Leader of the United National Party (UNP) MP Ranil Wickremesinghe addressing the All Party Conference held this (23) morning under the President’s patronage inquired about the report of the International Monetary Fund (IMF) regarding Sri Lanka.

In response, Finance Minister Basil Rajapaksa commented that the government has not yet received the IMF report on Sri Lanka.

Further being insisted by Wickremesinghe that the Sri Lankan representative of the IMF should be inquired in this regard, Minister Rajapaksa stated that the draft of the final report formulated by the IMF has been received.

However, the Finance Minister denied the UNP Leader’s request on disclosing the draft report in Parliament.

Further contributing to the All Party Conference led by the President, Wickremesinghe stressed that it may take at least five years for Sri Lanka to overcome the current crisis. Stabilising the country’s economy and ensuring economic recovery in the next two years would be the two major issues before Sri Lanka, he added.

MIAP

Sri Lanka had appealed to China if a restructuring of the debt could be arranged to mitigate the economic crisis that had arisen in the face of the COVID-19 outbreak.

Colombo: China refused to assist Sri Lanka which appealed to reschedule its huge Chinese debt burden in the face of the COVID-19 outbreak that has adversely affected the tourism sector, said a media report.

Colombo appealed if a restructuring of the debt could be arranged to mitigate the economic crisis that had arisen in the face of the COVID-19 outbreak. President of Sri Lanka Gotabaya Rajapaksa in a meeting with Foreign Minister of China Wang Yi sought the assistance of Beijing in the face of the deepening foreign exchange crisis of Sri Lanka and spiralling external debt.

“Replying to a question on the pending request from Sri Lanka for a debt relief, Foreign Ministry spokesman of China Zhao Lijian said in a news conference this month, that China had been providing assistance for the socio-economic development of Sri Lanka to the best of its ability and would continue to do so. In concrete terms, this meant nothing,” the Hong Kong post reported.

“China has shed some crocodile tears over the economy of Sri Lanka getting caught in a quagmire after hobnobbing with the BRI projects of China, record inflation, soaring food prices and the sufferings of the people,” said a media report.

“The key concern, however, is how such a negative situation would impact the attitude of Colombo towards borrowings from China,and what it would mean for the ultimate relation between China and Sri Lanka. There is concern that the experience of Sri Lanka is prompting countries like Myanmar, Malaysia and Nepal to suspend Chinese investment projects,” it added.

Though the crisis in Sri Lanka was apparent after the pandemic that dried up the international tourist traffic to the island nation, one of its main foreign exchange-earners, the country’s debts spiralled and foreign exchange reserves shrunk as the end result of reckless borrowings from China to finance infrastructure projects, reported The Hong Kong Post.

With tourism hit by the pandemic, the economic structure of Sri Lanka, which was already tottering under the heavy burden of loans, crumbled. A major part of this debt was owed to China, which accounts for nearly USD 8 billion.

This debt burden was a result of China’s Belt and Road Initiative (BRI) projects like Hambantota Port and Colombo Port City for which Chinese agencies lent large amounts to Sri Lanka under stiff terms of repayment.

Notably, in 2021-22, Colombo’s debt repayment to Beijing amounted to nearly USD 2 billion. Further, Hambantota port has already been leased out to China for 99 years against USD 1.2 billion.

In the face of the deepening foreign exchange crisis, Sri Lanka President Gotabaya Rajapaksa sought China’s help in December 2021 as he requested a debt restructuring in a meeting with China Foreign Minister Wang Yi. However, Beijing has reportedly shown Colombo the door, according to the media report.

“Ironically, the deeply pro-China Rajapaksa government dug its own grave as it had booted out the Millennium Challenge Corporation (MCC) of the USA with its offer to extend developmental assistance grant to Colombo as the Board of Directors of MCC discontinued its USD 480 million contract with Sri Lanka in December 2020 “due to lack of partner country engagement,” the publication reported citing the US embassy.

Further, China-assisted projects in Sri Lanka are likely to deepen the debt of the island nation. Moreover, locals of Sri Lanka are protesting against some of these projects which will affect their livelihood.

One of these projects is an industrial park attached to the Hambantota International Port which has incited violent protests by local people as they fear that the area would become a Chinese colony, reported the media organisation.

Given the current crisis coupled with the absence of any assurances from China for concrete support, Sri Lanka seems to be reassessing the extent to which it can bank on China.

However, it is nearly impossible for Rajapaksas to deny China its committed space in Sri Lanka due to arbitration threats and likely obligations. It is an economic annexation of a sovereign country and not a debt trap alone.

NDTV

Lebanon has recently joined the list of countries facing the worst economic crisis in the world. We can partially guess what the next country will be. When I was in Lebanon last year, I witnessed first-hand the suffering of the people caused by the economic crisis. Within six months, a middle class population had been completely wiped out. Only two wealth groups survive during such economic crises. One is rich and the other is poor.

Besides, another change in such an extraordinary environment would happen without our knowledge. Rich will become richer. Poor will become poorer. A race called the middle class will become extinct by itself. There are two main reasons for Lebanon’s economic crisis. One is Fiscal crisis and the other one is political instability, besides, devaluation of local currency and USD liquidity. Everything that happened in the first three months was a catastrophe invisible to the public. About 5,000 private & medium enterprises were closed.

One million people lost their jobs. Inflation increased by 250%. While  the monthly income is unchanged, its value is drastically reduced. The monthly salary, which was previously enough for a family of five to eat three meals a day, is now enough for two meals a day. Essential imports were low due to the informal sector was somehow stable (black money – USD).

The government, on the other hand, was fighting among itself without trying to reach any ‘good’ or ‘urgent’solutions. 

On the other hand, people were upset that they could not widthraw their money from the banks. Banks kept a ceiling and controlled people’s withdrawals. Banks have also stopped withdrawing USD. People who did not know the root cause of the problem, smashed the banks.

The oil companies raised the prices of all fuels in a single day – which has increased many times before.

Rising fuel prices will always have a snowball effect. Accordingly the Lebanese capital began to change. The price of bread, Lebanese’s staple food, public transport, taxi, vegetable & pharmaceutical have skyrocketed. 

Prices of all goods / services as well as other food items have gone up. The price of drinking water has skyrocketed. Electricity is expensive. Thus the lives of the poor came to the streets. The number of street beggars increased.

 Crime increased. Lebanon which was Known as the ‘Little Paris of the Middle East’, was slowly becoming a nation difficult for humans to live in.

The national crisis reached its peak after two months. Fuel shortages paralyze Lebanon completely. When there was a shortage of fuel in Lebanon despite the money, people began to stand & cry along the streets. The basic reason for this restriction is that petroleum companies will no longer be able to import fuel from abroad.

Neither Lebanese nor the country as a whole have the dollars needed to import. Not even a single candy dessert can be bought overseas for the Lebanese pound. A country that relies on imports cannot survive without the dollar.

Every day thousands of vehicles wait in front of gas stations. Some brought their vehicles at two in the morning and left the queue in front of the gas station and waited all day. Even though only 20 liters of fuel were provided per vehicle per day.

Severe fuel shortages led to many more massive problems. The most important issue is the power outage. Within two weeks, one of Lebanon’s two major power plants closed its doors, saying it could never operate again.

It reduced Lebanon’s overall electricity supply by 40%. On the other hand, since the private companies were the backbone of the Lebanese power supply, they also cut off power supply, making it impossible for them to operate their power generators all day. 

 So, at the end of six months, the whole of Lebanon had to face a 14-18 hour blackout. The people were plunged into darkness little by little.

In the meanwhile another ‘miracle’ happened. When the economic crisis reaches a critical level, the only way to recover is to fall at the feet of the International Monetary Fund (IMF) but Lebanon does not want to go to IMF. The reason is the ego of those in power. (Remember the recent interviews with the Governor of the Central Bank of Sri Lanka?). Thus, the IMF, the last hope, abandoned Lebanon.

Lebanon’s economic crisis is not over. (It will take 10-15 years to fix a massive economic downturn).

There is no progress. The contrary situation is getting worse day by day. Lebanon could not find any solution. They have not yet been able to reach any conclusions regarding the political & fiscal reforms. 

The IMF says the situation is out of control and they describe it as one of the worst economic crises in history.

As I had a racial fear in me at the time of writing this, the same feeling must have occurred to you too while you read this.

The path, we are on is not the right one. Only God can save us.

Amalraj Francis

Some of the Indian suppliers arrived in Sri Lanka have denied the release of imported items from India for Indian currency, days after the government’s move of obtaining a US$ 01 billion debt facility from India to alleviate some of the issues occurred with the economic crisis befallen the country, including the shortage of essential food items.

The Indian debt facility is expected to be used for the release of about 1500 containers carrying essential food items imported from India stalled at the Colombo Port, but the suppliers’ resistance to release them in the demand of US Dollars instead of Indian currency has made another strike against the mission to alleviate the economic crisis in Sri Lanka.

Meanwhile, the Essential Commodities Importers’ Association claimed that several more steps need to be completed to import essential food items under the Indian debt facility, warning that until then, the application of the debt facility for the imports may not be possible, hence a further collapse in the importation.

MIAP

Finance Minister guaranteed the Ruling Party MPs that the ongoing dollar crisis would be over by the month April, speaking at the discussion held with the Sri Lanka Podujana Peramuna (SLPP) parliamentarians under the patronage of the President yesterday (23).

The country is currently suffering from a number of crises, the absence of fuel, LP gas, cement and milk due to obstructions on importation to name one, many of which are spawned by the huge dollar deficit, leading to endless public queues.

The Finance Minister stated that as soon as the dollar deficit is over, it would be possible to import enough fuel, gas and food items, thereby requesting his fellow MPs to have full confidence in him on the matter.

MIAP

The Committee on Public Accounts has approved the addition of amendments to the value added tax (VAT), surging the tax from 15 per cent to 18 per cent based on the provision of fiscal services.

The draft bill has been formulated to implement the tax policy proposals mentioned in the Cabinet Memorandum No. MF/FP/32/CM/2021/212 dated December 14, 2021

In addition, the amendment facilitates the exemption of the VAT on donations of medical equipment, machinery and medicines made to state-run hospitals and the Ministry of Health in the event of an epidemic or public emergency.

The CoPA also approved the compact between the Government of the Democratic Socialist Republic of Sri Lanka and the Government of the Republic of Turkey on the prevention of double taxation and tax avoidance on revenue-based taxes.

Nevertheless, the aforementioned amendment is due to be tabled in Parliament on March 24.

The Committee on Public Accounts aka CoPA was convened under the patronage of its Chairman MP Anura Priyadarshana Yapa at the Parliament complex yesterday (22).

MIAP

One of the privileges of being a government minister is that you have public servants paid by the taxpayers at your disposal to do the work that ordinary citizens have to do day in and day out. Including staying in a queue for hours to get fuel. This is very common in the developing world.

Exceptionally, you get a few politicians like the President of Uruguay Jose Mujica who drove an old Beetle along the streets of his country. Nothing changed for him as President. There have been a few others. 

Today, Sri Lanka is facing the biggest economic crisis since independence. We had a similar set back in 2001, but it was never so acute where one had to stay for hours in a queue for fuel, medicine or milk or be out of power for five hours daily. Conservative estimates are that Sri Lanka will run a deficit around $ 9 billion in 2022. Now how do we bridge this? 

Forex market

The black market for foreign exchange keeps rising despite the devastating devaluation of over 30% in a day, worse than even what the war-torn Afghanistan underwent, which was 11%, and the currency recovered fast. To add to our woes the current economic crisis can get far worse if there is an escalation of hostilities in Ukraine. So, what do we do as a country to make available the key essentials for the public? With the humongous devaluation of the LKR, prices of every item have seen an increase of over average of 30% overnight. Exams have been cancelled because of no paper. 

As the vocal economist Dr. W.A. Wijewardena points out, “The present collapse of the rupee has not been totally unexpected. For many months, independent analysts had warned the Government and the Central Bank about its insane attempt at fixing the rupee-dollar rate at 200 at mid-level without a supportive foreign exchange reserve. But the Bank had adamantly maintained and misled the President too that it had enough resources at hand to keep the rate at that level and there was no necessity for Sri Lanka to seek IMF support or work on restructuring the country’s foreign debt. Ex-Governor W.D. Lakshman ascribed this to following an alternative policy measure which only he knew of.”

Further Dr. Wijewardena notes, “If the Bank could not supply foreign exchange to the market at the given rates, the result was either the rate had to move up or allow the development of a black market dealing in foreign currencies. Since the Bank did not want a black market to develop because it is the worst enemy of a central bank, it allowed the rates to go up by widening the margin between its buying and selling rates from time to time.” This black market has now become a cancer for the financial sector. It is slowly eating into the stability of every sector.

All-party effort

Unfortunately, for the Government other than some ministers, no one has confidence the Government has the skills and competence to take Sri Lanka out of this crisis. The Opposition and the public who have spent hours on the road want the Government to go home. But this is a democratically elected government. 6.9 million voted for them. It is they who should take the responsibility. No point in blaming the Rajapaksa family. The former five times Prime Minister Ranil Wickremesinghe forewarned the Government of this crisis, on the day he entered parliament in 2021; the Government however took little notice. Instead, the public ridiculed him for not prosecuting the Rajapaksas for their excesses in the previous administration. The Easter Sunday attacks were the beginning of our misery. 

Recently Wickremasinghe has said very loudly that given the unprecedented crisis with no end in sight, that “there must be a national consensus on the basic principles needed for this. There is no national consensus in our country. One Government changes what the other Government did. If we do not look to the future and move forward there will be no future.” 

The country desperately needs an all-party council to take key decisions from now on; it cannot be left only in the hands of the Rajapaksa coterie. Our nation’s future is at stake, it is not only theirs. All political parties have failed the people, therefore at least now they must rise up and save the day for our future generations. It is no longer the “job” that should matter to our politicians.

IMF bailout

So, what do we do? Going to the IMF would provide us an opportunity that would allow the country to seek the assistance of other friendly foreign nations and agencies who are willing to help, but who want a structure and good governance; they are not interested in propping up personalities who have failed the people on all sides. We need all our political parties working together to take measures to revive our failed economy. Including the setting up of an international development forum. We need to negotiate an immediate financial facility with the IMF, that cannot wait any longer given the situation we are currently in, we need to increase interest rates to manage the forex market and manage inflation and our tax structure needs order. 

As Dr. Wijewardena points out, “President Gotabaya Rajapaksa last week was vague about the Government’s seeking a funding facility from the IMF immediately. That confusion will make the foreign investors more confused. It could not make a significant turnaround in the falling prices of ISBs out there in the market.”

The generous Indian bail out will be good for one or two months given that we celebrate the New Year next month. Ironically, what happens when that money runs out? Run to China? Japan? USA? Therefore, given the current public sentiment, it is important for national consensus to be reached now and an economic recovery program signed by all political groups, to prevent one or two people taking decisions anymore; we cannot be at their mercy anymore.

DailyFT

The writ petition filed by Dr. Shafi Sahabdeen of the Kurunegala Teaching Hospital seeking an order to settle the arrears payments entitled to his employment during his suspension of services on the false charge of performing ‘sterilising procedures’ on Sinhalese Buddhist mothers was called before the Appeal Court today (23).

The petition was taken up before the Appeal Court Bench comprised of Justices Sobhitha Rajakaruna and Dhammika Ganepala.

Additional Solicitor General Sumathi Dharmawardena appearing for the Attorney General told the Court that steps will be taken to pay all the arrears of salaries and allowances entitled to Dr. Shafi.

A letter issued by the Director General of Establishments of the Ministry of Public Administration in this regard has also been submitted to the Court.

The letter reveals that all the arrears of salaries, allowances, cost of living allowances and interim allowances entitled to Dr. Shafi during the period of his suspension will be paid off.

The plaintiff in his petition also stated that he was protesting against the Director of the Kurunegala Hospital, Chandana Kendagamuwa, who carried out the disciplinary inquiry against him. Additional Solicitor General Dharmawardena, on the other hand, stated that he was against it.

MIAP