The International Monetary Fund (IMF) is still awaiting creditors’ assurances on Sri Lanka debt restructuring in order to present a Fund-supported program for Sri Lanka to the IMF’s Executive Board, for approval.
The IMF said “As soon as adequate assurances are obtained and remaining requirements are met, including by the Sri Lankan authorities, a Fund-supported program for Sri Lanka can be presented to the IMF’s Executive Board for approval that would unlock much needed financing.”
“The assurances from Sri Lanka’s official creditors are essential to restore debt sustainability and government authorities should reach a collaborative agreement with private creditors to get the approval of IMF executive board”.
The IMF confirmed that India has committed to help ease the debt burden of its crisis-stricken neighbor Sri Lanka as part of a possible International Monetary Fund-supported program.
“Sri Lanka is engaged with other official bilateral creditors to obtain similar assurances,” Reuters quoted an IMF spokesperson as saying in a statement.
“As soon as adequate assurances are obtained and remaining requirements are met, including by the Sri Lankan authorities, a Fund-supported program for Sri Lanka can be presented to the IMF’s Executive Board for approval that would unlock much needed financing.”
Sri Lanka requires the backing of China and India – its biggest bilateral lenders – to reach a final agreement with the IMF that is essential to help the country emerge from its worst financial crisis in seven decades.
The island nation of 22 million people has grappled with challenges during the past year ranging from a shortage of foreign currency to runaway inflation and a steep recession – the worst such crisis since independence from Britain in 1948.
Reuters reported last week that India had told the IMF it strongly supports Sri Lanka’s debt restructuring plan as the island seeks a $2.9 billion loan from the global lender, according to a letter.
Ananda Palitha, Convenor of the ‘Samagi Joint Trade Union Alliance’ attached to the Samagi Jana Balawegaya (SJB), and Secretary of the Electricity Consumers Association Sanjeewa Dhammika who were arrested by Kollupitiya Police yesterday evening (23) on the charges of threatening and criminal coercion against two members of the Public Utilities Commission of Sri Lanka (PUCSL) were remanded till January 26, as ordered by Fort Magistrate Thilina Gamage today (24).
Colombo, Sri Lanka – More than 180 prominent economists and development experts from around the world have made a global appeal to Sri Lanka’s financial lenders to forgive its debt, even as other experts are not convinced it is the best way forward for the island nation.
According to World Bank estimates, Sri Lanka has an external debt burden of more than $52bn as of December. Of that, nearly 40 percent is owed to private creditors, including financial institutions, while the rest is owed to bilateral creditors where China (52 percent), Japan (19 percent) and India (12 percent) are the largest ones.
Colombo defaulted on its debt repayments in April and negotiated a $2.9bn bailout with the International Monetary Fund (IMF).
But the IMF will not release the cash until it feels that the island nation’s debt is sustainable.
Now several prominent academics and economists, including Thomas Piketty who wrote the bestseller Capital, Harvard University economist Dani Rodrik and Indian economist Jayati Ghosh have issued a statement (PDF) calling for the cancellation of Sri Lanka’s debt by all external creditors and measures to stem the illicit outflow of capital from the country. The statement was put together by the “Debt Justice” campaign group, a global movement to “end unjust debt and the poverty and inequality it perpetuates”.
The private investors who lent at high interest rates to corrupt politicians must face the consequences of their risky lending by cancelling the debt, the academics said in the statement.
The academics have accused private creditors of contributing to Sri Lanka’s first-ever sovereign debt default as they accrued “a massive profit” by charging a premium to lend. Therefore, they said, the private lenders who benefitted from higher returns must be “willing to take the consequences” of their actions, meaning cancelling the debt and forfeiting the loans.
But not everyone agrees with this suggestion.
WA Wijewardene, a former deputy governor of the Central Bank of Sri Lanka, says that should the debt cancellation plan actually go through, it might lead to the collapse of the current global financial system.
Many of the academics who have signed the said statement are not economists, he told Al Jazeera.
“It is a galaxy of academics belonging to the social sciences field. As such, it needs to be critically appraised because, if accepted for Sri Lanka, it in fact provides a blueprint for a new world economic order.”
He added: “The present economic order is an interdependent, interconnected system. If you break this, the world will collapse. You don’t know what would happen thereafter.”
The ongoing economic crisis has left at least 8 million Sri Lankans as ‘food insecure’ [File: Eranga Jayawardena/AP Photo]
Wijewardene told Al Jazeera that he was surprised that Dani Rodrik, “who was a strong advocate for Washington Consensus, ie neo-liberal economic reform throughout the world” and Thomas Piketty, “who is from the opposite camp,” are on the same platform calling for debt cancellation.
Instead, he said, these academics and economists “should argue for the accountability to be established”.
“Money borrowed has been wasted or appropriated by rulers, leaving [out] people who haven’t benefitted from them. Those rulers should be made accountable for the losses and we should fight to establish a governance system in which they should be prosecuted for their crimes,” he said.
Wijewardene added that the cancellation of debt would not benefit the people but “the corrupt, despot” leaders.
“Corrupt despots have already benefitted from the money borrowed. When debt is cancelled, they don’t have to repay and can continue to borrow more and use that money for private gains. This is known as the moral hazard problem in economics; that when someone has taken responsibility for your liabilities, you have no incentive to take even the minimum precautions to minimise it,” he said.
Time for bilateral creditors to step up
For now, Nandalal Weerasinghe, the head of the Sri Lanka Central Bank, has urged China and India to come to an agreement over reducing the country’s debt.
“We don’t want to be in this kind of situation, not meeting the obligations, for too long. That is not good for the country and for us. That’s not good for investor confidence in Sri Lanka,” Weerasinghe told the BBC recently.
On Friday, India’s Foreign Minister S Jaishankar, while on a two-day visit to Sri Lanka, said that New Delhi had extended financing assurances to the IMF to clear the way for Sri Lanka to move forward but did not specify what those assurances were.
India’s Foreign Minister S Jaishankar (left), seen shaking hands with Sri Lankan President Ranil Wickremesinghe, told Sri Lanka that his country has given financial assurances to the IMF to facilitate a bailout plan [File: Sri Lankan President’s Office via AP]
On the heels of India’s assurance, China has offered a two-year moratorium, according to Sri Lanka’s Sunday Times newspaper.
In a letter to President Ranil Wickremesinghe, the Exim Bank of China, responsible for much of the loans given to Sri Lanka, said the two-year moratorium would be a short-term suspension of the debts owed to China while asking all Sri Lanka’s creditors to get together to work out medium-term and long-term commitments.
China is yet to make any official statement in this regard.
The assurances come on the eve of a Paris Club meeting of Sri Lanka’s creditors to discuss debt restructuring measures as a prelude to the IMF funds.
The chances of China acceding to requests for a loan waiver are slim as similar demands will then come from other parts of the developing world where China is an active lender, said Dhananath Fernando, the chief executive officer of Advocata Institute, an economic policy think tank in Sri Lanka.
“When you offer a debt relief to one country, it is like a court order. Other countries will also like to get the same relief,” he told Al Jazeera.
Moreover, taxpayers in any country would not be happy to completely write off loans offered to another country, a sentiment pointed out by IMF Managing Director Kristalina Georgieva.
“It is the notion, and is actually very broadly shared by many officials and citizens in China, that China is still a developing country and therefore … they expect to be paid back because it is a developing country,” she said in a media roundtable earlier this month.
“So, a haircut in the Chinese context is politically very difficult,” but China understands that the equivalent of that can be achieved by stretching maturities, reducing or eliminating interest rates, and payments to ultimately reduce the burden of debt, she added.
Dismissing the call for debt cancellation as “impractical”, Advocata Institute’s Fernando said that all the creditors will eventually have to agree on either a haircut (reducing the debt payment), coupon clipping (asking the lenders to reduce or waive off interest rates on bonds), extending the maturity of the loans or a combination of all three.
The Japanese embassy in Colombo had not responded by press time to an Al Jazeera request for comment.
Trade unions join call to cancel debt
Meanwhile, supporting the call for debt cancellation, a trade union representing garment factory workers, a key employer and income generator in Sri Lanka, said the economic restructuring measures required by the IMF as part of its debt relief plan will have the Sri Lankan government privatise state-owned enterprises, impose new taxes and increase the tax rates.
None of these measures “would provide an answer to Sri Lanka’s present debt crisis,” said Anton Marcus, co-secretary of the Free Trade Zones and General Services Employees Union, in a statement. The academics’ call “should be further lobbied by all labour rights campaigners and global trade union federations when Sri Lanka’s export manufacturing and service sector is hard-pressed for orders that threaten employment on large scale, in a country that is burdened with spiralling cost of living,” Marcus said.
The World Food Programme estimates that 8 million Sri Lankans — out of a 22 million population — are “food insecure” with hunger especially concentrated in rural areas.
Retired Major and Lawyer Ajith Prasanna, who was convicted for contempt of court, will be serving rigorous imprisonment of four years as ordered by the Supreme Court.
In addition, Prasanna was handed a fine of Rs. 300,000 and failure to settle will extend his sentence by six more months.
The verdict was declared by the three-member Supreme Court bench with a favoured majority by Justices Preethi Padman Surasena and S. Thureirajah.
Anyone questioning the non-issuance of the gazette declaring the date of the upcoming Local Government Election has no proper understanding about the manner in which such affairs are carried out, Chairman of the Election Commission Nimal Punchihewa said, joining an interview aired on Hiru TV.
Q: Do you even have any confidence that this election will be held on March 09?
“What lies here is not a problem of trust. As a Commission, we’re obliged to serve a legal responsibility. We’re currently serving that legal responsibility. Accordingly, we’re planning to hold the Election on March 09. The initial matters in this regard are being sorted out.”
Q: Some questioned why was the gazette in this regard not issued..
“So you see, such sentiments have been made without any understanding or comprehensive study into the matter. Because, the Commission is not the one to declare the date of a Local Government Election. Such affairs are being carried out by the respective returning officer of the institution. What the Commission does is approving the date. In general practice, after the nominations are taken in, the returning officers of those areas declare a date upon agreement. Then, a date alone is not sufficient for a gazette issuance, for the schedules on the number of institutions, the names of the contesting parties, the names of the candidates, the electoral divisions and etc. shall also be included.”
Two persons accused of transporting explosives hidden in a lorry were arrested by Bingiriya Police.
The lorry passing a roadblock in Wilattawa was intercepted by officers of the Bingiriya Police station and the explosives were recovered thereafter, Police Spokesman’s Office said.
The two suspects were arrested along with 89 pipes containing carefully packed explosives, 21 service strings 80 ft long, and nine boxes containing 100 detonators each.
The arrestees, 33 and 44, are residents of Mannar, and are to be produced before the Hettipola Magistrate Court today (24).
The Bingiriya Police are conducting further investigations.
Marking a major milestone in a strategic petroleum storage project in Sri Lanka whose fate has remained uncertain for decades, Lanka IOC, Ceylon Petroleum Corporation and the Government are now jointly developing the Trincomalee oil tank farm in eastern Sri Lanka.
The agreement to implement this project was signed on January 06 2022. The move, which finally firms up India’s role in the controversial project discussed since the time of the Indo-Lanka Accord of 1987, follows Cabinet clearance subsequently.
Sections have opposed the previous Rajapaksa government’s decision to involve India in a project that was much negotiated by different governments, but was never finalized.
The Cabinet of Ministers approved last year to allocate 24 oil tanks for the business activities of the Ceylon Petroleum Corporation and to allocate 14 tanks of the Lower Oil Tank Complex already in use by Lanka IOC for the company’s business activities.
The Cabinet also approved to implement a development project by a company named Trinco Petroleum Terminal Pvt. Ltd for the remaining 61 tanks, of which 51% will be owned by Ceylon Petroleum Corporation and 49% by Lanka IOC.
Accordingly, this deal will bring Sri Lanka US$ 500 Million but the profitability of the venture will depend to a great extent on the cost of funds.
It has to be understood that there is a relationship between the profitability of a business and the cost of its capital.
The type of capital financing impacts the profitability and the profit margins. If the capital itself is debt -heavy it will be a reason for reducing the net profits of a company.
It is difficult for the CPC which is already in heavy debts to provide the initial capital for the new Company.
Partners will have to procure their components of contribution within the limits of cheaper costs if they expect to generate profits. It will be a gigantic task for the CPC which is heavily burdened with debts some remaining unsettled over long periods to fulfill their part.
Compared to the huge cost of refurbishing which may involve unforeseen large expenditures (particularly due to the very long period during which the tanks have remained unused) the initial costs to put them in good order before offering for any commercial venture may be very high.
Lanka Indian Oil Company (LIOC) disclosed that the work on the Trincomalee oil tank farm is now in progress adding that ten tanks would be ready for development after the area is cleared of woods very soon by the State Timber Corporation.
Seven tanks had already been cleared and the clearing of woods around three more tanks would be completed by the middle of next month, LIOC announced.
LIOC will call tenders for consultancy services to design the laying of the pipeline from the jetty to the tank farm.
Ananda Palitha, Convenor of the ‘Samagi Joint Trade Union Alliance’ attached to the Samagi Jana Balawegaya (SJB), and Secretary of the Electricity Consumers Association Sanjeewa Dhammika were arrested by Kollupitiya Police yesterday evening (23) on the charges of threatening and criminal coercion against two members of the Public Utilities Commission of Sri Lanka (PUCSL).
SL Consumer Affairs Authority (CAA) is now cracking down on egg sellers for violating maximum retail price initiative by selling it at a higher price amidst the ongoing struggle of Poultry and egg industrialists due to scare city of inputs.
The lack of animal feed, rising raw material prices, the fuel crisis, transportation issues, problems with foreign exchange when importing animal feed have brought the industry to collapse at present industry sources claimed.
Egg price has risen to over 65 rupees after the suspension of the gazette extraordinary published by the Consumer Affairs Authority (CAA) stipulating a maximum retail price (MRP) on eggs.
Egg producers have been stubborn and rejected the government request to reduce the egg prices. The MRP decision resulted in many poultry producers not supplying eggs to the markets until the prices increase.
The Consumer Affairs Authority yesterday (23) warned traders disobeying stipulated Maximum Retail Prices (MRP) for eggs, affirming that legal action will be taken against several vendors who violated the law.
On Friday, the Government issued a Gazette notification on the advice of the Attorney General stipulating the new MRP for eggs, where a white egg should be sold at an MRP of Rs. 44 and a brown egg at Rs. 46.
However, during raids conducted by the CAA yesterday, several traders were caught selling eggs at a higher price disregarding the stipulated MRP.
Despite having severe regulations and raids, traders were seen selling eggs at various prices above the stipulated MRP, after the All Ceylon Egg Producers Association refused to abide by the Gazette.
Sri Lanka will see a drop in egg prices to 50 rupees from next month onward, a top industry official said, amid the government’s effort to import eggs to bring down the prices.
The poultry and egg-producing industry’s struggle to boost the sector came under the spotlight yesterday at a high-level review involving Government officials.
The progress and challenges of the chicken and egg producers thus far were discussed in depth at a meeting chaired by Senior Advisor to the President on Food Security Dr. Suren Batagoda at the President’s Media Centre yesterday.
The poultry and egg-producing industry stakeholders were briefed on the significance of all parties coming to a consensus to grow the sector, a statement issued by the President’s Media Division noted.
Discussion topics included; the lack of animal feed, rising raw material prices, the fuel crisis, transportation issues, problems with foreign exchange when importing animal feed, as well as potential solutions to these problems.
Batagoda pointed out that most of the issues related to the industry could be solved by way of coming to a collective agreement among all the stakeholders by determining the prices of egg and poultry products accordingly.
He also called on all industry stakeholders to cooperate to promote the sector as President Ranil Wickremesinghe plans to transform the poultry and egg industry into an export business.
Chairmen of the Egg Trade Association, Restaurant Owners Association, All Ceylon Egg Production Association and National Farmer Association Board also presented issues affecting the industry as well as probable solutions to them.
The willingness to reach a collective agreement for the advancement of the poultry and egg industry was a special feature of the discussion while the intervention made by the President’s Office for the security of the industry was also appreciated.
Showers or thundershowers will occur at several places in Western, Sabaragamuwa and North-western provinces and in Kandy, Nuwara-Eliya, Galle and Matara districts during the afternoon or night and fairly heavy showers above 75mm are likely at some places, the Department of Meteorology said in a statement today (24).
Showers may occur in Northern, Eastern, Uva and North-Central provinces and in Southern coastal areas during the morning.
General public is kindly requested to take adequate precautions to minimise damages caused by temporary localised strong winds and lightning during thundershowers.
Marine Weather:
Condition of Rain:
Showers or thunder showers will occur at times in the sea areas off the coast extending from Kaluthra to Pottuvil via Galle and Matara. Showers or thunder showers will occur at several places in the other sea areas around the Island.
Winds:
Winds will be north-easterly and wind speed will be (20-30) kmph. Wind speed may increase up to 40 kmph at times over the sea areas off the cost extending from Chilaw to Trincomalee via Puttalam and Kankasanthurai and from Hambantota to Galle via Matara.
State of Sea:
Sea areas off the coast extending from Chilaw to Trincomalee via Puttalam and Kankasanthurai and from Hambantota to Galle via Matara will be fairly rough at times. The other sea areas around the island will be slight. Temporarily strong gusty winds and very rough seas can be expected during thundershowers.
