By Uditha Jayasinghe

COLOMBO, Sept 23 (Reuters) – Sri Lankan authorities will formally hold talks with international creditors on Friday to start the process of restructuring billions of dollars of its debt and share plans to tackle the island’s worst economic crisis in more than seven decades.

The success of the restructuring process is critical for the nation of 22 million to secure final approval for a $2.9 billion loan from the International Monetary Fund and subsequent financing from other global agencies.

The money will help the island nation overcome an acute shortage of food and fuel that sparked sweeping street protests for months this year and led to the ouster of then-President Gotabaya Rajapaksa.

Sri Lanka’s finance and other officials plan to hold a virtual interactive session to share the objectives of its loan package agreed with the IMF on Sept. 1 and the next steps of the debt restructuring process.

Its presentation to the creditors will be made public after the event. The government has already held preliminary restructuring talks with neighbour India and diplomats based in Colombo.

“There was a very positive response from the meeting with ambassadors chaired by the president on Thursday,” an official at the president’s office said, speaking on condition of anonymity.

“Sri Lanka is focused on trying to get the IMF deal finalised by December or early next year.”

Sri Lanka’s foreign currency debt was $47.3 billion as of end-2021 and local-currency debt at $53.6 billion, according to an update from the Ministry of Finance in August. China, Japan and India are its top bilateral creditors.

The foreign currency debt includes $13 billion in international sovereign bonds held largely by private creditors, such as asset managers BlackRock (BLK.N) and Ashmore (ASHM.L).

1. John Hopkins University Economist Professor Steve Hanke reports that Sri Lanka is 3rd in the world in terms of the depreciation of the local currency against the USD: 1st – Zimbabwe: 2nd – Cuba.
   
2. Cabinet approves import of 25,000 MT of maize or alternative grains for the production of animal feed to address the current shortage of maize in the country.
   
3. Sri Lanka’s Ambassador in Russia Professor Janitha Liyanage says Aeroflot flights between Moscow and Colombo will resume from 9th October.
   
4. Bar Association expresses concerns at the President’s move to declare certain areas in Colombo District as high-security zones.
   
5. SLPP General Secretary Sagara Kariyawasam says the government never promised to offer chairmanship of COPA and COPE to the Opposition: also says the opposition is misleading the country by such false claims.
   
6. Police fire water cannons and tear gas to disperse persons protesting against the declaration of high security zones: 84 persons including the National Organizer of the Socialist Youth Union Eranga Gunasekara and two Buddhist monks arrested.
   
7. Minister of Agriculture Mahinda Amaraweera expresses concern over the future of the poultry industry in the country as the economic crisis is severely affecting the production of chicken and eggs.
   
8. Parliament passes Bill to establish a “National Council” representing all recognised political parties in Parliament, with responsibility to guide short, medium, and long-term national policies, without a vote: PM Dinesh Gunawardene says it was presented after reaching agreement with all political parties.
   
9. Cabinet approves President Ranil Wickremesinghe’s proposal to limit Ministers’ trips abroad: Ministers’ travels limited to “necessary trips”: delegations limited to “required personnel”.
   
10. “Bandula” 80, the oldest elephant in the Dehiwala Zoo, dies: Bandula had been brought to the zoo in 1943 as a year-old calf, and thereafter trained to participate at the “elephant dancing show” which is a major tourist attraction.

Looking at the length and breadth of the economic crisis after the Covid era, it appears that the current Sri Lanka is caught in the trap of an ‘Economic Hitman’. Gotabaya Rajapaksa, who came to power on November 16, 2019, faced this debt burden. As of 2014, the amount required for debt servicing was two billion dollars, and in 2019, the amount surged three times to six billion dollars. After ‘leaning against the wall’ in the debt trap, Sri Lanka had two solutions. One solution was to maintain the economic stability of the country by paying off the due loan installments, even in the midst of dire straits.

Although this appears to be a highly pressured method, various strategies could have been sought to pay off the loan premium through unpopular practices such as import restrictions. Sri Lanka followed this methodology till 12th April 2022. It was also the method that the Central Bank of Sri Lanka (CBSL) must follow. The Central Bank had no legal right to follow any other method.

The next method was to unilaterally default on the loan without paying the installments. This is seen as declaring the country bankrupt. Such a serious decision cannot be taken by an official let alone by the President or by a single opinion. There is a separate legal status for that, and it must be approved by the Cabinet and Parliament.

Soft Default

President Gotabaya Rajapaksa was considering a case of debt default in the world economy, using what he described as ‘soft default,’ on the subject of Sri Lanka at this time. Dr. Indrajith Coomaraswamy and Prof. Shantha Devarajan advised him on that. The Central Bank of Sri Lanka was paying the due installments and doing its job even when these two were contacting the ex President through Zoom and advising the him to direct Sri Lanka to a smooth debt default. The Ministry of Finance also knew that the practice of the Central Bank was correct.

It is also necessary to consider Dr. Indrajith Coomaraswamy and Professor Shantha Devarajan, who became the sole advisor of President Gotabaya Rajapaksa, and who were assigned to give advice for the economy of Sri Lanka, according to the coordination of Milinda Moragoda. Dr. Kumaraswamy, who served as the Governor of the Central Bank during the Good Governance government, is one of the leaders who led Sri Lanka to the current debt trap. Dr. Kumaraswamy, a strong financial backer of the LTTE and a consultant to Raj Rajaratnam’s Galleon Company, who was convicted by a US Court in 2011 for profiting by using undisclosed information in insider trading, also acted as the Indian side’s representative for the ECTA agreement with Milinda Moragoda as a member of the Pathfinder Team.

Rajapaksa had intended to not pay the debt by single decision as the first step to bankrupt the country by rounding up World Bank advisers like Prof. Devarajan. Accordingly, the proposal of Dr. Indrajith Kumaraswamy and Professor Shantha Devarajan was that Dr. Nandalal Weerasinghe should be appointed as the new Governor of the Central Bank of Sri Lanka. Accordingly, Dr. Weerasinghe became the new Governor on April 7, 2022, and by the sole decision of the new governance, on April 12, Sri Lanka decided to default on its sovereign foreign debt with immediate effect. Foreign-aided NGOs were already exerting the environmental influence necessary to add the adjective bankrupt to Sri Lanka, and even so, Sri Lanka acted for its economic sovereignty. In this situation, the country’s economic sovereignty was illegally betrayed by Dr. Weerasinghe.

At the same time, the power center of the Sri Lankan economy began to gather around the International Monetary Fund (IMF). Thus, it is my understanding that it was Weerasinghe who took the necessary steps for the assassination of the country’s economy.

On April 29, United National Party (UNP) Chairman Vajira Abeywardena questioned as to whose permission was Sri Lanka declared bankrupt.

He asked whether the Cabinet had given the approval to act considering the country to be bankrupt and weather the Ministry of Finance and the Minister himself had approved it. As the Chairman of the UNP, he also stressed that it is the responsibility of all 225 members of Parliament to study the issues and tell the country whether the Parliament has given approval.

Sri Lanka is in a very sad situation in front of the world and the Central Bank, which answers to everything, did not respond to Abeywardena’s statement that the country has reached that situation due to non-payment of debts. Vajira Abeywardena also questioned about this in Parliament.

He added that those who declared Sri Lanka bankrupt have committed an illegal act, and although the Parliament has given up financial control and handed it over to others, since the financial control belongs to the Parliament by law, declaring the country bankrupt is a powerless process, and the current President is questioning it in Parliament when he was still a Member of Parliament. He also said that neither the Ministry of Finance nor the Central Bank has the power to bankrupt the country and said that when something is done without power, everyone remains silent. He said that the country’s bankruptcy was declared by the other group without the knowledge of the representatives of the Parliament, but the blame was placed on the Chambers. He further said that it is the responsibility of everyone in Parliament to demand a proper investigation into the bankruptcy of the country.

This is treachery of the worst kind, as well as an offense of the gravest kind. Dr. Weerasinghe is the main person responsible for that.

With the decision to default, Sri Lanka had to resort to a position dependent on the International Monetary Fund for its entire economic process. Dr. Weerasinghe, who participates in the discussions about Sri Lanka with the IMF and has become the head of the preparation of the necessary Sri Lanka policy. He previously served as the Sri Lanka representative of the Monetary Fund of Sri Lanka. Due to Weerasinghe receiving three years for the opportunities of working in the financial fund which is entitled to others for two years, he got the opportunity to get the super pension provided by the financial fund. Accordingly, Dr. Weerasinghe is now a pensioner of the financial fund. What is the morality of him having such a relationship with the financial fund for Sri Lanka to negotiate with it? On one hand, Sri Lanka’s decision to default on the International Monetary Fund; On the other hand, being the negotiator of the financial fund on behalf of Sri Lanka as a beneficiary of the financial fund.

It is true that Gotabhaya Rajapaksa, who was the puppet of Milinda Moragoda, gave this ability to Weerasinghe. However, Dr. Weerasinghe was ultimately stabbed, but more weight should be put on him when it comes to this economic assassination.

President Ranil Wickremesinghe is scheduled to leave for the Philippines on the 26th. That is to participate in the 57th Congress of the Asian Development Bank which will be held in Manila from the 26th to the 30th.

Wickramasinghe will participate in the conference as the Minister of Finance.

Sri Lanka has the position of chairman of this year’s conference. That was according to a request made by the then Finance Minister Ravi Karunanayake in 2016.

The conference was scheduled to be hosted by Sri Lanka in March, but due to the situation in the country, the then Finance Minister Mahinda Rajapaksa asked the heads of the Asian Development Bank to postpone the conference.

According to that request, the 57th Congress was postponed and it was later decided to hold it in Manila, Philippines, hosted by Sri Lanka.

It is also reported that the President will ask Asian countries to support the debt restructuring program initiated by the Sri Lankan government.

Unless the polls are dramatically mistaken, on September 25th Italians will elect the most right-wing government in their country’s post-war history. A three-party alliance is expected to win more than 60% of the seats in parliament; the Brothers of Italy (fdi) looks set to dominate the trio, and its leader, Giorgia Meloni, to take over as prime minister.Listen to this story.

Liberals shudder. The fdi has its roots in neo-fascism. In speeches Ms Meloni hammers away at illegal immigrants and “woke ideology”. She told American conservatives earlier this year that “our whole identity is under attack”, and has accused the European Union of being complicit in ethnic “replacement”. She defends and admires Viktor Orban, Hungary’s populist prime minister. Ms Meloni’s elevation would follow the Sweden Democrats’ success last week in becoming that country’s second-largest party, with a probable say in the next government. Marine Le Pen in France took 41% of the vote in her race against Emmanuel Macron in April. All these are signs of a powerful shift in the European balance towards the nationalist hard right. Fed up with the failures of the established parties, voters are plumping for the untried and untested.

And liberals are not the only ones to worry. Flinty bankers fret that Ms Meloni will tangle with the eu, go soft on reform and lose control of Italy’s mountainous debt stock ($2.7trn, or over 150% of gdp). The fdi has no experience of government (it was founded in 2012, and took just 4% of the votes in the election of 2018), and its expected coalition will include the parties led by Silvio Berlusconi and Matteo Salvini, two untrustworthy men with a record of tricky relations with Brussels. Both have plenty of reasons to clash with Ms Meloni, who will have stolen a crown each thinks should be his. In a country that has had 30 prime ministers and more than twice that many governments since 1946, this is not a recipe for stability.

How anxious should these very different camps be? The risks are obvious. But there are also reasons to be cool-headed. First, consider social policy. fdi members are strongly committed to Catholic values, and many would like to turn the clock back. But Ms Meloni has clearly stated that she has no plans to strike down the law that permits abortion, which has been in place since 1978 and enjoys solid support; an attempt to repeal it was rejected in a referendum in 1981 by nearly 70% of those voting. Much the same is true for gay rights. Gay civil unions have been permitted since 2016 and, although there is no consensus favouring gay marriage, there is also no urge to scrap the partnerships. A crackdown on illegal migration is surely to be expected, but when Mr Salvini was last in government, between 2018 and 2019, he promised the same, only to find that the obligations of international law and eu rules imposed limits on what he could do.

The reality is that Italy is constrained in many ways, not least through the roles played by its indirectly elected president and the head of its constitutional court, a pair of impeccable centrists. Similar constraints will limit the amount of damage to the eu that Ms Meloni could cause, even if she wanted to. It is true that, like Mr Salvini, she has in the past talked about scrapping the euro or even leaving the bloc itself. But both of them have grasped that membership of the eu is popular in Italy, where 71% of people support the euro. Ms Meloni has already committed herself to follow the reform plan drawn up by her predecessors and approved by the European Commission, which comes with a handy €200bn ($198bn) or so of pandemic-recovery money. She does say she will seek some changes to it, but in agreement with the commission; good luck with that.

A bust-up would turn off the supply of money. It would also mean that Italy would become ineligible for support under the European Central Bank’s new bond-buying instrument. It would cause a crisis in the markets, and Ms Meloni knows it. Insiders say she is trying to find a reassuring banker to serve as her new finance minister and a respected pro-European to be her foreign minister. Reassurance is Ms Meloni’s mission, and in this she is different from Mr Salvini, an unreliable firebrand. The fact that she is the one who has risen to the top of the rightists’ pile is the best bit of news in a disquieting situation.

There is one more indubitable plus to Italy’s probable new prime minister. Unlike Mr Salvini and Mr Berlusconi, or indeed Ms Le Pen and Mr Orban, Ms Meloni is no fan of Vladimir Putin. Since the invasion of Ukraine, she has been a steadfast and strong voice of support for Ukraine and nato.

Nonetheless, Ms Meloni faces daunting odds. Italy’s economy is unproductive and hampered by structural, cultural and demographic problems. Since 2000, gdp per person has not grown—as it must if Italy is to deal with its stock of debt. Almost a quarter of young Italians are not in employment, education or training, by far the worst level in the eu. The eu-backed reform plan is meant to help correct this, but the turnaround will be long and slow, if it happens at all. It will need to be pushed for a decade or more, not the 17 months managed by Mario Draghi, the outgoing prime minister.

Is Ms Meloni the right person to do the pushing? Nothing in her speeches suggests that she understands the need for competitiveness. In fact, she favours sweeping nationalisation and protectionism, though she will be unable to achieve either.

Hope, but plan

What happens if the economy goes wrong? After years of interest rates being set at or below zero, the ecb raised them by 0.75 percentage points this month. Further increases are forecast for this year. If the going gets really tough, will Ms Meloni work calmly with the eu and the ecb, or flip to full populist mode, as Greece did a decade ago? An embattled leader, with Mr Salvini snapping at her heels, who tried to shore up her popularity by blaming the eu for Italy’s problems would be a very different prospect from the Ms Meloni on offer now. Yet here, too, is a sliver of comfort. Ms Meloni needs the eu because Italy cannot shoulder its debt without help from Brussels. Europe must calmly accept Italy’s democratic decision to elect Ms Meloni and help her succeed, while privately warning her how damaging to both Italy and the eu a falling-out would be.

THE ECONOMIST

The celebration of the 92nd National Day of Saudi Arabia was organized yesterday (23) afternoon at the Colombo Shangri-La Hotel.

Prime Minister Dinesha Gunawardena, Speaker Mahinda Yapa, President’s Senior Advisor Sagala Ratnayake and many distinguished guests attended the event.

The special attention of this National Day event is that Bodu Bala Sena General Secretary Galagodaatte Gnanasara Thero has joined the event as a special guest. It is clear from the observation of social media that his presence, who has acted strongly on Muslim extremism and criticized Saudi organizations on several occasions, has caused many people to be surprised.

Its Chief Executive Officer Lecturer Dilantha Withanage, who had been away from the activities of the Bodu Bala Sena organization for several years, also participated in this National Day celebration along with Gnanasara Thero as a special guest.

The Bodu Bala Sena organization has come to the conclusion that with Saudi Crown Prince Salman adopting a moderate policy against Islamic extremism, the Saudi embassy departments are working with different attitudes.

Accordingly, several rounds of discussions were held recently between the Saudi ambassador officials and representatives of the Bodu Bala Sena organization led by Gnanasara Thera.

The report also states that Saudi diplomatic departments have asked Gnanasara Thero to take the lead in establishing Buddhist-Muslim friendship by studying Buddhist and Muslim problems internationally.

Sri Lanka is expecting a debt relief of 2.9 billion dollars from the International Monetary Fund to get rid of the dollar crisis and debt crisis it is facing. Several rounds of discussions were held over the course of several months.

Reuters reports that the Central Bank is expecting that the relevant loan amount will be approved before the end of this year.

Reuters reports that in a discussion held by the officials of the Central Bank with the investors yesterday, opinions have been expressed in this regard.

1. Supreme Court grants “leave to proceed” in the FR petition challenging former President Maithripala Sirisena’s presidential pardon to Royal Park murder convict Jude Jayamaha.
2. Cabinet cancels coal tender awarded on 25th August: selected supplier has not furnished the performance bond, citing concerns over on-going litigation and payment risk due to debt default: Lanka Coal decides to activate last year’s tender to make procurements.
3. President Ranil Wickremesinghe allows previously-banned weed-killer Glyphosate to be used for all crops in the next Maha season in a bid to boost agricultural production.
4. Minister Dr Bandula Gunawardana says Sri Lanka Railways will sell scrap steel rails to earn foreign exchange amid a currency crisis.
5. President Ranil Wickremesinghe issues gazette declaring High Security Zones around Parliament, Supreme Court, High Court, Magistrate’s Court, Attorney General’s Dept, Presidential Secretariat, President’s House, Defence HQs and official residencies, PM’s Office, and Temple Trees.
6. Central Bank officials inform investors that IMF approval of USD 2.9 bn loan is likely by year-end: however, inner sources say Ministry of Finance and CB actually believe the earliest date of disbursement, if all goes well, would be 2nd Quarter of 2023.
7. Chinese Embassy says medicine worth RMB12.5mn (Rs.650mn) donated by China to Sri Lanka is on the way: also offers food and other humanitarian assistance valued at USD 400,000: requests PM Dinesh Gunawardena to provide a list of the country’s immediate requirements.
8. Japanese Ambassador says Japan will support debt restructuring “negotiation process” so that Sri Lanka can reach the final agreement with IMF: also says it intends to play “constructive role” with other creditor countries including China and India.
9. State Minister of Tourism Diana Gamage proposes the growing of cannabis (ganja) and promoting it as an ayurvedic medicine: elaborates many new avenues to promote tourism.
10. Peradeniya University starts project to provide students with opportunities to work part-time: programme to provide for students from all 9 faculties to engage in work within the university itself.

President Ranil Wickremesinghe has issued an extraordinary gazette announcement, turning a significant area of ​​Colombo into a high security zone.

According to this gazette announcement, the Parliament Complex and its surrounding area, the Presidential Secretariat, the Presidential Residence, the Prime Minister’s Office, Temple Trees, the Supreme Court complex including the Supreme Court, the Colombo Magistrate’s Court Complex, the Attorney General’s Department, the Army Headquarters, the Air Force Headquarters, the Navy Headquarters, the Police The headquarters, the offices of the Defense Secretary and the three armed forces commanders and their surrounding areas have been declared as high security zones.

The Secretary of Defense has been designated as the competent authority for the implementation of these orders and without the permission of the Senior Deputy Inspector General of Police for the Western Province, no procession or public meeting of any kind can be held in the high security zones.

The lighting of firecrackers or other fireworks for any reason is strictly prohibited.