The government’s decision to temporarily default on sovereign debt repayments, akin to a declaration of bankruptcy, will deal another major blow to the country’s economy and credibility. It comes at a time when mass protests are spontaneously taking place in all parts of the country on account of the economic hardships that the people are being put through. The resignation of the cabinet nearly two weeks ago and the failure to appoint a new one is indicative of government paralysis which is injurious to the country.
The mass protests have continued non-stop, and continued even on New Year days traditionally devoted to the family and to religious observances. They are a popular expression of the withdrawal of the people’s mandate from the government. The slogans both written and articulated in all demonstration sites in Colombo and elsewhere convey that the President and government have lost their mandate to govern and need to resign. This sentiment has generated a mass movement coming together irrespective of their religious and ethnic backgrounds.
The National Peace Council believes it is the responsibility of the president and parliamentarians who function under the provisions of our Constitution to find modalities to come together to pull the country out of the plight we are in. The focus of the mass protests has been the corruption and lack of accountability within the government. We call on the government leadership in particular to heed the will of the people which is getting stronger by the day and restore their credibility and dignity. We endorse the spirit of the demands currently being articulated.
Accordingly, we call on the government to repeal the 20th Amendment that concentrates powers in the presidency and erodes the independence of state institutions that ensure accountability and transparency. A downsized presidency and an interim government with a new prime minister acceptable to both the government and opposition is the most urgent necessity. Such an interim government with new faces could also appeal to the international community for the necessary bridging finance to enable the economy to get restarted. Immediate attention should be given to supply fuel, cooking gas, electricity, medicines and essential goods to the general public.
A meeting between pro-government lawyers and the Hon. Prime Minister Mahinda Rajapaksa was held at Temple Trees this morning (18).
Discussions were held on resolving the problems that have arisen in the country so far and the prejudice caused to the country due to the ongoing struggles against the government.
The lawyers pointed out that the removal of the President was unconstitutional and it appears that without a clear understanding of the Constitution the struggles were being led by an organized group based on the problems currently faced by the people.
During the struggles of 1988-89, the protest against the assassination of the then President J. R Jayewardene ended in great devastation to the country.
The lawyers also mentioned that the struggle being waged against the President, the Prime Minister and the government by the youth without any understanding of the past and the existing laws and which is being carried out all over the country could lead to another catastrophe in the country.
The lawyers said that ordinary people do not seem to be giving money to facilitate the current struggles and that there are suspicions that some organization is spending money in an organized manner to destabilize the country.
The lawyers also pointed out that the Sri Lankan media should not knowingly or unknowingly support the struggle to destabilize the country in various ways and that the media should act responsibly in such a situation.
The lawyers said that it was timely to audit the assets of the people’s representatives and that it should start with the state institutions and government officials. They said that the corruptions of state institutions and officials are now being loaded on the shoulders of politicians since the government officials do not change although the peoples’ representatives are changing time to time.
Lawyers further pointed out that organized gangs are using the people to embarrass the government and remove the President and the Prime Minister to achieve their narrow goals, so it is imperative that the President and the Prime Minister act with courage in fulfilling the needs of the people with a clear understanding of this crisis.
Prime Minister Mahinda Rajapaksa stated that the government is working to resolve the crisis in the country and that the people should be aware of the political conspiracies being carried out by other organizations using the people.
A group of lawyers including President’s Counsels W. Dayaratne and Rashik Shahrukh were present at the event.
According to Pakistani media, a Pakistani anti-terrorism court sentenced six people to death and seven others to life in jail for their roles in the lynching of a Sri Lankan national for alleged blasphemy.
In the murder case, 89 men have been charged, nine of whom are juveniles.
Seven of them have been sentenced to life in prison, while the remaining 76 have been sentenced to two years in prison.
Judge Natasha Nasim, who conducted the trial in secret within the high-security Kot Lakhpat Jail in Lahore on a daily basis, declared the verdict in front of the suspects.
The judge did not announce the verdicts of nine minor defendants whose trials are still ongoing.
Last year, a religiously fanatic mob lynched and burned Priyantha Kumara, a 49-year-old Sri Lankan citizen and manufacturing manager in Pakistan’s Punjab city of Sialkot.
At the time, Imran Khan, Pakistan’s prime minister, condemned the vigilante violence and promised to prosecute the offenders.
The trial of the case in Kot Lakhpat Jail was completed by an anti-terrorism court.
In the case that was heard on a daily basis, both the prosecution and the defence had finished their arguments.
The investigative officers’ and eyewitnesses’ statements had also been recorded.
The Ceylon Petroleum Corporation (CEYPETCO) has increased fuel prices effective from midnight today (18), days after the Lanka Indian Oil Company (LOIC) announced theirs.
Petrol Octane 92 – Rs. 338 per litre Petrol Octane 95 – Rs. 373 per litre Auto Diesel – Rs. 289 per litre Super Diesel – Rs. 329 per litre
Three more Ruling Party members have been sworn in as state ministers.
Diana Gamage – State Minister of Transport Seetha Arambepola – State Minister of Education and Technology Vijitha Berugoda – State Minister of Ports and Naval Affairs
Accordingly, the number of state ministers sworn in before President Rajapaksa today (18) has increased to 24.
Archbishop of Colombo His Eminence Malcolm Cardinal Ranjith speaking to a briefing held in Colombo today (18) disapproved of the new Cabinet appointed by President Rajapaksa today by calling it a mere deception and to be serving no people’s hopes.
The Cardinal also disclosed that there were information on thugs and armed forces plotting to dissolve the protesters which would be an unacceptable and immoral response. Instead of engaging in such stupidity, the sovereignty of the people should be respected and the law should move towards a new system that is above political authority, he emphasised.
The Cardinal further noted that the rulers who deceive the public by not acting in a manner that assures the sovereignty of the people should be stepping down.
The swearing in of new state ministers has commenced at the President’s House.
These state ministries are being appointed in relevance to the Cabinet of Ministers appointed this (18) morning.
Nevertheless, the public protest demanding the President, the Prime Minister and the government to step down are continuing for the 10th consecutive day.
BANGKOK — Debt-ridden Sri Lanka has stepped into uncharted waters. Negotiations begin this week in Washington between government officials and the International Monetary Fund for a relief program, against the backdrop of protests at home and the decision to stop paying its overseas debts.
It is the 17th time the Indian Ocean nation has sought a financial lifeline from the fund, the second-highest frequency in Asia, after Pakistan. The planned default, however, is a first, leaving holders of its hard currency-denominated bonds expecting a debt restructuring in which they will take a haircut on what they are owed.
Nandalal Weerasinghe, a veteran central banker and economist brought out of retirement this month to be governor of the Central Bank of Sri Lanka, has his sights on calming creditors.
He told reporters after raising interest rates by a record 700 basis points in one of his first acts, “[This] will give a strong message to the international investors, to our creditors and to the markets that we are going to get out of this crisis as soon as possible.”
His stance has set him apart from his politically tainted predecessor, Nivard Cabraal, whose views mirrored the ultranationalist vision of President Gotabaya Rajapaksa and who eschewed engagement with the IMF in favor of homegrown solutions like cutting imports and making bilateral currency swap deals with the likes of China to build foreign exchange reserves.
For the markets, the lead-up to Sri Lanka’s historic failure to make an interest payment due April 18 is a chronicle of a default foretold.
An international sovereign bond (ISB) maturing in July had been trading at 54 cents to the dollar even before the default plan was announced, reflecting the risk of a significant haircut. A $1.25 billion bond maturing in 2023 was trading at 47 cents to the dollar.
“Existing market prices were significantly down, and bondholders knew a default was on the cards,” said Murtaza Jafferjee, managing director of JB Securities, a financial consultancy in Colombo.
Sri Lanka’s foray into the international capital markets began in 2007, while the country was at the end of a nearly three-decade civil war and under the presidency of Mahinda Rajapaksa, Gotabaya’s popular elder brother. International investors clamored for that first $500 million bond for its high yield, an 8.25% coupon rate.
“It was oversubscribed, a real success story, but it led to a borrowing binge,” said a veteran commercial banker in Colombo, recalling a wave of further issues with coupons averaging 6%. “We were partying without thinking when to repay.”
Sri Lanka has been grappling with its history of “twin deficits” — trade and budget deficits — and its cycle of borrowing to settle older loans was possible only as long as rating agencies gave the country a good grade for an emerging market. After all three main agencies had downgraded Sri Lanka’s sovereign ratings to junk by early 2020, the door to the capital markets slammed shut.
Nearly 70% of the government’s revenue was going toward debt interest payments by 2020 after it slashed taxes, worsening the budget deficit to over 10% of GDP for 2021 and 2022. COVID-19 caused receipts from tourism to plummet, robbing the country of a key source of foreign earnings to build currency reserves. Likewise, the pandemic disrupted the foreign exchange that came from remittances of migrant workers employed abroad.
By the end of last month, the $81 billion economy’s usable foreign reserves had slumped to just $200 million, from $7.6 billion in December 2019. Official reserves stood at $1.7 billion, but that included a $1.5 billion swap with the People’s Bank of China that has conditions attached, according to bankers in Colombo.
Food, fuel and pharmaceutical shortages in the import-dependent country and a spike in inflation — including food inflation at over 30% by March — turned public anger against the ruling Rajapaksas, the country’s most influential political clan. The idea of paying foreign debt while people went hungry became untenable.
Amid calls for the president to step down, Gotabaya’s entire cabinet resigned, and he has appointed a four-member rump to replace them, including a confidant, Ali Sabry, as finance minister. On April 12, a five-page document released by the Ministry of Finance said the Sri Lankan government will “suspend normal debt servicing of all affected debts for an interim period.”
The move has raised the stakes in the talks with the IMF, which will begin at the fund’s spring meeting on Monday.
The fund has already offered Sri Lanka economic benchmarks that need to be met to restore macroeconomic stability and debt sustainability. The country needs to raise income tax and value-added tax (VAT), fund staff members have said. It must implement a tighter monetary policy to contain rising headline inflation, now at 18.8 %, the highest in Asia. It must have a flexible exchange rate to rebuild international reserves and phase out the central bank’s direct financing of budget deficits, the IMF said in a report released in March.
But it will be bitter medicine for a Sri Lankan public already battered by economic hardship. “Raising interest rates will bankrupt small businesses, the backbone of the economy, and increasing VAT at a time of a crisis will affect more people,” said Ahilan Kadirgamar, a political economist at the University of Jaffna in northern Sri Lanka. “This is going to be a long, painful process.”
Bondholders will also be key stakeholders. By the end of 2020, a year into Gotabaya’s term, the country’s foreign debt was $38.6 billion, accounting for 47.6% of the central government’s total debt, according to the IMF. International sovereign bonds made up the largest share, at $14 billion, followed by $8.8 billion in loans from multilateral lenders and $6.2 billion in bilateral debts. The top 20 ISB holders included BlackRock, Allianz, UBS, HSBC, JPMorgan Chase and Prudential, according to Advocata Institute, a Colombo-based think tank.
Weerasinghe said he is seeking to appoint international legal and financial advisers as the country readies for intense negotiations. Bond market analysts are building models to judge how much investors will have to write off and what kind of payment schedule they can expect on the restructured bonds.
The political pressure building up against the government has not been lost on markets. “We believe investors are worried that the IMF talks and restructuring negotiations may be disrupted in the absence of a unified government that can ratify the economic adjustments and commit to the implementation of reforms,” Avanti Save, credit strategy research director at Barclays, wrote in a note to clients.
Investors reached by Nikkei Asia echoed those sentiments. “The bondholders will be looking to the IMF talks to assess the deal and whether the government is capable of implementing the reforms,” said one Hong Kong-based fund manager who has invested in Sri Lanka’s international bonds. “They will use that to figure out what kind of haircut lies ahead — a reasonable one, or something worse.”
New ministers of the Cabinet were appointed without regard to seniority and every minister should be working without seeking any additional privileges, said President Gotabaya Rajapaksa, addressing the occasion of swearing in new Cabinet of Ministers today (18).
The President urged every minister to commit themselves to honest, efficient and clean administration.
The President also urged the new Cabinet to turn the public institutes under them into bodies without corruption and committed to public service.
No changes were made in the Premiership, Finance Ministry and the Foreign Affairs Ministry.
The Court today (18) denied a request to impose a travel ban on former Finance Minister Basil Rajapaksa and former Finance Secretary S.R. Attygalle.
Keerthi Thennakoon, a provincial governor of the previous government, had made this request to the Court and Maithri Gunaratne, another former provincial governor of the previous government, appeared in Court on his behalf.
A vacation court is functioning today and only one of the five Colombo Magistrate Courts operates. Colombo Additional Magistrate Harshana Kekunawala, who served as its Judge, denied the above request.
