Monday, 22 April 2019 05:45

Sri Lanka’s corporate sector confidence plunges to low level

Amidst growing sentiment of cynicism and slow private sector credit growth, Sri Lanka’s business sector confidence has plunged to very low levels although IT Business Process Outsourcing (BPO) spiked significantly despite political uncertainty, economic analysts claimed.

Private sector credit growth in February slowed to a low of 13.6 percent on the, down from 14.8 percent a month ago, Central Bank data showed.

The working group appointed by Prime Minister Ranil Wickremasinghe to look into this issue and make recommendations noted that “although no interest rate caps on lending has been proposed by them at this stage, the need for it will be reviewed if the intended reductions do not take place expeditiously.”

They have recommended imposing deposit interest rate caps on banks, and revising the basis for determining the existing caps on finance companies.

Another recommendation was to permit deposits up to Rs. 250 million from SMEs (instead of the present limit of Rs. 50 million), to be treated in a manner that will reduce the liquidity requirements needed under the liquidity coverage ratio.

The working group also recommended banks should design a revolving working capital product for SMEs to replace the Terms on Over Drafts (TODs), and introduce risk-based pricing instead of applying the unauthorised OD rates.

Sri Lanka’s Private sector entities including top corporate s have taken a battering especially following the prolonged drought and ensuing political tug-of-war and resulting instability during the 52 day political impasse instigated by the President during the end of last quarter last year, official report revealed.

However four of the largest diversified corporates, two private sector banks, two largest apparel manufacturers, a multinational consumer goods company and a major telecommunications service provider in Sri Lanka has been able to keep its head above troubled waters during this period.

Sri Lanka corporate performance is reported have been facing a challenging time, reflecting bad to worse economic conditions to several of its core sectors, though few companies remained resilient to improve their bottom line, the report indicated.

Sri Lanka is emerging as a global IT Business Process Outsourcing (BPO) destination of choice in a number of key areas despite the country’s not so rosy economic conditions.

The BPO sector includes financial and accounting services, investment research, engineering services, and UK-based legal services.

Several U.S. companies, many small or medium sized, are developing software in Sri Lanka.

The government seeks to further develop Sri Lanka as a base for information technology, call centers, and out-sourcing, the official report revealed.


(LI NEWS)

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