Debt-stricken Sri Lanka and New Zealand discuss ways to deepen bilateral trade and investment ties
Winston Peters, New Zealand's deputy prime minister and foreign affairs minister, met Sri Lanka Foreign Affairs Minister Vijitha Herath in the capital Colombo on Monday. The five-day visit by Peters is scheduled to continue until Wednesday
The visit comes as Sri Lanka struggles to emerge from its worst economic crisis, which began in the Indian Ocean island nation three years ago.
The countries have improved relations in recent years, establishing a New Zealand embassy in Colombo in 2021 and a Sri Lankan embassy in Wellington this year.
The discussion Monday focused on advancing ties in trade, investment, agriculture, education and tourism, Herath said.
'We also explored expanding trade links in high-potential sectors such as diary, processed food, fresh produce and discussed improving market access for Sri Lankan products,' Herath told reporters.
He commended New Zealand's support in developing Sri Lanka's dairy industry, saying it had a 'transformational impact on rural livelihood.'
Sri Lanka has embarked on an effort to expand and modernize its domestic diary industry in recent years, but still produces only about 40% of the country's demand for milk and dairy products, while the balance is imported.
New Zealand is a key supplier of those dairy products, especially milk powder. In 2024, New Zealand exported $335 million in goods to Sri Lanka, with dairy products forming the bulk.
Trade balance between the nations favors New Zealand, which in 2024 imported goods worth $64 million from Sri Lanka including tea, coffee, apparel and rubber products.
The discussion included reducing red tape at the border and how to 'increase Sri Lanka's market access capabilities," Peters said.
"We discussed the growing number of New Zealand companies working with and investing in Sri Lanka or looking to work with Sri Lankan partners,' said Peters, adding that those collaborations will benefit Sri Lanka's tourism, agriculture and healthcare sectors.
Sri Lanka declared bankruptcy in April 2022 with more than $83 billion in debt, more than half to foreign creditors. It sought the help of the International Monetary Fund, which approved a $2.9 billion, four-year bailout package in 2023 under which Sri Lanka was required to restructure its debt.
In September last year, Sri Lanka said it had concluded the debt restructuring process after reaching agreements with bilateral and multilateral creditors and private bondholders. Sri Lanka is seeking to obtain $17 billion in debt service relief.
Sri Lanka's crisis was largely the result of economic mismanagement combined with fallout from the COVID-19 pandemic, along with 2019 terrorism attacks that devastated its important tourism industry. The pandemic also disrupted the flow of remittances from Sri Lankans working abroad.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
14 minutes ago
- Reuters
Asian stocks waver as investors look to tariff negotiations, earnings
SINGAPORE, July 22 (Reuters) - Asian share markets drifted lower after scaling a near four-year peak on Tuesday ahead of a slate of corporate earnings, while investors took stock of tariff negotiations between the U.S. and its trading partners. The dithering mood is set to continue in Europe where the focus will be on earnings from firms including SAP ( opens new tab and UniCredit ( opens new tab. EUROSTOXX 50 futures and DAX futures both dipped 0.5%, while FTSE futures eased 0.3%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab hit its highest level since October 2021 in early Asian hours but was last down 0.4%. The index is up nearly 16% this year. The S&P 500 (.SPX), opens new tab and the Nasdaq (.IXIC), opens new tab notched record-high closes on Monday. The Japanese markets returned to action after a holiday on Monday following the weekend's election where the ruling coalition suffered a defeat in upper house elections, although Prime Minister Shigeru Ishiba vowed to remain in his post. Japanese shares (.N225), opens new tab, (.TOPX), opens new tab briefly jumped at the open but reversed course to trade lower by Tuesday afternoon, as the election results were largely priced in and were not as bad as investors had feared. The yen rallied 1% on Monday, recouping some of the losses from past weeks and was last slightly weaker at 147.73 per dollar. Kristina Clifton, an economist at the Commonwealth Bank of Australia, said the weakening of Ishiba's leadership will open the door to more fiscal expansion that is negative for Japanese assets, including the yen. "The bottom line is longer term Japanese government bond yields and JPY can fall if concerns about Japan's fiscal spending deepen." Investor focus has been on tariff negotiations ahead of the August 1 deadline with the European Union exploring a broader set of possible countermeasures against the United States as prospects for an acceptable agreement with Washington fade. The most important deals for the global outlook are with the EU and Japan, CBA's Clifton said. "The USD reaction to the announcement of trade deals with these countries would depend on the details of the deals in our view," Clifton added, noting the dollar could turn down again against the euro and the British pound. The euro was steady at $1.1689, after rising 0.5% in the previous session but still away from the near four-year high it touched at the start of the month. The single currency is up 13% this year as investors look for alternatives to U.S. assets bruised by tariff uncertainties. The dollar index , a measure against six other key currencies, was at 97.905. Investors are awaiting results this week from Wall Street giants Alphabet and Tesla (TSLA.O), opens new tab, as well as from European heavyweights LVMH ( opens new tab, and Roche (ROG.S), opens new tab, as uncertainty over tariffs clouds the outlook. The rumblings around the Federal Reserve's independence and whether U.S. President Donald Trump will fire Fed Chair Jerome Powell have kept investors on tenterhooks in recent weeks. Trump appeared near the point of trying to fire Powell last week, but backed off with a nod to the market disruption that would likely follow. U.S. Treasury Secretary Scott Bessent said on Monday the entire Federal Reserve needed to be examined as an institution and whether it had been successful, further exacerbating concerns about the independence of the U.S. central bank. The Fed is widely expected to hold rates steady in its July meeting but might lower rates later in the year. Market focus will be squarely on Powell's speech later on Tuesday for clues about when the Fed might ease policy. Goldman Sachs strategists expect the Fed to deliver three consecutive 25-basis-point cuts starting in September, "provided inflation expectations remain in check amidst worries about Fed independence." In commodities, Brent crude futures fell nearly 1% to $68.56 a barrel, while U.S. West Texas Intermediate crude slipped 1% to $66.51 per barrel.
Reuters
14 minutes ago
- Reuters
Drop in US Treasury yields helps Indian rupee
MUMBAI, July 22 (Reuters) - The Indian rupee was marginally stronger on Tuesday and dollar-rupee forward premiums ticked up as concerns over the economic fallout of U.S. President Donald Trump's trade war drove U.S. Treasury yields, the greenback and crude oil prices lower. The rupee ticked up to 86.2650 per U.S. dollar by 11:10 a.m. IST, slightly higher than its close at 86.2925 in the previous session. The dollar index was steady at 97.9 in Asia trading after falling 0.6% on Monday, tracking a decline in U.S. Treasury yields that saw the 10-year yield touch a near two-week low of about 4.35%. Short-term U.S. Treasury yields declined as well, which helped boost far-tenor dollar-rupee forward premiums. The 1-year dollar rupee implied yield rose to an over two-week high of 2.03%, while a fall in rupee liquidity in the banking system helped lift very near-tenor dollar-rupee swap rates. Indian assets largely sidestepped a media report that a trade deal between India and the U.S. is unlikely before August 1 with equities and the rupee clinging to slight gains while the yield on the benchmark 10-year bond was little changed. Steep reciprocal levies on exports to the U.S. are slated to go into effect next month with India likely to face a 26% charge in the absence of a deal. "The rupee's trajectory remains tilted toward further weakness, with both the 86.00 and 86.20 levels now breached. This opens the door for a move toward 86.50–86.80," said Amit Pabari, managing director at FX advisory firm CR Forex. In addition to uncertainty on global trade dynamics, muted foreign portfolio flows have also been a sore point for the rupee. Overseas investors have net sold about half a billion dollars of local stocks in July so far while year-to-date outflows stand at nearly $9.5 billion.
Reuters
14 minutes ago
- Reuters
Industrial pruning won't pull China out of deflation as quickly as last time
BEIJING, July 22 (Reuters) - China's hardened rhetoric against price wars among producers is raising expectations Beijing may be about to kick off industrial capacity cuts in a long-awaited, but challenging, campaign against deflation that carries risks to economic growth. Communist Party leaders pledged this month to step up regulation of aggressive price-cutting, with state media running its harshest warnings yet against what it describes as a form of industrial competition that damages the economy. These signals echo Beijing's supply-side reforms a decade ago to reduce the production of steel, cement, glass and coal, which were crucial to ending a period of 54 consecutive months of falling factory gate prices. This time, however, the fight against deflation will be much more complicated and poses risks to employment and growth, economists say. The trade war with the U.S. meanwhile is intensifying price wars, squeezing factory profits. Challenges Beijing didn't face last decade include high private ownership, misaligned incentives at local and national level, and limited stimulus options in other economic sectors to absorb the job losses resulting from any capacity cuts. Beijing sees employment as key to social stability. Exporters and even the state sector are already shedding jobs and cutting wages, while youth unemployment runs at 14.5%. "This round of supply-side reform is far, far more difficult than the one in 2015," said He-Ling Shi, economics professor at Monash University in Melbourne. "The likelihood of failure is very high and if it does fail, it would mean that China's overall economic growth rate will decline." Economists expect that any efforts by Beijing to reduce capacity will be undertaken in small, cautious, steps, with officials - keen to achieve annual economic growth of roughly 5% - keeping a close eye on spillover effects. An expected end-July meeting of the Politburo, a decision-making body of the Party, might issue more industry guidelines, although the conclave rarely delivers a detailed implementation roadmap. Analysts expect Beijing to first target the high-end industries that it once billed as the "new three" growth drivers, but which state media now singles out for fighting price wars: autos, batteries and solar panels. Their expansion accelerated in the 2020s as China redirected resources from the crisis-hit property sector to advanced manufacturing to move the world's No.2 economy up the value-chain. But China's industrial complex, a third of global manufacturing, looks bloated across the board. Most sectors have capacity utilisation rates below the 80% "healthy" level, Societe Generale analysts said, blaming weak domestic demand and an investment-driven growth model that favours producers over consumers. U.S. and EU officials have repeatedly complained that this model is flooding global markets with cheap goods made in China and endangers their domestic industries. A foreign chemicals company manager surnamed Jiang, who asked for partial anonymity to discuss the industry, said overcapacity in her sector was evident as early as 2023, yet firms continue to expand. "If money is cheap and abundant, any company thinks it won't go bankrupt and can crush competitors to death," Jiang said. For all the state support manufacturers receive, most are privately owned, unlike the raw material producers Beijing trimmed last decade, largely through blunt administrative orders. Reducing capacity now requires a less predictable process of curbing subsidies, cheap land supply, preferential loans or tax rebates, then letting markets pick winners and losers. But the local officials who would have to implement this have the opposite incentive: developing industry champions that draw supply chain investments and employment to their region. "Local governments, in their efforts to transform the local economy, encouraged firms to invest in these new sectors," like solar or batteries, a policy adviser said on condition of anonymity due to the topic's sensitivity. "There's nothing inherently wrong with transformation and upgrading, but the problem is that everyone is targeting the same few sectors," said the adviser, adding that the U.S. trade war has exposed such industries as being "too big." Yan Se, deputy director of the Institute of Economic Policy at Peking University, said local government resistance would turn "important and necessary" capacity cuts into a long-term, gradual process that won't end deflationary pressure on its own. Stimulating demand would work better, Yan told a conference last week. Producer prices dropped for the 33rd month in June. China faces a painful trade-off between a deeper and shorter stretch of price falls as output cuts trigger job losses and a longer run of overcapacity and deflation that delays the blow to employment, economists say. Macquarie estimates last decade's reforms chopped tens of millions of jobs. But an ambitious project to redevelop shanty-towns across China, estimated by Morgan Stanley at 10 trillion yuan ($1.4 trillion), offered displaced workers new ones. Manufacturing is now much less labour intensive. Still, jobs will be lost, and "there's no way" other economic sectors, also facing weak consumer demand, can absorb the shock, said Monash University's Shi. In another echo from last decade, high-level talk of urban redevelopment re-emerged last week. But any new investment in that area would likely be too small to compensate for lost industrial activity and jobs. "I don't think we can expect real estate to digest job losses from supply-side reforms anymore," said John Lam, head of Greater China property research at UBS. "It was used for that in the past and it created overcapacity in our sector," said Lam. Authorities "don't seem to be going in that direction, which I think is correct." ($1 = 7.1772 Chinese yuan renminbi)
