The voting related to the second reading of the 2022 Amended Appropriation Bill presented to Parliament by President Ranil Wickramasinghe is scheduled to be held today (02).
The debate regarding this interim budget started yesterday (31) and it is scheduled to be held today.
After the debate, voting is scheduled to take place in the afternoon.
An extraordinary gazette notification has been issued imposing maximum retail prices for 43 types of medical devices including contact lenses and stents.
This gazette announcement issued by the Minister of Health Keheliya Rambukwella is effective from yesterday (01).
President Ranil Wickramasinghe has established 08 task forces consisting of heads of the public and private sectors to create good investment opportunities and secure investors.
The empowerment of this task force was held yesterday (01) at the President’s Office under the chairmanship of President’s Secretary Saman Ekanayake.
Below is the announcement issued by the Presidential Media Division in this regard.
The 2022 revised budget had proposed to reduce the mandatory retirement age to 60 years and retire all employees of government and semi-government institutions who have exceeded that age from December 31.
However, the Ministry of Public Administration says that this does not apply to the services whose retirement age has been revised due to human resource needs and circular instructions will be issued in this regard with the approval of the Cabinet.
Below is the announcement issued by the ministry.
President Ranil Wickremesinghe addressing the event in which the government of Sri Lanka entered a staff-level agreement with the International Monetary Fund (IMF) today (01) said he considers this to be the beginning of a new economic era where the country could be committed to a very competitive export-oriented industry.
The President noted that the beginning will be difficult, but more progresses can be made as the country moves forward. The approach will also make it easier for Sri Lanka to sustain its social services and to look after vulnerable groups, the President pointed out.
Reaching an agreement with the IMF will be a clear proof of the government’s commitment to create a better life for the people, he emphasised. The IMF’s support would be extremely important to recover Sri Lanka from the bankruptcy and the difficulty of paying foreign debt, he added.
On a personal note, the President added that when he was born, Sri Lanka had no debt and that the country had sufficient reserves to lend to the United Kingdom which was recovering from war times.
MIAP
The package includes nearly $3 billion in loans for an island nation that ousted its president amid a devastating economic crisis.
By Skandha Gunasekara and Mujib Mashal
COLOMBO, Sri Lanka — Sri Lanka and the International Monetary Fund on Thursday reached a preliminary agreement on a bailout package as the bankrupt island nation tries to rebuild trust with lenders and find a way out of a crippling economic crisis that toppled its president.
The deal, which still requires final approval from the I.M.F.’s executive board, would extend an emergency loan worth $2.9 billion in return for an overhaul of the country’s economy to reduce its fiscal deficits. The assistance would also be conditioned on engagement by Sri Lanka with creditors like Japan, China and India to restructure its huge foreign debt, on which the country defaulted this year.
“Financing assurances to restore debt sustainability from Sri Lanka’s official creditors and making a good-faith effort to reach a collaborative agreement with private creditors are crucial before the I.M.F. can provide financial support to Sri Lanka,” the organization said in a statement announcing the staff-level agreement on the loan under a 48-month arrangement.
Sri Lanka’s debt crisis reached a climax in the spring, as the South Asian nation of 22 million ran out of foreign reserves for essential imports such as fuel and medicine. After months of sustained protests over the deteriorating conditions, President Gotabaya Rajapaksa, whose family had dominated Sri Lankan politics for much of the past two decades, was forced out in July.
The new president, Ranil Wickremesinghe, has warned of difficult times ahead as he has tried to lay the groundwork for measures that could put the economy back on track.
To reduce government expenses, he has increased the price of electricity and fuel, which were heavily subsidized. As costs for energy imports have ballooned, reaching $500 million in some months, the country has rationed fuel and continued an extensive ban on imports of foreign goods.
In August, inflation for food items reached nearly 94 percent on a year-on-year basis, and transportation costs had increased by nearly 150 percent, according to data released by Sri Lanka’s Central Bank on Wednesday.
Umesh Moramudali, an economist at the University of Colombo, in Sri Lanka’s capital, said that the $2.9 billion in assistance would be welcome for a country scraping for any foreign exchange. But what is most important about the I.M.F. deal is that it could help Sri Lanka regain some credibility with creditors to restructure its existing debt and secure further financing, he said.
“Once you reach an agreement with the I.M.F., others are not too cautious to lend,” he said. “Right up until now, the problem for many lenders was that they were not sure about Sri Lanka’s path, as there was a lot of unpredictability, instability and ambiguity.
But with an I.M.F. program, they know that Sri Lanka is officially committed.”
Sri Lanka’s external debt stands at about $50 billion, a majority of it from multilateral lenders and sovereign bonds. The debt soared in recent years because of large tax cuts and reckless spending on expansive infrastructure projects. The final blow came with the pandemic lockdowns, which deprived the country of billions in overseas remittances as well as tourism revenue.
Japan, one of the main bilateral lenders, has announced its willingness to convene a conference of the creditors to help restructure the debt, but it is not clear when such a meeting would place or whether China would attend.
The two countries, along with India, make up the main bilateral lenders. As Sri Lanka descended into crisis this year and struggled to get new funding, India extended billions of dollars in loans, credit lines and currency swaps.
For months, Sri Lanka’s economic crisis festered as officials in Mr. Rajapaksa’s government remained in denial of the gravity of the situation. Negotiations with the I.M.F. finally began in April in Washington, followed by virtual negotiations and visits by I.M.F. teams.
The discussions focused on reducing Sri Lanka’s fiscal deficits and “designing a comprehensive economic program to correct the macroeconomic imbalances, restore public debt sustainability,” the I.M.F. said.
W. A. Wijewardena, an economist who formerly served as the deputy governor of Sri Lanka’s Central Bank, said some of the required reforms — such as improving tax collection — would be easier for the government to achieve than others.
Privatizing state-owned enterprises that are a burden on the treasury, or shifting the economy to an export-oriented one that would bring Sri Lanka sufficient foreign reserves, are long-term projects that will require overcoming political pushback from powerful unions.
“So unless the government is able to stick to this reform program with a specifically setout timeline with milestones at each point, I don’t think we will be able to get the country back on the old growth path,” Mr. Wijewardena said.
The New York Times
The staff level agreement with the International Monetary Fund (IMF) to being entitled to a loan assistance of US $ 2.9 billion should be instrumental in recovering Sri Lanka from the economic crisis befallen it and debt restructuring, emphasised Dhananath Fernando, calling in a briefing today (01).
The economic guru pointed out that with this staff level-agreement, it may be possible to obtain assistance from other countries and international bodies, advising that this should be the last time in which the island nation should seek support from the IMF given the record of six times being successful in seeking support out of sixteen attempts.
Fernando noted that the credit facility yet to be received is not enough to import fuel for a year, but the country can obtain what he described as a ‘good character certificate’ through the staff-level agreement with the IMF. Accordingly, Sri Lanka should take this opportunity to rebuild the country’s economy in the event that the IMF has paid attention on about seven aspects of granting assistance, he added.
These aspects include, autonomy of the Central Bank, protection of the poor, building foreign reserves, stabilisation of the financial and banking system, imposing regulations to stop corruption, and etc.
MIAP
Poorly-Directed Freebies May Have Adverse Economic Impact. Sri Lanka Best Example: Experts
Poorly-directed freebies may wreak havoc with state finances and have adverse consequences on the economy, as in the case of Sri Lanka, experts say.
New Delhi:
Poorly-directed freebies may wreak havoc with state finances and have adverse consequences on the economy, as in the case of Sri Lanka, experts say while noting it is important to define a freebie and how it is different from welfare expenditure.
Recently, the Supreme Court said freebies at the cost of taxpayers’ money might push the country towards imminent bankruptcy.
Economic think tank ICRIER Chairman Pramod Bhasin said, “Most freebies (unless at a time of huge urgency such as COVID) which are often poorly directed are a fiscal mistake with significant adverse consequences. And these exist in most states and under most forms of governments.” Bhasin noted that “political compulsions” cause most politicians to announce freebies as their way of capturing votes.
“If there were a way to limiting these within each state and also centrally, that would be a welcome move—but that is also for the elected representative to decide,” he said, adding that there is a need to define a freebie and how it is different from welfare expenditure.
Echoing similar views, Institute for Studies in Industrial Development (ISID) Director Nagesh Kumar said state governments need to be responsible regarding fiscal management unless they wish to get into an unsustainable situation.
“Basically, freebies given by state governments can wreak havoc with state finances. As demonstrated in Sri Lanka’s case, fiscal profligacy always leads to disaster,” Kumar said.
Vice Chancellor of BR Ambedkar School of Economics (BASE)N R Bhanumurthy said any policy intervention that does not ensure net addition to production and productivity in the medium term to long term may be treated as a ‘freebie’.
” …it is important to define what a freebie is and how it differs from welfare expenditures. If introduced, such policies (freebies) could only accentuate the already worsening public debt situation in many states and create perverse incentives and intergenerational friction,” Bhanumurthy said.
On India’s current macroeconomic situation, Bhasin said amid fear of recession all over the globe, India seems relatively far better placed, calmer and far more stable.
“Of course, India faces its share of downside risks. With spiralling energy prices and the forecast of lower GDP growth at 6.1 per cent (for 2023 as per IMF), we will, of course, see an impact,” he said, adding that relative to the rest of the world, India is in a much better position to weather this storm.
According to Bhasin, there has also been an outflow of investments from India. Still, against that, the Indian rupee has depreciated only moderately compared to other G20 countries, sometimes by half the amount versus Europe and the UK.
He said that India’s foreign exchange reserves are more than adequate in terms of sound macroeconomic perspective,” In fact, India has done remarkably well to manage through these times at a time when we would be considered very vulnerable to global shocks.” Bhanumurthy opined that India is absolutely in a better position than many of the advanced economies and has zero probability of getting into recession.
“Our outlook suggests that India should continue to be one of the fastest growing large economies with growth between 6.5 to 7 per cent in the current year,” he said, adding that in terms of downside risks, clearly, there are no domestic factors.
He said only the external factors could pose some downside pressures on the Indian economy.
“However, the domestic fundamentals are strong enough to cope with such external risks, ” Bhanumurthy opined.
According to Kumar, with its robust macro fundamentals, acceleration of industrial growth (IIP) in the past few months, and prospects of a good or normal monsoon, the Indian economy is expected to grow at 7-7.5 per cent in 2022-23, which will make it the fastest growing major economy in the world.
“Key risks to the growth outlook are posed by possible volatility of oil prices against the backdrop of the Ukraine-Russia war, and further worsening of the pandemic requiring lockdowns,” he said.
Kumar said another headwind for India is arising from the hardening interest rates in the US as the Fed is unwinding the easy money policy rather aggressively.
“Yet I do not think that a repeat of the 2013-14 type of situation (taper-tantrum) is likely, given the sizeable forex reserves of around $570 billion,” he asserted.
Two suspects remanded in connection with the assassination of a group of people including former Minister Jeyaraj Fernandopulle have been acquitted today (01) as per the order of the Gampaha High Court.
The two, ex LTTE militant Selvarajah Kirubakaran and former Assistant Police Superintendent Senarath Lakshman Cooray, accordingly, have been acquitted of all charges.
16 persons including Mr. Fernandopulle were killed and 84 injured in a suicide bomb attack near Weliveriya Kanthi Stadium on the morning of April 06, 2008.
The Attorney General lodged the case in the Gampaha High Court under 31 charges including murder of 16 persons, attempted murder 84 persons and plotting for murder.
MIAP
IMF statement of 1st September 2022: The proposed (but yet unknown) IMF agreement has several pre-conditions to fulfill
