This was the first extension of an international debt instrument to Sri Lanka after the government led by President Gotabaya Rajapaksa on April 12 temporarily suspended debt servicing. The embattled government had announced an orderly default unti…
In an “unstinted and multi-faceted support” to Sri Lanka which is grappling with its worst-ever economic crisis, India has extended the duration of the USD 400 million currency swap facility which had been concluded with the island nation in January. This was the first extension of an international debt instrument to Sri Lanka after the government led by President Gotabaya Rajapaksa on April 12 temporarily suspended debt servicing.
The embattled government had announced an orderly default until the country came to an agreement with the International Monetary Fund (IMF) for a possible bailout package.
“India’s unstinted and multi-faceted support to Sri Lanka continued. As ongoing currency support, @RBI extended the duration of the US$ 400 million currency swap for @CBSL which was concluded in #January this year,” the High Commission of India said on Twitter.
However, the debt service suspension was not applicable to currency swap arrangements with other central banks.
The debt default came as the island nation was grappling with its worst-ever economic crisis compounded by forex shortages and a balance of payments crisis.
Sri Lanka had also drawn on Indian credit lines worth USD 1 billion for essential imports and separate ones for the importation of fuel.
The Reserve Bank of India (RBI) signed the currency swap agreement with the Central Bank of Sri Lanka under the SAARC Currency Swap Framework 2019-22.
Under the agreement, the Central Bank of Sri Lanka can make drawals of US Dollar, Euro or Indian Rupee in multiple tranches up to a maximum of USD 400 million or its equivalent.
Sri Lanka’s economic crisis is caused in part by a lack of foreign currency, which has meant that the country cannot afford to pay for imports of staple foods and fuel, leading to acute shortages and very high prices.
The country is witnessing large-scale protests against the government’s handling of the debt-ridden economy – the worst-ever economic crisis in the country’s history.
Protests demanding the resignation of President Rajapaksa and his Sri Lanka Podujana (Peramuna)-led government have intensified as shortages continued and prices soared.
Last week, the Sri Lankan government said it would temporarily default on USD 35.5 billion in foreign debt as the pandemic and the war in Ukraine made it impossible to make payments to overseas creditors.
Accordingly, the price of a bar of sunlight has soared up to Rs. 135, the price of a bar of baby soap to Rs. 175 and the price of a bar of Lifebuoy, Rs. 145.
Triggered by acute shortage of foreign currency, ill-timed tax cuts, losses to tourism, fall in foreign workers’ remittances, shortages of food and fuel, and high foreign debt, Sri Lanka is currently battling the worst economic crisis since its independence.
The current economic crisis situation has negatively impacted the employment of about 1.2 million of those who are working in the construction industry and if this situation prevails, the entire industry faces the threat of collapse, industry sources said.
Considering this current turmoil, GlobalData, a leading data and analytics company, forecasts Sri Lankan construction industry to contract by 4.6% in real terms in 2022 against the previous projection of 9.2% growth.
The outbreak of the COVID-19 pandemic exacerbated weakness in the tourism sector of Sri Lanka that had already been battered by the ‘Easter Sunday bombings’ in April 2019.
The weakness in the sector – which is the third-largest source of foreign exchange – is expected to continue over the coming months, due to the ongoing Russia-Ukraine crisis, given that Russia is one of the largest tourism markets for Sri Lanka.
Pooja Dayanand, Analyst at GlobalData, comments: “The depleting foreign currency reserves, mounting debt, and the continuing weakness in Sri Lanka’s tourism sector are expected to limit the public spending on infrastructural projects this year.
Besides the economic catastrophe, the country is also witnessing a troubled political environment. This is expected to further weigh on investor confidence, thereby further affecting the Sri Lankan construction industry’s output this year.”
The Sri Lankan construction industry, which is one of the biggest GDP contributors and employment generators in the country, is also facing significant headwinds due to the shortage of cement.
The severe foreign exchange crisis has prompted the government to impose strict import control measures. This has led to the shortage of raw materials required to produce raw materials domestically.
Dayanand concludes: “The Sri Lankan government’s decision to default on all its outstanding foreign debt could prevent a further deterioration of the country’s financial position.
Although it had sought debt relief from India and China, both countries offered more credit lines to buy commodities. However, the government’s plan to seek financial assistance from the IMF and the World Bank, could provide economic aid to bounce back.
Around 75% of construction work in the country has come to a standstill owing to the increase in the cost of building materials together with the spike in fuel prices, says the National Construction Association of Sri Lanka.
Its Vice President, M.D. Paul stated that the price of a cube of sand has increased by over Rs. 8,000, to almost Rs.22,000, after the fuel price hikes.
However, since the fuel price hikes also increases all transport costs, a cube of sand now costs Rs.30,000, he added. .
Moreover, metals, ABC and all other building material costs have increased by 60 to 70%, the National Construction Association mentioned
The Colombo Magistrate’s Court yesterday rejected a request by the Police to issue an enjoining order against the march to be held by the Inter-University Students Federation (IUSF) today (24).
The Police had said that the march will block Galle Face Roundabout, NSA Roundabout, Galle Road, Janadhipathi Mawatha, Ceramic Junction, York Road, GOH Junction, Bank Road, Lotus Mawatha, and will cause severe public distress as well as damage to public property. The police had submitted a report to the court requesting that an enjoining order be issued against 16 students, including the leaders of the student union.
Refusing to issue such an order, the Additional Magistrate had stated that the police have the power to execute in the event of an illegal act under the Police Ordinance.
However, sources said that as of this morning, the police had set up heavy roadblocks in the area and blocked the roads.
Beleaguered Prime Minister Mahinda Rajapaksa who has been pushed to the wall by suffering Sri Lankans says that the Chinese Premier has given a firm assurance for the stability of the island nation.
The Sri Lankan Prime Minister has made this revelation at a time where hundreds of thousands of university students led by Inter University Students Federation are planning to covered into Gota go Gama protesters village in Colombo Galle Face green today Sunday 24.
Ina last ditch attempt to save his disgraceful government led by President Gotabaya Rajapksa which is responsible for the killing of a protestor who participated at a Rambukkakna protest against fuel price hike, 74 year old Mr Rajapaksa noted that Chinese Premier Li Keqiang in telephone conversation with him has given this pledge.
He added that China will continue to provide every assistance for Sri Lanka‘s socio economic development stability, Prime Minister’s office announced.
China has given this assurance at time where Sri Lanka’s closest India has already stepped into assist Sri Lanka even by going out of the way, at the IMF spring meetings to persuade the donor agency to help the crisis country.
According to Prime Minister’s office, Chinese Premier has pledged to provide assistance to solve financial problems faced by the country with the aim of improving living standard of the suffering people of Sri Lanka.
He also told the Sri Lanka premier that he has clear understanding of the difficulties and challenges faced by Sri Lanka.
Several economic analysts noted that the Chinese Premier should also understand the reasons behind present problems were the short sighted ad hoc policies and wide spread corruption of the present regime led by President Gotabaya Rajapaksa who has already accepted some of his misdeeds .
China has already assured Sri Lanka that it will provide US$ 2.5 billion loan facility to overcome the present man-made economic crisis.
The China International Development Cooperation Agency (CIDCA) has pledged an urgent emergency humanitarian aid of RMB 200 million to Sri Lanka, including 5000 tonnes of rice (with the previously announced 2000 tonnes), pharmaceuticals, production materials and other essentials.
Furthermore, the Yunnan Province has announced a donation of RMB 1.5 million worth of food packages to Sri Lanka.
The Presidential Media Unit says that in addition to the 27 state ministers appointed last week, two other former state ministers will continue to hold those portfolios.
Accordingly, Lohan Ratwatte – State Minister of Gem and Jewelery Industries Piyal Nishantha de Silva – State Minister of Women and Child Development, Pre-School and Primary Education, School Infrastructure and Education Services
Weerasumana Weerasinghe, who represents the group that left the government and became independent, says that if the cabinet, including Prime Minister Mahinda Rajapaksa, does not resign, they will have to be removed by a no-confidence motion, which will take into action from next week.
“We continue to say that this cabinet, led by the Prime Minister, should step down and appoint an all-party cabinet. It has not happened yet. Even groups in the SLPP are making this request. But it has not been listened to. Meanwhile, the Samagi Jana Balawegaya is preparing for a no-confidence motion. We discussed the matter with them, but the no-confidence motion was not presented to us in writing. We have to be flexible to find a solution to this crisis at this moment if the Prime Minister and the Cabinet do not intervene to step back and take this decision. We will have to support the no-confidence motion filed by the Samagi Jana Balawegaya or we present another no-confidence motion to remove the Prime Minister and the Cabinet and form a new government. The decision taken at this moment is to prepare for the formation of that all-party government. IMF talks will end by April 24. Accordingly, after the 24th it will not be possible for us to allow this government to exist. Therefore, we hope to enter the next political action constitutionally within the next week. ”
Weerasumana Weerasinghe, a Member of Parliament representing the Independent Group of Parliamentarians, stated this while expressing his views to the media yesterday (23).
The Planters’ Association of Ceylon (PA), is demanding authorities take immediate action to prioritise Sri Lanka’s plantation industry which contributes over $ 1.5 billion to Sri Lanka’s export revenue.
“The Government’s failure to allocate fuel quotas to the Regional Plantation Companies (RPCs), together with continuous power disruptions and uninformed policymaking, is bringing Sri Lanka’s commercial plantations to a standstill.
Due to the lack of fuel, all leaf and latex transport operations have been severely impacted and there is insufficient fuel to operate standby generators,” the PA said.
Commenting on the dire situation, PA media spokesperson Dr. Roshan Rajadurai cautioned that the Government’s continuing failure to give any priority whatsoever to the needs of RPCs and the broader industry, together with a series of catastrophic policy blunders had resulted in severe disruptions to production and transport and rapid escalation of production cost of tea by around 30% from the beginning of 2022.
“RPCs will no longer be able to continue operations as usual if real and meaningful solutions are not provided immediately,” emphasised Dr. Rajadurai.
“Despite our critical contribution to the industry and the Sri Lankan economy, the authorities have failed to understand our value. Instead they have continuously discriminated the RPCs even in the past, as compared with other export industry stakeholders and the rest of the plantation sector.”
“Our sector was severely disrupted even before the current domestic economic crisis by uninformed policy making decisions, including the completely irrational ban on import of essential agriculture inputs. The issues we are seeing now across the economy are directly connected to this unplanned, unscientific, and short-sighted approach to policy,” Rajadurai added.
“While at long last, the Government has publicly accepted the failure of this policy, the once vocal proponents of such unsound claims are nowhere to be seen although the industry continues to pay the price, despite our repeated warnings and admonitions about the ill effects of such policy.”
While the Government retracted its decision to ban imports of agricultural inputs such as fertiliser, recommended weedicides, fungicides and pesticides, these have not been available since April 2021. The bureaucratic processes required for the bans to be lifted takes a long time, and have obstructed imports, creating severe shortages.
Compounding these challenges, the depreciation of the rupee and the global increase in commodity prices have resulted in the price of these essential inputs skyrocketing. For instance, the price of fertiliser used for tea has increased 25-fold from before the ban; from approximately Rs. 30,000 per metric tonne (MT) of urea to Rs. 750,000 per MT and prices are still increasing.
As a result, the cost of production of 1 kg of tea has now risen to nearly Rs. 800. However, at the Colombo Tea Auction, the Net Sale Average (NSA) of high-grown tea was only around Rs. 717, up to end-March.
In addition, the unavailability of inputs will reduce yields and quality in the long run. Despite better weather compared to last year, the industry has seen a decline in tea and rubber crops this year, compared with the corresponding period of last year, as the lack of agricultural inputs such as fertiliser, weedicides and fungicides begin to take effect.
With tea and rubber being perennial/long-term crops, such adverse effects on yield could be felt throughout the productive life of the plant. Rubber cultivations too have been impacted by fast-spreading diseases such as pesta. In the absence of necessary inputs to arrest their spread the disease has already resulted in a 30-40% crop loss.
Tea estates operate throughout the 24 hours of the day and require uninterrupted electricity to do so. If, for instance, the withering operation is disrupted/interrupted for a few hours, bacterial contamination takes place, drastically reducing the quality of the tea produced.
The first Blue Planet Fund (BPF) – Ocean Country Partnership Programme (OCPP) Biodiversity Stakeholder Session was held on 14 March, at the Ministry of Environment introducing the Defra led BPF visit to Sri Lanka while the second meeting of the BPF – OCPP took place on the same day with the Fisheries and Seafood Sector related agencies. The £500 million Blue Planet Fund, financed by the UK Official Development Assistance (ODA) budget, supports developing countries to protect the marine environment and reduce poverty and was developed by the UK government to protect the ocean from plastic pollution, warming sea temperatures and overfishing. This includes UK’s call to protect at least 30% of the global ocean by 2030 and UK’s existing commitments to stopping plastic pollution entering the ocean through the joint UK and Vanuatu-led Commonwealth Clean Ocean Alliance.
One of the Fund’s programmes is the newly designed bilateral technical assistance programme which is based on scoping and needs assessments, ocean partnerships and emergency marine pollution responses. The OCPP aims to deliver marine science technical assistance and the three core themes of marine pollution, biodiversity loss and supporting sustainable seafood and supports countries in strengthening marine science expertise, developing science-based policy and management tools, and educating coastal communities. The OCPP has the ultimate aim of delivering tangible and positive impacts on the livelihoods of coastal communities that depend on healthy marine ecosystems. The OCPPs current partners are Belize, Bangladesh, India, Maldives and the Pacific.
In this regard, the close and active collaboration between the Ministry of Foreign Affairs and the British High Commission in Colombo on several other climate and environment related initiatives resulted in Sri Lanka receiving support under the BPF-OCPP. As part of the OCPP collaboration with Sri Lanka, a delegation comprising of officials from the UK government’s Department for Environment, Food and Rural Affairs (Defra), Centre for Environment, Fisheries and Aquaculture Science (Cefas), Joint Nation Conservation Committee (JNC) and Marine Management Organization (MMO) visited Sri Lanka from 14 – 18 March 2022 and held several meetings, field visits and discussions with local stakeholders. This visit was preceded by a technical visit of Cefas from 28th February to 11th March 2022.
During the first session, the Deputy High Commissioner for the British High Commission in Sri Lanka, Lisa Whanstall thanked those present for their collaboration and stated that she looks forward to future partnerships. She further commended the Government of Sri Lanka for the wide-ranging cooperation and commitments at UNFCCC COP-26. She stated that “…Moving forward the UK is eager to continue supporting Sri Lanka to achieve these targets and to build on our exiting platform of environmental engagements.”The UK government hadspent close to £1million under the Commonwealth Litter Programme (CLiP) to provide assistance in combating marine pollution in 2021.Assistance via CLiP provided laboratory facilities to analyze micro plastics to MEPA, NARA, ITI and the CEA, development of educational packs for primary and secondary schools and developing media packs for mainstream and social media all in local languages, research collaboration, assessment of ghost fishing gear and accumulated waste in ports, providing garbage trapping nets for rivers, etc. The UK delegation expressed their willingness to continue supporting Sri Lanka to help drive transformative action and shift the relationship between people, science and the planet.
The Secretary to the Ministry of Environment, Dr. Anil Jasinghe in his presentation on the OCPP grant and the priorities in the marine biodiversity and marine protected area domain, highlighted key management issues such as the absence of a wholistic plan for marine spatial planning, identification and designation for EEZ; absence of a clear pathway for 30×30 and commitments related to marine sector in National Biodiversity Strategic Action Plan (NBSAP)/draft National Environment Action Plan (NEAP); offshore spatial planning still very rudimentary; multi use- Multi-stakeholder nature within existing MPAs and the absence of SEA for the use of coastal resources. He further explained that based on the National Environment Policy, the National Environment Action Plan (NEAP) has been developed recently and Conservation and Sustainable Use of Coastal and Marine Resources is one of the main thematic areas identified under the NEAP.
He further stated that among economic activities, tourism and fisheries are the most dependent on the natural resources of the coast and that according to the statistics, coastal and marine fisheries, tourism, industry, maritime transport (ports and shipping), are some of the major economic activities associated with the coastal and marine resources and environment that generate 10 percent of Sri Lanka’s foreign exchange earnings and account for 6.7% of employment.
The second meeting focused on ‘Why sustainable seafood is important’ and how developing nations, such as Sri Lanka are particularly dependent on the ocean while the ocean is facing serious and increasing threats from over-exploitation, pollution, biodiversity loss and climate change.
The Blue Planet fund will aim to provide support that would ensure seafood in Sri Lanka is produced and distributed in ways which support healthy ecosystems, does not over-exploit marine stocks, provides sustainable inclusive and equitable livelihoods and enhance resilience to climate and socioeconomic shocks. The OCPP Programmes will also incorporate cross-cutting themes such as gender and vulnerable groups, climate change, economic shocks, etc.
Deputy British High Commissioner Whanstall stated that the UK is focused on environmental and wildlife conservation as well and that collaborative work is of paramount importance. The Deputy High Commissioner further emphasized that the Glasgow Climate Pact commitments are significant and need to be initiated.
State Minister for Ornamental Fish, Freshwater Fish and Shrimp Farming, Fisheries Harbour Development, Multi-Day Fishing and Fish Exports Kanchana Wijesekara thanked the UK government, the Blue Planet Fund and the UK-High Commission for their offer to collaborate. The State Minister stated that over 80% of Sri Lanka’s fish stocks have depleted with a significant effect on tourism. He emphasized on post-harvest losses(40%);insufficient availability of technical advice, need for a stronger legal framework and monitoring/management of marine resources are the main areas of concern. The State Minister further requested for assistance to develop aquaculture and sustainable fishing and added that the State Ministry will give its fullest support to the relevant agencies for the collaboration under BPF – OCPP.
During the Wrap Up session organized with the participation of all relevant stakeholders, the UK team offered to continue building on existing marine pollution, marine biodiversity and sustainable seafood related activities focusing on Outreach and Education, Science, and Governance and Policy under each theme. Other key highlights on potential areas for collaboration included assistance for Marine Spatial Planning, assessing marine natural capital, support for effective management of Marine Protected Areas in line with 30 x 30 initiative that Sri Lanka is already a part of, support for enhancing capabilities of Sri Lanka for maritime disaster preparedness, support to strengthen sustainable seafood production and trade and support to reduce IUU fishing in national waters.
