Sri Lanka has sought India’s assistance in garnering international support to secure bridge financing as it enters negotiations with the International Monetary Fund (IMF) for a bailout programme to cope with the island nation’s worst economic crisis in decades, according to a statement from the Sri Lankan high commission.

On Tuesday, Sri Lanka declared it would default on its external debt pending a bailout from IMF. The move was attributed to the country’s critically low foreign exchange reserves. This was the first time Sri Lanka has announced a debt default since its independence in 1948.

In addition to reviewing bilateral economic cooperation, Moragoda and Sitharaman discussed how India can assist Sri Lanka in getting international support to secure bridge financing and the IMF economic adjustment programme itself, through both bilateral and multilateral partners, said the statement from the Sri Lankan high commission.

They also explored the possibility of enhancing and restructuring some of the assistance already provided by India in the form of credits for essential commodities and fuel, as well as balance of payment support.

Moragoda and Sitharaman observed that the assistance provided by India so far “could form part of the bridging finance required by Sri Lanka until the economic adjustment programme with the IMF would be negotiated”, the statement said.

“It was also observed that India was the first country to support Sri Lanka in this manner to secure bridging finance until that programme would be in place,” the statement added.

Sitharaman expressed her concern over the humanitarian cost of the economic crisis and said “India would stand by Sri Lanka to overcome its challenges”. Moragoda thanked her for her personal interest in supporting Sri Lanka at this difficult time.

The process of negotiating a bailout with the Washington-based IMF is expected to take at least six months, if not more. In the interim, the Sri Lankan government will have to work out a bridge financing arrangement to take care of its immediate needs.

Moragoda and Sitharaman noted that Sri Lanka’s finance minister Ali Sabry and his delegation will meet the ministerial delegation from India in Washington next week on the margins of the IMF spring meetings.

The envoy also thanked Sitharaman for the assistance that India is extending to Sri Lanka in the form of credits for essential commodities and fuel, and for balance of payment support.

India has so far provided Sri Lanka financial aid worth almost $2.5 billion, including a $500-million line of credit in February for fuel purchases and another $1-billion line of credit in March for buying food, medicines and other essential items. India has provided a currency swap of $400 million under the Saarc facility and deferred the payment of $515 million to the Asian Clearing Union.

Massive peoples protest- a reason to hope for a better future

It is important that the peoples of Sri Lanka, irrespective of their ethnicity, religion, party affiliation or country of domicile, identify with these citizens’ effort for change and render their support.

Sri Lanka is in the midst of many crises. The economic calamity developing over the last two years is now a full-blown economic and political crisis. The people have lost total confidence on the government to steer the country out of this crisis. Fear is gripping that the conditions are going to get much worse to the point of widespread hunger and malnutrition which in the past was seen only in the Tamil areas during the war. It is this desperation as well as the realisation of the incapacity, self-aggrandizement, repressive and autocratic rule of the Rajapaksa clan that is fuelling the spontaneous protests all across the country and among the Sri Lankan diaspora.

Sri Lanka has undoubtedly reached its nadir in its post-independent history and is fast becoming a failed state. Its history of living beyond means; nation-building blunders that treated one-third of its people as second class citizens; policies of marginalising the Tamil community leading to the three-decades-long war of destruction, displacement and huge defence expenditure; the inability to reap the benefits of peace post-2009 through political accommodation, demilitarisation of former conflict areas, and extensive economic support from the affluent Tamil Diaspora; and ill-considered, corruption-riddled megaprojects often with no scope of economic returns, nepotism – all of these have contributed to where the country finds itself today.

This downward trajectory accelerated drastically under Gotabaya’s presidency – arguably the least competent government in the history of Sri Lanka – as exemplified by its disastrous taxation and fertiliser policies. All warnings about the impending economic Armageddon were ignored for more than a year. These are self-evident truths for any keen observer of the country. But the government is still refusing to own up its blunders, simply blaming it all on COVID, and hoping that crisis management and crafty politics will help its survival.

The recent economic disaster has its roots firmly in the political debacles of President Gotabaya. The electorate was taken up by his Sinhala Buddhist nationalistic bravado excluding the Tamils, Muslims, Christian and other minority communities of Sri Lanka in its vision for the country and chose to ignore his atrocious human rights record. In power, President Gotabaya displayed little regard for human rights, rule of law, democratic governance and promoted further polarisation among communities (just a few examples; forced cremation policy during the pandemic, appointment of a racist monk as head of Presidential Commission for ‘One Country One Law’). The autocratic rule by the President through a small coterie of family members and handpicked serving and ex-military personnel, with a severely marginalised Parliament under the newly enacted 20th amendment to the constitution, led to a government with no checks and balances, and no competent support from capable and independent commissions and officials.
It is time the leadership listened to the people, put aside destructive personal and political agendas, and acted in partnership with all political parties to make fundamental changes to the present governance arrangements with targeted initiatives to overcome the economic crisis.

Embarking on deceptive half measures such as reallocating ministries among the same council of ministers is not a credible option.

The message from the people are clear – they had enough of the corruption and nepotism of the Rajapaksa family and calling for accountability for their past and present actions; want freedom to express their views and protest peacefully; do not want authoritarian rule under any political leadership; and want to return to their normal life with basic economic needs met.

Addressing these concerns needs an effective transitional governance arrangement that will not have Rajapaksas’ dominance but will have the credence to seek support from international governments and institutions to alleviate the immediate livelihood difficulties of the people.

In parallel, the governance structure of the country needs to be comprehensively overhauled. A consensus seems to be evolving in Sri Lanka and among the diaspora (with the possibility of many groups working together), regarding the key features of a reformed state – (a) abolishing Executive Presidency and empowering the Parliament to be the centre of power; and (b) ensuring meaningful power devolution to the regions as a means of empowering all communities. It is important that all these critical legal and constitutional reforms are carried out judiciously and concurrently.

Tamils in Sri Lanka have been struggling for their political rights over many decades. For the last twelve years, they have sought to overcome several crippling effects of the war which include returning to their land to lead a normal life without an overpowering military presence and knowing the truth about their missing relatives. Despite many commitments given locally and internationally by the Sri Lankan leaders, progress has been marginal at best, and the support from civil society from the South has been negligible. All of these leading to widespread apathy and cynicism among the Tamils regarding the present developments in the country.

Whilst we share these disappointments of the Tamil community, GTF recognises the remarkable and hopeful developments taking place in Sri Lanka and their potential to trigger meaningful and long-lasting changes in the country. It is all the more critical that this momentum should not be lost but lead to a historic transformation in the country, with no violence whatsoever from any quarters.

The government’s decision to temporarily default on sovereign debt repayments, akin to a declaration of bankruptcy, will deal another major blow to the country’s economy and credibility.  It comes at a time when mass protests are spontaneously taking place in all parts of the country on account of the economic hardships that the people are being put through.  The resignation of the cabinet nearly two weeks ago and the failure to appoint a new one is indicative of government paralysis which is injurious to the country.

The mass protests have continued non-stop, and continued even on New Year days traditionally devoted to the family and to religious observances.  They are a popular expression of the withdrawal of the people’s mandate from the government. The slogans both written and articulated in all demonstration sites in Colombo and elsewhere convey that the President and government have lost their mandate to govern and need to resign.  This sentiment has generated a mass movement coming together irrespective of their religious and ethnic backgrounds.  

The National Peace Council believes it is the responsibility of the president and parliamentarians who function under the provisions of our Constitution to find modalities to come together to pull the country out of the plight we are in. The focus of the mass protests has been the corruption and lack of accountability within the government.  We call on the government leadership in particular to heed the will of the people which is getting stronger by the day and restore their credibility and dignity.  We endorse the spirit of the demands currently being articulated.  

Accordingly, we call on the government to repeal the 20th Amendment that concentrates powers in the presidency and erodes the independence of state institutions that ensure accountability and transparency.  A downsized presidency and an interim government with a new prime minister acceptable to both the government and opposition is the most urgent necessity.  Such an interim government with new faces could also appeal to the international community for the necessary bridging finance to enable the economy to get restarted. Immediate attention should be given to supply fuel, cooking gas, electricity, medicines and essential goods to the general public.

Governing Council

The National Peace Council is an independent and non partisan organization that works towards a negotiated political solution to the ethnic conflict in Sri Lanka. It has a vision of a peaceful and prosperous Sri Lanka in which the freedom, human rights and democratic rights of all the communities are respected. The policy of the National Peace Council is determined by its Governing Council of 20 members who are drawn from diverse walks of life and belong to all the main ethnic and religious communities in the country.

Two Sri Lankan women have received international recognition at the 6th International Conference for Women Entrepreneurs held recently in New Delhi, India.

This conference was organised jointly by the Federation of Indian Women Entrepreneurs, Ministry of MSME, Government of India and the Institute of Studies in Industrial Development (ISID). They were bestowed with the ‘Priyadarshini Lifetime Achievement Award’.

They are Ms. Shirley Jayawardena, the first-ever female President of the Federation of Chambers of Commerce and Industry of Sri Lanka, who has decades of service in the Sri Lankan and South Asian chamber movements.

Sri Lanka’s PR specialist Rezani Aziz who is founding Secretary and member of SAARC Chamber Women Entrepreneur Council and country president of the global Association of Business was the other recipient

RM

The economic fallout from Russia’s invasion of Ukraine now includes a sovereign default. On April 12th Sri Lanka said that it would suspend payments on the $35bn its government owes foreign creditors. Surging food and energy prices, the result of wartime disruption to commodity markets, have dealt a heavy blow to an economy that was already mismanaged, and brought even erstwhile government supporters onto the streets in protest. Sri Lanka may not be the only country to run aground in the hazardous conditions prevailing in the global economy.

Rising inflation and higher interest rates are painful everywhere, but the stakes are particularly high in poor and middle-income countries. Food prices, which are up by nearly 20% this year, make up a greater share of consumer spending. Inflation is more likely to spiral out of control. And policymakers must also worry about capital flight and falling exchange-rates when the Federal Reserve raises interest rates—as it will over the next year.

As investors have priced in such tightening, the yields on ten-year Treasuries have risen by 1.2 percentage points in the past six months. That is roughly the same increase as during the “taper tantrum” of 2013, when emerging markets suffered capital flight because of a hawkish Fed. There is no sign of a repeat retrenchment on that scale, in part because many middle-income countries now have stronger balance-sheets, and also because many emerging-market central banks have been raising interest rates to get ahead of the inflation problem. (Brazil’s central bank has increased rates by nearly ten percentage points in little more than a year.) But investors have pulled some money out of emerging markets, and the Fed may yet have to raise rates further still.

Often higher rates in the rich world are associated with a stronger world economy, which boosts exports for emerging markets. This time, however, America is overheating, and may face a recession as it slams the monetary brakes. Europe is being squeezed by expensive energy. Though countries that pump oil or grow soyabeans will benefit from higher commodity prices, they must still fight inflation and cope with tighter financial conditions. Commodity importers like Sri Lanka face the sort of pressure that can unseat governments as well as disrupt the economy. Food and energy prices are fuelling unrest in Tunisia and Pakistan.

Several middle-income countries face idiosyncratic crises: China is locking down to battle a coronavirus outbreak, and Argentina continues to stagger under the weight of unsustainable debts. But the greatest vulnerability is found among the poorest economies, nearly 60% of which are in debt distress or at high risk of it, according to the World Bank. One worry is that almost a third of their total debt now carries a floating rate of interest, up from 15% in 2005, making them more exposed to monetary tightening.

It does not help that it is harder than ever to provide emergency support to struggling poor countries. In aggregate they owe more to China than to the “Paris Club” of rich governments who have typically co-operated to restructure debts. So far attempts to include China and other new lenders like Saudi Arabia and India in debt-restructuring efforts have flopped. The imf only lends to countries with sustainable debts, and the West does not want to see its aid being siphoned off by other creditors. Geopolitical conflict is making the poor world’s economic problems worse, and harder to resolve. 

THE ECONOMIST

Thushara Jayasinghe, Chairman of Litro Gas Lanka has resigned from his post.

It is said that he has sent a letter to the President informing him of his resignation.

He has stated in his letter that he will resign from April 14 on the basis of policy decisions regarding the gas crisis and the current situation in the country.

Litro has also suspended gas distribution for five days until the 18th and has given all employees five days off.

Due to the crisis in foreign reserves, the government has not been able to import gas properly and has not been able to resolve the issue further.