McKinsey mantra for Sri Lanka
- McKinsey Senior Partner Chair of Insights and Ecosystems Sven Smit moots likely Indian century ahead and says strategically located Sri Lanka stands to gain
- Describes Sri Lanka’s potential as solid and this could be realised with right strategies, competence and competitiveness and make Sri Lanka grows better and bigger than it had in the past
- Stresses Sri Lanka must find its own positioning in the region and globally
By Nisthar Cassim
Renowned global management consulting firm McKinsey is urging Sri Lanka to use the strategic geographic location effectively and benefit from India’s rise whilst following best practices of successful emerging economies.
“If the Indian century comes through, whoever is related to that will have benefits,” emphasises McKinsey Senior Partner Chair of Insights and Ecosystems Sven Smit who is also the Chair of the McKinsey Global Institute, the firm’s business and economics research arm.
“Are you close to something that grows?” queried Smit in an interview with the Daily FT during a recent visit to Sri Lanka. “One of the endowments of Sri Lanka is location. I come from the Netherlands, where the port of Rotterdam is. To what degree can Sri Lanka be the port of India or a port? Even if you’re a port to India, that will make a big difference,” he added, reinforcing that Sri Lanka stands to benefit from India’s rise.
Smit stressed when something as big as India starts to move at a different pace, it pulls its surroundings and Sri Lanka with right strategies, competence and competitiveness, can grow better and bigger than it had in the past.
He stresses Sri Lanka needs to ask itself whether the country is making what India needs or be the logistics hub for what it needs or ships out. McKinsey executive said that at the potential level Sri Lanka is solid and this could be realised by the right strategies. “The more you have the best business policies and practices the better it is,” said Smit and listed among them were fiscal discipline and currency stability along with a dynamic agriculture, manufacturing and services sector including tourism and logistics.
“Sri Lanka has a natural endowment to do agriculture and better agriculture is needed in the world, including productivity. Sri Lanka could be one of the more productive locations,” said Smit who is a member of McKinsey’s global leadership team, overseeing the firm’s knowledge development.
He added that being an island nation, Sri Lanka also has a natural attraction to tourism which has great potential.
He stressed that “Every country will need to find its position.” According to Smit, a country can only get one or two words in the mind of the world. “From a brand perspective of New York it is Wall Street and the Big Apple. Singapore has its financial centre. Sri Lanka can put one or two words. Is it the port, is it tourism, or is it a manufacturing place? This doesn’t mean that you should do all four, but one or two of those should be the things that the world will think or remember when it is comes to Sri Lanka.”
“What always works is if you have one or two strong winners, it will pull everything up. If you have an industry that’s big and strong ‒ be it manufacturing, tourism or ICT, and for that you need basic services, and then when that engine runs on the platform of that, another engine can run. Countries are going to be known for what works the best,” Smit added.
https://www.ft.lk/top-story/McKinsey-mantra-for-Sri-Lanka/26-746781
Quick impressions on post-war development
Jaffna revisited
The recent visit to Jaffna, after several years of forbidden travel due to the pandemic, provided an opportunity to revisit areas of interest and observe the changes, including positive and negative developments, in both the economic and social fronts. It was a quick visit and unexpectedly the timing of the visit coincided with the visit of the President who declared open the Jaffna Cultural Centre on 11 February 2023. The festive atmosphere that prevailed on that day was combined with a subdued celebration of the 75th anniversary of Sri Lanka’s Independence. The atmosphere signified that Jaffna is slowly emerging from the isolation that kept its charms hidden.
Except for the cleaning up and beautification of Aryakulam and its environs with a benefactor’s contribution, the Jaffna Municipal Council does not appear to have initiated any significant renovation and refurbishment work in public areas
Economic Activities
The war-torn city of Jaffna is coming back to life after almost three decades and three years of the pandemic while struggling to cope with day-to-day cost of living pressures and erosion of well entrenched societal values. One could witness the disappearance of bullet marked buildings which are being renovated with remittances received from overseas.
The end of the war saw significant road development initiatives sponsored by the central government. This resulted in paved roads including the major artery-A9-and other pivotal highways that connect Kankesanthurai, Palaly and Point Pedro. Unfortunately, some areas did not benefit from this uneven development. For example, the road leading to some of the main Islands like Velanai,Pungudutivu and Nainathivu is in a dire state requiring immediate attention. There could be similar situations elsewhere not traversed by the author.
Renovation of old houses and temples, and establishment of small businesses appear to have occurred during the pandemic. The emergence of supermarkets combined with a surfeit of wedding halls give the impression that there was money circulating in the community despite lack of evidence of enhanced economic activity-remittances from abroad have been used to reconstruct damaged houses and buildings as well as invest in some less productive ventures. Anecdotal evidence suggests that most of the wedding halls will soon be white elephants!
While construction activities proceeded on a small scale with private funding, public places like the Jaffna market and Tinnevely market areas remained largely untouched. Except for the cleaning up and beautification of Aryakulam and its environs with a benefactor’s contribution, the Jaffna Municipal Council does not appear to have initiated any significant renovation and refurbishment work in public areas. The development of the Aryakulam area into a place of both historical and touristic attraction is a welcome move, but may require further investments to enhance its potential.
In a city where the primary mode of transport was bicycles, the growth in the number of scooters signified that overseas remittances were occasionally put to good use despite contradictions in the way funds were invested. The Jaffna youth considered the possession of scooters as a status symbol in addition to its practical value as a transportation mode. This has also helped older adults to be less dependent on public transport to get to work and attend to household activities.
In anticipation of an influx of tourists, increased number of medium sized hotels and resorts and a plethora of guesthouses have sprung up in the last few years. Many of the guesthouses remain empty although hotel occupancy rates are improving with south-north traffic and a sprinkling of overseas tourists.
An interesting development is taking place consequent to the removal of border controls. The movement of Sinhalese from the south has increased considerably and their involvement in some economic activities has created an opportunity for increased social interaction with the Tamils. A substantial number of people travel from the south to visit religious places in Nagadeepa/Nainatheevu and other areas of social interest. The number of visitors from the south outnumbered those from within Jaffna on the day the author visited Keerimalai Springs, a place noted for its religious significance and healing properties. Another event comes to mind-the author witnessed a busload of visitors from the south entering the Jaffna market after visiting Sri Naga Vihara and negotiating prices for products in Sinhala. It was interesting to observe that proficiency in the Sinhala language among Tamil traders was even better than their counterparts in Colombo. This situation raises hopes that movement of people irrespective of their race, religion or caste will now promote unity in diversity and greater interaction among the country’s diverse population.
The involvement of Sinhalese in some economic activities has created an opportunity for increased social interaction with the Tamils
The social structure is reported to be crumbling. The social stratification that encompassed caste-based divisions which continued to survive the onslaught of the civil war is now co-existing with clan- based divisions resulting in sharp deterioration in the social order. The emergence of gangs engaged in criminal activities using sword as a weapon combined with indiscriminate use of drugs among the youth have created a divisive population.
In contrast to this development however, a substantial number of youth pursuing higher studies have shown keenness in their studies. What was gratifying were the scenes witnessed in many roadside areas where queues of students in bicycles were waiting for their turn to attend tuition classes. The difference was that such students were always accompanied by one of their parents compared to what prevailed a decade or two ago when the same practice of attending tuition classes rested entirely with the students themselves. This sharp difference has apparently arisen due to the fear that unaccompanied students would fall a prey to drug use and other socially disruptive practices.
An assessment
Is Jaffna booming, blooming or busting is the question that arises in the minds of those familiar with Jaffna’s heritage, historical background, culture and socioeconomic development patterns. Jaffna is going through a process of transformation which displays both positive and negative features. The author, in his book entitled, ‘ManagingDevelopment: People, Policies, and Institutions’ launched in Colombo under the auspices of the current President (then Prime Minister) in August 2019 and later in Sydney, Australia in September 2019, and in Manila, Philippines in November 2019 had this to say about development, “Development is about people. People are both partners and beneficiaries of change. Good policies and effective institutions provide the basis for sound development management. Successful institutions derive their power from competent leaders and good management practices. The pace and process of development are determined by good governance and strengthened capacity to implement and manage projects”. Viewed from this perspective there are shortfalls and issues relating to policies, appropriate institutional structure and oversight and sound governance, including dynamic leadership and management, providing form and content to structured development at the local level.
Regaining confidence in the stability of life which had been badly battered during the civil war and subsequent post-war period could be considered a significant positive feature. Although the pandemic had an adverse impact on agricultural activities there was progressive participation in pursuits that kept people engaged in productive occupations. At present farming activities are slowly building up though not to the levels of the pre-war situation.
Non-farm activities comprised opening of small-scale grocery stores, supermarkets, fisheries and general business ventures and mixed trading enterprises, including tourism related ventures. Supermarkets and agro-industrial enterprises such as mills, and packaging industries have generated some employment among the youth.
Infrastructure development, one of the key features of post war development, has had both positive and negative impacts due to uneven spread and lack of adoption of a strategic planning approach.
Education has been identified as an industry in the Jaffna peninsula from the time of the British and continues to be so even now although standardisation of university admissions in the 1970s caused a substantial setback. However, the level of interest in pursuing higher studies is evident in the keenness shown by students to follow tuition classes despite obstacles.
The participation of people from the south in economic activities has brought the Sinhala-Tamil communities together and with or without their knowledge they are promoting inter-communal harmony and social integration.
The primary limiting factor is the lack of a planned investment pattern, both public and private, that has resulted in uneven and lopsided development which has contributed to unproductive ventures mushrooming in several parts of the city. This was confirmed by many, including legislators who understand the pulse of the people better. Some of the supermarkets located in distant areas were reported to be on the verge of closing due to lack of business. The practicality and sustainability of these ventures were not subjected to critical examination at the planning stage. The same applies to guesthouses many of which have had no guests for months.
Another limiting factor is the drug menace which seems to attract the marginalised youth who, having suffered from the trauma, loss of life and poverty during and after the war, found an escape route provided by unscrupulous and influential drug traffickers.
Conclusions
Jaffna is moving forward and is witnessing a positive transformation, albeit with limitations arising from ill-planned, adhoc and disjointed interventions spanning the entire development domain. The absence of investments in any major industrial venture suggests that long-term investment planning has been missing. A distinguishing feature of the development pattern is that investment funds came largely from overseas remittances with no significant inputs from successful local entrepreneurs or from local government institutions. This needs to be reversed and funds should be generated within the country at central and local levels if the pattern of investment is to be directed at ventures that will have a durable impact on the society with their economic and social viability assessed and analysed critically at the planning stage. This however does not preclude external financing provided it is channelled appropriately.
There needs to be a centrally located planning entity or a technically competent approval body which could coordinate the approval, supervision and monitoring of new ventures based on their relevance and economic value. An overarching body of this nature could possibly fall under varying authority levels depending on the scope, nature, and size of the investment portfolio; under the district secretariat, the Governor or the Jaffna Municipal Council, as appropriate.
The social issues, including drug trafficking, need to be tackled with appropriate intervention, supervision and funding from both central and local government levels. The establishment of an effective, high level task force comprising representatives from civil, military, police and NGO’s to handle crime and drug use could play a pivotal role to apprehend offenders, seek appropriate punishments, and enforce rehabilitation activities endorsed by medical and social welfare institutions.
(The writer is formerly of the Ceylon Civil Service and Retired Senior Professional of the Asian Development Bank)
https://www.dailymirror.lk/opinion/Quick-impressions-on-post-war-development/172-256631
Sri Lanka to seek competitive bids for state asset sales
ECONOMYNEXT – Sri Lanka will adopt a competitive bidding process for asset sales and will shortly call for expressions of interest from transaction advisors to support the divestment program, the head of the state enterprise re-structuring unit Suresh Shah said.
All assets will be sold through a competitive bidding process and no unsolicited bids will be accepted.
The first step will be to select transaction advisors.
“We will work with development financial institutions and qualified and experienced consultancy firms to provide transaction advisory services,” Shah said.
“After the transaction advisors study the companies, we will call for bids.”
Sri Lanka’s cabinet of ministers has given the go ahead for the sale of SriLankan Airlines including Sri Lankan Catering which has large volumes of debt from losses after it was taken back to state management from Emirates.
Sri Lanka Telecom, Sri Lanka Insurance Corporation, Litro Gas Lanka Ltd/Litro Gas Terminals Pvt Ltd, Canwill Holdings Pvt Ltd which owns the Grand Hyatt building, Hotel Developers (Hilton) are also in the list.
The transaction advisors will assist in “sell-side due diligence, valuation, data room creation, transaction strategy and marketing” of the firms, according to a statement from the re-structuring unit.
All assets will be sold through a competitive process. Both domestic and foreign investors could bid.
“We will not accept unsolicited bids,” Shah said. “We will follow a transparent and credible process. Whoever want to make a bid will be given the opportunity. We will call for bids both locally and internationally.”
A decision to list any unlisted firms has not has not been taken as yet but will be considered, he said.
In addition to getting immediate cash from asset sales, helping boost cashflows, the government will also bet a share in any higher future profits under private management through corporate income tax, not counting turnover taxes.
The debt of SriLankan Airlines will be re-structured before a divestiture.
According to IMF program related documents, a plan to re-structure debt of several state companies including SriLankan Airlines has to be approved by cabinet by June 2023 under a structural benchmark involving a World Bank program.
By September residual dollar loans would be transferred to the government. (Colombo/Mar28/2023)
Sri Lanka to seek competitive bids for state asset sales
Karaikal-KKS ferry service to commence on 29 April
Minister of Ports, Shipping and Aviation, Nimal Siripala de Silva said the first ferry line, of the new ferry service, to be operated between Karaikal Port in Puducherry, India and Kankesanturai (KKS), is scheduled to call at the KKS Port on 29 April.
The Minister disclosed this information at a discussion, with the stakeholders of this new ferry service, held recently at the Ministry.
A passenger terminal was built at the KKS Port as part of infrastructure development for the new ferry service. The Sri Lanka Ports Authority (SLPA) has provided a financial facility of Rs 144 million for construction carried out by the Sri Lanka Navy.
The initial construction phase of the passenger terminal has already been initiated by the SL Navy and will be handed over to the SLPA by the second week of April, following completion.
The ferry service owners at the discussion revealed that USD 50 will be charged from a passenger for a one-way trip and a baggage allowance of 100 kg will be permitted.
A ferry will carry 150 passengers at a time and will take around 4 hours to reach KKS from Karaikkal Port. Ferry service owners emphasised that only day time services will be operated initially. The Minister said as the ferry service has been launched, any entrepreneur from Sri Lanka or India is welcome to invest.
The Minister also said besides the launch of the new ferry service, the expansion activities of the KKS Port will be expedited.
“As the credit line from India for this construction is insufficient, an additional credit facility of USD 16 million has been requested from the Indian Exim Bank,” the Minister said.
Karaikal-KKS ferry service to commence on 29 April
Sri Lanka is in an interval in hell: Dr. Shanuka Senarath
If SL does not strengthen its finances, it may default on IMF loan
Govt. needs to control inflation as gateway to economic recovery
After Premadasa’s time, SL has never had a proper economic policy
Population of 20 million in this country, but only 500,000 pay tax
Sri Lanka is currently in what he would term an ‘interval in hell,’ says Economist, Attorney-at-Law, and University of Colombo Department of Economics Senior Lecturer Dr. Shanuka Senarath. “This is just the tip of the iceberg; all the problems are still under the carpet,” he asserted, in an interview with The Sunday Morning.
Commenting on the anticipated International Monetary Fund (IMF) bailout, he asserted that the $ 2.9 billion assistance package was hardly any financial gain, but noted that working with the IMF would put Sri Lanka on a better global footing. However, he warned that if Sri Lanka did not strengthen its finances, there was a possibility of it defaulting on the IMF loan too.
In the course of the interview, Dr. Senarath also spoke on areas the Government should prioritise in moving towards recovery, the tax regime, the latest power tariff hike, the Samurdhi poverty alleviation programme, the lack of a focused national economic policy, and the complete disinterest in tackling corruption.
Following are excerpts:
How do you view Sri Lanka’s current economic status and what’s your outlook for the country in the months ahead, especially in the backdrop of positivity surrounding the IMF bailout package for Sri Lanka?
If you look at the current economic status of the country, Sri Lanka obviously is a bankrupt country. It has been declared bankrupt so we are not paying our debt obligations and we are also not importing things as we used to do.
On average we were paying around $ 600 million as interest and repayments of debt, which we are not paying now, so we are saving around $ 600 million a month. Also, due to import restrictions, we are saving around $ 1,000 million a month.
Given that we are bankrupt and we are not importing or paying our debt, we are in what I would call an interval in hell – a situation which may look quite calm but is not. This is just the tip of the iceberg; all the problems are still under the carpet. That is how I would explain the nature of our economy in brief.
If I come up with a shorter example, if we have a hire purchase vehicle and stop making our repayments, no one will suddenly come and take our vehicle. There is a time gap between default and legal enforcement. We are in that time gap at the moment.
We have defaulted, we have to restructure our debt, and we have to pay back our debt; we are in an interval and we have to face real economic hardship in future.
Will this be the case even if the IMF bailout comes through?
The IMF bailout is $ 2.9 billion, which will be given to us over four years’ time. That is hardly any financial gain or loan because it is a minimal amount.
The good part about the IMF is, when Sri Lanka’s debts are restructured in light of the IMF funding, it gives a signal to the rest of the world that we are with the IMF. As a result, we will be able to do things like issue sovereign bonds or go for bilateral debt agreements. Other than that, the IMF won’t give any monetary strength to the country. However, it’s a good thing that the IMF has given a greenlight.
With the IMF, we can expect a slight recovery in the economy, but that doesn’t guarantee anything. Greece defaulted on its IMF loan; that is also a possibility. If we do not really strengthen our finances, there is a possibility that we may default on the IMF loan as well.
What should the Government’s priorities be in order to speed up recovery?
If we have a disease, we have to control our growing temperature. Our economy is facing huge inflation. Over the last 12 months, inflation has been over 100% and prices have doubled.
First, the Government needs to control inflation, for many reasons. One is, when we have this sort of inflation, it affects people’s purchasing power. People are becoming poorer. It also affects our domestic economy and our industries, which is why the economy is shrinking. Inflation also results in exports becoming harder to market in foreign markets. Local inflation is higher and so is the cost of production.
The Government should control inflation as the first step, as a gateway to economic recovery.
While revenue generation is important, negative impacts on people’s purchasing power is in turn negatively impacting the overall economy. How can these factors be balanced and managed favourably?
People’s purchasing power has gone down by more than 50%. In a rough estimate, the real value of Rs. 100 would be around Rs. 33 by now; purchasing power has declined by around 66%. That is something severe, with no increase in income. This is simply due to inflation, which the Government should control.
I will give you one good suggestion of what the Government should do. Oil or fuel is the lifeblood of the economy given that electricity and diesel are the main components of power generation in the economy.
If you look at the process of supplying fuel to the Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC), the Government imposes a tax of almost 100% on fuel. The price of a litre of petrol when it arrives in Sri Lanka is well below Rs. 200. A litre of diesel costs around Rs. 250. Then the Treasury imposes a tax, which makes a litre of petrol Rs. 400 and a litre of diesel more than that.
Fuel is given to the CEB at these prices, due to which the price of electricity has gone up. Transportation uses fuel at this price, so the cost of transportation has gone up. The entire economy is facing inflation because transportation and power are the main sources of production. As a result, all prices are going up, from bread to whatever else.
If the Government can provide fuel to the CEB at CIF [Cost, Insurance, and Freight] price, that will control inflation. This is just one example I can suggest to policymakers. There are many ways of controlling inflation; this is how we can enhance people’s purchasing power and at least try to control the situation.
What are your thoughts on the current tax regime, especially in the backdrop of protests by trade unions?
Taxes are quite usual in any economy. The biggest argument from the Government side is that in other countries, taxes are quite high. I agree. Say for example in Australia, after a certain point taxes are around 33% of income.
However, the issue here is, given our purchasing power, we have been facing so much inflation over the last two years and our prices have doubled or more, while there has been no increase in income over the last 12 months.
On the other hand, there are so many indirect taxes in the Sri Lankan economy – for example, the tax on fuel and various other things like Value-Added Tax (VAT), which are indirect taxes that have also caused prices to go up. There are also other means of revenue generation from the Government side, fees and so on, which have gone up as well.
As a result, people are experiencing or gaining very little real income. The amount you can spend is very little as all these indirect taxes, fees, and everything else has gone up. On top of that, once we have these tax rates, it will be devastating. That is why the trade unions are working on this.
Some people have found out that they are gaining negative salaries; once they have paid their loans and the tax is imposed, they have to pay something to the institute for which they work. This is the nature of the situation.
There is an issue in Sri Lankan tax rates. The tax curve should be something that increases gradually. For lower-income brackets, the tax should be very low. For example, Rs. 200,000 is a very low amount of income in Sri Lanka at the moment. Even for Rs. 100,000, there is a tax. I do agree that even for a Rs. 50,000 income there should be a tax, but that should be at an absolute minimum – it should be nominal, say 0.5% or something. When it goes up, the tax rate should go up accordingly.
One of the biggest issues with the current tax rate is that taxes are higher at middle-income levels and comparatively lower at higher-income levels. I believe the tax threshold should go up at least to Rs. 200,000 and from there onwards tax should increase gradually.
There is another problem as well. We have a population of 20 million in this country, but only 500,000 people pay tax. Our tax base is quite weak because a lot of people are not paying taxes and the tax system is not developed. That is something the Government should focus on rather than forcing the entire burden on these 500,000 taxpayers.
How do you view the latest power tariff hike and its impact on people and industries?
If you look at the formulas and the rates of tariff on power, the increase is mainly for those who consume less power. For a person consuming less than 90 units per month, the hike is more than 250%, which is quite high.
The other issue is that our economy is already shrinking. Estimates are that it has gone down by 20%. The World Bank estimates that our economy will shrink another 4% by the end of this year, but that is for the formal economy. In a country like Sri Lanka, with such a wide informal economy, the actual drop will be more than 4% because most economic activities are not recorded. As a result, my estimate as an economist would be another 10% or 20% for this year as well.
Our industries are closing down – mainly local industries do not have the capacity to export; they don’t have any other market. Local demand is confined to essentials. People are mostly buying only food items and essentials like medicines; they have cut out most of the items we consider as luxury items in our current state. On top of that, we have this huge increase in electricity bills, which definitely impacts people’s purchasing power. It’s another indirect tax.
Industries also cannot cope with these prices and when they add their prices to the products, no one will buy them. Even export prices will go up tremendously in line with the electricity prices, which will result in a problem for Sri Lankan exporters in foreign markets.
Now we have a sudden appreciation of the rupee, which we have incorporated with all the good hopes, but look at what happens to the exporters – the amount of rupees they are getting for exports has suddenly dropped. The increases in cost of production, electricity, and all other factors along with the sudden appreciation of the rupee all work as obstacles for economic recovery.
The IMF has called for an increase in welfare programmes, even as some of the revenue generation steps are pushing people into economic hardship. How can the wellbeing of the lesser-privileged sections of society be ensured?
That is a very crucial point when it comes to a crisis. In an economic crisis, poverty increases. Our poverty over the last 10 years was around 5% of the population and it has risen to 10% now. It’s a challenging task for any government to address poverty in a crisis. One good thing the Government can do is minimise inflation and also strengthen its poverty alleviation programmes like Samurdhi.
If you look at Samurdhi, one of the biggest issues is that about 7% of recipients are from among the highest income earners in this country. Another 5% of actual poor people who should get the allowance are not getting it.
The Government was talking about a project where it would give the Samurdhi based on electricity consumption; this was discussed some time ago. People consuming less than 90 units a month are considered to be poor. There are issues with the measurement of considering people who use less power as poor, but all these impacts of power hikes are again on those who should receive Samurdhi.
The Samurdhi allowance, for example, is given to political henchmen rather than those who really need it. The Government should look into these factors and strengthen its poverty alleviation programme.
Addressing poverty amid a crisis is a hard thing, but it is something that should be done. If this situation continues, the impacts of malnutrition and the collapse in education will be seen in another 10 years’ time.
Does Sri Lanka actually have a focused economic policy or is it just flailing about in the dark in a reactionary manner?
To be honest, the sad truth is that we don’t have one. If we look at the economic history of this country, after President R. Premadasa’s time, we have never had a proper economic policy.
When we were kids, we had some sort of an industrial policy for this country, where they started garment factories and were starting to move towards semi-industrialisation of the country, which was quite good for the time. If you look at some of Sri Lanka’s export giants, those organisations came during the time of those industrialisation policies, especially in the garment industry.
After that, we never had a proper policy or a framework to address the needs of this country. What the Government has always done is depend on the revenue of those who are working in the Middle East. India has now banned sending housemaids to the Middle East given the higher social costs of such employment, but it is sad to see that Sri Lanka is solely depending on the monies of those working in the Middle East.
If you look at India, it is generating more dollars by selling IT services to the world compared to the revenue generated by Saudi Arabia by exporting oil. Imagine how much India is earning by strengthening its IT sector? What have we done? We were talking about monorails and technology villages, but we have never implemented anything. We have made some concrete investments in harbours, airports, and towers, which have no impact on the economy.
To be honest, as an economist, I have not seen any strong policy or any considerable policy on our economy over the last two decades.
While people undergo tremendous hardship, no politicians and State officials have been held accountable for the economic crisis. How can faith in the system be restored and people’s buy-in ensured in getting Sri Lanka back on track?
That is one of the key points I would like to emphasise on. If you look at the history of this, if I go back two years when Fitch Ratings was downgrading Sri Lanka, some of our key people who are responsible for economic management were talking about this downgrade as a conspiracy against the country because we had finished the war – the usual gallery political discussion.
At the time, we as economists said, ‘do not utter these words; they may burn the trust we have among the international community’. We have lost reputation and recognition in international communities over the last five years due to many factors.
Corruption, bribery – there was a time we were talking about a 10% commission on all investments coming into Sri Lanka – mismanagement and nationalist ideology have ruined the reputation of this country internationally. Locally, if you talk to an average Sri Lankan, no one believes in politicians because of corruption.
One good thing – and I don’t think this will ever happen – that can be done is carrying out proper investigations into what happened, into the corruption that has taken place. The report on illicit finance states that $ 20 billion has been looted from Sri Lanka over the last 10 years. That $ 20 billion amounts to almost half of our debt obligations.
For example, Israel is considering building a canal from the Red Sea to the Mediterranean, which would cost $ 15 billion; $ 20 billion is more than that. $ 20 billion is enough for Sri Lanka to survive for five years without doing anything. That is the amount we have lost thanks to corruption.
The IMF is talking about corruption control but nobody here is talking about it. The IMF is talking about tax increases and the Government is very happy about it. The IMF is talking about revenue generation through taxes, that is fine and politicians are happy, but nobody is talking about corruption control.
One good thing whoever comes into power in the future can do is have a proper investigation like in Malaysia and Singapore. We talk about becoming Singapore, but we are not talking about controlling corruption. That is something that should be done, it is an urgent need, but we cannot expect it from the current regime or current politicians.
President writes open letter to bilateral creditors with appeals and assurances
- Letter with clarifications aimed at providing comfort to all and enable SL to progress swiftly to next stage of the debt treatment negotiations
- Reiterates he is committed to stay the course, and says SL relies on creditors to do the right thing
- Woos all to maintain and even enlarge and strengthen official bilateral creditor coordination
- Says new era starts with full implementation of IMF-supported program and resolution of debt situation
- Commits to transparency and assures SL will not make any side arrangements with any creditor aimed at reducing debt treatment impact on that creditor
- Assures not to resume debt service to any creditor unless that creditor agrees on a comprehensive debt treatment in line with IMF-supported program parameters and comparability of treatment principle
President Ranil Wickremesinghe yesterday wrote an open letter to all official bilateral creditors of Sri Lanka with multiple appeals and assurances ahead of next week’s Executive Board consideration and approval of $ 2.9 billion four year Extended Fund Facility (EFF).
The letter contains clarifications aimed at providing comfort to all and enable Sri Lanka’s to progress swiftly to the next stage of the debt treatment negotiations.
Following is the full text of President Wickremesinghe’s open letter.
It was with great satisfaction and sincere hope that I welcomed the announcement made last Tuesday by the Managing Director of the IMF, Kristalina Georgieva, that an IMF Executive Board meeting will be held on 20 March 2023 to consider and hopefully approve the Extended Fund Facility (EFF) arrangement we requested as part of our efforts to restore macroeconomic stability and debt sustainability.
I would like to praise your diligence and express my gratitude to the Paris Club creditors and Japan in particular, and to India and China for enabling the cooperation required to arrive at this point and explicitly delivering IMF compatible financing assurances as well as the other creditor countries which answered the Paris Club creditors’ call to join them. I would also like to thank the Paris Club Secretariat for supporting these efforts.
Since taking office last July, my Government and I have been engaging in good faith with all of you, providing all the necessary information to enable you to make a proper assessment of our debt situation, and the required efforts to close our funding gap and restore debt sustainability. My Government also deployed all efforts to demonstrate our commitment to the EFF program and relentlessly engage on the path to reforms. Our administration has already implemented major reforms by way of prior actions agreed with the IMF.
In the 75 years of Sri Lanka’s independence, there has never been a more critical period for our economic well-being and future development. That is why we have introduced a robust reform agenda aimed at achieving debt sustainability, strengthening governance, widening the social safety nets supporting the most vulnerable and ensuring we can grow an inclusive economy attractive to international business. This is how we will improve the lives of our people and ensure they are first in line to benefit from improvements in our economic conditions.
The IMF-supported program will be critical to achieving this vision for our country. Hence, this new era starts with the full implementation of the IMF-supported program and the resolution of our debt situation with you as long standing partners, as well as with our commercial creditors. There is still a lot of work to be done together. I encourage you to maintain and even enlarge and strengthen official bilateral creditor coordination in the context of our forthcoming engagement. It is the best way of achieving an efficient, transparent and equitable implementation of our debt treatment exercise. For that, I call on the Paris Club bilateral partners, in particular Japan, together with all our other official bilateral partners, including India and China, to garner and foster coordination as you best see fit.
We also understand and acknowledge that we must ensure that appropriate safeguards are in place to ensure equitable burden sharing and comparability of treatment. To alleviate any legitimate concern in that regard, there are commitments that we can make to those of you willing to take action ahead of the others.
The first of these commitments, probably the most important one, is transparency. We commit to communicate transparently with all of you on any debt treatment terms that are agreed with any creditor or group of creditors, before being formalised. In the same vein, we commit to report regularly on our indebtedness, ensuring no financial liabilities incurred by the country are undisclosed.
Second, we commit not to resume debt service to any creditor unless that creditor agrees on a comprehensive debt treatment in line with IMF-supported program parameters and the comparability of treatment principle.
Third, we reiterate our commitment to a comparable treatment of all our external creditors, with a view to ensuring all-round equitable burden sharing for all restructured debts. To that end, we will not conclude debt treatment agreements with any official bilateral creditor or any commercial creditor or any group of such creditors on terms more favourable than those agreed under any multilateral platform put forward by our official bilateral creditors. Offering a debt treatment outside of the perimeter set by the debt targets under the IMF program would risk making Sri Lanka’s debt unsustainable again. To this end, we also confirm that we have not and will not make any side arrangements with any creditor aimed at reducing the debt treatment impact on that creditor.
I sincerely hope that these clarifications will provide comfort to all of you and enable us to progress swiftly to the next stage of the debt treatment negotiations. This is paramount for our country. Just as my administration and I have committed to do, we rely on all of you to do the right thing.
RW Govt. gears up to finalise IMF deal
(The Morning 12-03-2023)
- China’s latest assurance on SL debt restructuring brings IMF deal closer
- Govt.-India in agreement to extend $ 1 b credit line by a few months
As Sri Lanka nears the one-year mark of last year’s Aragalaya people’s power protest campaign, the country’s economic revival seems to be finally on track with the appreciation of the Sri Lankan Rupee and economic activities showing positive signs following news of the proposed International Monetary Fund (IMF) deal likely to be finalised this month.
However, the public’s agitation over the ongoing hardships seem far from over, with Opposition parties, civil society, trade unions, and university students taking to the streets over a plethora of demands. It would therefore be correct to say that the challenges faced by the Ranil Wickremesinghe Government are far from over.
Nevertheless, there was some respite for the Government with the receipt of the latest letter by the China Export-Import Bank on Monday (6), expressing commitment to Sri Lanka’s debt restructuring programme. The letter by the Export-Import Bank of China was signed by the Bank’s Vice President, Zhang Wencai.
“We hereby express our firm support to Sri Lanka through a debt treatment. This would be in line with the goal/objective of restoring public debt sustainability consistent with the envisaged IMF-supported programme and delivered through financial operations negotiated between our two sides. In view of the time needed for Sri Lanka to complete the debt treatment negotiation, in order to end your default status as soon as possible, and pave the way for the country’s economic recovery and debt sustainability restoring, the bank is going to provide an extension on the debt service due in 2022 and 2023 as an immediate contingency measure based on your request, which means you will not have to repay the principal and interest due of the bank’s loans during the above-mentioned period, so as to help relieve your short-term debt repayment pressure.
“Meanwhile, we would like to expedite the negotiation process with your side regarding medium- and long-term debt treatment in this window period, with a view to finalising the specifics of a debt treatment in the coming months, based on the principle of active communication, friendly discussion, mutually-beneficial, and win-win cooperation. We will make our best efforts to contribute to the debt sustainability of Sri Lanka,” the letter has stated.
The letter has further stated: “The bank will support Sri Lanka in your application for the IMF Extended Fund Facility (EFF) to help relieve the liquidity strain. In the meantime, adequate contributions from all the creditors would be a critical condition for a speedy solution as desired by all the parties. We will continuously call on commercial creditors (including the international sovereign bondholders) to provide debt treatment in an equally comparable manner, and encourage multilateral creditors to do their utmost to make corresponding contributions, to help you better respond to the crisis and emerge from it.”
Following the latest assurance received by the Chinese, President Wickremesinghe informed Parliament that Sri Lanka was expecting IMF Board approval by the end of the month after its largest bilateral creditor gave written support for debt restructuring via the Export-Import Bank of China on Monday (6). He said the Government had received the letter of assurance from the Chinese Exim Bank the previous night and the letter of intent signed by the Central Bank Governor and the President had been sent to the IMF the same night.
Meanwhile, US Treasury Secretary Janet L. Yellen on Monday spoke with President Wickremesinghe and expressed support for Sri Lanka’s steps towards an IMF-supported programme to advance economic reform and achieve a strong and durable recovery.
According to the US State Department of Treasury, the Secretary welcomed Sri Lanka’s commitments to transparency and comparable treatment for all bilateral official and private creditors.
IMF Chief Kristalina Georgieva said on Twitter: “I welcome the progress made by Sri Lankan authorities in taking decisive policy actions and obtaining financing assurances from all their major creditors, incl. China, India and the Paris Club.” She added that she looked forward to presenting the IMF-supported programme to the Executive Board on 20 March.
“Sri Lanka has now received financing assurances from all major bilateral creditors. This paves the way for consideration by the IMF’s Board on 20 March the approval of the Staff-Level Agreement reached on 1 September 2022 for financing under an Extended Fund Facility. Approval by the board would also catalyse financing from other creditors, including the World Bank and the Asian Development Bank. The arrangement will support the authorities’ programme of ambitious reforms that they have already embarked upon, which will help Sri Lanka emerge from its current crisis and set it on a trajectory of strong and inclusive growth,” the IMF stated on Tuesday (7).
Sri Lanka is making good progress towards unlocking the IMF bailout package but its Restricted Default (RD) status will only come off after the debt restructuring process reaches completion, rating agency Fitch had stated on Friday (10). “Sri Lanka’s post-default ratings would depend upon our assessment of its credit profile. If the key parameters for returning to debt sustainability under the IMF programme allow for a moderate and extended debt reduction process, this could facilitate debt restructuring talks but may weigh on the sovereign’s post-default credit rating,” Fitch said in a statement.
Meanwhile, Reuters last week reported that Sri Lanka was negotiating with India to extend a $ 1 billion credit line by a few months. The news report, quoting sources, has stated that the credit line is due to expire on 17 March, with Sri Lanka having used only about two-thirds of it, mainly for medicines and food.
A source at the Sri Lankan Finance Ministry has also been quoted as saying that the Government wanted to extend the credit line by 6-12 months because there was about $ 300 million of it left unused. By Thursday (9), an agreement had been reached on the extension.
Trinco Oil Farm- and related issues
(From The Island 8-03-2023)
New move on Trinco oil tank farm
Having participated at the China Bay parade, President Wickremesinghe, accompanied by National Security Advisor and Chief of Presidential Staff, Sagala Ratnayake, and several others, including Power and Energy Minister Kanchana Wijesekera, toured the Trincomalee Oil Tank Farm, consisting originally of 100 tanks, situated in 827 acres of land. The tank No. 91, however, was destroyed in Japanese air attacks, launched by ship-borne bombers, and attack aircraft, during World War 11. President Wickremesinghe is the first head of state to visit the Oil Tank Farm since Sri Lanka handed it over to Lanka Indian Oil Company (LIOC) during his previous tenure as the Prime Minister. The Oil Tank Farm is situated in China Bay. Managing Director of LIOC, Manoj Gupta, was there to welcome President Wickremesinghe.
In terms of the agreement, finalized on 07 February, 2003, during Chandrika Bandaranaike Kumaratunga’s tenure as the President, the LIOC took over the 99 oil tanks, each capable of holding 12,300 tonnes (1 tonne =1,000 litres) of fuel. The upper and lower tank farms consist of 85 tanks and 14 tanks, respectively.
On behalf of Sri Lanka, the then Secretary to the Treasury, Jayampathy Charitha Ratwatte ,signed the agreement, operative for a period of 35 years. In fact, the Trincomalee facility is so far covered by three agreements, namely (i) the Indo-Lanka Accord of 29 July, 1987, signed by President JRJ and PM Rajiv Gandhi (ii) the agreement on taking over of possession and related matters of the China Bay installation of the Ceylon Petroleum Corporation (CPC), signed on 07 February, 2003, and (iii) comprehensive agreement on cooperation in economic projects, finalized on 26 April, 2017, by Indian External Affairs Minister Sushma Swaraj and Development Strategies and International Trade Minister Malik Samarawickrema.
President Wickemesinghe declared, at China Bay, in no uncertain terms, the urgent need to go ahead with the Oil Tank Farm development project.
In line with the government’s overall strategy, President Wickremesinghe recently brought in one-time Navy Commander, Admiral Ravi Wijegunaratne, as the Managing Director of the Ceylon Petroleum Corporation (CPC), and to its Director Board as President’s nominee, and also as Chairman, CPC Trincomalee Oil Tank Farm Development Company. The Director Board consists of eight-four each from Sri Lanka and India. The CPC /LIOC venture is meant to speed up the entire process. National Security Advisor Sagala Ratnayake is working on this project.
Of the 99 tanks, 61 tanks are empty. President Wickremesinghe is keen to restore the unused 61 tanks to working condition. Would it be possible to store here what can be safely called the strategic Indian oil reserves?
Indian response to the 80s threat
On 29 July, 1987, President JRJ and Premier Rajiv Gandhi exchanged letters which dealt with the Trincomalee Oil Tank Farm as part of the controversial Indo-Lanka Accord. They essentially addressed security issues, against the backdrop of the then growing Indian concerns that foreign military, and intelligence personnel, posed a serious threat to India. India never acknowledged that Sri Lanka wouldn’t have had to seek foreign military assistance if not for its then Premier Indira Gandhi launching a destabilisation project here by covertly training Sri Lankan Tamil armed groups, as a direct counter to then Sri Lankan President JRJ’s overt pro-Western stand, by even offering Trincomalee as a base to Washington.
India included the Trincomalee Oil Tank Farm in the agreement that was meant to bring the situation under control. But, at the end of its direct intervention, India had lost 1,300 officers and men, over double that number wounded, and Rajiv Gandhi himself was blown up, in Tamil Nadu, by a female Tiger suicide bomber. It was the price India paid for interfering in Sri Lanka’s internal affairs.
At the time New Delhi’s hand was also forced by covert Western actions to destabilize and, possibly, break up India, by backing various separatist groups there. So, in a way, the Tamil separatist movement here was hijacked by the West to sow discord in India, where there are more than 60 million Tamils. The West, led by the USA and the UK, was all out to finish off India, even using Pakistan as a proxy because it was seen as being too close to the then Soviet Union. But they were halted, in their tracks, because of the solid backing that New Delhi received from Moscow, the then countervailing military power. Later, with the collapse of the Soviet Union, in the late 80s, the West found a new convenient mortal enemy in Islamic terrorists, who were in the first place incubated, in Pakistan and Afghanistan, by Washington, to chase out Russians from the latter, with the backing of wealthy Arab countries, like Saudi Arabia.
So those in Delhi should be aware that if there was no China, India would have been the West’s current number two target, after Russia. These pale faces are essentially and, undoubtedly, evil, especially if one looks at what they have done around the world by plundering and enslaving the weakest, while outwardly professing ‘all men are created equal’. At least the Russians, after their October revolution, helped to free many of the enslaved colonies. All those colonies were given independence, for fear of the spread of Communism, and certainly not because the colonial powers suddenly became enlightened.
Let me reproduce the letter, dated 29 July, 1987, signed by Rajiv Gandhi.
” (1) Conscious of the friendship between our two countries, stretching over two millennia, and more, and recognizing the importance of nurturing this traditional friendship, it is imperative that both Sri Lanka and India reaffirm the decision not to allow our respective territories to be used for activities, prejudicial to each other’s unity, territorial integrity and security.
(2) In this spirit, you had during the course of our discussions, agreed to meet some of India’s concerns as follows: (i) Your Excellency and myself will reach an early understanding about the relevance and employment of foreign military and intelligence personnel with a view to ensuring that such presence will not prejudice Indo-Sri Lankan relations; (ii) Trincomalee, or any other ports in Sri Lanka, will not be made available for military use by any country in a manner prejudicial to India’s interests; (iii) The work of restoring and operating the Trincomalee Oil Tank Farm will be undertaken as a joint venture between India and Sri Lanka; (iv) Sri Lanka’s agreement with broadcasting organizations will be reviewed to ensure that any facilities set up by them in Sri Lanka are solely used as public broadcasting facilities and not for any military or intelligence purposes.
(3) In the same spirit India will: (i) Deport all Sri Lankan citizens who are found to be engaging in terrorist activities or advocating separatism or secessionism (ii) provide training facilities and military supplies for Sri Lankan security forces
(4) India and Sri Lanka have agreed to set up a joint consultative mechanism to continuously review matters of common concern in the light of the objectives stated in para 1 and specifically to monitor the implementation of other matters contained in this letter.
(5) Kindly confirm Excellency that the above correctly sets out the agreement reached between us. Please accept, Excellency, the assurances of my highest consideration.”
India raised concerns particularly over US and Israeli presence in the 80s. But, today, India is part of the Quadrilateral Security Dialogue (QSD), widely known as the Quad, formed to meet what the US, Japan, Australia and India perceived as the growing Chinese challenge. Sri Lanka is caught up in the Quad politics due to heavy Chinese investments here, particularly the leasing of the Hambantota Port, for a period of 99-years, to China, in 2017, by the Yahapalana government. But what is really interesting is that the same government finalized a wide ranging memorandum of understanding for cooperation in economic projects, on 26 April, 2017, with India, that covered the Trincomalee Oil Tank Farm, eight months before China secured 85 percent of shares in the Hambantota Port for USD 1.12 bn.
Media management in armed forces
While the writer was working on the presentation for JNSC, the US embassy, in Colombo, in a joint press release with Sir John Kotelawela Defence University (KDU), dealt with the launch of a publication, titled ‘A Shared Vision for the Indo-Pacific: Implications for South Asia,” edited by Dr. Harendra Vidanage, at the Cinnamon Grand, one of the hotels targeted by the Easter Sunday bombers.
Vice Chancellor of the General Sir John Kotelawala Defence University, Major General Milinda Peiris, was among those present, along with US Ambassador here Julie J. Chung.
The joint statement quoted Rear Admiral (ret.) Peter A. Gumataotao, of the USN, as having told the gathering: “What is at stake is our ability to respond to activities that undermine the values and principles of a free and open Indo-Pacific. Competition is good, but when rules are changed, the process should be transparent and agreed on. The US embassy is busy promoting a shared vision for the Indo-Pacific. It would be pertinent to mention that the US embassy issued statements in Sinhala, Tamil and English. Obviously, the media management is part of their operation. A few days before the Cinnamon Grand event, Ambassador Chung visited Parliament. She was there to welcome the appointment of new office-bearers of the Sri Lanka-US Parliamentary Friendship Association. Rebel SLPP MP Chandima Weerakkody was elected the President of the Association.
Sri Lanka seems to be in a catch 22 situation. Contrary to repeated assurances that Sri Lanka wouldn’t take sides in China vs Quad, Sri Lanka appears to be already tilted towards the US-led grouping. The proposed operationalization of the Trincomalee Oil Tank Farm should be examined against the Quad operations. Economic ruination has paved the way for external interventions as Sri Lanka struggled to cope up with growing challenges.
The armed forces and police find the situation tough as media manipulations continue. India is now part of the overall US political-security-economic policy. India actually encourages Sri Lanka to be part of the US-led club but there can be certain concerns. Unfortunately, the Opposition has conveniently missed key factors in the strategic Indo-Pacific project. The status of India-US relations is at its zenith, therefore our giant neighbour wouldn’t mind even if Sri Lanka signed the Status of Forces Agreement (SOFA) with the US. The Americans prefer to call the SOFA Visiting Forces Agreement (VFA).
Sri Lanka entered into the Acquisition and Cross-Servicing Agreement (ACSA) in August 2017 during Maithripala Sirisena’s tenure as the President. Perhaps those responsible for national security should study the circumstances President Sirisena gave into pressure that was brought to bear on him by Sri Lankan Ambassador in Washington at that time, Prasad Kariyawasam, to renew ACSA, in early August 2017. Sri Lanka first signed the ACSA in March 2007. It expired in 2017. The Yahapalana partner obviously had no objection. SOFA was first signed in 1995 during CBK’s presidency. Apparently, the United States asked Sri Lanka for a new pact and sent a draft to the Sri Lankan Ministry of Foreign Affairs, in August 2018. SOFA, however, is on hold.
The Millennium Challenge Corporation Compact (MCC) – a project worth USD 480 mn (Rs 89 bn) – was torpedoed by a committee, headed by Prof. Lalithsiri Gunaruwan, in February 2020. The economist didn’t mince his words when he declared ACSA, SOFA and MCC could be part of the US-Indo Lanka strategy.
Political leadership, regardless of the party in power, appears to have continuously failed to examine developments/situations/events properly. For the first time such a report was prepared in Sinhala.
The government media needs to closely study developing situations. With the emergence of social media, in the past decade, as an extremely powerful tool, media management has become a tough task. Situations cannot be tackled by simply issuing statements, or trying to suppress information.
A cohesive system is required to address issues at hand. Perhaps, those handling media will have to work outside official channels to overcome challenges.
Sri Lanka’s growing dependence on foreign powers to meet its needs, ranging from essential items, including medicines, school uniforms and defence requirements, in a way portends long term problems. Sri Lanka should be certainly grateful for international support but also mindful of other factors.
A recent statement, attributed to Deputy Indian High Commissioner, Vinod K. Jacob, underscored the status of Indian assistance. Jacob declared that India offered as many as 1,500 training slots, annually, to Sri Lanka, at an annual cost of USD 7mn. Jacob was addressing a group of Indian Navy trained Sri Lanka Defence Forces personnel, on board INS Sukanya, on February 28.
Referring to India’s much-touted ‘Neighbourhood First’ policy, Jacob mentioned a five-point plan to take Indo-Lanka relations to the next level. The Indian HC quoted Jacob as having said: “First is the potential for economic and financial cooperation by building on the Indian support to the people of Sri Lanka, in 2022, to the tune of USD 4 billion. The focus could be laid on areas, such as trade in national currencies, ease of investments and strengthening financial cooperation. Second, the two sides are working towards increasing air, ferry, digital and energy connectivity. Third, a new type of development cooperation partnership building on the existing multi-billion portfolio, with special emphasis on vulnerable communities, is required. Fourth, both sides need to enhance people to people exchanges, particularly in tourist movements. Fifth, it is essential to strengthen the cultural, religious, music, movie and sporting links for mutual benefit.”
Sri Lanka needs to develop a strategy of its own, drawing support from the international community. The current economic-political-social crisis should be addressed, without further delay. The failure to reach a consensus, on Local Government polls, can cause a protracted political conflict that may undermine the overall efforts to restore economic stability.
https://island.lk/prez-takes-trinco-oil-tank-farm-to-next-level/
IMF chief welcomes Sri Lanka’s progress in taking policy actions, securing creditor assurances
(Adederana 8- 03-2023)
The Managing Director of the International Monetary Fund (IMF) has welcomed the progress made by the Sri Lankan authorities in taking decisive policy actions and obtaining financial assurances from all major creditors including China, India and the Paris Club.
In a statement, Kristalina Georgieva said she looks forward to presenting the IMG-supported program to the organization’s Executive Board on March 20.
“The Extended Fund Facility (EFF) will support the authorities’ program of ambitious reforms, which will help Sri Lanka emerge from its current crisis and set it on a trajectory of strong and inclusive growth,” the IMF chief said further.
Sri Lanka has closed in on getting a sign-off on the long-awaited bailout package of USD 2.9 billion from the IMF upon receiving fresh financial assurances from China on restructuring the island’s debt.
Addressing the parliament this morning, President Ranil Wickremesinghe said a letter of agreement, signed by him as the finance minister and the Central Bank Governor Dr. Nandalal Weerasinghe, was forwarded to the IMF soon after receiving assurances from the Export-Import (EXIM) Bank of China last night.
However, the Deputy Ambassador of China to Sri Lanka, Hu Wei officially handed over the financial assurance letter issued by the EXIM Bank of China to Sri Lanka’s Finance Ministry Secretary, Mahinda Siriwardana this afternoon at the Presidential Secretariat.
The envoy noted that large-scale Chinese companies are looking forward to visiting Sri Lanka in the near future to explore new investment opportunities.
This evening, the IMF confirmed that Sri Lanka has now secured financial assurances from all major bilateral creditors, paving way for the IMF’s executive board to consider green-lighting the EFF for the island nation grappling with its worst economic crisis since independence from Britain in 1948.
The IMF said its executive board will meet on March 20 to review a preliminary staff-level agreement first signed in September, offering a lifeline to Sri Lanka with a 48-month arrangement under the EFF of about USD 2.9 billion.
The objectives of this IMF-supported program are to restore macroeconomic stability and debt sustainability, while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.
“This paves the way for consideration by the IMF’s Board on March 20 the approval of the Staff Level Agreement reached on September 1, 2022 for financing under an Extended Fund Facility,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department (APD) said in a statement.
The IMF says its board’s approval of a new loan for Sri Lanka would help catalyse financing from other creditors, including the World Bank and the Asian Development Bank.
“The arrangement will support the authorities’ program of ambitious reforms, that they have already embarked upon, which will help Sri Lanka emerge from its current crisis and set it on a trajectory of strong and inclusive growth,” Srinivasan added.
The announcement came days after the IMF praised Sri Lanka’s surprise decision on March 3 to raise interest rates and move toward a market-determined exchange rate as evidence of a commitment to reducing inflation and enacting reforms.
Indian fishermen issue: Permit talk gathers flak across the board
- Move will violate sovereignty and affect all Sri Lankan fishermen: Annarasa
- Fisherfolk against this move, prepared to protest in the streets: NAFSO
- A step back from progress made to resolve issue: Kadirgamar
- No decision taken to issue permits, only a proposal: Ministry
A proposal by the Government to permit Indian fishermen to fish in Sri Lankan waters has received widespread condemnation from Sri Lanka’s fishing community as well as from civil society groups.
The criticism comes as coastal fishermen, especially in war-torn Northern and Eastern Provinces, struggle to sustain their livelihoods following the impact of Covid-19, surging fuel costs, and the economic crisis.
The Government initially devised the proposal in 2021. The idea is to issue licences to Indian fishermen for a fee to permit them access to Sri Lankan waters to carry out fishing activities. This is seen as a method to overcome the issue of Indian and Sri Lankan fishermen clashing in the northern seas of Sri Lanka. While this proposal was not pursued at the time, the Minister of Foreign Affairs recently brought attention to the option during a speech in Parliament, once again.
Will affect all SL fishermen
Kayts Fisheries Co-operative Society Secretary Annalingam Annarasa said that the decision, if implemented, would violate Sri Lanka’s sovereignty and affect all Sri Lankan fishermen, not just those in the north.
“Giving permission for Indian fishermen to fish in Lankan waters is a violation of the country’s sovereignty. This act won’t just affect northern fishermen but also the fishing community around the island as well as those who consume fish. This is not a policy northern fishermen will agree to.
“However, if India, as an act of harmony, stops bottom trawling activities in our waters, we will consider allowing small boats to engage in fishing activities (but not for illegal methods of fishing). Regardless, bottom trawling activities of Indian fishermen have to stop for three to five months for us to even consider this policy,” Annarasa opined.
He said that the decisions that had been taken at the ministerial level in 2016 to ban bottom trawling needed to be implemented. The landmark decision by Sri Lanka to ban the destructive form of fishing is seen as a move to protect its ocean resources, sustain a vibrant marine ecosystem, and be in line with global practices to deter poaching.
“Governments can change but actions should not change. Both countries should implement what was accepted as a decision. There is no second thought or alternatives that the northern fisherfolk are thinking of.”
Annarasa asserted that if Indian fishermen were allowed into Lankan waters, the local fishing industry would be outfished and consumers would be impacted as they would be forced to buy imports.
“In the north, around 200,000 people and 50,000 households depend on fishing as their livelihood. This policy will push fisherfolk to quit their livelihoods and survive on daily wage earning jobs for the rest of their lives once the sea becomes dominated by Indian fishermen.
“Secondly, it will lead to a situation where people who consume local fish will no longer be able to purchase them. People will be pushed to purchase tinned fish from foreign countries because this move won’t have proper management. We are speaking of the destruction of natural resources of the sea.”
Govt. proposing unsustainable policies
He charged that the Government was attempting to sell the country’s natural resources to earn foreign exchange in the short term.
“In 2018, an act was introduced to ban bottom trawling. This new policy or move to provide licences violates that act. The State is trying to sell our sea for dollars, without even considering whether it will be a sustainable process in the long term. We can also bring in dollars through seafood.
“Even now, blue-legged crabs are purchased at a low price and exported. When kerosene was sold at Rs. 87, a blue-legged crab was purchased at Rs. 2,100. Now the fuel price is Rs. 305 but the price of a crab is Rs. 1,600. Can [fishermen] continue to do this, considering the dollar rate? Who is concerned about these issues? Does the Minister of Fisheries even know about this? Is the Government even thinking about this? The Government is acting for its own benefit and not for the betterment of the people,” Annarasa charged.
Fisherfolk prepared to protest
Meanwhile, civil society groups also remain opposed to such a move by the Government.
“This will be a disaster for Sri Lankan fishermen – not only northern fishermen but Sri Lankan fishermen as a whole. It is really dangerous and we completely reject this. We have been working to prevent this situation and to push the Government to stick to the international maritime boundary and law. Fisherfolk are against this and are already prepared to take to the streets in protest,” National Fisheries Solidarity Organisation (NAFSO) National Coordinator Herman Kumara said.
He said that they would seek judicial recourse over the matter. “There is already a dangerous situation where Indian and Sri Lankan fishermen clash, with nets being destroyed and boats being damaged. Sri Lanka’s fish resources are being depleted and bottom trawling is destroying the ecosystem.
“Permitting Indian fishermen to fish in Sri Lankan waters is a violation of existing laws, so we will go to court and take action. Our waters have already been destroyed because of bottom trawling. We will go to court to demand that they protect our fishermen and take serious action in this regard.”
A regressive step
University of Jaffna Senior Lecturer Ahilan Kadirgamar asserted that this was a massive step back from the progress made to resolve the issue of Indian fishermen encroaching into Lankan waters. “It is a disastrous move by the Government. It will be devastating for the northern fishing community and a huge step back from the progressive moves taken to resolve the Indian poaching issue over the last 13 years.”
He said this showed the Government’s desperation to earn foreign exchange, disregarding the importance of natural resources.
“The Government is in a desperate situation. It has completely surrendered to Indian interests. It is also very short-sighted and is trying to earn a little bit of foreign income by issuing these licences. This just shows the complete lack of vision of the Government – it is not only thinking of a fire sale of assets through privatisation, for example the CEB and other assets, but even the sale of our own natural resources.”
No decision yet on licences
Ministry of Fisheries Secretary Indu Rathnayake said that no decision had been taken to issue permits for Indian fishermen.
“This was but a mere proposal. No such decision has been taken. We have to find a solution to this problem and there are many options on the table inducing this proposal. However, there has been no decision taken in this regard.”
She added that official discussions would be conducted in the coming months on a Government to Government basis while community level talks would be ongoing.
“Official discussions at a Government to Government level will be held. They will include ministers of the Central Government of India and Sri Lanka, as well as the High Commissioners of the respective countries. The date for the talks is yet to be decided, but we are in the process of organising this. There will be talks with the fisher communities this week. The Minister will go to Kachchatheevu and meet the fishermen from both Sri Lanka and India.”