Author: TELO Admin

The Criminal Investigation Department (CID) has intensified its investigation into the controversial organic fertiliser transaction between Sri Lanka and the Chinese company Qingdao Seawin Biotech Group Co. Ltd., which led to a financial loss of $ 6.9 million for the country.

A senior CID official, speaking to The Sunday Morning on condition of anonymity, confirmed that investigations into the alleged irregularities in the fertiliser procurement were actively underway.

However, the official noted that no further information could be released at this stage as it could affect the integrity of the ongoing inquiry.

The controversy dates back to November 2021 when Sri Lanka’s National Plant Quarantine Service (NPQS) rejected a consignment of organic fertiliser imported from Qingdao Seawin Biotech, claiming the presence of harmful bacteria in the samples.

The Chinese company disputed the findings and demanded third-party testing. The rejection of the shipment led to a standoff between the supplier and the Sri Lankan authorities, with the Chinese company seeking $ 8 million in damages and initiating arbitration proceedings in Singapore.

Despite rejecting the shipment, the Sri Lankan Government had eventually agreed to settle the dispute by paying $ 6.9 million to the Chinese supplier. The payment was made by the State-owned People’s Bank through a letter of credit after a court order barring the transaction was removed.

The decision to make the payment despite the rejection of the fertiliser consignment drew widespread public criticism and concern from legal and agricultural experts.

In 2022, the Attorney General’s Department had advised the Government to initiate legal action to recover the losses incurred from the failed fertiliser deal. However, The Sunday Morning reliably learns that no such legal proceedings have been filed against Qingdao Seawin Biotech to date.

Inquiries made in 2023 revealed that the Sri Lankan authorities had formally informed the company of their requirement to either refund the amount or supply chemical fertiliser as compensation.

The Chinese company, however, had responded that it did not handle chemical fertiliser and had offered instead to supply another shipment of organic fertiliser of the same type as originally contracted.

A senior official from the Ministry of Agriculture in 2023 disclosed that, given the sensitive diplomatic nature of the matter, the issue had been referred to the Ministry of Foreign Affairs for bilateral discussions between the two Governments and that the Agriculture Ministry had sought guidance from the Cabinet by submitting a formal Cabinet paper seeking instructions on how to proceed with the settlement.

The official also added that although the ministry could act under the terms of the existing settlement agreement, it sought explicit Cabinet approval to ensure procedural compliance and avoid potential complications in the future.

Also, it was revealed that at one point, Qingdao Seawin Biotech had indicated a willingness to provide chemical fertiliser for part of the compensation, although no such arrangement had been finalised.

Despite the years that have passed since the controversy first erupted, numerous attempts by The Sunday Morning to obtain responses from the Ministry of Foreign Affairs have been unsuccessful.

In 2021, plans were made to import 96,000 MT of fertiliser, but the first shipment was rejected under the Plant Protection Act after being found to be contaminated with harmful bacteria. Despite this, 75% of the payment was made in advance.

The deal sparked widespread protests from farmers and contributed to reduced agricultural yields. In addition to the financial loss, indirect and unquantified economic impacts include crop losses and potential legal liabilities.

The National Audit Office (NAO) has called for legal action against responsible officials and the supplier, and urged recovery of the funds lost due to poor oversight and premature payment without securing financial guarantees.

When contacted by The Sunday Morning, Ministry of Agriculture Secretary D.P. Wickremasinghe confirmed that the CID was currently conducting investigations into the matter.

However, he acknowledged that aside from these ongoing inquiries, the Government was yet to take any formal steps to pursue compensation for the financial losses incurred.

He stressed that no legal action or claims had been initiated at this stage and the focus remained primarily on the CID’s investigation.

The International Monetary Fund (IMF) has warned that while Sri Lanka’s economic outlook is positive, downside risks have increased.

Kenji Okamura, Deputy Managing Director and Acting Chair said that the government should continue to implement governance reforms and advance trade-facilitation reforms to boost export growth and diversification.

On July 1, 2025, the Executive Board of the International Monetary Fund (IMF) completed the Fourth review under the 48-month Extended Fund Facility (EFF) Arrangement, allowing the authorities to draw SDR254 million (about US$350 million). This brings the total IMF financial support disbursed so far to SDR1.27 billion (about US$1.74 billion).[1]

The EFF arrangement for Sri Lanka was approved by the Executive Board on March 20, 2023 (see Press Release No. 23/79) in an amount of SDR 2.286 billion (395 percent of quota or about US$3 billion). The program supports Sri Lanka’s efforts to durably restore macroeconomic stability by (i) restoring fiscal and debt sustainability while protecting the vulnerable, (ii) safeguarding price and financial sector stability, (iii) rebuilding external buffers, (iv) strengthening governance and reducing corruption vulnerabilities, and (v) enhancing growth-oriented structural reforms.

The Executive Board reviewed a report from the Managing Director on the inadvertent provision of inaccurate data by Sri Lanka on the ceiling of the central government’s stock of expenditure arrears. The under-reporting of the arrears stock identified through a detailed analysis of budget line appropriations gave rise to noncomplying purchases and a breach of Sri Lanka’s obligations under Article VIII, Section 5. The authorities have worked openly and closely with IMF staff to provide corrected data and have undertaken several corrective measures related to the clearing and reporting of arrears. They are also committed to improving reporting and data verification practices going forward in line with IMF technical assistance. Based on these actions, the Executive Board approved the authorities’ request for waivers of non-observance.

The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]

Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:

“Sri Lanka’s performance under the Fund-supported arrangement is generally strong with some implementation risks being addressed. Reforms are bearing fruit, with economic growth strengthening, inflation remaining low, reserves accumulating, and fiscal revenues improving. The debt restructuring process is nearing completion. The economic outlook is positive, but downside risks have increased. In case shocks materialize, the authorities should work closely with the Fund to assess the impact and formulate policy responses within the contours of the program. Steadfast program implementation will be crucial.

“Sustained revenue mobilization is critical to restoring fiscal sustainability and creating fiscal space. Strengthening tax exemption frameworks, boosting tax compliance, and enhancing public financial management to ensure effective arrears management are important. Further improving the coverage and targeting of social support to the vulnerable is also necessary. A smoother execution of capital spending within the fiscal envelope would help foster medium-term growth. The restoration of cost-recovery electricity pricing and the operationalization of automatic electricity tariffs adjustment are commendable and should be maintained to contain fiscal risks.

“The progress to advance the restructuring of Sri Lanka’s debt is noteworthy. Timely finalization of bilateral agreements with remaining official and commercial creditors is a priority.

“Monetary policy should continue to prioritize price stability, supported by sustained commitment to eliminate monetary financing and safeguard central bank independence. Greater exchange rate flexibility and gradually phasing out administrative balance of payments measures remain critical to rebuild external buffers and economic resilience.

“Resolving non-performing loans, strengthening governance and oversight of state-owned banks, and improving the insolvency and resolution frameworks are important to revive credit growth and support private sector development.

“Structural reforms are crucial to unlock Sri Lanka’s potential. The government should continue to implement governance reforms and advance trade-facilitation reforms to boost export growth and diversification.”

Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:

“The Executive Board of the International Monetary Fund (IMF) reviewed noncomplying purchases made by Sri Lanka under the 2023 Extended Arrangement under the Extended Fund Facility (“EFF”), as well as a breach of obligations under Article VIII, Section 5. The noncomplying purchases arose as a result of the provision of inaccurate information by the authorities on the stock of expenditure arrears at the first, second, and third reviews under the EFF.

“The inaccuracies in information provided to the IMF were inadvertent and arose because of weaknesses in the timely reporting of arrears by line ministries to the Ministry of Finance, as well as a misunderstanding by the authorities of the definition of “arrears” under the Technical Memorandum of Understanding.

“The Executive Board positively considered the authorities’ corrective actions, the fact that arrears repayments will be accommodated within the existing fiscal envelope, and the authorities’ commitment to improving public financial management procedures in line with the new PFM law, to reduce the risk of accruing arrears or inaccurate reporting of information going forward. In view of the above, the Executive Board agreed to grant waivers for the nonobservances of the quantitative performance criterion that gave rise to the noncomplying purchases and decided not to require further action in connection with the breach of obligations under Article VIII, Section 5.”

President Donald Trump has said he signed 12 tariff letters which will be sent out on Monday, after earlier saying they will be sent on Friday amid expectations in Sri Lanka of getting a communication early.

“I signed some letters and they’ll go out on Monday, probably twelve,” Trump told reporters Saturday.

“Different amounts of money, different amounts of tariffs.”

Sri Lanka was slapped with a 44 percent Trump tariff which was suspended till July 09 after reducing the tariff to 10 percent.

Sri Lanka was among the first set of countries to start negotiating with the US.

Cabinet spokesman Nalinda Jayatissa said last week that Sri Lanka expected a letter before the July 09 deadline.

“We have an expectation from our side that we can get some amendment of the tariff to minimise the effect on the economy and our exporters as a result of interventions the government has made,” he said.

There have been reports that the rate in the ‘Trump letter’ will go into effect from August 01.

It is not clear what Trump meant by ‘different amounts of money’ in his latest comments on Saturday. But some countries had promised higher imports, and Trump had also remarked that ‘small’ countries would get some relief.

Sri Lanka is keen not to be at a disadvantage with competitors, which would lead to a shift of business, especially apparel.

India, which had more imports from the US and a lower trade surplus, proportionately than Sri Lanka was hit by only a 26 percent Trump tariff, Pakistan 29 percent and Bangladesh 37 percent.

Trump said he had struck a deal with Vietnam leader To Lam for a 20 percent tariff (down from 46 percent), but details are not clear given his tendency to make sweeping generalizations.

Sri Lanka has now access to Starlink’s high-speed, low-latency internet. Elon Musk, billionaire head of SpaceX and Tesla said in his X social media platform.

“Starlink’s high-speed, low-latency internet is now available in Sri Lanka!”, Musk tweeted in his verified X account.

Sri Lanka started discussions with Starlink under the previous government headed by Ranil Wickremesinghe.

Sri Lanka’s telecommunication regulator last year granted a telecommunications service provider license to a locally incorporated firm of Starlink satellite system founded by Musk. The island nation has already amended its Telecommunications Regulatory Commission (TRC) Act to accommodate the Starlink satellite system.

Sri Lanka initiated the move after former President Wickremesinghe met Musk on the sidelines of the 10th World Water Forum in Indonesia three months ago.

The collaboration with Starlink is expected to provide internet facilities via satellite technology, marking a significant transformation in the technology sector with a fast internet service.

Starlink is not yet established as a telephone network company in Sri Lanka.

Starlink is a low earth orbit satellite network, connected to Musk’s SpaceX group.

The network connects around 4.5 million people around the world with high-speed internet across nearly 100 countries, territories and other markets.