www.combank.lk

1. Economic Capsule
December 2019
276th Issue
Research & Development Unit
Economic Capsule
May 2021
292nd Issue

2. C O N T E N T S
BANKING & FINANCE
 Combank named “Best Bank in Sri Lanka” for the 10th time by FinanceAsia
 ComBank wins ‘European Quality Award’ from Europe Business Assembly, UK
 ComBank offers Credit Card holders auto bill settlement with leading utilities
 ComBank launches Corporate Fuel Credit Card & Prepaid Fuel Card
ECONOMY & BUSINESS
 World Bank predicts economy to bounce back in Sri Lanka
 Central bank amends rule on mandatory conversion requirement of export proceeds
 Sri Lanka’s Manufacturing PMI  Apr 2021
 Sri Lanka’s Services PMI  Mar 2021
 External sector performance- Jan to Mar 2021
 Bangladesh - Sri Lanka Currency Swap increased to USD 250mn
 Economic News Snippets
INTERNATIONAL
 Rising debt in emerging markets could push back COVID recovery and
widen gap with developed world
 Biden proposes USD 6tn budget to boost infrastructure, education and
climate
 US, France, Germany push for ‘historic agreement’ on 15% global
corporate tax rate
 US, France, Germany push for ‘historic agreement’ on 15% global
corporate tax rate

3. Banking &
Finance

4. Combank named “Best Bank in Sri Lanka” for
the 10th time by FinanceAsia
Research & DevelopmentUnit
The Commercial Bank of Ceylon has once again been declared the ‘Best Bank
in Sri Lanka’ at the 2021 FinanceAsia Country Awards, taking its place among
global and regional giants adjudged the best domestic banks in their
respective countries.
This is the 10th occasion that Commercial Bank has been bestowed this
prestigious accolade by FinanceAsia, which is acknowledged as the presenter
of one of the best-known and most credible sets of awards in Asia's financial
services industry.
The FinanceAsia Country Awards are based on the respective banks’ performance, encompassing key events of the
year, financial results including profits, NPL ratios, provisioning, return on equity, capital adequacy ratios, total
assets, loans, deposits, branch network, vision and long-term strategy, market position versus the nearest
competitor, principal sources of profit, and feedback of stock market analysts.

5. ComBank wins ‘European Quality Award’ from
Europe BusinessAssembly, UK
Research & DevelopmentUnit
The Commercial Bank of Ceylon has been presented the ‘European Quality
Award’ by the Europe Business Assembly of Oxford, UK, which is an
international corporation that encourages economic and social development
on a global level.
This prestigious international recognition is awarded to regional companies
that demonstrate excellence in their management of quality and their
approach to total quality management that contribute to the satisfaction of
their customers, employees, and other stakeholders.
Commercial Bank was honoured with the European Quality Award for the high quality of its products
and services, and in receiving the award, the Bank gains a significant advantage that will help raise its
competitive capacity in the European and world markets.

6. ComBank offers CreditCard holders auto bill
settlement with leading utilities
Research & DevelopmentUnit
Automated utility bill payment with no intervention by the customer
has brought about a new dimension in convenience for ComBank
credit card holders by offering them an option to automatically
settle their monthly bills to the country’s most-widely used utilities.
With travel restrictions and safety concerns due to the pandemic,
ComBank credit card holders need not go outside to settle their
monthly utility bills.
The Bank has announced that its credit card holders can now enrol to Dialog, Ceylon Electricity Board (CEB),
Mobitel and the National Water Supply & Drainage Board (NWSDB) to settle bills automatically every month via
a designated Credit Card.
Further, registration for Automatic Bill Settlement has been simplified, with credit card users being given the
option enter their credit card details via the Bank’s website, accept terms and conditions and register,
eliminating the need to visit the bank.

7. ComBank launchesCorporate Fuel CreditCard
& Prepaid Fuel Card
Research & DevelopmentUnit
The Commercial Bank of Ceylon has introduced a
Corporate Fuel Credit Card and a Prepaid Fuel Card
that can exclusively be used for fuel purchases and will
eliminate the cumbersome fuel allowance
reimbursement process currently followed by most
companies.
Designed to benefit large companies as well as small and medium enterprises that reimburse employee fuel bills every month,
these cards aim to replace company fuel books and travel voucher books and significantly save time spent on verifying bills,
collating and reconciling usage information, and fretting over lost receipts.
A Prepaid Fuel Card is essentially issued to employees of a company, at the request of a company and is a reloadable card that
works like a debit card and can only be used at fuel stations. At the beginning of each month, a company can credit an employee’s
monthly fuel allowance in advance to his or her ComBank Prepaid Fuel Card account which can then be used to purchase fuel.
Monthly usage is provided to the company by the Bank and the company can top up the card with the required amount to enable
the employee to utilise his or her next month’s allowance.
Meanwhile, a Corporate Fuel Credit Card is enabled with an automated settlement option where the fuel usage of an employee is
automatically debited from the company’s current account when the Card is used by the employee to pump fuel.

8. Economy &
Business

9. Research & DevelopmentUnit
World Bank predicts economy to bounce
back in Sri Lanka
• The World Bank forecasts
a bouncing back in
Sri Lanka’s economic
activity with up- and
down-side risks in
financial vulnerabilities
despite heavy toll of the
COVID-19 pandemic.
Key macroeconomic indicators
For the full report follow : https://thedocs.worldbank.org/en/doc/15b8de0edd4f39cc7a82b7aff8430576-0310062021/original/SriLanka-DevUpd-Apr9.pdf
• This was highlighted in the Sri Lanka Development Update (SLDU) released recently by the
World Bank with a special focus on economic and poverty impact of the coronavirus contagion
on the island nation and the lives of its people.

10. Central bank amends rule on mandatory
conversion requirement of export proceeds
Research & DevelopmentUnit
• The Monetary Board having considered the requests made by exporters of goods,
has amended the Rule No.2 of 2021 as published in the Gazette Extraordinary No.
2218/38 dated 09.03.2021 to reflect the following:
a. Reduce the percentage of mandatory conversion requirement of export
proceeds of goods into Sri Lankan Rupees from 25 to 10 per centum.
b. To extend the number of days given to exporters to convert the export proceeds
of goods into Sri Lankan Rupees, as required in (a) above, from fourteen (14)
days to thirty (30) days, provided, however, that such date of conversion shall
not be a date later than One Hundred and Eighty (180) days from the date of
shipment.
Source: CBSL

11. Sri Lanka’s Manufacturing PMI  Apr 2021
Research & DevelopmentUnit
Following the seasonal pattern, manufacturing PMI contracted
to 44.3 in April 2021 with a decline of 22.7 index points from
March 2021.
This was mainly due to the significant declines in Production,
New Orders, Stock of Purchases, and Employment sub-indices
compared to the significant expansion recorded in March.
Source: CBSL

12. Sri Lanka’s Services PMI  Mar 2021
Research & DevelopmentUnit
Services PMI dropped to 48.9 in April 2021, reversing the
growth momentum observed in the Services sector for four
straight months.
This decline was underpinned by the deteriorations observed
in new businesses, business activities, employment and
expectations for activity.
The Index
PMI is calculated as a ‘Diffusion Index’, where it takes values between 0 and 100.
PMI = 50 - sector remained neutral on month-on-month basis
PMI > 50 - sector is generally expanding on month-on-month basis
PMI < 50 - sector is generally declining on month-on-month basis
Source: CBSL

13. Research & DevelopmentUnit
External sector performance- Jan to Mar 2021
Source: CBSL
Category Jan-Mar
2020
Jan-Mar
2021
Growth %
Merchandise Imports 4,503 5,041 12.0
•Consumer Goods 966.1 997.9 3.3
•Intermediate Goods 2,545.7 2,990.7 17.5
•Investment Goods 983.8 1,050.1 6.7
•Unclassified 7.1 2.4 -65.7
Merchandise Exports 2,650 2,982 12.6
•Industrial Exports 2,134.1 2,302.4 7.9
•Agricultural exports 506.5 663.8 31.0
•Mineral exports 4.9 11.8 140.9
•Unclassified 4.2 4.3 2.0
Trade Balance -1,853 -2,059 -11.1
Tourism 682 13 -98.1
Worker’s Remittance 1,600 1,867 16.7
March 2021 Performance
• Sri Lanka’s external sector showed a mixed
performance in March 2021 with a widened trade
deficit on the one hand, and a healthy growth in
workers’ remittances and a slight pickup in the
tourism sector on the other. The deficit in the trade
account widened in March 2021, for the first time
since April 2020. Both exports and imports were
significantly higher in March 2021, compared to
March 2020 as well as February 2021.
• However, workers’ remittances grew steadily, and the
tourism sector continued the recovery process, albeit
at a very slow pace.
• The Sri Lankan rupee depreciated against the US
dollar during the month, partly reflecting the
seasonal demand for imports.
• Meanwhile, in March 2021, the Central Bank entered
into a bilateral currency swap arrangement with the
People’s Bank of China for Chinese yuan 10 bn
(approximately USD 1.5 bn) with a view to promoting
bilateral trade and direct investment for economic
development of the two countries, and to be used for
other purposes agreed upon by both parties
(USD Mn)

14. Bangladesh - Sri Lanka Currency Swap
increased to USD 250mn
Research & DevelopmentUnit
• Bangladesh’s currency swap agreement with
Sri Lanka will be completed by next month, a top
official of Bangladesh Bank has said.
• A total of USD 250mn would be provided on the
deal set in motion during March.
• Initially the Bangladesh Bank (BB) board approved
a USD 200mn currency swap deal with Sri Lanka in
March.
Under the draft currency swap proposal, the BB would provide up to USD 250mn in foreign currency to meet
Sri Lanka’s foreign currency expenditures, the officials said.
Against the fund, Sri Lanka would keep a same amount of its local currency, Rupee, with the Bangladesh Bank along
with a government guarantee. The BB would get around 1-2 % plus LIBOR from Sri Lanka as interest.
Source: Daily News

15. Research & DevelopmentUnit
World Bank approves USD 80.5mn additional
financing for vaccines
The World Bank approved USD 80.5mn additional financing
to help Sri Lanka access and distribute fairly COVID-19
vaccines and to strengthen the country’s vaccination system
and pandemic response. This additional finance builds on the
USD 217.56mn- Sri Lanka COVID-19 Emergency Response and
Pandemic Preparedness Project, which was approved in April
2020.
Economic News Snippets
Forex regulations revised to help cross-
border transactions
The Central Bank has revised regulations under the
Foreign Exchange Act, No. 12 of 2017 (FEA) for further
simplification and clarity improvement, “with the
objectives of achieving greater efficiency in the conduct
of cross-border foreign exchange transactions alongside
further facilitating economic activities of the
stakeholders through greater convenience of doing
business”.
More details:
https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_202104
23_revised_regulations_issued_under_foreign_exchange_act_no_12_of_2017_e.pdf
Foreign currency transaction monitoring system
launched
Sri Lanka will be implementing a comprehensive cross border and
foreign currency transactions monitoring system through licenced
banks to assist migrant workers on the continuation of their
remittances from overseas.
The aim of the government is to pay more attention and provide
more assistance to migrant workers when they enter a very different
job market in the new normal COVID-19 situation and afterwards,
according to Finance Ministry sources.

16. International

17. Rising debt in emerging markets could push back
COVID recovery and widen gap with developed world
Source: CNBC
Research & DevelopmentUnit
• Swelling debt levels may cause emerging markets to fall further behind developed
markets in the economic recovery from the Covid-19 pandemic, an economist said.
• “With the pandemic, debt rose across all types… the big increase of course was in
government debt — and no surprise because of such a need to provide fiscal
stimulus at the same time the tax revenues were down much across the board
around the world,” Steve Cochrane, chief Asia-Pacific economist at Moody’s
Analytics, told.
• Total global debt across government, corporate, household and financial sectors
rose by a record USD 24tn in 2020, an analysis by Moody’s Analytics showed. The
increase took global debt to a new-high of 366% of gross domestic product.

18. Research & DevelopmentUnit
Biden proposes USD 6tn budget to boost
infrastructure, education and climate
• Joe Biden set out a USD 6tn budget
proposal that, if passed, would fund a
sweeping overhaul of US infrastructure
and pour money into education and
climate action, while driving government
spending to its highest sustained levels
since the second world war.
• The president’s first budget is largely a
political document, and faces months of
difficult negotiations in Congress where
Republicans are already balking at the
scale of his spending plans. But it clearly
sets out Biden’s ambition to remake the US
after the coronavirus pandemic. Source: The Guardian

19. US, France, Germany push for ‘historic
agreement’ on 15% global corporate tax rate
Research & DevelopmentUnit
• France and Germany pushed for a “historic” agreement among major economies on a
minimum tax rate for multinational corporations, hoping to shore up support after
sceptical European countries expressed opposition to the plan.
• Spearheaded by US President Joe Biden, the proposal for a 15% minimum tax rate has
hit turbulence after Ireland’s Finance Minister expressed “significant reservations” over
it.
• “The change of (US) administration offers a historic opportunity and we have to seize
opportunities when they present themselves. It’s now. It’s now that we must act,”
insisted French Finance Minister Bruno Le Maire at a joint press conference ahead of
the upcoming Franco-German Economic and Financial Council.
Source: AFP

20. Research & DevelopmentUnit
US and China hold first ‘candid’ trade talks
under Biden tenure
• Top US and Chinese trade negotiators have held
“candid” talks, their first under the Biden
presidency, as Washington continues to raise
concerns over Beijing’s trade practices.
• In the long-awaited first official engagement
between the US trade representative Katherine
Tai and the Chinese vice-premier, Liu He, held
virtually, the two sides emphasized the
importance of the bilateral trade relations and
agreed to further negotiations.
Source: Bloomberg

21. 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.
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