Author: TELO Admin

Developments in Sri Lanka underline the risk of destabilising social and labour unrest throughout Asia-Pacific because of rising living costs impacting the region, S&P Global Market Intelligence said.

Countries with similarly weak economic fundamentals and/ or poor economic policies have reduced resilience to external shocks, such as the COVID-19 pandemic, the Russia-Ukraine conflict, high oil prices and inflation and therefore are more likely to experience sustained and politically de-stabilising social unrest. Pakistan, Nepal, Bangladesh and Laos, for example, are particularly vulnerable to similar crises, but to varying extremes.

Sri Lanka’s parliament on 20 July elected acting President and Prime Minister Ranil Wickremesinghe as the interim president to lead an all-party interim government. The government has since March 2022 faced mass public protests driven by the country’s economic collapse. The resultant shortages of essential commodities – including food, fuel, and medicine – along with extreme inflation (which IHS Markit expects to exceed 45% over 2022) triggered a near total erosion of public confidence in the government of former president Gotabaya Rajapaksa.

Sri Lanka’s new interim government will almost certainly seek to focus short-term efforts towards securing external funding – principally through the IMF and the other multilateral lenders but also from close strategic partners, including China and India – as well as concluding debt rescheduling negotiations. While IHS Markit assesses that an IMF programme is likely, disbursement of funds and therefore an improvement in domestic social conditions is unlikely till 2023. Beyond this, political instability is likely to continue, with parliamentary elections likely once economics stabilisation has taken place.

Sri Lanka’s economic weakness has been the primary driver of the country’s ongoing crisis. Foreign exchange reserves have decreased over the past three years, in part due to a decline in revenue triggered by fiscal policies under Rajapaksa’s government and its resistance to negotiating a bailout with the IMF. Tax revenue fell to 7.3% of GDP in the third quarter of 2021 versus 12.8% in the equivalent period of 2019, just before the government introduced a series of tax cuts.

External factors have also had a compounding effect, with the COVID-19 pandemic undermining the tourism sector, the third largest foreign currency earning sector in the country, and the Russia-Ukraine conflict driving already high food and fuel prices. With debt servicing payments upcoming, the government was forced to declare a moratorium on its external debt obligations in April 2022. The government has allowed the rupee to free float, causing a severe depreciation in the exchange rate, which is projected to depreciate 82.3% against the US dollar by end-2022, and exacerbating inflation caused by shortages of imported goods and global inflationary pressures.

Pakistan, the fragile external position, exacerbated by soaring global commodity prices, has already led to a rapid depletion of foreign exchange reserves, sharply rising inflation, and a sudden change of government in April 2022 with a strong possibility of snap elections in the next year. Recent deregulation of domestic fuel and electricity prices as part of IMF bailout conditions further elevate the risk of social and labour unrest in the next year.

While Bangladesh and Laos are vulnerable, they have mitigating factors that set them apart from Sri Lanka, Pakistan and Nepal. Bangladesh has strong foreign exchange reserves allowing it to better weather economic pressures and reduces the risk of mass anti-government unrest. In Laos, rising living costs and fuel shortages have led to anger against the government on social media but large-scale anti-government protests are unlikely due to the Lao People’s Revolutionary Party’s restrictive security regime.

Other countries in APAC are likely to be more resilient to government instability as rising inflation and living costs drive unrest. Protests for example are particularly likely in Indonesia, India, Thailand and the Philippines although we do not expect changes in government leaderships as a result. Labour unrest is also likely to be significant in South Korea, India, and Bangladesh, driving supply chain risks in their garments and electronics sectors, as well as to ports and domestic cargo industries.

While calling for an all party or multi party government, Samagi Jana Balawegaya (SJB) MP Dr.Harsha de Silva today said Sri Lanka’ will slide further as a nation.

“I have urged from day one that we must establish an all or multi party government. My reasoning has always been that without broad support we will NOT be able to undertake the deep and comprehensive structural economic reforms needed to get us out of this mess. Today even the World Bank had said without such reform no money will come. That is true. But even before that without reform we cannot get IMF agreement nor deal with our creditors Dr. De Silva said when Daily Mirror inquired from him on the reports which said he is to be appointed as the minister of finance.

“Most politicians either don’t understand the depth of the economic crisis we are in or they are not interested in resolving the crisis. It is my view that unless such a government is setup and reforms commenced we will slide further as a nation and get closer to an implosion. Of course such a government must be interim, short term. The current Parliament does not reflect the peoples mandate. It is completely distorted. Thus if such a multi party government is to established then we must agree to elections at the earliest possible time,” he added.

India worries that the Chinese-built and leased port of Hambantota will be used by China as a military base in India’s backyard. The $1.5 billion port is near the main shipping route from Asia to Europe.

Shipping data from Refinitiv Eikon showed Chinese research and survey vessel Yuan Wang 5 was en route to Hambantota and due to arrive on Aug. 11, at a time when Sri Lanka is facing its worst economic crisis in seven decades. India has provided Sri Lanka with nearly $4 billion in support this year alone.

During a weekly briefing late on Thursday, an Indian foreign ministry spokesman said the government was monitoring the planned visit of the Chinese ship, adding that New Delhi would protect its security and economic interests.

India has already lodged a verbal protest with the Sri Lankan government against the ship’s visit, Reuters reported on Thursday.

In response to questions from Reuters, China’s foreign ministry said Beijing had always exercised freedom of the high seas lawfully.

“China hopes that the relevant parties will view and report on China’s marine scientific research activities correctly and refrain from interfering with normal and legitimate maritime activities,” the ministry said in a statement.

Relations between India and China have been strained since armed clashes on their border two years ago killed at least 20 Indian and four Chinese soldiers and led to a massive build-up of troops on both sides.

Foreign security analysts describe the Yuan Wang 5 as one of China’s latest generation space-tracking ships, used to monitor satellite, rocket and intercontinental ballistic missile launches.

The Pentagon’s annual report on China’s military modernisation says the Yuan Wang ships are operated by the Strategic Support Force of the People’s Liberation Army (PLA).

A Sri Lankan consulting firm, the Belt & Road Initiative Sri Lanka, said on its website that the Yuan Wang 5 would be in Hambantota for a week and “conduct space tracking, satellite control and research tracking in the northwestern part of the Indian Ocean region through August and September”.

Sri Lanka formally handed over commercial activities at its main southern port to a Chinese company in 2017 on a 99-year lease after struggling to repay its debt.

China is one of Sri Lanka’s biggest lenders and has also funded airports, roads and railways, unnerving India, which is now trying to claw back lost ground.

Sri Lanka angered India in 2014 when it allowed a Chinese submarine and a warship to dock in Colombo.

(Reporting by Krishna N. Das in New Delhi, Yew Lun Tian in Beijing and Greg Torode in Hong Kong; Editing by Raju Gopalakrishnan and Mark Heinrich)

Copyright 2022 Thomson Reuters.

President Ranil Wickremesinghe has decided to prorogue Parliament with effect from midnight today (28).

According to the extraordinary gazette issued this evening, the next session will commence at 10:30 AM on 3rd August 2022.

What does it mean when Parliament is Prorogued?

A prorogation which is a temporary recess of Parliament, should not extend to a period of more than two months, However, such date for summoning Parliament may be advanced by another Presidential Proclamation provided it is summoned for a date not less than three days from the date of such fresh proclamation.

When Parliament is prorogued, the Proclamation should notify the date for the commencement of the new Session of Parliament under Paragraph (3) of Article 70 of the Constitution.

Constitutional Provisions:

During the prorogation the Speaker continues to function and the Members retain their membership even though they do not attend meetings of Parliament.

The effect of a prorogation is to suspend all current Business before the House and all proceedings pending at the time are quashed except impeachments.

A Bill, motion or question of the same substance cannot be introduced for a second time during the same Session. However, it could be carried forward at a subsequent Session after a prorogation.

“All matters which having been duly brought before Parliament, have not been disposed of at the time of the prorogation of Parliament, may be proceeded with during the next Session,” states the Paragraph (4) of Article 70 of the Constitution.

Pending Business of Parliament:

In the light of this constitutional provision, a prorogation does not put an end to pending Business. Thus, a pending matter may be proceeded with from that stage onwards after the commencement of the new Session. At the beginning of a new Session all items of Business which were in the Order Paper of Parliament need to be re-listed, if it is desired to continue with them.

Commencement of the New Session:

At the end of a prorogation a new Session begins and is ceremonially declared open by the President. He is empowered under the Constitution to make a Statement of Government Policy in Parliament at the commencement of each Session of Parliament and to preside at ceremonial sittings of Parliament in terms of the provisions stipulated in Paragraph (2) of Article 33 of the Constitution.

The President is empowered to make a statement of Government Policy at the commencement of each new Session. In the past, it was known as the Throne Speech which was delivered by the Governor-General.