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* Sri Lanka shares steady at 17-month high on tax-cut optimism; rupee slips
Mon, Dec 2, 2019, 08:32 pm SL Time, ColomboPage News Desk, Sri Lanka.

Dec 02 (Reuters) COLOMBO- Sri Lankan shares closed nearly unchanged on Monday, steadying at a 17-month high hit in the previous session, as positive sentiment surrounding tax cuts by the country's new government continued to cheer investors, while the rupee ended weaker.

The benchmark stock index closed 0.05% up at 6,215.23, its highest since June 25, 2018. The bourse gained 1.5% last week, and is up 2.69% for the year.

The rupee fell 0.22% to 181.25/35 per dollar, compared to Friday's close of 180.85/181.00, Refinitiv data showed. It is up 0.7% so far this year.

The government said on Wednesday it had decided to reduce value-added tax (VAT) to 8% from 15% from Dec. 1, and abolish some other taxes as well, in its attempt to boost economic growth that has fallen to a near two-decade low.

Emerging Asia Economics said in a note on Monday that the tax cut decision would provide a significant boost to the economy, but put increased strain on the country's fragile public finances.

"Unless Sri Lanka raises taxes elsewhere or cuts spending, the VAT cuts will lead to around $2 billion in lost revenue (around 2% of GDP) and the deficit is likely to widen to around 6.5% of GDP in 2020," it said.

"This is much larger than the 5.3% deficit target agreed with by the IMF (International Monetary Fund), who could withhold future loan payments unless the government reverses course."

Foreign investors were net buyers in the equity market for the first time in five sessions on Monday and after being net sellers for 24 sessions out of 26.

They bought a net 70.1 million rupees ($389,444) worth of shares on Monday, but the market has suffered a net foreign outflow of 10.7 billion rupees worth of equities so far this year, according to index data.

Equity market turnover was 702.6 million rupees, less than this year's daily average of about 725 million rupees. Last year's daily average was 834 million rupees.

Meanwhile, foreign investors were net buyers of government securities on a net basis for the sixth straight week, purchasing a net 4.3 billion rupees worth of government securities in the week ended Nov. 27.

Total foreign outflows from government securities through Nov. 27 stood at 43.7 billion rupees, according to central bank data.

Read More:: Reuters (Source)