This document provides an economic update for August 2022 from the Research & Development Unit of Commercial Bank of Ceylon. It includes the following highlights: - An IMF mission visited Sri Lanka to reach a staff-level agreement and Sri Lanka hopes to finalize an IMF program by December 2022. - Sri Lanka halted imports of over 300 items and allowed electric bike imports. Apparel exports crossed $3 billion for January-July while foreign investment targets were 58% achieved. - Total state-owned enterprise losses in the first four months of 2022 outweighed annual losses in 2021, driven by currency depreciation impacts. - The IMF warned of weakening Asian growth and rising inflation pressures. Global

1. Economic Capsule
August 2022
Research & Development Unit
307thIssue

2. CONTENTS
BANKING & FINANCE
 CBC Results – 30.06.2022
 LMD ranks ComBank the Most Respected Bank in Sri Lanka for 18th year
 ComBank adjudged ‘Best Engaging Overall Cards Base’ by Daraz for 3rd consecutive year
 ComBank revolutionises Sri Lankan banking with ‘wearable banking’ via Flash Digital
Account
ECONOMY, BUSINESS & DEVELOPMENT
 IMF mission visits Sri Lanka
 Sri Lanka halts imports of over 300 items, allows to import electric bikes
 Apparel exports cross USD 3.0bn for January-July period
 Board of Investment realises 58% of investment target set for 2022
 Total SOE Losses in the first four months of 2022 Outweigh Annual Losses in 2021
 Foreign debt share on the rise
 Four countries relaxes travel advisory against Sri Lanka
 CBSL takes steps to increase foreign currency positions
GLOBAL OUTLOOK
 “Asia’s Economies FaceWeakening Growth, Rising Inflation
Pressures” - IMF
 USD 18Trillion Wiped Off Global Markets in First Half of 2022,
*WFE Data Reveals
 Debt reliefs for Zambia
 Global Macroeconomic snapshot
Research & Development Unit

3. Banking &
Finance

4. Research & Development Unit
CBC Results – 30.06.2022

5. Research & Development Unit
LMD ranks ComBank the Most Respected Bank in Sri
Lanka for 18th year
The Commercial Bank of Ceylon has been declared the Most
Respected Bank in Sri Lanka for the 18th consecutive year and has
retained its ranking as the fourth Most Respected corporate entity in
the country overall, in the 2022 ‘Most Respected Entities in Sri Lanka’
rankings published by the LMD magazine.
The Bank was also ranked second overall for Financial Performance, Honesty, and Vision which
are three of the twelve attributes covered by the survey commissioned by the magazine.
Additionally, it was placed among the Top Five corporate entities in Sri Lanka in 2022 in seven
of the attributes and was the highest-ranked bank for nine attributes including Financial
Performance, Quality Consciousness, Management Profile, Honesty, Corporate Culture, CSR &
Sustainability, Vision, HR & People Management, and Crisis Management.

6. Research & Development Unit
ComBank adjudged ‘Best Engaging Overall Cards Base’
by Daraz for 3rd consecutive year
The Commercial Bank of Ceylon has been
adjudged the ‘The Best Engaging Overall Cards
Base’ for the third consecutive year at the
‘Payment Partner Performance Awards 2022’
hosted by Daraz, South Asia’s largest ecommerce
platform.
The Bank was presented this prestigious award for
supporting the Daraz platform by generating the
highest number of transactions by both credit and
debit card bases and the highest number of unique buyers’ engagements during the financial
year 2021-22.
Commercial Bank is the only Sri Lankan bank to win this award for three years consecutively.

7. Research & Development Unit
ComBank revolutionises Sri Lankan banking with
‘wearable banking’ via Flash Digital Account
The Commercial Bank of Ceylon has scaled new heights in
digital innovation, becoming the first bank in Sri Lanka to take
banking to the realm of wearable technology.
The Bank’s and the country’s first “wearable banking” product
was achieved with the integration of access to, and select
features of, the Bank’s ‘Flash’ Digital Account with Apple
Watch in collaboration with Digital Payment Services Pvt Ltd.
Flash account holders who own Apple watches linked to iPhones can now check their account
balances and check payment requests and bill sharing requests from the smartwatches on their
wrists without reaching for their phones, the Bank said.
While the first step of this initiative focuses on enabling account balance view and accepting fund
transfer requests, the Bank is already exploring the possibility of enabling additional features such
as bill payments and own account transfers that will significantly enhance the functionality of
wearable banking.

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

9. IMF mission visits Sri Lanka
Research & Development Unit
An International Monetary Fund mission visited Sri Lanka on 24 August. The mission will remain in the country till 31st August 2022
and expects to reach a staff level agreement.
According to CBSL Governor and other reliable sources Sri Lanka has a chance to finalize the IMF
negotiations and drawdown the 1st tranche of the Extended Fund Facility (EFF) by end of December
2022…
1.Fiscal Plan :The Government has to give a fiscal plan to the IMF
2.Debt Sustainability Analysis (DSA): The IMF also needs to give a Debt Sustainability Analysis (DSA) to the Government after
studying the Fiscal Plan.
3. Staff Level Agreement with the IMF
4.Debt restructuring/Engagement with creditors: With the DSA the Government appointed consultants Lazard and Clifford
Chance need to engage the creditors.
Countries in the Paris club and non-Paris club will also be engaged in parallel by the Government. A holistic and equal
treatment solution to all creditors must be agreed on(This could take approximately a year)
However, the debt restructuring negotiations do not have to be completed in order to finalize the agreement with IMF.
Clear progress should be demonstrated with assurance of sufficient financing to achieve debt sustainability.
5.Final Agreement: Once the IMF is comfortable with the above measures, the Executive Board can approve the EFF for
disbursement in tranches.
However, the speed of entering into a final agreement with the IMF will depend on the successful conclusion of the
combined efforts as outlined above.

10. Research & Development Unit
Timeline so far…
April 18-22 2022: Sri Lankan authorities’ request for an IMF-supported program
May 9-24 2022: Virtual discussions between IMF team& Sri Lankan authorities
June 20-30 2022: IMF mission team visited Colombo to discuss about economic policies and
reforms to be supported by an IMF Extended Fund Facility (EFF) arrangement.
Debt Restructuring: Representatives of the financial and legal advisory firms Lazard
and Clifford Chance were in Sri Lanka in June 2022 to assist Sri Lanka’s debt
restructuring efforts.
Aug 24-31 2022 : IMF mission visited Sri Lanka in order to reach a staff level agreement.
IMF mission visits Sri Lanka (Cont.)
Source : IMF, Reuters

11. Research & Development Unit
Sri Lanka halts imports of over 300 items, allows to
import electric bikes
Sri Lanka has halted imports over 300 items from August 23 until further notice in a
latest gazette issued.
The goods loaded until August 23 will be allowed to be cleared by customs until
September 14.
The ‘temporarily suspended’ items include dairy products, cosmetics, electrical goods,
water craft, ships, aircraft, electrical and electronic goods and building material.
Some industrial machinery including metal working machinery, packing machines and
ball bearings have also been halted.
However the government has allowed importation of electric bikes
Source : BOI Sri Lanka

12. Research & Development Unit
Apparel exports cross USD 3.0bn for January-July period
The export revenue of Sri
Lanka’s apparel sector for the
first seven months of the year
crossed the USD 3bn mark,
with July recording a positive
performance, which affirms the
industry’s ability to sustain
resilience.
According to the provisional data released by the Joint Apparel Association Forum
(JAAF) , the export revenue for the January-July 2022 period totalled USD 3.52bn.
Source : EDB

13. Research & Development Unit
Board of Investment realises 58% of investment target
set for 2022
The state-run investment promotion agency, the Board of
Investment (BOI) said it has to-date achieved 58% of the
investment target set for the year.
For the period from January 1 to the first week of August
2022, Sri Lanka has been successful in bagging investments
worth USD 1.29bn. The agency has a target of attracting
investments worth USD 2.2bn for 2022.
The BOI has inked a total of 75 agreements, of which 26 are fresh projects. The
remaining 49 agreements that were signed are for expansion projects.
Source : BOI

14. Total SOE losses in the first four months of 2022 -
Outweigh annual losses in 2021
Research & Development Unit
During the first four months of 2022 the cumulative
loss of State-Owned Enterprises (SOEs) amounted to
LKR 860 BN. This figure outweighs the annual loss of
SOEs in 2021.
The top 3 contributors to the increase of the loss
were Ceylon Petroleum Corporation (CPC), Sri
Lankan Airlines and the Ceylon Electricity Board.
Source : Ministry of Finance, Publicfinance.lk
The losses were driven by the exchange rate loss due to the depreciation of the currency by 58% in the
first four months of 2022. Certain SOE’s with higher level of exposure to foreign debt were more
vulnerable to the depreciation of the currency. The CPC was one such SOE that was severely impacted by
the exchange rate.

15. Foreign debt share on the rise
Research & Development Unit
Sri Lanka ended 2021 with a total outstanding
Government debt of 17,873 BN (105% of GDP).
At the end of the first quarter of 2022, total
outstanding Government debt had increased to
21,697 billion.
Foreign debt as a percentage of total
outstanding Government debt increased from
37% at the end of 2021 to 47% in the first
quarter of 2022. On average for the past decade
domestic debt has accounted for 56% and
foreign debt has accounted for 44% of total
outstanding Government debt.
The rupee value of the country’s foreign debt increased by 68% from February to April 2022, following the
depreciation of the exchange rate in March 2022. This was the main contributing factor for the increase in total
outstanding Government debt. ​ Source :Publicfinance.lk

16. Research & Development Unit
Four countries relaxes travel advisory against Sri
Lanka
The governments of France, Switzerland, UK
and Norway have relaxed the travel advisory
to Sri Lanka.
The updates were published by the
governments after the Sri Lankan
government announced that the state of
emergency imposed in the country would not
be further extended after 18th August as
there is no major threat in the country.
X

17. CBSL takes steps to increase foreign currency positions
Research & Development Unit
Relaxation of the Mandatory
Conversion Requirement on
Service Export Receipts/Proceeds
With the view of encouraging
service exporters to repatriate
their export proceeds into the
country, the Central Bank of Sri
Lanka has withdrawn the
mandatory requirement to
convert service export
receipts/proceeds, that are
received in Sri Lanka on or after 12
August 2022.
Amnesty to Deposit/Sell Foreign Currency in the
Hands of the Public
In order to attract foreign currency held with the
public into the banking system, the Minister of Finance
has issued an Order granting an amnesty period of 1
month effective from 15.08.2022 for persons in, or
resident in, Sri Lanka who hold foreign currency notes
in possession to:
i. Deposit into a Personal Foreign Currency Account
or into a Business Foreign Currency Account as
specified in the Order, as applicable; or
ii. Sell to an Authorized Dealer (Licensed Commercial
Bank or National Savings Bank).
Read more: https://www.cbsl.gov.lk/en/node/13034
Read more: https://www.cbsl.gov.lk/en/news/relaxation-of-the-
mandatory-conversion-requirement-on-service-export-receipts-proceeds

18. Global
Update
Research & Development Unit

19. “Asia’s Economies FaceWeakening Growth, Rising
Inflation Pressures” - IMF
The global economic outlook has darkened,
and growth across Asia and the Pacific is
poised to slow further amid the continuing
impact of Russia’s invasion of Ukraine and
other shocks.
Asia’s growing inflation pressures
remain more moderate compared with other
regions, but price increases in many countries
have been moving above central bank targets,
IMF said.
Research & Development Unit
Source: IMF
https://blogs.imf.org/2022/07/28/asias-economies-face-weakening-growth-rising-inflation-pressures/
Asian Advanced
Economies
Asian Emerging and Developing
Economies

20. USD 18Trillion Wiped Off Global Markets in First Half of
2022, *WFE Data Reveals
Research & Development Unit
New data published by the World Federation of Exchanges
(WFE), the global industry group for exchanges and central
clearing counterparties, lays bare the full economic impact
of the Ukraine war upon a global economy still trying to
recover from the Covid-19 pandemic.
The WFE’s Market Highlights report for the First Half of
2022 reveals a sharp retraction in market capitalisation of
around 15% when compared with the previous six-month
period, with all global regions experiencing decreases of
similar proportions. A total of more than USD 18tn was
wiped off global markets in the first six months of 2022.
Source : *World Federation of Exchanges
Number of **IPOs – 1H 2022
52%
Capital raised through IPOs – 1H 2022
62%
**IPO –An initial public offering or stock launch is a public offering in which shares of a company are sold to
institutional investors and usually also to retail investors

21. Debt relief for Zambia
Zambia’s official creditors led by China have agreed to
provide debt relief to the southern African nation,
paving the way for an IMF bailout and setting a
precedent for how Beijing could work with other
lenders to tackle the threat of a wave of defaults across
emerging markets.
A committee of creditors co-chaired by China and
France said that they were “committed to negotiate
with the Republic of Zambia terms of a restructuring”
under a G20 framework to co-ordinate debt relief.
Research & Development Unit
Source Ft.com
Kristalina Georgieva, the IMF’s managing director, said that she was “very pleased to
welcome” the commitment by the creditors, which will unlock a USD1.3bn IMF loan
to revive Zambia’s finances. Zambia still has to negotiate exact terms of the relief and
reach a similar deal with private creditors.

22. Global Macroeconomic snapshot
Research & Development Unit
Country/Region GDP % (Q2) Inflation (%) Budget balance%
(2022 Forecasted)
Currency Units (per
USD as of 17 Aug)
10Y Government
Bond (as of 17 Aug)
USA 1.6 8.5 (Jul) -6.0 - 2.9
China 0.4 2.7 (Jul) -6.2 6.78 2.4 (5y yield)
Japan 1.1 2.3 (Jun) -6.1 135 0.0
Britain 2.9 10.1 (Jul) -5.0 0.83 2.1
Euro Area 3.9 8.9 (Jul) -4.3 0.98 1.1
Germany 1.5 7.5 (Jul) -3.2 0.98 1.1
India 4.1 (Q1) 6.7 (Jul) -6.5 79.5 7.2
Source The Economist (Aug 20-27 Edition)

23. 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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