Sri Lanka’s government appears increasingly upbeat about its chances of receiving International Monetary Fund (IMF) board approval for a USD 2.9 billion bailout by December, but the multilateral lender has cautioned that the time frame remains uncertain, and much depends on discussions with the heavily indebted country’s creditors.
However Sri Lanka is hopeful that the first tranche of the IMF disbursement will be available before the end of 2022, but it depends on cooperation from the creditors and assurances, revealed Central Bank Governor Dr. Nandalal Weerasinghe on Friday (23).
Peter Breuer, senior mission chief for Sri Lanka, and Masahiro Nozaki, mission chief for Sri Lanka, in written comments to Nikkei Asia, said, “It is difficult to predict the timeline, as the process of debt relief discussions takes time. All parties who are involved in the process should move expeditiously, so that Sri Lanka can emerge from the crisis as quickly as possible.”
On Sept. 1, Sri Lanka reached a staff-level agreement with the IMF to obtain the $2.9 billion, a crucial lifeline for a country wrestling with the worst economic crisis in its history. The country’s year-on-year inflation topped 70% in August, and the public continues to face severe shortages of essentials.
Earlier this year, Sri Lanka defaulted on a foreign bond for the first time, after its foreign reserves dwindled to next to nothing. “We announced that we are not in a position to pay,” central bank Gov. Nandalal Weerasinghe said in May, confirming the “pre-emptive default.”
“Our position is very clear. Until [the lenders] come and restructure, we can’t pay,” Weerasinghe said.
Last Friday, Sri Lanka’s Finance Ministry held an online presentation for external creditors to explain the situation and discuss the next steps toward restructuring. A handout cited “some past policy mistakes” along with the COVID-19 pandemic and the resulting crisis as key factors that crippled the economy, depleted reserves and forced the country to stop debt repayments.
The day before, President Ranil Wickremesinghe chaired a meeting with ambassadors from 23 Paris Club and non-Paris Club countries, including Japan, France and India, to discuss related matters.
Wickremesinghe appealed to all creditor countries to offer the “financing assurances” on debt sustainability the IMF has said are essential for the board to give the final green light.
The Indian High Commission in Sri Lanka, for its part, expressed support even before the creditor briefings. On Sept. 20 it said that it had started discussions on restructuring Sri Lanka’s official debt to India. A spokesman told Nikkei Asia that the “cordial atmosphere” of the talks reflected New Delhi’s support for an “early conclusion and approval of a suitable IMF program.”
Noting the need for other creditors to work on ensuring Sri Lanka’s debt is manageable, he added that India would remain “closely engaged” with relevant stakeholders.
During last Friday’s presentation, Weerasinghe and Mahinda Siriwardana, secretary to the Treasury and Ministry of Finance, noted that as of the end of June, Sri Lanka’s public debt stood at 122% of gross domestic product. A figure equivalent to 70% of GDP was denominated in foreign currency.
According to the presentation by the Ministry of Finance and the central bank, China, Japan and India were the country’s top three bilateral creditors, with China accounting for 52% in total, followed by Japan at 19.5% and India at 12%.
The Sri Lankan officials also pushed for the formation of an ad-hoc coordination group to expedite the process of obtaining financing assurances from multiple creditors. They explained that such a group would allow official bilateral creditors to give such assurances to the IMF collectively, after discussing the matter among themselves.
The Japanese Embassy in Colombo agreed that it is essential for all creditors to come to the table for debt restructuring discussions to ensure that the process is transparent and fair. “If all the creditor countries will participate in a coordination platform proposed by President Wickremesinghe, the government of Japan is ready to contribute to the discussion in a constructive way,” the embassy told Nikkei Asia.
But all eyes are on top creditor China, known for its preference for refinancing loans or deferring repayments rather than restructuring and settling for loss-making “haircuts.”
On the sidelines of the United Nations General Assembly last week, Sri Lankan Foreign Minister Ali Sabry met his Chinese counterpart, Wang Yi, who pledged China’s support for a Sri Lankan economic recovery.
A Chinese Foreign Ministry readout of the meeting said that Wang promised China “is ready to work with Sri Lanka to carry forward the traditional friendship, consolidate strategic mutual trust and deepen and expand pragmatic cooperation.”
He also said that China would “continue to offer assistance within our capacity to help Sri Lanka overcome temporary difficulties.”
Still, a highly placed Sri Lankan diplomatic source said that although debt discussions have started with some countries, it is “impossible” to say how long they will take and when a final decision will be made.
IMF says timeline remains uncertain despite CB Governors year end dream
Sri Lanka three wheelers to go off the roads after four decades
Sri Lanka three wheeler importation has dropped to almost zero level owing to government’s strict vehicle import ban with only 19 new registrations of tuk tuks posted during the past eight months for the first time in over four decades since it hit the roads, top official of the Motor Traffic Department (MTD) said.
Following its importation to Sri Lanka in quantity in the 1980s by Richard Peiris Company under president J R Jayawardene’s regime with open economy, the auto-rickshaw three-wheeler has replaced the Morris Minor as the taxi of Colombo and the suburbs.
This new three-wheelers taxis service became popular among the middle class and low income earners as a quick and convenient public transport mode at that time providing employment for hundreds of thousands of youth who suffered in frustration without jobs in economic down turn in 1970-77 period.
Three-wheelers are the main form of last-mile transport. They provide flexibility in labour markets, contributing to their popularity.
The final and most significant reason for the large number of three-wheelers is the lack of sufficient public transport – both in terms of quantity and quality. If there was an option for anyone to become a service provider of public transport, most three-wheeler drivers would have become public transport drivers.
MTD Commissioner General Nishantha Weerasinghe said only 2,093 three-wheelers were registered with the department last year.
According to MTD statistics 7,150 three-wheelers in 2020, 15,490 in 2019 and 20,063 three-wheelers had been registered at the Motor Traffic Department in 2018.
He noted that according to official records, new three-wheeler registration exceeds 50000 from 2011 to 2020; the annual average in 2011 was 138426 new three-wheelers the highest three-wheeler registration in a year, compared to 129547 three-wheelers registered in 2015.
He revealed that a total of over 1.18 million three-wheelers are registered with the department thus far but only around 500000 to 800000 were in running conditions at present.
Three wheeler services is an important source of employment for more than 500000, informal sector self employed persons although it has been branded as menace for many road users, a recent survey c revealed.
In the Colombo district, three wheeler drivers usually earn Rs 2000-3000 a day in other districts, some were able to earn around Rs 500 per day.
At present their daily income has come down due to five-litre weekly quota under QR system and the drop in the number of passengers traveling in three wheelers as they cannot afford high fares.
According to City Traffic Police most of these tuk tuk drivers are used to drive recklessly with least concern for other road users, violate traffic rules and road rules and creep into every nook and corner of the roads, cutting to every side, taking sudden U turns.
Among the other offences were stopping to pick-up wayside passengers, overtaking on the opposite lane to beat the traffic lights, constantly tooting the horn and intimidating and abusing other motorists.
Some of these drivers were engaged in drug trafficking and other vices or aiding abetting such offences, a senior DIG said adding that it is essential to regulate this service soon.
Govt to lease over 6000 acres of NLDB farm land to private firms
In a strategic move of improving the dairy and animal husbandry industry, the Government is now offering state owned land and farms to private sector firms, local or foreign investors on a long term basis.
Under this initiative a tender has been called from prospective investors to hand over six large farms with lands in the extent of 6268 acres owned by National Livestock Development Board (NLDB).
The aim is to tap the emerging modern agricultural technology and develop the animal husbandry industry to meet the local demand and exports as well, a top official of the Agriculture Ministry disclosed.
He noted that the government will be providing opportunities and offering farms and land to the private sector to act as a facilitator and help Sri Lanka farmers reap the benefits of the huge potential that lie in the island.
Investors are free to cultivate the land with any crop while developing the dairy and animal husbandry industry and sell it to the domestic market and also export, he added.
“It is a win-win situation for the farmers’ and investors,” he said adding that this initiative will help the government’ target of achieving self sufficiency in milk production at least by 2024.
The ministry will offer more land parcels belonging to the NLDB and other State-owned entities countrywide for the setting up of large scale dairy farms considering the success of this animal husbandry and milk production venture.
Under the proposal submitted by the Ministry of Agriculture, six land land slots with farms belonging to the NLDB would be allocated for this purpose.
Accordingly, Nuwara Eliya Bopath Talawa Farm in the extent of 1,133 acres, Puttalama Kottukachchiya Farm consisting 500 acres, Kurunegala Nikaveratiya Farm 1,054 acres, Anuradhapura Oyamaduwa Farm 1,477 acres, Anuradhapura Parasangaswewa Farm 1,632 acres and Hambantota Weerawila Farm consisting 472 acres are to be leased to private firms and investors selected in a proper tender procedure .
Many of these farms are making profits, NLDB top official said, pointing out that it is intended to develop Sri Lanka’s animal husbandry, the liquid milk industry, and develop large-scale farms for the cultivation of breeding animals, production of milk, meat and crops using modern technology under this project.
Although the country’s requirement of milk is estimated at 722 million liters per annum, the current local supply remains at around 422 litres, catering to only 40 percent of the demand.
Therefore, top ministry official pointed out that Sri Lanka spends US$ 365 million on dairy imports per annum, mostly for the powdered milk products.
Nandalal must not act like a Thug
Central Bank Governor Weerasinghe was asked by the deposed PB Jayasundara to retire and leave the Central Bank in a hurry. Before he left he made sure his pension was increased. He came back at the invitation of the ex President. His exorbitantly high benefits snd salaries are surely our concern.
Because that is paid by the tax payer. His trips to the golf club in the government owned S Class Benz is paid by the tax payers. He lives in a mansion in Colombo 7 thanks to the tax payer. He was reprimanded by the bond commission for his inaction surely he can’t hang that on us.
His background and his Uncles and Aunts and what they did is not our concern. The main concern we had and have was that he made Sri Lanka a bankrupt country without the approval of parliament. He used the word soft default to argue his case. The several investment and restructuring specialists whom we consulted told us that a default is a default.
The consequences of a default is humongous and unrepairable. So for highlighting this the Governor is going out of the way to put pressure on state institutions to withdraw all government advertising. We are disappointed that the Chairman of those institutions don’t have the backbone to ask him to mind his affairs. He is only the Governor of the Central bank, but he is acting as though he is the President of Sri Lanka. Not so long ago he threatened the Sunday Times writer.
Instead of focusing on minimizing the rising burden to the population, he is spending his time attacking the media that is highlighting his stupid and shortsighted decisions, like holding Interest rates at 30% . Essentially destroying the business sector. We have so far not seen the Central Bank raising one cent from overseas to ease the forex situation in the country after he became Governor. Other Governors did that.
Nandalal Weerasinghe is no match to us. Many others very much more powerful than him have tried to destroy us and destroyed themselves. So do your job as a public servant or for the sake of the public please go back to Australia the place you came from. Sri Lanka is a resilient nation, we will come out of this crisis with of with out you Mr Governor. So far you have only made it worse for the majority.
Sri Lanka’s construction sector collapses making 90 percent of work standstill
Sri Lanka’s construction sector has crashed with 90 percent of their work countrywide coming to standstill risking the loss of 75 percent of the work force mainly due to shortage of cement, iron and other raw material and its high prices in the economic crisis, the National Construction Association of Sri Lanka complained.
While the broader economy contracted by 8.4 percent in the second quarter ended in June, the construction activities, which contributed an outsize 9.5 percent to the overall economic output, shrank by nearly twice as much as in the same period, indicating its importance to the Sri Lankan economy, specially in the post-war era.
According to the data released by the Census and Statistics Department, construction activities declined by a significant 16.2 percent in the April-June quarter, as the economic crisis sent ripple effects across multiple sectors.
The sputtering economy came to a near standstill in the second quarter, after the foreign exchange crisis unraveled in proportions and magnitudes, which nobody had anticipated, forcing the government to suspend almost all its big infrastructure projects.
Meanwhile, private developers scrambled to source materials such as cement and others amid their inability to find dollars to import them and soaring prices, which sent the cost of construction through the roof.
Around 900000 law income earning workers out of 1 million including 600000 direct jobs in the building construction field have already lost their livelihood greatly affecting 1.2 million poor families in the lowest income strata, the association pointed out.
Over 1000 building material suppliers had to close down owing to non availability of items like cement, iron and other essential items for construction industry such as Aluminum, tiles, water pumps, and rain water gutters included in the temporarily banned import list , a move to stop foreign currency outflow.
It also included some industrial machinery including metalworking machinery, packing machines and ball bearings, chairman of the association Susantha Liyanaarachchi told the Business Times.
Making the situation from bad to worse, the government has also suspended almost all major infrastructure projects tumbling many building contractors into severe liquidity issues without paying unsettled bills amount to Rs.150 billion.
Although many mega projects were started during the previous government, due to not being able to complete the payments, the whole construction industry is in a great financial crisis he said.
The Treasury is also compelled to pay an additional 20 percent apart from their bills in accordance with their contractual agreement due to this sudden decision of suspending mega projects,
On the other hand, contractors are estimated to owe the banking sector an enormous sum of Rs.200 billion.
Meanwhile the cement scarcity has become a major stumbling block for the construction industry, largely affecting small time contractors and workers engaged in house building and repairing at present.
Total cement usage has fallen 19 percent to 2,855,000 metric tonnes during the six month period to June 2022 reflecting the gravity of the contraction in construction and impacting the country’s total economic out put, Finance Ministry data shows.
The cement imports dropped 84 percent to just 35,000 metric tonnes in June from a year ago, bringing the first six months imports to around 1 million metric tonnes, down 26.2 percent reflecting the severe foreign exchange crisis in the country.
Japan ready to do ‘its part’ over SL’s massive debt crisis!
Japan is prepared to “do its part” over Sri Lanka’s debt issue, but other creditors, such as China and India, should also be involved in efforts to resolve it, Finance Minister Shunichi Suzuki said Thursday.
Suzuki made the remarks after meeting with Ranil Wickremesinghe, president of Sri Lanka, which has reached a preliminary agreement with the International Monetary Fund on a $2.9 billion loan as the Asian nation needs to restructure its massive debt.
Suzuki said he urged Sri Lanka during Thursday’s meeting to provide the necessary information, make its own efforts to get China, India and other creditors involved and boost transparency.
“Japan will do its part if such preconditions are met,” Suzuki told reporters without elaborating in the Philippine capital Manila, where he attended a meeting of the Asian Development Bank.
During his visit to Japan, the Sri Lankan president met Wednesday with Japanese Prime Minister Fumio Kishida and discussed the debt issue. The leaders recognized the importance of “fair and transparent” debt restructuring that involves all creditor nations, according to the Japanese Foreign Ministry.
Sri Lanka defaulted on its debt earlier this year. The COVID-19 pandemic added to the woes of the Asian nation, already struggling financially after taking out loans from countries such as China to develop its infrastructure.
In a speech at the annual meeting of the ADB’s board of governors, Suzuki said the COVID-19 pandemic and surging energy prices caused by Russia’s war in Ukraine have “heightened the risk of debt vulnerabilities.”
“All creditors should cooperate in providing support in a coordinated manner, while debtor countries undertake reform efforts towards achieving a sound level of debt,” Suzuki said, in an apparent reference to Sri Lanka.
Source: Kyodo News
Railway controllers decide to end the strike
It is reported that the strike which started this morning (30) by the railway controllers has ended a little while ago.
Accordingly, the train operation has been resumed and the train delay caused by the strike will be reduced by this evening, said the sources of the department.
Railway controllers on strike!
The railway controllers have started an emergency strike a little while ago.
The strike was said to be due to a problem with their overtime pay.
Railway department sources said that due to this strike, the trains scheduled to run today (30) may be delayed or cancelled.
However, it was also reported that a discussion has started between the trade unions of railway controllers and the General Manager of Railways.
SRI LANKA ORIGINAL NARRATIVE SUMMARY: 30/09
- President Ranil Wickremesinghe presides at ADB’s 55th AGM: says sky-rocketing food, fuel & fertilizer are consequences of supply chain shocks created by the Ukraine war: urges creditor and debtor nations to work collectively to promptly address this situation.
- Party leaders decide to debate the draft 22nd Amendment to the Constitution on 6th & 7th October.
- IMF Senior Mission Chief for Sri Lanka – Peter Breuer says a timeline on the IMF programme cannot be predicted: explains the process of debt relief discussions takes time: previously CB Governor Dr Nandalal Weerasinghe had claimed the IMF program is likely to be approved by the IMF Board by end December.
- Central Bank’s T-Bond Weighted Average Yields soar past 30%: places Government Budget and SMEs under very severe stress: 3 years – 30.9%: 5 years – 31.5%: 9 years – 30.1%: rates now more than double the rates in March 22: analysts say these rates will pose enormous risks to stability, sustainability and growth.
- Colombo Port City Commission finally issues operating rules: businesses to get licenses for annual fee of USD 2,000.
- SJB MP Eran Wickramaratne laments country is suffering from serious poverty, loss of employment, loss of income, malnourishment, etc: Wickramaratne was a strong advocate to raise taxes, restructure debt and submit to an IMF program which would invariably lead to very tough conditions.
- Vehicle Importers Association President, Indika Merenchige says vehicle prices are dropping rapidly due to the sharp drop in demand: attributes demand-drop to people not being able to afford.
- Police launch extensive investigations over involvement of some politicians who had encouraged certain ‘protester’ groups to overthrow the government by forcefully occupying Parliament and preventing a vote to elect a new President, upon resignation of President Gotabaya Rajapaksa in July.
- President of the Federation of Renewable Energy, Thusitha Peiris cautions Sri Lanka is in for a longer power blackout and a second electricity tariff revision within the next 4 months: urges authorities to settle the burning issues of the renewable energy generation sector.
- Study by Sri Lanka’s Health and Ageing Study Consortium reveals nearly 1 in 3 adult Sri Lankans have high blood pressure and require anti-hypertensive treatment.
An announcement from the Meteorological Department about the rainfall
According to the Department of Meteorology, a slight increase in rainfall is expected in the southwestern part of the island today (30) and in the next few days.
Western and Sabaragamuwa provinces and Kandy, Nuwara Eliya, Galle and Matara districts will experience rain from time to time, while the North-West province will experience several showers of rain.
In Uva province and Ampara and Batticaloa districts, rain or thundershowers will occur at a few places during evening or night.
In the western slopes of the central hills, in the northern, north-central and southern provinces, and in the district of Trincomalee, windy per km. Gusts around 50 are possible.
The department kindly requests the people to take necessary measures to minimize the dangers caused by temporary strong winds and lightning that may occur with thunderstorms.
