Author: TELO Admin

Sri Lanka and Argentina remain very vulnerable amid a worsening in global financial conditions while China has suffered a sharp deterioration in financial resilience since pre-COVID times, a think-tank study found on Wednesday.

The resilience indicator, published by the Washington-based Center for Global Development, assesses which countries would be most economically and financially affected if an external shock were to materialise. It is based on data published by the International Monetary Fund, the World Bank and governments.

China was found to be “most weakened country” across a sample of 37 countries, having ranked among the top 10 most resilient emerging economies in 2019 and dropping to 18th place in 2023.

Emerging markets were now more vulnerable than in 2019 on an overall basis, economist Liliana Rojas-Suarez wrote in the report.

“The scars of the 2020-2022 shocks that started with the COVID pandemic and the subsequent multiple shocks, such as Russia’s war on Ukraine and the U.S. Fed’s increases in interest rates, are deep and have weakened emerging markets’ economic and financial conditions,” Rojas-Suarez wrote.

A severe shortage of dollars tipped Sri Lanka into its worst financial crisis since independence from Britain in 1948 last year, triggering its first foreign debt default in May 2022.

Argentina is in recession for the sixth time in a decade, with triple-digit inflation and foreign net reserves in the red.

The study also showed that debt sustainability has declined over the last four years across emerging market economies.

“In 2019, only Tunisia, Pakistan, Argentina, and Sri Lanka had ratios of external financing needs above 100%. Now, 12 of the 37 countries we examined, or about one third, are in that position,” Rojas-Suarez said, adding these countries have very large and unsustainable large public debt ratios.

The study calculated external financing needs by measuring short-term external debt plus current account deficits as a proportion of international reserves.

Bolivia, Egypt, Turkey and El Salvador are also on the list of vulnerable countries, while the study shows that Indonesia, Peru and Bulgaria are the most resilient countries in the group.

The United States yesterday signified its biggest boost for Sri Lanka’s hub status for shipping in the Indian ocean with its International Development Finance Corporation (DFC) committing a 20 year financing worth $ 553 million to upcoming Colombo West International Terminal (CWIT) by a joint venture involving Indian giant Adani, Sri Lanka’s top blue chip John Keells Holdings and the Sri Lanka Ports Authority.

Given the historic significance and importance of the support from a regional and Sri Lanka’s perspective, US Ambassador Julie Chung, Indian High Commissioner Gopal Bagley, Sri Lanka’s Foreign Affairs Minister Ali Sabry and President’s Chief of Staff and National Security Advisor Sagala Ratnayake witnessed the agreement signing yesterday in Colombo between the parties.

Analysts told the Daily FT that given the 20 year tenor, the financing for the entirety of the debt component of CWIT is favourable. It also comes at a time when Sri Lanka remains a default-Sovereign and low grade credit rating. The CWIT costs $ 750 million and the balance is funded by equity.

DFC said its commitment of over half a billion US Dollars to support the development of a deep-water shipping container terminal in the Port of Colombo, will provide critical infrastructure for the South Asian region.

The new terminal reflects DFC’s commitment to financing high-quality infrastructure that supports its partner’s development needs, invests in local communities, and is respectful of local financial conditions. The investment further demonstrates the US enduring commitment to Sri Lanka’s economic growth and its regional economic integration, including with India.

When commissioned, CWIT will be the largest and deepest container terminal in Sri Lanka. With a quay length of 1,400 m and an alongside-depth of 20 m, CWIT will be equipped to handle ultra large container vessels with capacities of 24,000 TEUs. The new terminal’s annual cargo handling capacity is likely to exceed 3.2 million TEUs. Last year the Colombo Port handled nearly 8 million TEUs.

DFC, the US government’s development finance institution, partners with the private sector to finance solutions to the most critical challenges facing the developing world. It invests across sectors, including energy, healthcare, infrastructure, agriculture and small business and financial services.

DFC CEO Scott Nathan said, “DFC works to drive private-sector investments that advance development and economic growth while strengthening the strategic positions of our partners. That’s what we’re delivering with this infrastructure investment in the Port of Colombo.”

“Sri Lanka is one of the world’s key transit hubs, with half of all container ships transiting through its waters. DFC’s commitment of $ 553 million in private-sector loans for the West Container Terminal will expand its shipping capacity, creating greater prosperity for Sri Lanka, without adding to sovereign debt, while at the same time strengthening the position of our allies across the region,” Nathan added.

US Ambassador to Sri Lanka Julie Chung said, “The $ 553 million investment by DFC for the long-term development of the Port of Colombo’s West Container Terminal will facilitate private-sector-led growth in Sri Lanka and attract crucial foreign exchange inflows during its economic recovery. This financing is symbolic of the US long-standing commitment to the development and well-being of the people of Sri Lanka. Sri Lanka regaining its economic footing will further our shared vision for a free and prosperous Indo-Pacific.”

The US sentiments were in apparent response to China whose state-owned entities manage and majority own the biggest and most modern terminal (CICT) in the Colombo Port and the Hambantota International Port in deep-south of Sri Lanka.

Adani Ports and SEZ Ltd, is India’s largest port operator whilst JKH already operates Sri Lanka’s first ever private sector owned and managed terminal South Asia Gateway Terminal Ltd.

This is the first time that the US Government, through one of its agencies, is funding an Adani project, which is a ringing endorsement of the group, Adani said adding, “It shows their confidence in the group’s ability to invest and to create a world class container facility in Colombo Port.”

Adani Ports and Special Economic Zone CEO Karan Adani said, “We welcome the association of the US International Development Finance Corporation (DFC), the US government’s development finance institution, in funding the Adani project, and we see this as a reaffirmation by the international community of our vision, our capabilities and our governance.”

”As one of the world’s largest port developers and operators, APSEZ brings to this project not only our proven world-class expertise but also our deep experience in infrastructure creation. When completed, Colombo West International Terminal project will transform the socio-economic landscape, not just in Colombo but across the Island, through thousands of direct and indirect new employment opportunities and by massively boosting Sri Lanka’s trade and commerce ecosystem.”

JKH Chairperson Krishan Balendra said, “DFC’s investment is an endorsement of the potential of the West Terminal project and a boost for investor confidence as Sri Lanka’s economy recovers”.

The Port of Colombo is the largest and busiest transhipment port in the Indian Ocean. It has been operating at more than 90% utilisation since 2021, signalling its need for additional capacity. The new terminal will cater to growing economies in the Bay of Bengal, taking advantage of Sri Lanka’s prime position on major shipping routes and its proximity to these expanding markets.

The Adani group said it is expanding its global footprint through strategic investments in emerging markets. Adani Ports has positioned itself as the market leader in the transport logistics and energy utility portfolio businesses, focusing on large scale infrastructure development in India with operations and management practices benchmarked to global standards. Through its continued commitment to creating stellar and sustainable assets, the group is playing a vital role in building a better future for India and the world.

According to reports, the Power and Energy Ministry is expediting the signing of documents for a Memorandum of Understandings (MOUs) with India’s Adani Group to establish a new wind power plant in the Mannar basin with a capacity of 250 MW, Sri Lanka Podujana Peramuna (SLPP) MP Prof. Charitha Herath said.

Addressing the media, he said the Ministry is ready to complete the signing of all agreements before November 25.

According to the 2009 Electricity Act, a bit of a process should be followed for local generation of electricity by any private company. But this process was not followed for projects conducted between two governments (government to government – G to G).

MP Herath said the current government is trying to sign all agreements while putting India’s Adani Group into the act to pretend that the project is run between Sri Lanka and India.

He said the groups, including the Ceylon Electricity Board (CEB) chairman and General Managers, are in a hurry to complete all agreements before passing the new Electricity Act. These people are trying to give this project an unsolicited proposal.

After completing the project, the responsible groups are trying to sell one unit of wind power-generated electricity for Rs. 46, and these people are trying to sign this agreement for 30 years.

Meanwhile, fixing three new transformers at the Nadukuda Grid Substation was attached to the said project.

The agreement signing process has been boosted these days, other than those mentioned in the agreements.

It has been estimated to sell one unit of electricity, which is currently being generating from Pooneryn Wind-Solar Hybrid Energy Park, at Rs.46. A total of 234 MW of electricity is generated from the Pooneryn wind-solar power plant.

The agreements on all other electricity generation projects were signed for twenty years, but the projects under India’s Adani Group were signed for thirty years.

The officials at the Power and Energy Ministry and the CEB were requested to make a note that they were forced to make this agreement with any of the higher officials, such as ministers, because there would be a definitive investigation over this issue by the next incoming government, Prof. Herath claimed.

Leaders of Sri Lankan Tamil parties need to step up their engagement with India for resolving the Tamil issue, according to A. Varatharaja Perumal, former Chief Minister of the once-unified North-Eastern Province of Sri Lanka.

In an interview with The Hindu after taking part in a book launch event in Coimbatore on Saturday, Mr. Varatharaja Perumal, who held the CM post nearly for one-and-a-half years during December 1988-March 1990 following the Indo-Lanka Accord of 1987, said there had to be pressure from the Tamil parties and their leaders, “who are not acting [in this regard].”

Recalling how Tamil rebel groups and parties were, during 1983-87, in frequent contact with Indian leaders, both in New Delhi and Tamil Nadu, the former leader of the Eelam People’s Revolutionary Liberation Front (EPRLF) pointed out that a similar relationship did not exist now. “Merely sitting at a hotel in Jaffna and writing a letter to Prime Minister [Modi] would not work,” he observed.

Conceding that the Indian government too had a responsibility on the Tamil question even though it could not do what it did between 1983 and 1990, the 70-year-old former CM, who shuttles between India and Sri Lanka, said: “The Government of India cannot act in isolation. It needs the support of Indian people and leaders. There should be a voice within India for devolution and the political settlement [to be worked out in Sri Lanka]. This can be possible only if the Tamil leaders maintain close ties with leaders in New Delhi and Tamil Nadu. So, the primary responsibility lies with them.”

At the same time, no room should be given for any “extreme or radical” move, Mr\. Varatharaja Perumal hastened to add.

Emphasising that the 13th Amendment of Sri Lankan Constitution, dealing with devolution through elected bodies of provincial councils, should be “properly” implemented, he said if it was interpreted on the lines of similar features of the Indian Constitution in India, “this will take care of 70% to 75% of the political issues.”

Also, there was a need to “revisit the 13th Amendment” and the Indian government should constitute a team of legal experts to study the subject and convey [to Sri Lanka] how to ensure the “proper implementation” of the Amendment, against which the Sri Lankan government had never taken the stand per se.

“There are forces in several Sinhalese parties that favour devolution, besides NGOs and academicians,” he said, expressing the hope that with “consistent persuasion and perseverance,” progress could be achieved in the area of devolution.

On measures to be taken for refugees from Sri Lanka living in Tamil Nadu, Mr. Varatharaja Perumal responded that the issue concerning the refugees had to be viewed humanely. While the demand for Indian citizenship could be considered last, there were “pressing issues” that required to be attended to first. The Indian government could, either individually or jointly with the Sri Lankan government, provide permanent documents to those who wanted to take up proper employment in India or abroad. Similarly, property acquisition rights could be given to the refugees for the purpose of housing. Restrictions on camp refugees’ visits to Sri Lanka could also be eased, he added.