The World Bank has approved the immediate release of US $ 10 million for the purchase of essential drugs for Sri Lanka.
That was after a discussion with Finance Minister Mohamed Ali Sabri yesterday (11).
Interest rates on Treasury bills rise to record levels
The yields of the Treasury bill auction yesterday jumped across the board to their highest levels in many years, in line with Friday’s 700-basis point rate hike by the Central Bank, under its new Governor Dr. Nandalal Weerasinghe.The unprecedented monetary tightening sent jolts across the bill yields, as they rose between 559 basis points and 767 basis points, recording the highest single-day surge ever in Sri Lanka’s financial market history.
The three-month bill yield jumped 559 basis points to 19.79 percent, while the six-month bill yields surged 731 basis points to 22.73 percent.
The benchmark one-year bill yields registered the highest-ever jump, rising 767 basis points to settle at 23.36 percent.
The bill yields were the earliest to reflect Friday’s shock move by the Central Bank, which delivered the highest ever increase in key policy rates since the 300-basis point hike in 2001.
Soon after raising the interest rates, Dr. Weerasinghe said he wants to see the response of the rate hike when the markets reopen on Monday.
How the stock market would absorb the rate hike effect could not be seen on Monday, as the market was closed on April 11 and 12, after the government declared special public holidays prior to the Sinhala and Tamil New Year holiday that falls on the 13th and 14th.
The rationale for the aggressive hike in key rates, according to the Monetary Board, is to rein in the inflation, which is galloping at more than 14-year highs and the Central Bank’s inflation forecasts showed inflation peaking at 28 percent in three months.
At the auction held yesterday, the Central Bank offered Rs.87.5 billion in bills across the three tenures but accepted Rs.81.9 billion, as the Public Debt Department as usual accepted little amounts from six-month and one-year bills, although there was some improvement in bids received and amounts accepted than previous weeks.
According to dealers, there is further scope for the bill yields to rise and they do not rule out the one-year bill yields above 30 percent in the next couple of weeks.
If that happens, banks can raise deposits and put them in Treasury bills and do nothing else and still make a nice risk-free profit in the next couple of years.
Every second you protest in the road, we are losing dollars – PM
Prime Minister Mahinda Rajapaksa says that every second that people protest in the streets, the country loses the opportunity to receive dollars.
He said this while making a special statement to the public last night (11).
The full statement is below.
Humanitarian service launches to aid over 100,000 affected families
In a mission to provide emergency relief to the worst impacted families and communities in the country due to the ongoing economic crisis, Dialog Axiata PLC, MAS Holdings, Hemas Holdings PLC, Sarvodaya Shramadana Movement, and PwC Sri Lanka joined forces to launch the ‘Manudam Mehewara’ relief initiative.
Driven by its shared values and vision of providing immediate assistance to marginalised and vulnerable communities, the ‘Manudam Mehewara’ corporate coalition joined hands with like-minded partners including Sarvodaya, which will identify and provide emergency relief to more than 100,000 adversely affected families, especially communities in deep poverty.
PwC partnered with the initiative pro bono to monitor financial governance and reporting as per compliance requirements of the corporate partners. Furthermore, ITN, Siyatha, Swarnawahini, TV Derana, and Vasantham joined the effort as media partners.
Manudam Mehewara will commence operations on 10 April, where urgently required, essential dry rations packs will be distributed to families in need across all 25 districts.
Commenting, Dialog Axiata Group Chief Executive Supun Weerasinghe said: “We are grateful to MAS, Hemas, our project execution partner, Sarvodaya, and accountability partner PwC for joining us in this endeavour to provide emergency relief to more than 100,000 families in need across the country.
“As the trusted digital companion of over 17 million Sri Lankans, we recognised the immediate need to step forward to help relieve the impact on our adversely affected communities.
MAS Holdings Group CEO Suren Fernando said: “MAS is an organisation that is known for its social conscience, and at times like this we are privileged to be able to act upon one of MAS’ core values, giving back to the community and the country we call home.
“Having worked with Sarvodaya many times before, we are convinced that if anyone has the bandwidth and capability to significantly make a difference to these vulnerable communities, it is them. Sarvodaya is the ideal implementation partner, with its philosophy and its island-wide network of resources.
“I do sincerely hope that other corporates in Sri Lanka are inspired to join us, recognise the need to act now, and come together through this program or find ways that are within their means to support the people of this nation during their time of desperate need. This is our nation, our people, and our collective responsibility.”
Hemas Holdings Group CEO Kasturi Chellaraja Wilson said: “As a Sri Lankan corporate it is our responsibility to ensure that we address the immediate needs of our people across the country.
Our purpose, making healthful living happen, focuses on eliminating inequality and this partnership aligns with our ongoing efforts. In the upcoming months, we will continue to work with partners and carry out interventions that will relieve the burden of our communities and our employees.”
Expressing his thoughts on this initiative, Sarvodaya Shramadana Movement President Dr. Vinya Ariyaratne said: “We are pleased to join hands with such high-calibre companies like Dialog, MAS, and Hemas to launch this humanitarian initiative to provide emergency relief to the families most adversely affected by the current economic crisis.
The Manudam Mehewara programme will be conducted for 60 to 90 days until a sustainable benefit transfer system is established in the country through an effective economic recovery plan.
Sri Lanka begins preliminary talks with IMF on a funding facility
Sri Lanka and the International Monetary Fund held preliminary talks via zoom today Monday 11 on a funding program as a prelude to upcoming technical level negotiations relating to fund facility during Spring Meetings commencing on April 18 in Washington.
Central Bank Governor Dr. Nandalal Weerasinghe and Treasury Secretray Mahinda Siriwardena participated in the soom meeting that lasted around 40 minutes today with Anne-Marie Gulde -Wolf, Deputy Director, Asia and Pacific Department at International Monetary Fund
Sri Lnka team comprising the Finance Minister the Central Bank Governor and the Treasury will leave the country for Washington next week for IMF’s Spring Meetings on April 18 to start technical level negotiations for program support and debt restructuring.
e Central Bank and the Finance Ministry have already called for Requests for Proposals from prospective legal and financial advisers to select suitable experts for the debt restructuring process.
They will have to provide financial and legal advisory and technical assistance during negotiations with the IMF and other creditors for debt restructuring.
The Central Bank expects to pursue both debt restructuring and programme support from the IMF together as the clock is fast ticking ahead of the next large sovereign debt repayment of a billion dollars in July this year.
The ability of the country to settle the bond and other foreign debt obligations would solely depend on the level of success the authorities achieve during these talks with the IMF and other creditors.
Upon coming into a preliminary understanding about programme support during technical evaluation with the IMF, Sri Lanka will issue what is called a ‘Letter of Intent’ to the IMF stipulating the macroeconomic adjustments the domestic authorities are willing to undertake in order to put the economy back into working condition.
Dr. Weerasinghe responding to a question as to the size of programme support expected from the IMF said that they might seek full access to funds under Sri Lanka’s quota under an Extended Fund Facility (EFF).
FF is a long-term engagement with the IMF running into three years with structural adjustments into the member economy.
Under the current quota, Sri Lanka may be able to seek up to US$ 3.0 billion from the IMF, but the funds will not come at once as they are released in several tranches looking at the progress the recipient country makes with the agreed structural reforms to the economy.
Sri Lanka rupee goes up up and away due to ill timed floating
Sri Lanka rupee traded around Rs.369.55 on Monday 11 while it stood at Rs. 326 to the US dollar during the day on Friday (08), dealers said.
At the monetary policy review meeting later on Friday 11, the Central Bank tightened the policy by increasing the rates by 700 basis points.
The Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 700 basis points to 13.50 per cent and 14.50 per cent.
New Central Bank Governor Dr. Nandalal Weerasinghe on Friday faulted the way the exchange rate was managed by his predecessor saying the fixed rate was too long whilst on the other hand free float was not credible in terms of timing and sequencing.
He said that the rupee was artificially protected for too long with a fixed maximum rate thereby incentivising the black market.
He implied that if a fixed rate was to be maintained it should have been gradually adjusted upwards in tandem with the market conditions.
“The root cause of the Balance of Payment crisis should have been properly addressed,” the new CBSL Chief opined, adding that the failure made the sudden free float less credible in the eyes of the market.
It was pointed out that free float could have been better sequenced and timed and implemented after further tightening of the monetary policy thereby curbing demand as well as imports, a more prudent fiscal policy, and upward adjustment of prices of fuel and other utilities and starting talks with the International Monetary Fund (IMF).
In fact, the excessive depreciation of the exchange rate amidst the lacklustre performance in foreign exchange inflows, according to the Monetary Board statement on Friday warranted certain policy actions.
The result was the announcement of the highest ever increase of policy rate by 7% on Friday in a show of the tightest monetary policy stance in the history of CBSL to ensure greater macro-economic stability.
The Monetary Board said the move will help raise the cost of funds, thereby containing the expansion of money and credit; inducing the return of excessive currency in circulation to the banking system; eliminating interest rate anomalies; easing the pressure on the exchange rate and containing the build-up of demand pressures in the economy.
Dr. Weerasinghe also noted that the apparent “state of denial” by the previous Governor did not help improve the macroeconomic situation. Neither did the issuance of multiple gazettes to deal with the issue of foreign currency and reserves.
New CB Chief attacks exchange rate policy urging the public patience
The newly appointed Central Bank Governor Nandalal Weerasinghe issued a strong new policy directive, saying the Central Bank (CB) would curb excessive money printing, reduce rampant inflation, reduce commercial borrowings and keep the runaway US dollar in check.
He faulted the way the exchange rate was managed by his predecessor saying the fixed rate was too long whilst on the other hand free float was not credible in terms of timing and sequencing.
He said that the rupee was artificially protected for too long with a fixed maximum rate thereby incentivising the black market.
On Wednesday, hours before the new Governor assumed duties, Rs. 119.08 billion of new money was printed while the total money stock printed since January 1, 2021 amounted to a whopping Rs. 1.77 trillion, official sources said. Food inflation has surged to 30 percent last month, according to official statistics.
At a media briefing late on Friday after a meeting of the Monetary Board, Governor Weerasinghe said the CB increased policy lending rates by 7 percent on Friday, the highest interest rate hike in recent times.
Economists said the move would increase deposits of banks, reduce borrowings, curb inflation (due to less spending by the people) and in turn curb consumption demand, while less demand on imports would mean less pressure on the rupee vis-à-vis the dollar.
The Governor said he had a close relationship with new Treasury Secretary Mahinda Siriwardena. Officials said that previously, former Governor Prof. W.D. Lakshman had been subjected to heavy influence by then President’s Secretary Dr. P.B. Jayasundera and the Government.
At a meeting in July 2020, President Gotabaya Rajapaksa criticised Prof. Lakshman for not resorting to more money printing. Ironically, Dr. Weerasinghe, who was then the Senior Deputy Governor, was also present at the meeting. Thus, it remains to be seen how he would maintain the independence of the institution, officials said.
Dr. Weerasinghe also said he had the support of both the Government and the opposition. At the media briefing, he said Sri Lanka’s economy was now heading in a critical direction like a vehicle moving on a slope without brakes and it should be halted taking necessary action for some time without allowing it to crash.
An urgent policy document devised jointly by the CB and the Finance Ministry will be submitted to the Cabinet of Ministers, suggesting immediate measures that should be taken to tackle the present economic downturn.
The proposed policy package will include immediate measures to increase revenue with tax revisions, export promotion, curtailing expenditure by pruning additional expenses of ministries and state institutions and halting the heavy spending for infrastructure projects such as road development.
Dr. Weerasinghe expressed the belief that the current critical situation could be turned around with necessary monetary and fiscal policy initiatives working in close collaboration with the Finance Ministry. Excess money printing to keep the rates lower through the CB has resulted in skyrocketing of inflation in the past and it has to be addressed introducing necessary policy measures.
The rupee float has seen it depreciate by around 60 percent, he said, adding that the flexible exchange policy would continue and he believed it would stabilise with fluctuations in the market after some time.
For some time, the people would have to bear the economic hardships triggered due to not taking right decisions at the right time in fiscal and monetary management, he added.
“First of all, the Monetary Board, along with myself, is of the view that we have to be very proactive with our monetary policy decision making,” Dr. Weerasinghe said. “We have not been so proactive in the past. That is why we have come to this kind of very difficult situation.”
He disclosed that the CB would appoint legal and financial advisors for debt restructuring within two weeks while expediting talks with the International Monetary Fund (IMF).
He disclosed the technical negotiations with the IMF had already started with the Treasury Secretary heading the technical discussion. He noted that Finance Minister Ali Sabry would lead the Sri Lanka team at the IMF talks on April 18.
ICIJ reveals more than 800 Russians behind secret companies in landmark expansion of public offshore database
The Offshore Leaks Database spotlights vital new information on the covert financial activities of oligarchs, bankers and politicians as waves of Western sanctions target Putin loyalists.
The International Consortium of Investigative Journalists is making public a trove of new information about shell companies linked to Russians as part of a broader effort to spotlight the offshore world and the hidden wealth of Kremlin-linked figures in the wake of Russia’s invasion of Ukraine.
The company names and other data on more than 800 Russian nationals come from Seychelles-based Alpha Consulting Ltd., an offshore services provider that serves mostly Russian clients. The data includes newly discovered details about companies tied to Russian President Vladimir Putin’s allies and other Russian political figures who shelter assets behind opaque businesses that can be used to escape global sanctions.
Putin’s former communications minister, a high-ranking regional political leader, an imprisoned cryptocurrency specialist and an oligarch are among the Russians whose names appear in the data, which can be accessed through ICIJ’s public Offshore Leaks Database.
The database now contains information on more than 800,000 offshore companies, foundations and trusts, and links to people and companies in more than 200 countries and territories, which can be publicly searched and downloaded.
In addition to the data release, ICIJ and its partners are publishing new reporting that shows how Russian bankers, oligarchs and others in Putin’s orbit have obscured vast wealth in tax havens with the help of Western enablers. The data release, and the stories, draw primarily from the Pandora Papers, millions of offshore financial records that fueled a 2021 global investigation.
This new publication, dubbed Pandora Papers Russia, marks the latest effort by ICIJ to shine light into one of the world’s most secretive industries — and follows a decade of reporting on Russian offshore maneuvering in particular. For ease of access, ICIJ has compiled much of that prior reporting in a dedicated page called the Russia Archive.
The reporting and the data release come as U.S., British, European and other authorities scramble to hunt down money and assets of oligarchs and others with Kremlin ties, a task that offshore secrecy brokers, like Alpha Consulting, have made far more difficult.
Forty percent of more than 2,000 offshore corporations, foundations and trusts found among the leaked Alpha Consulting data and published today have one or more Russian beneficial owners. Another 23% have one or more Ukrainian beneficial owners.
The new data also links offshore companies to other firms and individuals from more than 100 countries and territories. Among Alpha Consulting’s high-profile clientele are Isabel dos Santos, Africa’s richest woman and the focus of ICIJ’s Luanda Leaks investigation; Martin Rushwaya, a Zimbabwean general and presidential adviser; and Davit Galstyan, the owner of an Armenian arms company that a United Nations panel in 2013 said was involved in supplying the United Arab Emirates with ammunition that was later transferred to Libya, which was under an arms embargo.
Dos Santos and Rushwaya did not respond to questions from ICIJ. Galstyan’s attorney, Armen Andrikyan, stated that one of Galstyan’s offshore companies was closed “years ago,” but he has two active offshore companies engaged in international trade. He denied that Galstyan’s arms company supplied ammunition to Libya, stating that Galstyan “has never supplied weapons to armed groups” and the deliveries to the United Arab Emirates “were made under NATO supervision.” He added that Galstyan possesses documents that disprove the panel’s allegations.
Alpha Consulting is one of 14 offshore services providers whose documents were leaked to ICIJ, setting in motion the Pandora Papers investigation, which reviewed more than 11.9 million records, containing 2.94 terabytes of confidential information. Offshore service providers specialize in the incorporation and operation of companies, trusts and foundations typically used to shelter assets in secrecy jurisdictions away from the view of tax and law enforcement authorities, the courts and the general public. The release of Alpha Consulting data is part of ICIJ’s ongoing effort to publish information from the Pandora Papers project. More data tied to the other providers will be published in the coming weeks.
Offshore Leaks Database shines light on offshore economy
Created by ICIJ in 2013 and maintained by ICIJ’s data and tech teams, the Offshore Leaks Database strips away the secrecy that cloaks companies and trusts incorporated in tax havens and exposes the people behind them. The database contains information from leaks that served as the basis for five ICIJ projects: Offshore Leaks in 2013, the blockbuster Panama Papers and Bahamas Leaks in 2016, the Paradise Papers in 2017, and last year’s Pandora Papers, the data of which is being added in installments.
The interactive database application reveals more than 740,000 names of people and companies creating and operating secret offshore structures. The data includes, when available, the names of the real owners. Because the records are leaked, not from a standardized corporate registry, there may be duplicates. In some cases, companies are listed as shareholders for other companies or for trusts, an arrangement that often helps obscure the real people behind offshore entities.
ICIJ doesn’t publish raw documents, corporate or personal, en masse. While the database contains a great deal of verified, organized and searchable information about company owners, proxies and intermediaries in secrecy jurisdictions, it doesn’t disclose private communications, bank account information or private personal documents.
ICIJ is publishing this information in the public interest. While the presence of a person’s or a company’s name is not intended to suggest or imply that they have engaged in illegal or improper conduct, ICIJ believes that providing this data to all for free helps shine a light on the scope of the offshore economy and the damage it perpetuates.
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Alpha Consulting data reveals high-profile Russians
Alpha Consulting was founded in 2008 by Victoria Valkovskaya, a Russian translator from Moscow who moved to the Seychelles, an Indian Ocean island nation, and opened the firm with her then-husband, Roy Delcy, a Seychelles native. As is typical in the offshore business, the firm provides so-called nominee directors, or stand-ins, for official corporate paperwork to help shroud shell companies’ actual owners. The company reported in 2019 that its client base was 75% Russian.
Roman Avdeev, a prominent Russian businessman and Alpha Consulting client, began selling radio components and decoders for TV sets in the late 1980s. After the fall of the Soviet Union in late 1991, Avdeev bought Credit Bank of Moscow, a major Russian financial institution. He owns a pharmacy chain and has interests in the construction, timber and oil industries. He also bought the Torpedo Moscow football club in 2017. Forbes lists his wealth at about $1.3 billion as of early April 2022. Credit Bank of Moscow has been under U.S. sanctions since February.
Alpha Consulting records show Avdeev-linked offshore companies to be registered in the Seychelles, British Virgin Islands and Belize. One of those entities, Hi Capital Corp., is listed in records as a personal savings company.
Leonid Reiman, a graduate of what is now the St. Petersburg State University of Telecommunications, worked as an engineer and later held senior positions in what is now the St. Petersburg city telephone network. He was appointed the Russian Federation’s minister of information and communications in 1999 before serving as adviser to the president.
In 2006, a Swiss arbitration panel found that Reiman had used an offshore mutual fund as a front to control large interests in Russia’s telecom industry while he was communications minister. Reiman has consistently denied owning state telecom assets.
Alpha Consulting records show that offshore firms connected to Reiman list their purpose as the trading of securities. Through a representative, Reiman declined to answer questions from ICIJ.
The records also link offshore firms to Alexander Vinnik, a Russian computer specialist. He allegedly operated a cryptocurrency exchange known as BTC-e until U.S. authorities seized it when he was arrested in Greece on a U.S. warrant in 2017. He was later extradited to France, where he was convicted of money laundering, and he is serving a five-year prison sentence. His lawyer has said he fears Vinnik could be extradited to the U.S. after he completes his term. Alpha submitted a report to Seychelles financial authorities in 2018, saying it had learned of Vinnik’s criminal record during due diligence checks, documents show. A lawyer for Vinnik didn’t respond to a request for comment from ICIJ.
The publication of Alpha Consulting data adds to what already was a huge trove of information on Russian elites in the Offshore Leaks Database. The database contains records from two financial service providers in the Pandora Papers that, together with Alpha Consulting, have the highest percentages of Russians as beneficial owners: Alemán, Cordero, Galindo & Lee (Alcogal) of Panama and Fidelity Corporate Services, founded in the British Virgin Islands. The records of all three firms are now available in the Offshore Leaks Database.
The database now includes information extracted from five leaks, on more than 11,000 entities with links to Russia. The Pandora Papers probe links nearly 3,700 companies to more than 4,400 Russian nationals — by far the most among all nationalities found in the Pandora Papers data. Russians control about 14% of all the companies and other legal entities revealed in the leak.
New Report Out on How Sri Lanka’s Garment Industry Created a COVID Crisis, and then Denied it
Colombo, Sri Lanka (April 11, 2022) – A new report released today by the Asia Floor Wage Alliance (AFWA) and Global Labor Justice-International Labor Rights Forum (GLJ-ILRF) details how Sri Lanka’s largest garment manufacturer Brandix Lanka and the government cracked down on unions after they spoke out about a COVID-19 superspreader event in a free trade zone outside of Colombo.
The outbreak in October 2020, in which thousands of garment workers and people in the surrounding communities were infected, followed a concert that Brandix management hosted in clear violation of COVID-19 protocols.
Based on interviews with unions, workers’ rights organizations and garment workers, the report, ‘Voices from the Field: Reprisals and Repression of Garment Worker Unions and Workers’ Organizations during COVID-19 in Sri Lanka’ shows that Brandix violated government COVID-19 guidelines in the days before the superspreader outbreak that infected 1,000 of the 1,400 workers at the factory. The outbreak – one of the country’s largest — would sicken thousands more in the region, especially garment workers, who themselves were blamed for the outbreak.
When the garment workers – who are largely women – and the women-led unions and workers’ rights organizations that support them spoke out publicly about Brandix’s responsibility for the outbreak, Brandix and the Sri Lankan government, police and military escalated a campaign of reprisals and repression against them.
“This report is a striking example of how unions in Sri Lanka are being policed — kept out of the free trade zones by the government and threatened with arrest if they speak out on behalf of garment workers,” said Sahiba Gill, Staff Attorney at GLJ-ILRF. “It is inhumane and illegal for governments and companies to bully unions and workers to deny them their fundamental rights.”
The retaliation by the Sri Lankan government and military includes public threats and police searches of garment sector trade unions and workers’ rights organizations, police searches of union leaders’ homes and the head of the Sri Lankan Army threatening unions on TV.
“Unions have been the frontline responders to garment workers during COVID-19 ensuring their rights are respected. Yet the government has threatened us for this work rather than supporting us,” said Chamila Thushari of Dabindu Collective Union.
Despite the well-documented breaches of COVID protocols at the factory, Brandix has denied wrongdoing in causing or worsening the outbreak.
“Reprisals and retaliation have interfered with accountability for the Brandix outbreak and the abuse and harassment of women garment workers that followed. These unions are being pressured to keep silent,” said Wira Ginting, Deputy International Coordinator for Asia Floor Wage Alliance.
Brandix has also denied unions access to its worksites and told workers that there will be no unionization at their factories.
“If unions had been granted access to Brandix factories, we would have monitored Brandix compliance with COVID-19 requirements — and the Brandix outbreak may never have happened,” said Ashila Niroshine Mapalagama of Stand Up Workers Union.
“When garment workers spoke out after the Brandix outbreak, we amplified their voices so those responsible could be held accountable. Our rights to freedom of speech and association should be respected,” said Chandra Devanarayana of Revolutionary Existence for Human Development (RED).
“Freedom of association is a fundamental right and we will work with Sri Lankan unions and global allies to ensure Sri Lanka protects that right and Brandix respects it,” said Jennifer (JJ) Rosenbaum, Executive Director of GLJ-ILRF. “We are committed to supporting workers’ rights in the global supply chain and to ensuring garment makers and the world’s largest retailers are held responsible for providing humane, fair and livable conditions for the workers who make the world’s clothing.”
GLJ-ILRF and AFWA are calling on the government of Sri Lanka and Brandix to respect freedom of association and engage in dialogue with women-led trade unions.
Sri Lanka’s garment industry represents 40% of its exports, a critical source of foreign currency for the country. Foreign currency shortages are a contributing factor in the current economic crisis, the worst in Sri Lanka’s post-independence history.
Asia Floor Wage
Shasheendra Rajapaksa resigns from Ministerial Portfolio
Shasheendra Rajapaksa has resigned from his post as the State Minister of Agriculture.
Succeeding Rajapaksa, another member of Parliament, SLFP Kurunegala District MP Shantha Bandara, has been sworn in in the post.
MIAP