Geert Bekaert and Campbell R. Harvey's
Chronology of Economic, Political and Financial Events in Emerging Markets
Sri Lanka
Major Political and Economic Events
The exchange rate was unified. Capital controls on inflows of capital were eased. Mehrez and Kaufmann Liberalization date. a1
Foreign banks were permitted. Restriction on capital outflows remain. a1
The introduction of the Insider Trading Laws.a4
The Effective Rate for the Rupee was to be determined daily by the Central Bank.b
Early in the year, Finance Minister Ronnie de Mel resigned over the handline policy against the JVP and was replaced by M.H.M Naina Marikkar. b
President Jayewardene decided not to be a candidate in the elections. Prime Minister Ranasinghe Premadasa of the ruling UNP won the elections. b
The nation's five-and-a-half-year state of emergency was ended.b
The ruling UNP got 125 out of 225 seats in the parliamentary election. Finance Minister D.B. Wijetunga was sworn in also as Prime Minister. b
The State monopoly on the import of rice was abolished. b
At midyear, the state of emergency was reimposed by the President for one month, subject to 30-day extensions under Parliamentary decree, as violent attacks increased in schools, universities and villages. b
JPV (Janatha Vimukthi Perama) leader Rohana Wijeweera and his deputy were killed in separate accidents and six of the seven members of the front's politburo were also killed or arrested in a bloody counter-insurgency campaign by Sri Lankan security forces, all but removing the Left-wing Sinhalese guerrilla movement as a serious threat.b
The government announced plans to boost agriculture to compensate for the shattered tourist industry.b
Banking crises (1989-1993): state-owned banks comprising 70% of banking system have estimated non-performing loans of about 35% of total loan portfolio.a2 The government nationalized the major banks.a1
After 32 months, the remaining Indian Peace Keeping Force left Sri Lanka. b
The IMF approved SDR 44.6 million in support of the program under the third (last) annual SAF. To facilitate nonresident investments in securities on the Colombo Stock Exchange, commercial banks were authorized to open nonresident Share Investment External Rupee Accounts (SIERA).b
Sri Lanka passed India as the world's leading tea exporter with 216,000 tons shipped. b
A Resident Guest Scheme under which foreign investors depositing a minimum amount of $150,000 would be entitled to resident visas was introduced.a3(first entry)
Companies incorporated abroad were permitted to invest in securities traded at the Colombo Stock Exchange, subject to the same terms and conditions as those applicable to such investments by approved national funds, approved regional funds, and nonresident individuals.a3
An Interbank Rate was established for all transactions and was to be determined daily in the interbank market according to a daily range set by the Central Bank. b
Foreign exchange allowances of emigrants at the time of departure were increased significantly.a3
The daily margin was set at 1%. There are no minimum reserve requirements of gold and foreign exchange for the national currency.b
Foreign exchange allowances granted to emigrants at the time of departure were further liberalized. The remittance of pensions in full to persons retired permanently abroad was permitted.a3
The opposition leader was assassinated. One week later President Pramadasas was assassinated. Wijetunga was elected as the president.
The government announced spending cuts to help reduce the fiscal deficit in line with IMF speculations. International donor countries pledged $840 million to Sri Lanka.
The first issues of commercial paper by Sri Lankan companies occurred.
United National Party (UNP) was defeated in provincial elections.
ADR effective date. (Company=JOHN KEELLS HOLDINGS LIMITED)a11
The emigrant allowance for individuals was raised to SL Rs 750,000.a3
The opposition People's Alliance won the parliamentary elections.
Gamini Dissanayake, the UNP leader and presidential contender, was assassinated.
The Prime Minister Chandrika Kumaratunga of the People's Alliance was elected as president. The ongoing conflict between the Tamils and the ethnic Sinhalese caused huge war expenses, about 5% of GDP.
Export-oriented companies, the only companies to escape the tax hike to finance the war against the Tamil rebels, registered the largest gains.
The CSE (the Colombo Stock Exchange) announced the plan to move into electronic international trading in a bid to revive trading and attract foreign investors.
The government made military gains in the north.
In the first quarter, a terrorist bomb exploded near the central bank building. Trading hours were set to accommodate a daily four-hour cut in power supplies.
Workers went on anti-privatization strikes.
In the second half of the year, world prices were near-record for Sri Lankan tea.
The government cut 20% of its spending.
The first prosecution under the Insider Trading Laws.a4
(Provisions specific to commercial banks and other credit institutions) Commercial banks were permitted to grant currency loans from their domestic banking units.a3
The central bank cut banks' reserve requirement by 2%.
A screen-based trading system was introduced to the stock exchange. The CSE allowed brokers to trade on their own accounts, with a limit on trading to 2% of the issued capital of any one stock.
A fatal bomb exploded in Colombo's central business district.
Separate nuclear tests conducted by neighboring countries, India and Pakistan weighed on the economy.
The government launched a $2.3 million Settlement Guarantee Fund to boost investor confidence.
Northwestern Provincial Council elections took place.
(Controls on credit operations) Banks were granted general permission to provide rupee credits to nonresident-controlled companies incorporated locally, except for approved companies. (Provisions specific to commercial banks and other credit institutions) Reporting requirements with respect to fund transfers through electronic fund transfer cards were introduced.a3
The government overturned the previously announced liquidation of its 10.5% stake in Sri Lanka Telecom and announced that it would launch an initial public offering.
President Chandrika Kumaratunga won 51% of votes in the presidential elections.
A car-bomb explosion nearly took the life of the president.
The government made no progress in the peace talks with the rebels and the IPO of Sri Lanka Telecom was not carried out.
The limits for foreign equity participation in banking and insurance activities were raised to 60% and 90%, respectively, from 49%. In the case of stock brokering, this limit could go up to 100% if permission is granted. Foreign investment in unit trusts were permitted, provided the trust deed contains the restriction to invest up to 20% in government securities.a3
President Chandrika Kumaratunga increased the Goods and Service Tax and National Security Levy to bridge the fiscal deficit and finance internal war. The rebels recaptured Jaffna, a crucial town in the north, and government troops suffered huge losses, which led to more tax increase.
Higher global oil prices increased oil and utility charges.
Sri Lankan rupee was devalued by 4% to boost exports and halt the decline in foreign reserves.
President Kumaratunga unveiled a new constitution in Parliament in an attempt to end the country's 17-year civil war. She invited Tamil rebels for talks and tried to meet their demand for more devolution of power to the provinces. But little progress was made. Higher taxes, utility charges and rupee depreciation led to 5% inflation rate. The cost of the war and the fall in tourism revenues made it impossible to meet the 7.6% budget deficit target of the year.
The ruling People's Alliance returned to power after a violence-marred campaign. The government had to depend on support of minority Tamil and Muslim parties for its survival. It had to pass a stopgap budget to allocate 20% of revenues forthcoming in 2001 for defense. The rupee fell steeply by 12.6%.
The Central Bank abolished the rupee's daily trading band, effectively floating the currency.
In the first quarter, the Sri Lankan Securities and Exchange Commission stepped up attempts to enforce corporate disclosure while the Colombo Stock Exchange (CSE) made its listing rules more efficient.
The failure of the northeast monsoon damaged crucial tea and rubber plantations and caused power cuts that hurt industry.
Colombo airport was attacked. Subsequently insurance surcharges on sea and air travel were imposed. The president suspend parliament and call for referendum on changing the electoral system. The ceasefire with the Liberation Tigers of Tamil Eelam rebels expired.
President Kumaratunga announced elections.
The United National Party (UNP) won elections. The Central Bank continued its monetary easing by bringing down the bank rate from 23% to 18%, lowering the statutory reserve requirements by 1%, and reducing the margin between the bank's discount and rediscount rates.
011217 Sri Lanka's trade has slumped dramatically in the wake of the global slowdown, officials revealed yesterday, with October exports down 20% year-on-year - the sixth month in a row that they have declined. Imports have also suffered after a 40% surcharge was imposed on customs duties, on top of the effect of the currency's depreciation. September imports fell 30% y-o-y.
011221 The Central Bank announced today that it was slashing the country's bank rate - the rate charged to banks to borrow from the Central Bank - by five percentage points from 23% to 18%.
020118 Power and Energy Minister Karu Jayasuriya yesterday announced that power cuts would be extended to two-and-a half-hours daily as a result of the country's deepening energy crisis
020416 After completing the necessary reviews, the International Monetary Fund (IMF) today approved the release of a US$60m loan to Sri Lanka under last year's 14-month stand-by arrangement. Officials noted that the facility, combined with the move to free-float the currency in January 2001, appeared to have halted the collapse of official reserves, though fiscal indiscipline and other shocks, both internal and external, had forced the economy into recession last year.
020517 The Central Bank will consider obtaining a sovereign rating this year after previous attempts at an inaugural benchmarking bond issue have been abandoned following escalation of civil war. Central Bank Governor Amarananda S. Jayawardena, speaking yesterday before a forum on economic reform, confirmed that 'there is a move to go in once again for a rating' before the end of the year.
020711 The Central Bank has cut the leading interest rate by an unexpectedly deep 100 basis points, in a bid to stimulate growth. The overnight reverse repo rate was lowered to 12.75%, from 13.75%, while the repurchase rate was cut to 10.5% from 11.5%. Median forecasts had predicted a reduction of 50 basis points.
020911 The central bank has received bids from about 10 international investment banks and financial funds for its US$350m debt issue. JP Morgan Chase, Salomon Smith Barney, Goldman Sachs, Standard Chartered Bank, HSBC, Deutsche Bank and Nomura Securities are reported to be among the interested parties. The deadline for registering interest is 13 September. The sale is the largest in the central bank's history, as authorities seek to capitalise on a slowly-entrenching truce in the 20-year civil war with rebel movement the Liberation Tigers of Tamil Eelam (LTTE).
030115 The World Bank has confirmed that it is formulating a framework for an internationally financed trust fund to support the economy's regeneration after two decades of civil war. The Bank engaged in the project after a formal invitation to participate was extended during on-going negotiations began in November 2002. The fund will mediate millions of dollars in aid that are expected to flow into Sri Lanka from bilateral and multilateral donors as a fragile truce negotiated between the government and insurgent Tamils continues to hold.
030226 The trade deficit rose by a sharp 22% in 2002 from the previous year to weigh in at US$1.41bn, the Central Bank reported yesterday (25 February 2003). The shortfall was generated by a 2.2% rise in imports to total US$6.1bn as exports fell by 2.4% to US$4.7bn. However, monthly data for December 2002 gave hope that a recovery may be slowly emerging as exports of garments, marine products and commodities all showed signs of recovery.
030421 IMF Approves US$567m Loan to Sri Lanka
030527 The government finalised proposals yesterday (26 May 2003) designed to grant financial authority to the secessionist Liberation Tigers of Tamil Eelam (LTTE) guerrilla group in an attempt to bring the group back to dialogue. The details of the proposals are not known, but what is evident is that some form of compromise is being offered.
030815 The central bank of Sri Lanka on Friday lowered the benchmark overnight repurchase rate to 7.5% from 8.25%, following a scheduled meeting of its policy board. The reverse repurchase rate was similarly cut by 75 basis points to 9.5%.
031001 The economy expanded by 5.5% in the three months to June from a year ago, the central bank reported yesterday. Growth was driven by a rise in manufacturing activity, responding to reviving external demand. Key exports of textiles and garments rose during the quarter by 8.9% on the year. Agricultural output, which accounts for around 20% of total gross domestic product (GDP), was hit by severe floods, and contracted by 6.7% on the year.
031016 The central bank today cut the leading overnight repurchase rate by 50 basis points to 7.0%, while the reverse repurchase rate was lowered to 8.5% from 9.5%. The cut was the latest in an easing cycle that has seen rates lowered by 225 basis points since the beginning of the year.
031205 The Japanese government yesterday reiterated its call for Prime Minister Ranil Wickremesinghe and President Chandrika Kumaratunga to end their stand-off and revive the peace process with the secessionist Liberation Tigers of Tamil Eelam (LTTE) guerrilla group. Japan is the country's largest foreign aid donor, and warned that continued political instability and a lack of progress on the peace process was jeopardising the US$4.5bn that the international community pledged to the rebuilding of Sri Lanka's war-torn areas earlier this year.
040120 The International Monetary Fund (IMF) stated today that a review to unlock a US$80m credit disbursal to Sri Lanka - under the current US$567m loan agreement - was on hold, pending resolution of a political row over tax reforms. Under the terms of the loan agreement, the government is mandated to increase tax revenues and cut expenditure to plug the gaping budget deficit.
040130 Finance Minister KN Choksy yesterday announced higher subsidies and a reduction in customs duties, in a move to curtail the rising cost of living. The announcement came ahead of provincial council elections in April, and is a blatantly populist move; the cost of living has been a key issue over the past three years. The United National Party (UNP) government came to power in 2001 on the promise of tackling the country's long-running conflict and its faltering economy.
040226 Sri Lanka's trade deficit hit US$1.54bn last year, up from US$1.41bn in 2002, according to figures released today by the Central Bank of Sri Lanka (CBSL). Exports and imports both increased by 9%; clothing sales led the export charge, while rising industrial activity increased demand for imports.
040319 Bank of Sri Lanka Contradicts IMF, Sees Monteary Easing in 2004
040617 Government Considers 100% Land Tax for Sri Lanka
040707 Speculation is rampant in Sri Lanka regarding a possible return to conflict, after a female suicide bomber today killed five people in an attack on the capital Colombo
Regulations on Foreign Investors

Restrictions: The vast majority of listed companies can have 100% foreign ownership, except some banks, insurance companies, residential housing, mining and some other companies. Share investment and proceeds repatriation take place through a Share Investment External Rupee Account (SIERA) opened through commercial banks.

Taxation: None.a6


Restrictions: No change.

Taxation: Not available.a7


the government has been keen to attract foreign investors, and has introduced a number of reforms towards this end. These include a modern Competition Bill, which was introduced in December 2002 and replaces the outdated Monopolies and Restrictive Trade Practices Act. Also, as of April 2002, restrictions were lifted on foreign investment in financial institutions and public utilities; 100% of the equity capital is allowed, free of exchange controls.

last updated on 7/11/04 by Jerome Mo, Duke Univ.

2002 the government has been keen to attract foreign investors, and has introduced a number of reforms towards this end. These include a modern Competition Bill, which was introduced in December 2002 and replaces the outdated Monopolies and Restrictive Trade Practices Act. Also, as of April 2002, restrictions were lifted on foreign investment in financial institutions and public utilities; 100% of the equity capital is allowed, free of exchange controls.

last updated on 7/11/04 by Jerome Mo, Duke Univ.