1.
Economic Capsule
January 2023
Research & Development Unit
312th Issue

2.
CONTENTS
BANKING & FINANCE
 ComBank introduces ‘Visa Direct’ and ‘Mastercard Send’ card-to-card fund transfers - a
first in Sri Lanka
 ComBank opens Indian Rupee Nostro Account to promote regional trade
ECONOMY, BUSINESS & DEVELOPMENT
 Sri Lanka’s Debt Restructuring Process – Response from India and China
 Govt. resumes measures to operationalise FTA with Singapore
 Cabinet nod to amalgamate BOI and EDB to form new export and investment
promotion agency
 Tourist arrivals in first three weeks of January top 70,000
 Sri Lanka to ink agreement with China to export 29 aquatic products
 Sri Lanka’s tea production hits 26-year low in 2022
 News Snippets
GLOBAL OUTLOOK
 “World food prices dip in December ’22”- FAO
 IMF board to consider approving Bangladesh support program on Jan. 30
 Jacinda Ardern's successor Chris Hipkins sworn in as New Zealand PM
 Croatia adopts the Euro
 How Big Tech’s pandemic bubble burst
 Global News Snippets
Research & Development Unit

3.
Banking &
Finance

4.
Research & Development Unit
ComBank introduces ‘Visa Direct’ and ‘Mastercard Send’
card-to-card fund transfers - a first in Sri Lanka
The Commercial Bank of Ceylon has announced the enabling of
‘Visa Direct’ and ‘Mastercard Send’ card-based fund transfer
facilities for the first time in Sri Lanka.
With this latest digital initiative of Commercial Bank, Visa and
Mastercard Debit and Prepaid cardholders can transfer funds
to any locally-issued Visa and Mastercard Debit, Credit or
Prepaid card through Commercial Bank’s ATMs, CRMs and Q+
Payment App.
The transfer of funds can be facilitated by just giving the card
number and the amount, thus creating a new era of
convenient, two-step fund transfers in the country, the Bank
said.

5.
Research & Development Unit
ComBank opens Indian Rupee Nostro Account to
promote regional trade
The Commercial Bank of Ceylon announced that it has opened an Indian Rupee
denominated Nostro Account at the 116-year-old Indian Bank - Mumbai, to facilitate
trade transactions between Sri Lanka and India.
The Bank said this decision follows the Central Bank of Sri Lanka (CBSL) classifying the
Indian Rupee as a designated foreign currency to promote trade and tourism in the
SAARC region.
By establishing a Nostro Account in Indian Rupees, the Bank supports efforts to enable
Sri Lankan and Indian importers and exporters to carry out trade transactions in Indian
rupees, in a manner that is beneficial to both parties.

6.
Economy, Business
& Development
News
Research & Development Unit

7.
Sri Lanka’s Debt Restructuring Process – Response from
India and China
Research & Development Unit
India extended its financial assurance to help Sri Lanka restructure its debt (23 Jan), and asserted to the International Monetary
Fund (IMF) that the authorities of the crisis-hit nation are expected to seek equitable debt treatment from all commercial
creditors and other official bilateral creditors.
The financing and debt relief, which will be provided by the Export Import Bank of India, will be consistent with restoring debt
sustainability under the IMF-supported program.
China responded to Sri Lanka’s long-standing request for a commitment on rescheduling its debts as a prelude to a bailout by
the International Monetary Fund (IMF) with an offer for a two-year moratorium. (24 Jan)
In a letter to the President in his capacity as Finance Minister, the Exim Bank of China, responsible for much of the loans given to
Sri Lanka, said the two-year moratorium would be a short-term suspension of the debts owed to China while asking all parties,
i.e. Sri Lanka’s creditors to get together to work out medium-term and long-term commitments.
It is learnt that the letter also extends China’s support to the IMF’s Extended Fund Facility (EFF) and requests the IMF to go
ahead with the discussions on debt restructuring that will lead to an IMF program.
Sri Lanka’s efforts to get China’s support along with India’s support for rescheduling its loans were being negotiated
for several months.

8.
Research & Development Unit
Govt. resumes measures to operationalise FTA with
Singapore
The government has resumed measures to
operationalise the Sri Lanka-Singapore Free
Trade Agreement (SLSFTA) that came into
effect in May 2018, Chief Negotiator at the
International Trade Office of the
Presidential Secretariat told.
The SLSFTA was the first comprehensive
FTA Sri Lanka entered into which covers
goods, services, investment, intellectual
properties, telecommunications, e-commerce, trade facilitation, government procurement,
competition and economic and technical co-operation.
The activation of the FTA was halted during the past three-year period due to negative political
developments.

9.
Tourist arrivals in first three weeks of January top 70,000
Research & Development Unit
The tourist arrivals to Sri Lanka in the first three
weeks of January have topped 70,000, indicating
tourism industry is firmly on the recovery path.
The provisional data from the Sri Lanka Tourism
Development Authority (SLTDA) showed that for
the January 01-22 period, a total of 72,002
international visitors had entered the country.
Top ten source markets, 1-22 January 2023
Source: SLTDA

10.
Research & Development Unit
Cabinet nod to amalgamate BOI and EDB to form new
export and investment promotion agency
The Cabinet nod has been granted to appoint a supervisory committee to facilitate the
establishment of the proposed agency for export and investment promotion amalgamating
Board of Investments (BOI) and Export Development Board (EDB).
It was proposed in the budget 2023 to form an agency amalgamating the operations of the BOI
and the EDB to promote export and investments with an integrated approach in a logical
manner.
“Although, the two entities have been in operation for decades, our exports and FDI inflows
have not increased significantly on par with countries such as Vietnam and India. Therefore, we
cannot be satisfied with the performance of these two agencies,” authorities said.
Source: BOI – Sri Lanka

11.
Research & Development Unit
Sri Lanka to ink agreement with China to export 29
aquatic products
In a bid to boost marine exports to China, the Government has decided to ink a protocol
between Fisheries Ministry and the Chinese Customs Authority.
“The General Administration of Customs of the Republic of China has approved the export of
33 Sri Lankan food products to China. Among them 29 are aquatic products and 38 Sri Lankan
companies registered in the Republic of China are working as exporters of these products,” a
statement from the Government Information Department noted.
There is a good demand for marine exports particularly for sea cucumbers to China and
authorities expect that this move will provide the necessary encouragement for aquatic
product exporters and will also help the economy to earn much-needed foreign exchange.
The government last year commenced a project to cultivate sea cucumbers in 5,000 acres in
Jaffna, Kilinochchi and Batticaloa districts that has a USD 1bn export potential.

12.
Research & Development Unit
Sri Lanka’s tea production hits 26-year low in 2022
Sri Lanka’s tea production, as expected,
declined by 48mn kilos or 16% in 2022,
compared with 2021, on the back of the
fertilizer issue and disruptions faced in the
middle part of the year.
The total national production for the year
was 251.50mn kilos, compared with
299.49mn kilos in 2021.
This was the lowest in 26 years, when 246mn kilos were produced in 1995.
Source: Forbes Tea Brokers

13.
News Snippets
Research & Development Unit
Child nutrition drops in Sri Lanka amid economic crisis
The number of children grappling with various forms of under nutrition in Sri Lanka increased for the first time in at least six years
in 2022, a government report and data from the health ministry indicate.
Sri Lanka is struggling with soaring prices, including of food, largely caused by its worst economic crisis since it gained
independence in 1948.
More than 43.4% of the country’s children under 5 years of age are suffering from nutrition problems, according to the report with
42.9% suffering from some form of under-nutrition.
Port City - Latest
Port City Colombo (PCC) recently welcomed a delegation of senior representatives from the Thai-Sri Lanka Chamber of Commerce, Sri
Lanka-Thailand Business Council and Embassy of Iran.
The objective of the visit was to explore potential opportunities for foreign direct investment within the project.
The delegation was led by Thai-Sri Lanka Chamber of Commerce President Akram Saroof, former Sri Lanka-Thailand Business Council
President Rizan Nazeer and Embassy of Iran Economic and Consular Section Chief K. Soheil.
Meanwhile a delegation of investors from the United Arab Emirates (UAE), led by His Royal Highness Sheikh Mohammed Bin Maktoum Bin
Juma Al Maktoum, visited Port City Colombo (PCC) during a special visit to Sri Lanka for the purpose. (Jan 14)

14.
Global
Update
Research & Development Unit

15.
World food prices dip in December ‘ 22
The index of world food prices dipped for the ninth
consecutive month in December 2022, declining by
1.9% from the previous month, the Food and
Agriculture Organization of the United Nations (FAO)
reported.
The FAO Food Price Index averaged 132.4 points in
December, 1.0% below its value a year earlier.
However, for 2022 as a whole, the index, which tracks
monthly changes in the international prices of
commonly-traded food commodities, averaged 143.7
points, 14.3% higher than the average value over 2021.
Research & Development Unit
Source: https://www.fao.org/newsroom/detail/world-food-prices-dip-in-december/en

16.
IMF board to consider approving Bangladesh support
programme on Jan. 30
Research & Development Unit
The International Monetary Fund’s (IMF)
executive board will consider approving a
support programme for Bangladesh on January
30, IMF Deputy Managing Director Antoinette
Sayeh said in a statement.
In November, the IMF provisionally agreed on a
USD 4.5bn support programme for Bangladesh
to help prevent economic instability escalating
into a crisis in the South Asian country.
Source: https://www.imf.org/en/News/Articles/2023/01/16/pr2303-press-statement-by-imf-deputy-managing-director-sayeh-on-bangladesh

17.
Jacinda Ardern's successor Chris Hipkins sworn in as
New Zealand PM
Research & Development Unit
Source: BBC
Chris Hipkins has been sworn in as New Zealand's
41st prime minister (25 Jan).
The 44-year-old was formally appointed to the
role in Wellington, a week after Jacinda Ardern's
shock resignation.
Ms Ardern, 42, had said she no longer has
"enough in the tank" to lead the country. The
country's governor-general Cindy Kiro accepted
her formal resignation on 19 Jan.
Mr Hipkins built a reputation as the minister who led New Zealand's Covid-19 strategy.
At the ruling Labour Party's caucus over the weekend (January third week), Mr Hipkins received
unanimous support to be promoted to lead the country, and now faces the uphill task of retaining
power in the upcoming general elections in October.

18.
Croatia adopts the Euro
On 1 January 2023 Croatia adopted the euro
and became the 20th member of the euro area.
On 12 July 2022 the Council of the European
Union formally approved Croatia’s accession to
the euro area and determined a Croatian kuna
conversion rate of 7.53450 per euro
This was the central rate of the kuna for the
duration of the country’s participation in the
exchange rate mechanism.
Research & Development Unit
Source: European Central Bank
Croatia is a small economy that is well integrated with the euro area through trade and
financial linkages. It has a population of around 4 million and its GDP accounts for about 0.5%
of euro area GDP. The composition of Croatia’s gross value added is broadly similar to that of
the euro area as a whole, with industry (including construction) and services contributing
around 25% and 72% respectively.
Member
countries
using the euro

19.
How BigTech’s pandemic bubble burst
Research & Development Unit
Source: CNN
The first year of the global pandemic had sparked a staggering shift toward online services, benefiting global tech giants company in the process.
Two years later, the situation appears much more stark. As of the first week of January Microsoft said it planned to lay off 10,000 employees as businesses
rethink their pandemic-era digital spending and confront broader economic uncertainty.
Microsoft isn’t the only company experiencing such a dramatic reversal. Days later, Google-parent company Alphabet followed suit, saying it plans to cut around
12,000 jobs, amounting to more than 6% of its staff.
Over the past three months, Amazon, Google, Microsoft and Facebook-parent Meta have announced plans to cut more than 50,000 employees from their
collective ranks, a stunning reversal from the early days of the pandemic when the tech giants were growing rapidly to meet surging demand from countless
households living, shopping and working online. At the time, many tech leaders seemed to expect that growth to continue unabated.
However, Apple remains an outlier as the one major tech company that has yet to announce layoffs, although the iPhone maker has reportedly instituted a
hiring freeze of all areas except research and development. Apple grew its staff by 20% from 2019 through last year, markedly less than some of its peers.

20.
Global News Snippets
Research & Development Unit
The Federal Reserve is set to again
slow the pace of its interest rate
increases at a Jan. 31-Feb. 1 policy
meeting while also signaling that its
battle against inflation is far from over.
Policymakers have reacted, with more
of them saying they are ready to raise
rates by only a quarter of a percentage
point (0.25%) at the upcoming
meeting, a back-to-normal approach
after a year in which the target policy
rate was ratcheted up by 4.25%, with
the bulk coming in 75-basis-point
increments.
Global Inflation tracker
Britain’s annual inflation rate dipped only slightly in December, to 10.5%. The government has promised
to halve the rate this year. Food prices rose by 16.9% over 12 months, the fastest pace in decades. In
America the inflation rate fell to 6.5% in December. In the euro zone it dropped to 9.2%.
The euro zone’s inflation rate dropped to 9.2% in December from 10.1% in November, helped by a sharp
fall in the cost of energy. An exceptionally mild start to the winter in Europe has helped push wholesale
gas prices down to where they were before the start of Russia’s invasion of Ukraine, which should help
ease inflationary pressures further.
Japan’s core consumer prices in December rose 4.0% from a year earlier, double the central bank’s 2%
target and hitting a fresh 41-year high, data showed, adding to recent growing signs of mounting
inflationary pressure.
China’s economy grew by just 3% in 2022, the weakest expansion since 1976 apart from 2020. Last year brought more extensive lockdowns in
China, disrupting factories and consumer spending. China’s exports in December fell by 9.9% year-on-year in dollar terms, the sharpest decline
since the start of the pandemic.
Argentina and Brazil, the two largest economies in South America, are in early talks to create a common currency, as part of a coordinated bid to
reduce reliance on the U.S. dollar.
International Energy Agency (IEA) Executive Director Fatih Birol believes Russia will lose its energy war with the West, saying China and India’s
crude oil purchases will likely fall short of offsetting the fall in shipments to Europe. Last week, an independent analysis from the Centre for
Research on Energy and Clean Air (a Finnish think tank) showed that revenues from Russia’s fossil fuel exports collapsed in December, significantly
hampering President Vladimir Putin’s ability to finance the war in Ukraine.

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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