By: Staff Writer

Colombo (LNW):Sri Lanka for the first time under the dictates of Washington based International Monetary Fund (IMF) after the declaring of preemptive debt default for the first time is participating the 2023 Annual and Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group from 10-16.

These meetings each year bring together central bankers, ministers of finance and development, private sector executives, civil society representatives, and academics to discuss the state of the global economy and issues of international concern, such as the growth outlook, financial stability, and poverty reduction.

The Meetings are the only gathering of its kind in the world and a unique forum for discussion on economic policymaking.

During Annual and Spring Meetings, Governors and country officials hold bilateral meetings with the staff and management of the IMF and World Bank.

Sri Lanka will be represented by State Minister of Finance Shehan Semasinghe, CB Governor Nandalal Weerasinghe and Finance Ministry Secretary Mahinda Siriwardena.

This year’s Spring Meetings come as political pressure ramps up for the global financial system to evolve to tackle the development and climate crisis at hand.

On the eve of IMF Spring Meetings and the country’s ongoing grapple to restructure massive external and internal debt with the first tranche of the international lender’s US$ 3 billion in hand, one of the first comments on the whole affair was made by Former Central Bank Governor Ajith Nivard Cabraal.

Sri Lanka’s economy is being controlled from Washington, Sri Lanka’s Former Central Bank Governor said recently.

Noting that he read 151 pages of the IMF report on Sri Lanka’s Extended Fund Facility, Cabraal claimed that it would not be easy for Sri Lanka to meet the conditions imposed by the global lender.

The Central Bank Governor and the leaders of the country must be mindful to work and not complain, former Central Bank Governor Ajith Nivard Cabraal said, adding that he has handled this job for the last nine years working for the country without making grumbles.

During his tenure Sri Lanka was servicing debt without any default even during the period of war and the economic crisis from 15 September 2021 till March 2022. The crisis started in 2019 during the tenure of W.D. Lakshman.

Cabraal’s comments carries validity as the country is attending spring meetings without any bargaining power as the country’s image has fallen to the low level of debt defaulter and it is compelled to oblige the Global lenders 48 bench marks and 9 prior actions.

On top of it, Sri Lanka has to face the pressure of its foreign and domestic creditors and that is why it is incomprehensible for taking a hasty decision to announce the sudden “debt default” and non- payment of all forex debt and interest (including the July 2022 USD 1,000 mn International Sovereign Bonds ISB) from 12th April 2022 onwards, and thereby risk major adverse consequences, together with a massive “cross-default” as well.

The IMF can play a vital role in supporting fragile economies that are increasingly at risk from climate change, and provided hope for many during the Covid crisis, injecting liquidity into the global system, and setting up the Resilience and Sustainability Trust.

But the medicine prescribed for the country’s ailing economy is very difficult to swallow. The Spring Meetings are a chance to drive some urgent changes in how the World Bank and IMF evolve, shaping the global consensus for reform to accelerate this evolution. 

In fact, Sri Lanka has been on IMF intensive care almost continuously since 1965 but not a single previous IMF program has not been able to cure the country’s ailing economy fully .This is the 17th time under IMF life support, hope for the best.

By: Staff Writer

Colombo (LNW):New York Federal Court rules in favor of Hamilton Reserve Bank against Sri Lanka bond default dismissing Clifford Chance’s defense on behalf of the SL government.

The case will therefore proceed, to decide on whether the GOSL must immediately pay the

There was no official statement of the government on this international news agency report and this court order has not been reported in major international news agencies such as Reuters and AFP .

Denise Cote, Judge of the District Court of the Southern District of New York, on March 24 dismissed the motion filed by the law firm representing the GOSL, Clifford Chance US LLP

US$280 million New York Court Judgment if Bond is not repaid.Sri Lanka was supposed to pay 5.875% interest on its international sovereign bond on July 25, 2022, but it was unable to do so due to the country’s ongoing financial crisis.

The Hamilton Reserve Bank has demanded full payment of the $250 million owed, citing interest of more than $7 million.

The bondholder has retaliated against the Sri Lankan government, claiming that the country’s default was orchestrated by people at the highest levels of government and that the Rajapaksa family was to blame.

The Sri Lankan government has asked a US judge to dismiss the case filed by Hamilton Reserve Bank for defaulting on bonds, the financial news agency Bloomberg reported.

The government had requested that the case in New York be dismissed over the country reaching debt default, stating that the case brought by one bank is an “apparent attempt to gain leverage over a nation in crisis and jump ahead of other foreign creditors.”

Hamilton Reserve Bank, based in the Caribbean islands of St. Kitts & Nevis, filed legal action citing the country’s default on a $1 billion sovereign bond.

The case will therefore proceed, to decide on whether the GOSL must immediately pay the outstanding amount.

Denise Cote, Judge of the District Court of the Southern District of New York, on March 24 dismissed the motion filed by the law firm representing the GOSL, Clifford Chance US LLP.

Based in the Caribbean nation of St. Kitts-Nevis, Hamilton Reserve Bank, which is being represented by the law firms of Bleichmar, Fonti & Auld LLP; and Jenner & Block LLP, brought the action for breach of contract, to recover the principal sum of $250,190,000 plus interest of 7,349,331.25 of the bonds.

The 10-year bonds matured on July 25, 2022. The registered holder of the bonds are New York-based Cede & Co., while Hamilton Reserve Bank is the beneficial holder.

Cede & Co. Has authorized Hamilton Reserve Bank to take action on behalf of Cede & Co. To recover the amounts. The GOSL’s argument was that Hamilton Reserve Bank had no authority as the registered holder of the bonds is Cede & Co.

In dismissing the motion, the court recognized the validity of Cede & Co’s authorization to Hamilton Reserve Bank.

By: Isuru Parakrama

Colombo (LNW): The Professionals Trade Union Collective is set to meet this (10) evening to decide their future actions regarding the government’s new tax scheme and the controversial “Anti-Terrorism Bill,” among other things.

The trade union actions are ever growing in the midst of government’s strict measure to impose tax on public servants and the formulation of the ATA, which, according to many critics, vests in a brute force over anti-government ideologies and is a direct blow in the head against democracy.

By: Isuru Parakrama

Colombo (LNW): The Election Commission is set to meet Prime Minister Dinesh Gunawardena this (10) morning, following the ongoing dilemma on the holding of the Local Government Election.

The Election Commission had requested a meeting with the Prime Minister on the matter, and Gunawardena, in response, had confirmed that the holding of a meeting would be possible on Monday (10) at 11.30 am.

The Commission thereafter is expected to meet tomorrow (11) to make a final decision on the holding of the LG Polls, whilst dodging many queries by the public on the ongoing delay.

The EC on a previous occasion had commented that the holding of the Polls may not be possible without receiving the necessary funds, adding that a letter submitted to the President, who also serves as the Minister of Finance, in this regard received no response.

WASHINGTON, AFP: The World Bank’s ongoing reform could result in a $ 50 billion lending boost over the next decade, US Treasury Secretary Janet Yellen told AFP ahead of stakeholders’ meetings this week where key changes are expected to be announced.

Central bankers, finance ministers and participants from more than 180 member countries are expected to gather in the US capital for the International Monetary Fund and World Bank’s spring meetings.

A key topic of discussion will be the World Bank’s evolution, amid a push for lenders to revamp and meet global challenges like climate change. The United States is the largest shareholder of the World Bank Group.

“I expect there to be an update of the bank’s mission to add building resilience against climate change, pandemics, and conflict and fragility to the core goals,” Yellen said in the interview with AFP. She added that there needs to be a recognition that these challenges aren’t separate or conflicting but rather, inextricably linked.

“Second, there will be an announcement that the bank is stretching its financial capacity to meet these objectives, and adopting changes or endorsing changes that could result in an additional $50 billion in extra lending capacity over the next decade,” Yellen said.

The move would be a significant resource boost marking a 20% rise in the International Bank for Reconstruction and Development’s (IBRD) sustainable lending level. The IBRD is the World Bank’s middle-income lending arm.

Yellen also said there would be an announcement on updating the bank’s operational model to “orient it towards the goals that we’re setting.” Among other things, this includes creating more incentives for the mobilisation of both domestic and private capital.

“We seek additional reforms during the rest of this year,” Yellen said.

In March, the World Bank submitted an evolution plan to be discussed with its development committee on 12 April, during the spring meetings.

Noting that World Bank President David Malpass has laid a “solid foundation” for the ongoing work, Yellen added that she expects US candidate Ajay Banga to be elected to the helm of the organisation and continue the revamp.

Banga was the sole nominee for the position after Malpass announced this year that he would step down early.

Also on policymakers’ agendas next week are support for war-torn Ukraine and debt restructuring.

“We have seen some movement by China on participating in debt restructuring for Sri Lanka, which is a hopeful sign,” Yellen said.

As global growth slows, the World Bank previously warned that the outlook is especially tough for the poorest economies – which face sluggish growth driven by heavy debt burdens and weak investment.

Yellen had earlier said that China should move more quickly on some debt restructurings.

Discussions on this front will continue as a newly formed global sovereign debt roundtable gathers, she told AFP.

“We’re having useful technical discussions on important elements of debt restructuring. China has been participating, and we all continue to press China for improvements,” she said.

Washington will continue pushing for a speedier and more predictable operation of the G20 “common framework” for debt restructuring as well.

On Ukraine, Yellen said: “Once again, we will work with all of our allies to insist that Russia cease its brutality in Ukraine.” She added that the United States would press for economic support alongside its partners on this front.

1. IMF Mission Chief Peter Breuer says SL has committed to reform after years of increasing economic problems and policy mistakes: also says significant tax cuts and delays in reforms contributed to the economic crisis: many analysts also point out that SL’s debt crisis was mainly caused by massive ISB borrowings of USD 12.5 bn from 2016 to 2019, while following an IMF programme.
   
2. US Treasury Secretary Janet Yellen says China participating in debt restructuring for SL is a hopeful sign: former Chinese PM Li Keqiang had previously called on multi-lateral institutions also to participate in debt restructuring along with other creditors.
   
3. Manufacturers Assn Chairman Dhammika Fernando says at least 30% of BOI companies are down-sizing and many are unlikely to re-start after the New Year holidays: also says 40% in the SME sector are on the brink of closure: notes the newly imposed taxes are a serious concern: warns about 30,000–50,000 jobs are likely to be lost in the 1st half of this year.
   
4. State Minister of Investment Promotion Dilum Amunugama says President Ranil
   Wickremesinghe will have his full support if he contests the upcoming Presidential Election: adds the President fearlessly accepted the challenge of reviving the country from a major crisis and managed to stabilise the country within just a year.
   
5. NPP Leader Anura Kumara Dissanayake says the Govt got involved with the IMF on purpose due to the CB Governor Nandalal Weerasinghe’s decision not to repay debt from 12th April 2022 onwards.
   
6. World Bank projects Sri Lanka’s economy to contract by 4.3% in 2023 on the back of the 7.8% contraction in 2022: says demand continues to be subdued, job & income losses have intensified, and supply-side constraints have adversely affected production: also says half a million jobs have been lost and 2.7 million additional people have fallen into poverty.
   
7. Govt Debt advisor and former Director of Raj Rajaratnam’s Galleon Fund Dr Indrajith Coomaraswamy says he hopes China will act as a guarantor on new issuances of int’l debt once the debt restructuring exercise is finalized: also says he doesn’t hear noises in debt restructuring, other than Hamilton Reserve Bank obtaining a judgement against the country: says money will be received from the World Bank in May while the ADB is also trying to get money in as fast as possible.
   
8. Fisheries Minister Douglas Devananda says Govt will begin disbursing Rs.1,514 mn compensation among fisher communities on the Western seaboard who were affected by the MV X-Press Pearl disaster.
   
9. Justice Minister Dr. Wijeyadasa Rajapakshe takes swipe at opponents of the proposed Anti-Terrorism Bill: says anyone who does not intend to engage in terrorism need not worry about the ATB.
   
10. Indian Premier League top team Chennai Super Kings recruits SL cricketers Maheesh Theekshana and Matheesha Pathirana to their squad: Theekshana debuted last season and was used in the PowerPlay by CSK captain M S Dhoni.

Pakistan foreign reserves have fallen to USD 4.2 billion, which is enough to cater for one month of import bill. Sri Lanka is facing a liquidity crunch.

By Shishir Gupta

Hindustani Times: Despite Sri Lanka getting the first tranche of a US dollar 362 million loan from the IMF, the island nation is facing a liquidity crunch as the loan conditions stipulate no more printing of Sri Lankan currency to curb the inflation and for prudent fiscal management. On March 20, the IMF cleared the USD 2.9 billion-dollar package for Sri Lanka in eight installments.

It is understood that Sri Lanka has repaid nearly half of US dollar 500 million dollar loan taken for fuel purchases last year, it is quite evident that donor nations including China, Japan and even India will have to take a significant haircut as part of debt restructuring of the island nation.

While Sri Lanka continues to struggle with the ongoing economic crisis after May 20, 2022 default, another Indian neighbour and cat’s paw of China in the Indian sub-continent, Pakistan, is staring at a default with reports indicating that Islamabad will have to cough up USD 77.5 billion in external debt between April 2023 to June 2026 to iron brother China, private creditors and Saudi Arabia. The external debt is one-fourth of Pakistan’s economy of USD 350 billion.

Even though Pakistan finance Finance Minister Ishaq Dar has assured the nearly bankrupt Islamic republic that it will manage a USD 6.5 billion package from IMF, Pakistan is facing a serious economic and political crisis with aggravated insurgencies in Balochistan and in Khyber-Pakhtunkhwa regions. With ousted prime minister and PTI chief Imran Khan going for the jugular of the Pakistani establishment to regain power, the judiciary split and PM Shehbaz Sharif facing public wrath over food shortage and rampant inflation, Islamabad has a fully blown crisis at hand with the world focused on Russian actions in Ukraine and Chinese actions on Taiwan. As the IMF package will come with riders accompanied with raising of taxes and rationalization of power tariff, the political cost of economic pain to the public will lead to further public disenchantment of the politicians and the Rawalpindi GHQ.

The Pakistan foreign reserves have fallen to USD 4.2 billion, which is enough to cater for one month of import bill. The USD-PKR exchange rate is touching 280 Pakistani Rupees to a US Dollar and there are food shortages in all provinces barring Punjab, the core of Pakistan.

According to a report by the United States Institute of Peace this week, the Islamic Republic holds external debt and liabilities of USD 126.3 billion as of December 2022. Nearly 77 per cent of this debt, amounting to USD 97.5 billion, is directly owed by the Pakistan government to various creditors and an additional USD 7.9 billion is owned by government-controlled public sector enterprises to multilateral creditors.

Pakistan owes USD 45 billion to multilateral institutions, USD 8.5 billion to Paris Club of creditor nations, USD 27 billion to China and some USD 7.8 billion as private debt and commercial loans. While Islamabad believes that iron brother China and fellow-Sunni Islamic nations will not let Pakistan default by refinancing loans, the repayment pressure will mount on the Islamic Republic to the tune of USD 24.6 billion in 2024-2025.

Given that Pakistan has virtually moved into the China-Russia axis and depends on Beijing for military hardware, the west, post withdrawal from Afghanistan, is rather indifferent to the woes of the Islamic Republic as it struggles to contain the rise of China. That Pakistan is a lackey of China does not really help its case.

Source: Hindustani Times