IMF happy with AKD’s commitment; eyes 2025 Budget:

• Says new Government’s commitment has enhanced confidence and ensures policy continuity
• Stresses sustaining reform momentum critical to safeguarding hard-won gains via program and putting economy on path towards lasting recovery, and stable and inclusive growth
• Calls for continued revenue mobilization efforts and spending restraint to prepare 2025 Budget in line with program parameters
• Suggests avoiding new tax exemptions will help reduce fiscal revenue leakages, corruption risks and build much needed fiscal buffers
• Urges for redoubling efforts to meet program’s minimum spending target on social spending and to improve targeting
• Critical next steps – complete commercial debt restructuring, finalize bilateral agreements with official creditors thereby restore debt sustainability.
• Says new Government’s mandate will reinvigorate governance reforms addressing corruption risks, rebuilding economic confidence, and making growth more robust and inclusive

The International Monetary Fund (IMF) on Saturday welcomed new President Anura Kumara Dissanayake’s and his Government’s commitment to continue with the on-going program and identified the 2025 Budget as a litmus test.

The IMF’s opinion follows its staff and the Sri Lankan authorities on Friday reaching agreement on economic policies to conclude the third review of the economic reform program supported by the IMF’s Extended Fund Facility (EFF).

Once the review is approved by IMF Management and completed by the IMF Executive Board, Sri Lanka will have access to about $ 333 million in financing bringing the total under the program to $ 1.3 billion.

“The new Government’s commitment to the program objectives has enhanced confidence and ensures policy continuity. Sustaining the reform momentum is critical to safeguarding the hard-won gains under the program thus far and putting the economy on a path towards durable recovery and stable and inclusive growth,” said IMF’s Senior Mission Chief for Sri Lanka Peter Breuer at a media briefing on Saturday along with Deputy Mission Chief Katsiaryna Svirydzenka and IMF’s new Resident Representative to Sri Lanka Martha Tesfaye Woldemichael.

Breuer said The IMF’s Executive Board will consider completion of the review based contingent on: (i) the implementation by the authorities of prior actions including the submission of a 2025 Budget consistent with program objectives; and (ii) the completion of financing assurances review, which will focus on confirming multilateral partners’ committed financing contributions and whether adequate progress has been made with the debt restructuring to give confidence that the restructuring will be concluded in a timely manner and in line with the program’s debt targets.

The IMF reiterated that Sri Lanka’s ambitious reform agenda supported by the EFF is delivering commendable outcomes. The economy expanded on average by 4% y-o-y in the four quarters ending in June 2024. High-frequency indicators point to continued expansion across all sectors. Average headline and core inflation remained contained at 0.8 and 3.8% during the third quarter. Gross official reserves increased to $ 6.4 billion at the end-October 2024 with sizable foreign exchange purchases by the Central Bank. Public finances have strengthened following substantial fiscal reforms.

Breuer also said the program’s performance was strong, with all quantitative performance criteria and indicative targets (IT) for end-June 2024 met, as well as the ITs for end-September 2024, except for the IT on social spending. Most structural benchmarks due before October-2024 were either met or implemented with delay; some benchmarks are delayed because of the election cycle.

He said maintaining macroeconomic stability and restoring debt sustainability are key to securing Sri Lanka’s prosperity and require persevering with responsible fiscal policy. Continued revenue mobilisation efforts and spending restraint are needed to prepare the 2025 Budget in line with program parameters. Revenue administration reforms and efforts to improve tax compliance will help to ensure that the burden stemming from the crisis is shared proportionately to taxpayers’ ability to contribute. Avoiding new tax exemptions will help reduce fiscal revenue leakages, corruption risks and build much needed fiscal buffers, including for social spending and to support Sri Lanka’s most vulnerable. Maintaining cost recovery in fuel and electricity pricing and resolving legacy debts will help minimise fiscal risks arising from State-owned enterprises.

The Government has an important responsibility to protect the poor and vulnerable at this difficult time. It is important to redouble efforts to meet the program’s minimum spending target on social spending and to improve targeting, adequacy, and coverage of social safety nets, particularly Aswesuma.

While inflation has decelerated faster than expected, continued monitoring is warranted to ensure sustained price stability and support macroeconomic stability. Against ongoing global uncertainty, it remains important to continue rebuilding external buffers through strong reserves accumulation.

Sri Lanka’s recent Agreement in Principle with bondholders is an important milestone putting Sri Lanka’s debt on a path towards sustainability. The critical next steps are to complete the commercial debt restructuring, finalise bilateral agreements with official creditors along the lines of the accord with the Official Creditor Committee and implement the terms of the other agreements. This will help restore Sri Lanka’s debt sustainability.

The new Government’s mandate will reinvigorate governance reforms addressing corruption risks, rebuilding economic confidence, and making growth more robust and inclusive.

The IMF team held meetings with President and Finance Minister Anura Kumara Dissanayake, Labour Minister and Deputy Minister of Economic Development Prof. Anil Jayantha Fernando, Deputy Minister of Finance and Planning Dr. Harshana Suriyapperuma, Senior Economic Advisor Duminda Hulangamuwa, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, Secretary to the Treasury K.M. Mahinda Siriwardana, and other senior Government and CBSL officials. The team also met with Parliamentarians, representatives from the private sector, civil society organisations, and development partners.” We would like to thank the authorities for the excellent collaboration,” Breuer added.

US development agency 'assessing ramifications' on Adani's Sri Lanka project

 US development agency 'assessing ramifications' on Adani's Sri Lanka project

By Reuters November 24, 2024

Nov 24 (Reuters) - A U.S. agency said on Sunday that it is reviewing the impact of Department of Justice bribery allegations against the founder of India's Adani Group on the agency's prior agreement to lend more than $550 million to a Sri Lankan port development backed by the group.

The U.S. International Development Finance Corp last November said it would provide $553 million in financing for the port terminal project in Colombo, the capital of Sri Lanka. The project is partly owned by the Adani Group.

Federal prosecutors in New York on Wednesday announced that Gautam Adani, the billionaire founder of the Adani Group, and seven other individuals had been indicted on charges of paying about $265 billion in bribes to Indian government officials to obtain contracts expected to yield $2 billion of profit over 20 years, and develop India's largest solar power plant project.

 

"DFC is aware of the recent allegations related to Adani and is actively assessing the ramifications in light of the recent DOJ announcement," an official with the development agency said in a statement.

"We are committed to ensuring that our projects and partners uphold the highest standards of integrity and compliance," the official said.

The agency said that no funds have yet been disbursed under the loan commitment.

Bloomberg News first reported the news on the DFC on Sunday.

The Adani Group did not immediately respond to requests for comment outside regular business hours on Sunday.

The Adani Group has said the Justice Department accusations as well as those leveled by the U.S. Securities and Exchange Commission in a parallel civil case are "baseless and denied" and said it will seek "all possible legal recourse."⍐

Reporting by Gursimran Kaur and Disha Mishra in Bengaluru; Editing by Paul Simao and Leslie Adler

________________________________________

Reuters

Indian parliament disrupted over Adani bribery allegations, bonds slide to year low

Tom Westbrook, Yantoultra Ngui and YP Rajesh Mon, November 25, 2024 

SINGAPORE/NEW DELHI (Reuters) -India's parliament was suspended on Monday after opposition lawmakers disrupted it demanding a discussion over bribery allegations against the Adani Group and Adani dollar bond prices fell to almost one-year lows as investors and lenders weighed the case.

The Indian conglomerate's billionaire chairman, Gautam Adani, and seven other people were last week charged by U.S. authorities with agreeing to pay around $265 million in bribes to Indian government officials.

The charges related to alleged payments to obtain contracts that could yield $2 billion of profit over 20 years, as well as to develop India's largest solar power project.

The charges also included making misleading statements to the public despite being made aware of the U.S. investigation in 2023.

The Adani Group has said the accusations as well as those levelled by the U.S. Securities and Exchange Commission in a parallel civil case are baseless and that it will seek "all possible legal recourse".

Indian opposition parties, who have consistently targeted Adani for what they say is his proximity to Prime Minister Narendra Modi, had said last week that they would raise the issue in parliament when it meets on Monday.

"As the parliament session begins, the first step the government should take is to have a detailed discussion on the Adani saga which has the potential of tarnishing India’s image at the global stage," Mallikarjun Kharge, president of the main opposition Congress party, posted on X just as proceedings began in the upper house of parliament.

This is the demand of the opposition alliance Congress leads, as the "hard earned investments" of tens of millions of retail investors are at stake, Kharge said.

Jagdeep Dhankhar, the Vice President of India and the chairman of the upper house, said he had received 13 notices from lawmakers demanding a discussion on the Adani issue but he could not allow them as they did not conform to rules.

Dhankhar asked Kharge to speak but was interrupted by lawmakers pressing their demand for a discussion, causing him to suspend the chambers briefly and later for the rest of the day.

OPPOSITION ALLEGATIONS AGAINST ADANI

Similar scenes played out in the lower house a little later, forcing the speaker to suspend business for the day there as well.

Indian opposition parties have in the past accused Modi's government of protecting and favouring Adani and his businesses, charges both deny.

Modi’s opponents say he has longstanding ties with Adani, going back nearly two decades to when Modi was chief minister of the western state of Gujarat, to which Adani also belongs.

They accuse the government of favouring the group in business deals, charges the government has rejected as "wild allegations".

The government has not commented on the indictment but Modi's Bharatiya Janata Party (BJP) has said that it is for the Adani Group to deal with and defend itself and that the law will take its course.

The disruption in parliament came as Adani dollar bond prices fell as investors cut their exposure to the conglomerate and some bankers considered pausing fresh lending in the wake of the indictment.

Banks and regulators have been reviewing exposure to the ports-to-power conglomerate in the wake of the charges.

The Singapore banking sector's overall exposure to the Adani Group, is small, the Monetary Authority of Singapore said on Monday.

"Banks have in place measures to review and manage their exposures to borrowers and counterparties," an MAS spokesperson said in a statement.

MOST ADANI STOCKS IN GREEN

DBS Group, Singapore's biggest bank by assets, had said in early 2023 that its exposure to the Adani Group was S$1.3 billion ($967 million). DBS declined comment in response to request from Reuters.

Some global banks are considering temporarily halting fresh credit to the company after the U.S. indictment but maintaining existing loans, according to several bankers spoken to by Reuters, raising questions about its access to future funding.

"In the near term, the U.S indictment is likely to constrain the group’s access to financing, particularly in the offshore market," a Lucror Analytics note published on Smartkarma said.

Cash balances of Adani portfolio companies stood at $6.33 billion as of first half of the current fiscal year ending March 2025, the company said.

The cash balances exceed long term debt repayments for the next 28 months, Adani said in a presentation on the credit and financial performance of its group companies, which it regularly shares after its quarterly results.

The crisis is the second in two years to hit the Adani group, which was last year accused by short seller Hindenburg Research of improperly using offshore tax havens. The company denied those claims.

In Asian trade on Monday, some of the most liquid debts, issued by Adani Ports and Special Economic Zone fell between 1 cent and 2 cents, with similar selling in Adani Transmission debt.

Ports bonds maturing in 2027 were down 1.6 cent to 88.98 cents on the dollar, having lost nearly 7 cents in face value since U.S. prosecutors issued the charges last week.

Longer-dated Ports bonds were down on Monday and have lost between 8 cents and 10 cents in face value on the news.

Adani Transmission debt maturing in May 2036 fell 1.8 cents on Monday for a loss of more than 7 cents since Wednesday.

Adani group's 10 listed stocks led by Adani Enterprises lost $27.9 billion in market value over two sessions last week after the U.S. charges.

On Monday, most Adani-backed stocks pared gains from early trade, with Adani Energy Solutions reversing course to trade down about 2%. Eight of 10 Adani stocks were trading in the green at 0643 GMT.

(Reporting by Tom Westbrook and Yantoultra Ngui in Singapore and YP Rajesh in New Delhi; Additional reporting by Sethuraman NR, Sudipto Ganguly and Nigam Prusty; Writing by Scott Murdoch and YP Rajesh; Editing by Jacqueline Wong, Lincoln Feast and Michael Perry)