Today (August 09), the Sri Lankan Rupee has exhibited a modest upturn against the US Dollar in comparison to the previous day’s rates at commercial banks within Sri Lanka.

Peoples Bank has noted a reduction in the buying and selling rates of the US Dollar, marking a decrease from Rs. 313.37 to Rs. 312.39 for buying and from Rs. 328.78 to Rs. 327.76 for selling.

Commercial Bank, on the other hand, has reported a decline in the buying rate of the US Dollar, showing a decrease from Rs. 313.51 to Rs. 310.77. Additionally, the selling rate has also observed a decrease, shifting from Rs. 328 to Rs. 326.

Meanwhile, at Sampath Bank, the buying and selling rates of the US Dollar have undergone a decrease, transitioning from Rs. 316 to Rs. 315 for buying and from Rs. 328 to Rs. 327 for selling.

1. CEB sources say one unit of the 270MW Norochcholai Coal Power Plant has broken down: out of the 3 power generation units at the Plant, only one unit is now in operation as a result of another unit being shut-down in June’23 to carry out maintenance work.
2. Minister of Energy Kanchana Wijesekara says the CEB will ensure an uninterrupted supply of power islandwide and has no plans for scheduled power-cuts: also says the CEB will procure necessary supplementary power needed to maintain 24-hour uninterrupted supply of power.
3. CB Governor Nandalal Weerasinghe says monetary policy transmission to the “real economy” is still incomplete: also says he “would like to see private sector interest rates come down further and at a faster pace”: analysts point out that the Central Bank is paying interest of nearly 20% per annum on T-Bills even now, and as long as that is done, it’s futile to expect private sector interest rates to reduce: since Weerasinghe assumed office, the economy has undergone massive contractions of 8.4%, 11.8%, 12.4%, & 11.5% in 2Q2022, 3Q2022, 4Q2022, & 1Q2023, respectively.
4. Police arrest 9 persons for “forcibly entering” the premises of the Central Bank: the group, said to represent the Joint Assn of Leasing and Debt Instalment Payers were demanding concessions for leasing facilities, and relaxation of “Parate actions” which were affecting them severely.
5. Cabinet approval granted to amend the EPF law to assure a 9% annual return for the 2023-2026 period: analysts point out that, in accordance with the very high interest rates since April’22 for Govt Treasuries, the returns of the EPF will easily be in excess of 20% from 2022 to 2026, and therefore a 9% return assurance is meaningless: analysts also say EPF returns to Members averaged over 10% from 2006 to 2014, when inflation was at single digits or near single digits.
6. Sri Lanka’s Women Parliamentarians’ Caucus led by MP Sudarshini Fernandopulle, receives a warm welcome at the New Zealand House of Representatives: the Caucus is on a “study tour”.
7. State Minister of Finance Ranjith Siyambalapitiya calls for an urgent report on the recent shooting incident which involved several officers of the Excise Dept: in that incident, 4 officers of the Excise Department were arrested for opening fire at a vehicle near a petrol filling station on Marine Drive, Bambalapitiya.
8. At least 60 students hospitalized after inhaling toxic smoke from a fire that erupted inside a chemical factory in Kandana: the students are from 3 nearby schools, St. Sebastian’s Balika Maha Vidyalaya, St. Sebastian’s Girls’ Primary School & St. Sebastian’s Boys Primary College.
9. Dept of Wildlife Conservation states the arrangement to provide water to animals in national parks around the country in view of the prevailing drought, is not aimed at ensuring the animals’ welfare, but preventing possible losses to the tourism industry: several parts of the country, including those where there are national parks such as Udawalawe and Yala, have been affected due to the extreme dry weather at present.
10. Owners of small-scale tea estates say they are facing numerous problems due to the serious drop in the price of tea leaves: explain that the price of a kg of green tea leaves, which had risen up to Rs.350-400 in the past, has now dropped to Rs. 160-165.

Dr. Lionel Bopage

An outline of the problem

Post-independent Sri Lanka (Lanka) has suffered from recurrent economic crises; the more notable ones being in August1953, in the late 1970s and most pertinently the current crisis which essentially bankrupted the country. The trigger for the current crisis was the prolonged pandemic that affected the world and the Russian – Ukrainian war in February 2022. The government’s misguided policies on agriculture, taxation and other sectors made the crisis worse. Post-independence, successive Lankan governments, regardless of their political hue and rhetoric have made more financial allocations to service its debt than it has allocated to education, healthcare, water, power and other essential social necessities. The advent of Covid-19 undermined trade and exacerbated this imbalance.

The pandemic resulted in a downturn in the Lankan economy, which is dependent on remittances from abroad, tourism and exports such as garments from the Free Trade Zones and agricultural products such as tea from the Malaiyaha areas. Global public debt as a percentage of GDP rose from an unacceptable 84 per cent at the end of 2019 to 100 per cent by the end of 2020. Even the world’s two largest economies China and the United States (US) were not immune. Their public debt ratio to GDP increased.

The conflict between Russia and Ukraine led to a spike in global commodity prices, particularly fuel, fertiliser and food. This adversely affected the poor and those who lived from one paycheck to the next. Furthering their misery was the strengthening of the US dollar – the “recognised” currency for world trade – thus making the defaults of low-performing economies like Lanka and Ghana a seeming inevitability. This becomes even starker when Lanka’s debt is looked at forensically.

Public Debt Situation

According to the IMF figures cited for March 2023, total public debt of the government of Sri Lanka was USD 83.6 billion of which the outstanding foreign debt was USD41.5 billion, i.e., 63.5 percent of the public debt. Of the GDP, multilateral debts were 17.6 percent and bilateral debts about 17.5 percent. About 52 percent of the bilateral creditors were Chinese, about 25 percent Japanese and 16 percent Indian.

This is sadly not something new. Sri Lanka’s economy since at least the early 1950s has failed to produce sufficient foreign exchange to meet the cost of imports. Add to this the fact that the vast majority of the population, given the informal nature of employment and business practices, do not pay tax. In addition, the largest share of government revenue is devoted to the military, dwarfing expenditure on health and education.

Successive governments were able to hide this underlying weakness in the economy and their incompetence, and corruption of the public purse when it came to accountability, the rule of law and transparency by evoking the spectre of the “other” usually in the form of minorities and they were thus able to shift the attention of the populace from their own and the economy’s shortcomings.

Hiding this fact that governments in the past, regardless of their political hue like in the present, have continued to borrow for non-productive and mostly wasteful and mismanaged projects leading to a huge external trade deficit, without being able to meet the country’s debt obligations; resulting in the country declaring bankruptcy. Lanka still produces few of its avidly sought-after consumer goods making the situation even more economically untenable. The top 20 per cent of the population enjoy 42 per cent of the island’s income while the lowest 40 per cent make do with 17.8 per cent.

“Free market” economy

The government as well as those in opposition are still advocating a free-market economy combined with a strategy of an export-led recovery process. So, the mantra of providing more and more incentives to attract foreign direct investment, promote tourism, and push local human resources abroad to make more foreign remittances continues. They conveniently forget that “free” market economics created the crisis in the first place and required the country to be bailed out by international financial agencies on numerous occasions.

Sri Lanka defaulted on its sovereign debt repayments last year and entered negotiations with the International Monetary Fund (IMF) for access to a loan package on the premise of implementing structural macroeconomic change. After obtaining USD 2.9 billion of financing from the IMF, Sri Lanka was required to initiate and complete its domestic debt restructuring process (reworded innocuously as debt optimization) in early July. As this process will lead to serious economic shocks, the government imposed a five-day bank holiday at the end of June 2023, to “facilitate” the market in absorbing those shocks and to avoid a run on banks.

This sort of brutal restructuring is not new to Sri Lanka. Since independence, Sri Lanka has had to go to the IMF with cap in hand 17 times. This will be the tenth IMF loan Sri Lanka received since the country was made into a free-market economy in 1977. The last loan was in 2016. The question the country needs to ask itself is, are we going to be hoodwinked yet again as the panacea offered by the IMF has been a systemic failure?

Restructuring and austerity

The impact of restructuring will depend on what social layer one belongs to. To a majority, it will be austerity once again, and once more people will be forced to demand economic justice. Those who loudly advocate for the IMF-led restructuring have become conveniently blind to tax avoidance and evasion, illegal siphoning of funds and money laundering and corruption, mismanagement and wastage of resources in the state sector. They have also been muted on the vital need to restructure the economy to meet the needs of the populace, not a minority of very wealthy individuals and families. Austerity has historically made the majority of the population poorer and has increased income disparity.

This paper forcefully challenges the economic mantra that debt restructuring needs to accompany fiscal austerity. A blind obedience to the a priori dictates of neo-liberalism is a sure fire recipe for disaster. The way the neo-liberal economy is designed, tax evasion and avoidance have become a systemic issue. It allows the siphoning off of taxable profits that corporations earn in developing countries like Sri Lanka to tax havens around the world. In Lanka, the tax base is not wide enough due to its extensive informal economy, and the large human resource component in overseas employment, who make remittances.

Accepting the IMF package requires cutting down of vital public expenditure such as on education, healthcare and social safety nets. It will also promote direct and indirect tax hikes, selling state-owned enterprises as well as natural resources to the private sector, establishing public-private partnerships, liberalization of public procurement and trade, increasing labour market ‘flexibility’ to hire and fire and reduce wages and pensions, increasing interest rates etc. Nothing will be done about corruption, cronyism and economic mismanagement.

The next section will cast a critical lens at the neo-liberal approach the IMF has adhered to.

To be continued

The legislative proceedings within the parliament today (August 09) will focus on the Second Reading of the Appropriation (Amendment) Bill, as confirmed by the Committee on Parliamentary Business chaired by Speaker Mahinda Yapa Abeywardena. General Secretary of Parliament, Kushani Rohanadeera, relayed this information following the committee’s meeting held yesterday.

The proposed bill entails a significant alteration to the borrowing limit, suggesting an increase from Rs. 4,979 billion to Rs. 13,979 billion.

Simultaneously, aligning with the decisions made during the Parliamentary Business Committee meeting on July 21, the agenda for today’s session also encompasses the Second Reading of the Betting and Gaming Levy (Amendment) Bill, deliberations on Regulations under the Fisheries and Aquatic Resources Act, and the consideration of the Sri Lanka Institute of Taxation (Incorporation) (Amendment) Bill.

Following these legislative discussions, there is a scheduled adjournment from 5:00 p.m. to 5:30 p.m., during which time the Opposition’s Motion will be addressed.

The forthcoming activities of this week’s parliamentary sessions will adhere to the framework established during the Parliamentary Business Committee’s meeting on July 21, as emphasized by the General Secretary.

Moreover, a notable highlight of today’s parliamentary sitting will be a special address by President Ranil Wickremesinghe, centering on the current economic state of the country. This address is anticipated to provide valuable insights into the nation’s economic trajectory.

In a recent development, President Ranil Wickremesinghe has been apprised of intelligence reports outlining an impending effort to instigate public unrest reminiscent of the events that transpired on May 09, 2022. Minister Bandula Gunawardena, addressing the media during the customary weekly press conference held on Tuesday (August 08), disclosed that the Head of State had shared information from the State Intelligence Service (SIS) with the Cabinet of Ministers.

The Cabinet spokesperson disclosed that the intelligence reports have illuminated the intentions of certain factions associated with the Aragalaya movement, which is aligned with the opposition. These groups are purportedly orchestrating a resurgence of the incidents that unfolded on May 09 of the previous year, exploiting the ongoing drought, electricity crisis, and water scarcity as a pretext.

Minister Gunawardena highlighted that there have been deliberate efforts to besiege the residences of Agriculture Minister Mahinda Amaraweera and Power & Energy Minister Kanchana Wijesekera. In anticipation of potential attacks, heightened security measures have been implemented to safeguard against such threats.

Further revelations by Gunawardena brought to light the involvement of at least two media organizations in the scheme to foment turmoil anew on the streets, utilizing the water crisis induced by the drought and the agitation among farmers as a convenient guise.

The minister underscored that this calculated endeavor represents an endeavor to disrupt the stability of the nation. He asserted that these specific factions are aiming to provoke law enforcement into a retaliatory response, potentially escalating to violent clashes, and exploit resulting casualties for their own political gains.

Several spells of showers will occur in Galle, Matara and Rathnapura districts.

A few showers will occur in Western province and in Kegalle, Kandy and Nuwara-Eliya districts.

Showers or thundershowers may occur at a few places in Eastern and Uva provinces and in Mullaitivu district during the evening or night.

Mainly fair weather will prevail elsewhere over the Island.

General public is kindly requested to take adequate precautions to minimize damages caused by temporary localized strong winds and lightning during thundershowers.

Amidst the ongoing drought conditions, the Victoria Reservoir is grappling with a substantial water loss, with an astounding three million litres of water evaporating daily, as revealed by Engineer-in-Charge Wasantha Ehelapitiya.

Ehelapitiya detailed that this vast quantity of water, amounting to five millimetres in depth across an expansive 11 square kilometre surface area, evaporates each day due to the prevailing arid climate.

The Engineer-in-Charge further illuminated the situation, explaining that typically, a portion of the water filling the Victoria Reservoir, equivalent to about two millimetres in depth, would evaporate daily. However, the current dry weather has exacerbated this process, causing the evaporation rate to more than double. Drawing attention to global solutions, he cited countries such as Germany, France, Korea, and China, which have successfully tackled water loss by deploying solar panels that float on water surfaces. These innovative installations not only curtail evaporation but also harness additional electricity.

Ehelapitiya also underscored the potential benefits of implementing a similar strategy in the Victoria Reservoir. By suspending solar panels above the water’s surface, a conducive environment could be fostered for aquatic life, providing a dual advantage of water conservation and enhanced ecosystem support.

In response to recent media speculations, Power and Energy Minister Kanchana Wijesekera clarified that there are no impending revisions to electricity tariffs. Taking to his Twitter account, the Minister emphasized that any adjustments to electricity tariffs would strictly adhere to the government’s established policies.

Minister Wijesekera further highlighted that the government’s policy framework entails annual revisions of electricity tariffs, a practice set to occur in January and July. This systematic approach ensures a balanced and predictable tariff structure for consumers.

Notably, the Minister also underscored the commitment of the Ceylon Electricity Board to provide uninterrupted electricity supply throughout the year, effectively eliminating the need for power cuts. This assurance comes as part of the government’s broader efforts to enhance the energy infrastructure and ensure a reliable energy grid for the nation.

The Sri Lanka Army Seva Vanitha Unit (ASVU) at the Army HQ expanding its welfare roles once again donated 100 dry ration packs to selected soldiers who are working at the Army HQ on Friday (04 Aug) during a special ceremony at the Army HQ, graced by Lieutenant General Vikum Liyanage RWP RSP ndu, Commander of the Army and Mrs Janaki Liyanage, President, ASVU as distinguished guests for the occasion.

After routine formalities in the simple ceremony, Lieutenant General Vikum Liyanage together with Mrs. Janaki Liyanage handed over air-chilled 3 Chiller Refrigerators to the Sri Lanka Army Service Corps – Seva Vanitha Branch (SLASC-SVB) for further promotion of the ‘Ranaviru’ yoghurt production project.

After the distribution of refrigerators, a cash cheque to the value of Rs 600,000/= was awarded to a disabled War Hero of the Gajaba Regiment to complete his partially-built house.

In addition to that, the Commander of the Army together with the ASVU President and Senior Members of ASVU awarded those 100 dry ration relief packs to soldiers. Each ration parcel included rice, potatoes, onions, coconut milk packets.

Major General M.G.W.W.W.M.C.B Wickramasinghe RWP RSP ndu psc, Director General General Staff (DGGS) of the Army, Brigadier I.H.M.R.K Herath USP ndc psc, Director Media, Brigadier N Mahawithana KSP, Brigadier Coordinating of ASVU, Senior ASVU members, Senior Officers, Officers and Other Ranks also participated in the event.

• Country to host the 5th Asia Pacific Forum from October 03rd to 06th.
• Dambulla and Hiriwadduna eco-tourism sites to be developed as eco-tourism destinations.
• A list of plastic items to be banned within the next couple of weeks.
• Contingency responsive action plan prepared to report the air quality calamity situation of the country.
• Preparation of National Policy on electricity and electronic waste management underway.
• GSMB to regularize mineral transportation.
• The regulation under the Mines and Mineral Act amended, facilitating investors to invest in mineral resources in Sri Lanka directly – Minister of Environment Naseer Ahamed.

Sri Lanka will launch the Climate Justice Forum (CJF) for the vulnerable and developing countries at the 28th meeting of the Conference of the Parties (COP 28) at the upcoming 2023 UN Climate Change Conference, Minister of Environment Naseer Ahamed stated.

Speaking further the Minister said that Sri Lanka has proposed the establishment of a CJF with the common objective of ensuring greater climate justice and accelerating the financing of losses and damages and providing an alternative and non-traditional approach.

Meanwhile, the Ministry of Environment in collaboration with the United Nations Environment Programme will host the fifth Forum of Ministers and Environment Authorities of Asia Pacific (5th AP Forum) which will take place from 3rd to 6th October 2023 in Colombo.

The Forum will provide a platform for governments, intergovernmental organizations, and other stakeholders to discuss and prioritize environmental issues in the Asia Pacific region, the Minister mentioned.

He expressed these views yesterday (06) during a press conference themed ‘Collective Path to a Stable Country’ held at the Presidential Media Centre (PMC).

Further, attention has been paid to the development of Dambulla and Hiriwadduna eco-tourism sites as eco-tourism destinations.

In addition to the Gazette notification that was issued on March 31 2021 for banning some single-use plastic items, plastic garlands, single-use spoons, forks, yogurt/ice cream spoons, plastic straws, stirrers, spoons and plastic string hopper trays will be banned within the next couple of weeks.

The CEA with the participation of the relevant stakeholder institutions has already prepared a contingency responsive action plan to report the air quality calamity situation of the country, Minister Ahamed stated.

The Ministry of Environment is also preparing a National Policy on electricity and electronic waste management.

The Geological Survey and Mines Bureau (GSMB) has commenced issuing transport licenses with destination, vehicle number, and route details to regularize mineral transportation. All these details are computer generated which prevents alterations by the license holder, the Minister added. The Ministry has also introduced a blacklisting procedure through the database system of the GSMB for the vehicles used for the illegal transportation of minerals.

The regulation under the Mines and Mineral Act has been amended and new provisions have been introduced for the exploration licence procedure. Further, new provisions to facilitate investors to invest in mineral resources in Sri Lanka directly without the involvement of brokers have been introduced.

Minister of Environment Naseer Ahamed, further commented;

Sri Lanka has proposed the establishment of a Climate Justice Forum with the aim of accelerating the financing of losses and damages and providing an alternative and non-traditional approach. Also, Sri Lanka is of the opinion that it is appropriate to include debt justice as an essential component of the overall solution proposal to be given to the climate-vulnerable and developing countries for their mitigation and adaptation interventions, taking into account the debt crises faced by those countries. In order to make that effort successful, the Cabinet approved the implementation of the strategic program presented by the Ministry of Environment as the proponent of establishing the Climate Justice Forum.

The Major activities to be carried out by the Ministry for this year include the formulation of a national climatic change policy, formulation of a national mineral policy, formulation of a national cooling policy for Sri Lanka, formulation of a Sri Lanka Road map for net zero Carbon by 2025, prohibition of four (04) environmentally harmful single-use plastic products and the establishment of climate cells to facilitate implementation of Provincial Adaptation Plan.

Under waste management, we have introduced new rules for plastic use and recycling. The Central Environment Authority (CEA) has already incorporated the provisions of Extended Producer Responsibility (EPR) and polluter pays the principal to National Environment Act amendment. Two pilot projects have already been implemented to practice EPR voluntarily.

PMD