.1,435.00mn in August to
Rs.144.47bn.
Six state-owned banks to undergo urgent reforms
Sri Lanka’s six state-owned banks are set to undergo urgent
reforms due to current pressure exerted on their capital
positions from massive amounts of bad loans and urgent
funding as well as liquidity constraints, informed official
sources said.
Bank of Ceylon, HDFC Bank, National Savings Bank,
Pradeshiya Sanwardena Bank, People’s Bank and Regional
Development Bank are included in the SOE restructuring
unit’s list of 31 state-owned enterprises (SOEs).
EDB kicks off revitalization of 2018-2022 National Export Strategy
The Export Development Board (EDB) announced it has initiated the
process of revitalizing its existing National Export Strategy 2018-2022, to
assist in the country’s journey towards economic advancement.
Spearheaded by the EDB, the effort is carried out in collaboration with
the Investment Promotion Ministry and with technical support from the
International Trade Centre (ITC) based in Geneva.
Fitch removes ‘Rating Watch Negative’ on 15 banks
following DDO completion
Fitch Ratings affirmed ratings on 15 Sri Lankan banks
and removed them from the Rating Watch Negative
(RWN), following the conclusion of the Domestic Debt
Optimization (DDO).
15. Research & DevelopmentUnit
Impact of the battle in the middle-east on SL
The battle in the middle-east is escalating for the second week running. This is a brief
look at how it may affect Sri Lanka…
Tea
The war scenario is likely to cause shipping lines to impose surcharges
resulting in higher freight rates adding to the woes of high costs.
Sri Lanka just commenced this year the Iran – Sri Lanka tea for oil deal
whereby exports of tea are expected to pay off the long overdue oil
bills. Iran is one of the biggest buyers of Ceylon Tea in the region.
Hence, Iran’s involvement in the war could be a cause for concern.
Meanwhile, with Palestine being a leading buyer of Ceylon Tea it is
likely to be affected as their ports within Gaza will be inaccessible as a
result of which they will have to channel the exports through Jordan
via the West Bank over land
Oil, commodity prices and global trade
Conflicts in the Middle East tend to lead to spikes in oil prices (oil prices
sky rocketed during the OPEC oil embargo of 1973-1974, the Iranian
revolution of 1978-1979, the Iran-Iraq War initiated in 1980, and the
first Persian Gulf War in 1990-91) . Since the region accounts for nearly a
third of global oil supply, any instability can create market uncertainty
based on concerns about interruptions to global oil supply.
The same could be applied to global trade as shipping routes will be
disrupted by the war.
Remittances
Middle east is the primary source market for our remittances. Sri Lanka’s remittances are recovering gradually after the economic crisis. However, if
the present war escalates in to a regional war, it will affect future remittance flows.
17. Global economy – IMF
Research & DevelopmentUnit
• Global growth is projected to fall from an estimated
3.5 % in 2022 to 3.0 % in 2023 and 2.9% in 2024.
• The rise in central bank policy rates to fight inflation
continues to weigh on economic activity.
• Global headline inflation is expected to fall from 8.7
% in 2022 to 6.9 % in 2023 and 5.8 % in 2024.
• The recent resolution of the US debt ceiling standoff
and, earlier this year, strong action by authorities to
contain turbulence in US and Swiss banking reduced
the immediate risks of financial sector turmoil.
18. Research & DevelopmentUnit
Source: IMF World Economic Outlook: October 2023
However, the balance of risks to global growth remains tilted to the downside.
Inflation could remain high and even rise if further shocks occur, including those from
an intensification of the war in Ukraine , tensions in middle east and extreme weather-
related events, triggering more restrictive monetary policy.
Financial sector turbulence could resume as markets adjust to further policy tightening
by central banks.
China’s recovery could slow, in part as a result of unresolved real estate problems, with
negative cross-border spillovers and rising youth unemployment.
Sovereign debt distress could spread to a wider group of economies.
On the upside, inflation could fall faster than expected, reducing the need for tight
monetary policy, and domestic demand could again prove more resilient.
Global economy – IMF (Cont.)
19. U.S. wraps up fiscal year with a budget deficit near
USD 1.7trillion, up 23%
Research & DevelopmentUnit
Source: CNBC, US Federal Fiscal Data
The federal government wound up its fiscal year in September with a deficit just shy of
USD 1.7tn, the U.S. Department of the treasury announced.
Wrapping up a year in which some thought the shortfall could exceed USD 2tn, the U.S.
ended up with an imbalance of USD 1.695tn, up about USD 320bn, or 23.2%, from
fiscal 2022.
For the 2023 fiscal year, total revenue fell USD 457bn, or 9% from fiscal 2022, to USD
4.439tn, largely due to a drop in non-withheld individual income tax payments amid a
worse performance in stocks and other financial assets as interest rates rose. Expenses
for the year decreased by USD 137bn to USD 6.134tn.
20. China restricts exports of graphite as it escalates a global
tech war
Research & DevelopmentUnit
China has unveiled plans to restrict
exports of graphite — a mineral crucial to
the manufacture of batteries for electric
vehicles (EVs) — on national security
grounds, the Ministry of Commerce and
the General Administration of Customs
said
Source: CNN Economy
The announcement comes just days after the United States imposed additional limits on the kinds of
semiconductors that American companies can sell to Chinese firms.
Global sales of EVs, including purely battery-powered vehicles and hybrids, are soaring, according to the
International Energy Agency.
21. China’s Xi announces over USD 100bn in new Belt and
Road (BRI) funding
Research & DevelopmentUnit
Beijing will inject over USD 100bn of new
funding into its Belt and Road initiative,
President Xi Jinping said at a summit
marking the vast infrastructure project’s
tenth anniversary.
Source: CNN, Economist
BRI in numbers
• China claims the BRI has created 420,000 jobs and lifted 40m people out of poverty.
• More than 150 countries have signed up to the BRI scheme, including 18 of the EU’s 27 members.
22. Egypt’s bonds spiral lower after Moody’s downgrade over
economic woes
Research & DevelopmentUnit
Egypt’s sovereign dollar bonds have tumbled after ratings agency Moody’s downgraded
the country’s credit rating deeper into junk territory, ramping up the pressure on the
cash-strapped nation as it heads into elections in December.
Source: Aljazeera economy
Moody’s moved Egypt down one notch to “Caa1” from “B3”, seven levels into junk, citing the
country’s worsening debt affordability.
The country is in the throes of a bruising economic crisis, with record inflation, crushing
government debt and a plunging currency that has driven more of its citizens to seek risky
routes out of the country.
23. Economist Claudia Goldin wins Nobel Prize for work on
gender gap
Research & DevelopmentUnit
Harvard economist Claudia Goldin has been
awarded the Nobel Prize in economics for her
work examining the gender pay gap.
Goldin, 77, was recognised for her research
showing that women are paid less than men on
average despite having higher education levels
and that most of the gap appears after childbirth.
Source: Aljazeera
For her research, Goldin examined data covering 200 years of women’s participation in the workforce in the United
States.
Goldin’s research found that a woman’s role in the job market and her pay are determined partly by individual
decisions, including educational choices, as well as broad social and economic changes.
24. News Snippets
Research & DevelopmentUnit
China’s GDP was 4.9% larger in the third
quarter than in the same period a year ago, a
faster pace of growth than analysts had
forecast. September’s growth in industrial
output and retail sales also beat expectations.
Officials downplayed talk of an economic
recovery, warning that “the external
environment is becoming more complex.” The
property market is very fragile, as speculation
mounts that Country Garden, the country’s
biggest developer, may have defaulted on its
dollar debt.
Britain’s annual inflation rate held steady in September, at 6.7%. Food
prices rose at the slowest pace since June 2022. The core rate, which
excludes energy and food, eased to 6.1%. The Bank of England left interest
rates on hold at its most recent meeting, and markets are betting it will do
so again. “Let’s not get carried away,” Andrew Bailey, the bank’s governor,
has said; the fight against inflation is not over.
The euro zone’s annual inflation rate fell sharply in September, to 4.3%, the
lowest level in almost two years. The core rate, which excludes food and
energy, dropped to 4.5%. The mood music (prevailing feeling) from the
European Central Bank is that it will keep its interest rates at the current high
levels so that inflation drops to 2% by 2025.
A rise in the cost of oil pushed Turkey’s inflation rate to 61.5% in September. The central bank has raised interest rates to 30%
in a bid to tame prices.
The rout in government-bond markets deepened, as investors bet
that interest rates would stay higher for longer. The yield on
America’s ten-year Treasury bond neared 5.0%, the highest since
2007. In Europe the yield on Germany’s benchmark ten-year debt
rose above 3% for the first time since 2011.
The humanitarian situation worsened in Gaza, where
about 5,000 people have been killed, according to the
Palestinians, amid Israel’s retaliation for the Hamas
attack. Under mounting international pressure, Israel
will allow food, water and medicine to cross from Egypt
to southern Gaza, where the population has moved to
take shelter.
25. 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…
“Macroeconomic policy reforms are starting to bear fruit and
the economy is showing tentative signs of stabilization.
Sustaining the reform momentum and addressing governance
weaknesses and corruption vulnerabilities are critical to put the
economy on a path towards lasting recovery and stable and
inclusive growth.”
-IMF Senior Mission Chief for Sri Lanka Peter Breuer
