By: Staff Writer

March 26, Colombo (LNW): McDonald’s local franchisee Rusi Pestonjee is to challenge the ex-parte enjoining order issued against him over a dispute concerning the sale of shares.

Pestonjee owns 98% stake in International Restaurant Systems Ltd., the local franchisee of McDonald’s.

Colombo Commercial High Court Judge Sumith Perera last week issued an enjoining order preventing Pestonjee from using the name McDonald’s in any way as well as sale of its food menu in 11 outlets until 4 April.

The Court made this order consequent to a lawsuit filed by McDonald’s Corporation, US seeking the court’s jurisdiction under the provisions of the Intellectual Property Act, No. 36 of 2003.

The plaintiff stated that it has terminated the right of the defendant to use the name McDonald’s or any name in any way or manner similar to the name McDonald’s and to use any name which would convey to the public that the said restaurants/outlets is in any way or manner connected to McDonald’s.

The plaintiff stated that the basis of the Development Agreement entered into in August 1997 has ceased to exist due to the actions of the defendant. The plaintiff further stated that the plaintiff does not desire the defendant to be a franchisee and to operate any restaurant under the name McDonald’s.

Dr. Romesh De Silva PC instructed by Sanath Wijewardane appeared for the plaintiff.

A spokesperson for the franchisee said that McDonald’s action is related to sale of shares and not due to hygienic issues as widely reported.

“As per the agreement Pestonjee is required to sell only up to 50% ownership of the local franchise entity but McDonald’s is demanding 100%. We will be contesting the enjoining order,” the spokesperson added. “

McDonald’s (MCD.N), opens new tab has ended an agreement with its local partner in Sri Lanka and all 12 outlets in the country have been closed, an attorney for the U.S. company said on Sunday.

“The parent company decided to terminate the agreement with the franchisee due to standard issues,” said Sanath Wijewardane, an attorney for McDonald’s. “They are not in business in the country. They may decide to return with a new franchisee.”

He said the deal was cancelled on Wednesday but the stores had continued to operate for some days.

Wijewardane declined to describe the issues but local media reported that McDonald’s went to court against Abans over allegations of poor hygiene.Abans says on its website, opens new tab it first partnered with McDonald’s in 1998.

By: Staff Writer

March 26, Colombo (LNW): An eminent economist and former Central Bank Deputy Governor W.A. Wijewardena says the real purchasing power of the people have halved at present in comparison to 2021.

According to him, in terms of the new series of the Colombo Consumers’ Price Index or CCPI, in January 2021 when the CCPI was 100, it cost a family of 3.8 members Rs. 91,880 to buy the basket of real goods and services involved.

In January 2024 when CCPI has increased to 200.6, the family should spend Rs. 184,311 to buy the same basket of real goods and services. That has increased the cost of living by 100%.

“If a family has the same income level as in January 2021, it amounts to cutting their real purchasing power by a half. This is an inflation tax which Sri Lankans have been paying over the period,” says Wijewardena.

Hence, it is not the current tax burden only that people should worry about. It is the total Government expenditure, known as the gross expenditure, about which they should be worried.

If the Government expenditure level is high and it is financed by taxing people, borrowing from both domestic and foreign sources, and printing money leading to inflation, people are forced to bear a burden.

Hence, higher the Government expenditure, greater the burden being borne by people.

For instance, the Budget 2024 envisages to raise Rs. 3.8 trillion by way of taxes and another Rs. 307 billion as other incomes.

But the total Government expenditure that includes the repayment of both domestic and foreign debt as well has been estimated at Rs. 11.7 trillion or 35% of estimated GDP.

It has generated a gross financing requirement of Rs. 7.4 trillion or 22% of GDP. Since the new Central Bank Act has prohibited the direct money printing to finance the budget, the entirety of the gross financing requirements should be financed by borrowing from the domestic and foreign sources and from commercial banks.

Thus, it is the total Government expenditure that should worry citizens instead of the mere tax payments.

The total expenditure of the Government, known as gross government expenditure, is made up of the recurrent or consumption expenditure, expenditure incurred for building the country’s capital stock, and money used for repaying the maturing Government debt.

Financing that expenditure, whether it is done through taxes, borrowings, or money printing, or a combination of all the three, is a burden to the people. Taxes force them to bear the burden today, borrowings tomorrow, and inflation today as well as the future. 

By: Staff Writer

March 26, Colombo (LNW): Plaintiff Hamilton Reserve Bank Ltd. (HRB), countering the defendant Democratic Socialist Republic of Sri Lanka’s motion for a five-month stay, has requested the New York Southern District Court to extend the stay till the end of April 2024 on the condition that timely and specific information about the status of restructuring be submitted by 16 April.

Sri Lanka was seeking a five-month hold on a lawsuit filed by a bondholder over the country’s historic debt default, telling a New York federal judge that it wants more time to negotiate with private creditors.

The island nation was sued in July 2022 by Hamilton Reserve Bank Ltd., which sought full payment on more than $250 million of Sri Lanka’s dollar bond that was due that month. The bank says it holds more than 25% of the bonds, which would likely enable it to block any modification of the notes.

Complete details about any restructuring proposal Sri Lanka made or received and the progress are the key contents of the proposed reports the Plaintiff demands.

In its ‘Memorandum of Law in Opposition to Defendant’s Motion for Further Stay,’ HRB argued a further five-month stay until the end of July 2024 is unwarranted. “

The traditional stay factors and comity do not support a five-month stay. The prior four-month stay has already afforded Sri Lanka a limited opportunity to achieve a consensual resolution before judgments are entered or enforced against its debts. Nothing more is required,” the Bank said.

Bringing out Peru’s restructuring, which took seven years as an example, the HRB pleaded: “Second Circuit law clearly states that bondholder actions cannot be kept indefinitely.

That is because sovereign debt restructurings, which involve ‘voluntary and open-ended negotiations’, are not the equivalent of a judicially enforced bankruptcy proceeding. Instead, sovereign debt restructurings are merely voluntary, private negotiations, with no judicial supervision or clear timeline, that typically take years.

Given such negotiations’ protracted and uncertain nature, courts should not deny bondholders’ right to enforce the underlying debt by making their rights conditional on the completion of restructuring.”

“Sri Lanka is pursuing private negotiations with other creditors that have ‘no obvious and reasonably proximate termination date,’ indeed, these negotiations remain at an early stage nearly two years after Sri Lanka’s default.

As in Peru, Plaintiff’s rights cannot be made conditional on the completion of Sri Lanka’s restructuring, since there is no assurance of whether or when that will occur. 

March 26, Colombo (LNW): The trend of the Sri Lankan Rupee (LKR) being appreciated against the US Dollar continues today (26), with the selling price remaining below the Rs. 300 threshold at leading commercial banks in the country.

At Peoples Bank, the buying price of the US Dollar has dropped to Rs. 296.40 from Rs. 297.38, and the selling price to Rs. 306.44 from Rs. 307.45.

At Commercial Bank, the buying price of the US Dollar has dropped to Rs. 296.44 from Rs. 296.77, and the selling price to Rs. 305.75 from Rs. 306.50.

At Sampath Bank, the buying and selling prices of the US Dollar remain unchanged at Rs. 298 and Rs. 307, respectively.

March 26, Colombo (LNW): Sri Lanka, emerging from its economic challenges, has implemented significant taxation measures affecting both businesses and individuals.

The International Monetary Fund (IMF) has indicated that these measures are necessary to sustain the country’s stability, at least for the foreseeable future.

IMF Senior Mission Chief for Sri Lanka, Peter Breuer, stressed the importance of maintaining the current tax levels to fund essential government services.

Addressing concerns raised by various sectors of the economy, Breuer emphasised the need for all citizens to contribute proportionally to support the provision of common goods.

Acknowledging Sri Lanka’s significant economic crisis and the resulting decline in real incomes, Breuer highlighted the drastic reduction in economic activity, with GDP dropping by 15 per cent in dollar terms in 2023 compared to the previous year.

He attributed the crisis to the government’s financial constraints due to insufficient revenue sources.

Historically, Sri Lanka has experienced higher revenue collection levels, reaching up to 20 per cent of GDP in the 1980s.

However, recent years have seen a decline, with general revenue averaging around 9 per cent of GDP between 2019 and 2022, significantly lower than the average for other emerging market countries.

Regarding fiscal reforms, the IMF welcomed Sri Lanka’s commitment but stressed the importance of continuing progress, particularly in introducing property tax and implementing revenue measures to meet mobilisation goals beyond 2025.

Additionally, efforts to enhance revenue administration, combat corruption, and ensure cost recovery in fuel and electricity pricing for state-owned enterprises were deemed crucial to minimise fiscal risks.