Sri Lanka public debt surges over 127-pct of GDP as monetary instability bites

Sri Lanka’s government debt has surged to around 126 percent of gross domestic product by the first quarter of 2022, with central bank debt contributing close to 10 percent of GDP in foreign debt, official data shows.

Sri Lanka’s central government debt rose to 21.6 trillion rupees of 117.4 percent of revised GDP by March 2022, from 104.6 percent as a ‘flexible exchange rate’ or soft-peg collapsed from 200 to 360 to the US dollar weighed down by a surrender requirement and low rates.

Government with central bank debt rose to 127 percent of GDP with the monetary authority borrowing money to finance either imports or debt repayments after printing money.

Gross central bank debt was around 9.58 billion rupees by March 2022.

About 1.8 billion in gross reserves borrowed from China are left with the central bank unable to use it due to prudential rules placed by China.

Goverment guaranteed debt of state enterprises topped 14 percent of GDP by April 2022, according to finance ministry data, taking the total to at least 140 percent of GDP.

By April however the rupee had depreciated further.

Sri Lanka’s central government debt started to climb with monetary instability worsening from the third quarter of 2014 with aggressive liquidity injections.

Sri Lanka was hit by currency crises in 2016 and 2018 as the central bank injected money through overnight repo, term repo and outright purchases of government securities driving up debt and slowing growth after each currency collapse.

Monetary instability came under ‘flexible’ inflation targeting and output gap targeting (printing money to boost growth) and the currency was allowed to depreciate after printing money through REER targeting a type of BBC (band, basket, crawl) policy advocated by Mercantilists in the 1980s.

In the seven years to 2022 there was monetary stability only in 2017 and 2019.

Sri Lanka’s central government debt ratcheted up from 72.3 percent of GDP in 2014 to 86.6 percent by 2019.

Source: Economy Next

US, UN recognise new Sri Lanka president, call for united, democratic approach to crisis

The United States and the United Nations have recognised the appointment of a new president in Sri Lanka and have stressed on the need for a united effort in overcoming the economic crisis while ensuring freedom of assembly and expression.

US Ambassador Julie Chung tweeted Thursday July 21 morning that the US looks forward to working with newly sworn in President Ranil Wickremesinghe.

“In these challenging times, it will be essential for all parties to redouble efforts to work together to tackle the economic crisis, uphold democracy and accountability, and build a stable and secure future for all Sri Lankans,” she said.

UN Sri Lanka Resident Coordinator Hanaa Singer-Hamdy tweeted that the UN acknowledges the constitutional transfer of power to a new president.

“Now is the time for all stakeholders to engage in broad and inclusive consultations to resolve the current economic crisis and the grievances of the people,” she said.

Elaborating on the statement, she said: “A peaceful and stable Sri Lanka will require dialogue, full respect for democracy, human rights and the rule of law, including respect for the freedom of assembly and expression. The UN stands ready to work with all stakeholders to fulfil the aspirations of the Sri Lankan people.”

Source: Economy Next

Ranil Wickremesinghe sworn in as new Sri Lanka President

Ranil Wickremesinghe took oaths as the 8th Executive President of Sri Lanka a short while ago. He was sworn in before Chief Justice Jayantha Jayasuriya at the parliament complex.

Sri Lanka’s 225-member parliament voted Wickremesinghe in as the new Head of State with a total of 134 votes cast in his favour. He faced off SLPP’s dissident MP Dullas Alahapperuma who was polled second with 82 votes. NPP leader MP Anura Kumara Dissanayaka secured only 03 votes.

Wickremesinghe, a six-time former prime minister had the backing of the Sri Lanka Podujana Peramuna (SLPP), the largest bloc in the parliament.

Two parliamentary members had abstained from voting while four of the 223 votes cast by the members were meanwhile found invalid.

The procedure for electing a succeeding president by Parliament is provided in the Constitution and the Presidential Elections (Special Provisions) Act (No. 2 of 1981), in the event of a vacancy in the office of the President before the end of the term. To be elected for the office of succeeding president, a candidate should get 50% or more votes from the valid number of votes.

Following the conclusion of the counting process, Secretary-General of Parliament, Dhammika Dasanayake announced to the House that Ranil Wickremesinghe was been elected as the 8th Executive President.

Pursuant to the provisions of the Presidential Elections (Special Provisions) Act (No. 2 of 1981), Wickremesinghe’s appointment was published in a special gazette notification last evening.

Wickremesinghe is thus qualified to hold the office of the President for the remaining term of the presidency, which was left vacant after his predecessor Gotabaya Rajapaksa stepped down last week. Wickremesinghe was appointed as the caretaker president, Rajapaksa fled the country on a military plane to the Maldives and then took a commercial flight to Singapore.

He has held the office of prime minister six times although he never completed a term. His latest and shortest term in office as the prime minister was when former President Gotabaya Rajapaksa appointed him to the position on July 13 this year, after his brother Mahinda Rajapaksa was forced to step down amidst growing public agitation over economic mismanagement and corruption allegations.

Brief history of new President Ranil Wickremesinghe

Ranil Wickremesinghe was elected to the 9th Parliament on June 23rd, 2021 as a National List Member representing the United National Party.

Born on March 24th, 1949, Ranil Wickremesinghe also held the position of Prime Minister of the previous Yahapalana government.

An alumnus of the Royal College of Colombo, Wickremesinghe was later selected to the Faculty of Law of the University of Colombo and sworn in as a lawyer.

He started his political career as the chief organizer of the United National Party in Kelaniya Constituency in the mid of 1970 and was later appointed as the chief organizer of the Biyagama Constituency.

In 1977, he was elected as a Member of Parliament for the first time and was the youngest cabinet minister in the J.R. Jayewardene government where he held the position of Minister of Youth Affairs and Employment.

He was the Minister of Foreign Affairs at the age of 28, and later served as the cabinet minister for Youth Affairs, Education and Industry, Science and Technology.

Ranil Wickremesinghe, who also served as the Leader of the House between March 06, 1989 and May 07, 1993, also served as the Leader of the Opposition in the Parliament of Sri Lanka from 1994 to 2001 and from 2004 to 2015.

He was first elected as the Prime Minister of Sri Lanka on May 7, 1993 and held that position until August 19, 1994. Ranil Wickremesinghe was the Prime Minister of Sri Lanka for the second time from December 9, 2001 to April 2, 2004, for the third time from January 9, 2015 to August 21, 2015, for the fourth time from August 24, 2015 to October 26, 2018, and for the fifth time from December 16, 2018 to November 21, 2019.

Thereafter, given the resignation of the former Prime Minister Mahinda Rajapaksa on the 9th of May, Ranil Wickremesinghe returned to the post of Prime Minister on the 12th of the same month in the capacity of Prime Minister.

Following the resignation of Gotabaya Rajapaksa from the office of President, he became the Acting President from 14th as per the Constitution.

Source: Adaderana

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CIA chief says Sri Lanka made ‘dumb bets’ on China

In a warning to other nations amid economic crisis in Sri Lanka, the US Central Intelligence Agency Director William J. Burn blamed “dumb bets” on high-debt Chinese investment by the island nation as a reason for the collapse of its economy.

“Economically, the Chinese have a lot of weight to throw around and they can make a very appealing case for their investments. In security terms, they are generally a little more cautious, partly because they look at the US experience over the last couple of days in the Middle East and South Asia. That causes them to draw back a little bit too. In parts of the Middle East, they also suffer from the object lessons from a place like Sri Lanka, today. Heavily indebted to China which has made some dumb bets about their economic future and suffering catastrophic economic and political consequences as a result,” he said at the Aspen Security Forum.

The Aspen Security Forum, an annual three-and-a-half day conference in Aspen, Colorado presented by the Aspen Strategy Group, has provided a non-partisan public venue for global leaders to discuss the key national security and foreign policy issues of the day for the past twelve years.

The 2022 Aspen Security Forum will take place July 19-22 in Aspen, Colorado.

Source: News 1st

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New Cabinet of Ministers to be sworn in tomorrow

A new Cabinet of Ministers will be sworn in tomorrow (July 22) at the Prime Minister’s Office in Kollupitiya.

According to the President’s Media Division (PMD), the swearing-in ceremony is scheduled to commence at 9.00 a.m.

Newly-elected President Ranil Wickremesinghe, who was voted in by Sri Lanka’s parliament to the office of President vacated by his predecessor Gotabaya Rajapaksa, took oaths this morning at the parliament complex.

Accordingly, a new Cabinet of Ministers will be formed under administration of President Wickremesinghe.

Source: Adaderana

‘He’s not our president’: Protesters reject new Sri Lankan leader

Anti-government protesters have returned to the streets of Sri Lanka’s capital and say they will continue their weeks-long uprising after parliament voted in acting leader Ranil Wickremesinghe as the country’s new president.

Hundreds of protesters gathered at the GotaGoGama site in Colombo on Wednesday, where only last week they had celebrated Gotabaya Rajapaksa’s resignation as president.

Addressing the crowds, protest leaders refused to accept six-time Prime Minister Wickremesinghe, 73, as the new head of state, holding him partly responsible for the country’s unprecedented economic and political crisis.

“As you know, the parliament elected a new president today, but that president is not new to us, it is not the people’s mandate,” Wasantha Mudalige, the leader of Inter University Student Federation, told the crowds.

“We managed to kick out Gotabaya Rajapaksa, who secured 6.9 million votes, but Ranil Wickremesinghe has now secured that seat from the back seat,” he added. “Ranil isn’t our president … the people’s mandate is on the streets.”

Protesters have also accused Wickremesinghe of making deals with the powerful Rajapaksa family to outmanoeuvre political rivals. Gotabaya Rajapaksa’s appointments of Wickremesinghe as prime minister in May and then acting president after he fled the country in July further angered protesters, who want the country’s ruling elite to go.

Protesters set Wickremesinghe’s personal residence on fire and occupied his office during protests last week.

At the protests on Wednesday, speaker after speaker – including Buddhist monks, Catholic clergy, students and artists – refused to endorse the parliament’s choice.

“Ranil Wickremesinghe should know that millions in the streets are much bigger than 134,” said artist Jagath Manuwarna, referring to 134 lawmakers who voted for Wickremesinghe.

While celebratory firecrackers were heard in some parts of the country last week when Sri Lankans heard Rajapaksa had resigned days, no such celebrations greeted Wickremesinghe’s appointment, with just dozens of his supporters seen celebrating on the streets.

Many Sri Lankan protesters were also left unimpressed with Wickremesinghe’s main rival at the election today, Dullas Alahapperuma, as he has no experience of governance in a heavily indebted country desperate for an International Monetary Fund bailout.

Sri Lankans have been protesting for weeks amid an unprecedented economic meltdown that has brought the country to the brink of bankruptcy and increasingly unable to pay for food, fuel and medicine.

‘No political base’
Feeling betrayed by parliament, the youth-led protest movement is currently regrouping and rethinking its strategy, according to Melani Gunathilake, a leading protester.

“We know very well that Ranil Wickremesinghe isn’t the same as Gotabaya Rajapaksa. He is a more cunning person,” she told Al Jazeera.

“Recently he has even been trying to suppress protests by imposing a state of emergency and sending air force helicopters over GotaGoGama. But I don’t think people will be intimidated by these actions any more. Sri Lanka deserves a leader who actually cares for its people, not somebody who thinks about his political future.”

But one analyst, who did not want to be identified, told Al Jazeera “the protests may not be sustainable”, as many of the demonstrators in Colombo and other urban areas are middle-class and could be less likely to keep protesting if their material situation improves under Wickremesinghe.

Wickremesinghe is scheduled to take the oath as Sri Lanka’s president on Thursday morning, with his presidential term set to last until 2024.

As soon he becomes president, the post of prime minister becomes vacant and the cabinet of ministers is dissolved. Wickremesinghe will also resign as a member of parliament.

His immediate focus would be to find a suitable candidate for prime minister in the new administration.

On Wednesday, Wickremesinghe called on political opponents to put aside their divisions and work together to tackle months of severe food, fuel and medicine shortages

“Now that the election is over, we have to end this division,” he said.

Speaking to the media soon after Wickremesinghe’s election, Minister Harin Fernando hinted that the president will try to form a national government together with many other parties.

Shehan Malaka Gamage, a protest leader who has been campaigning for justice for the victims of the 2019 Easter Sunday attacks, said Wickremesinghe will likely make concessions to protesters due to his lack of a strong base.

“Unlike years ago … he has executive powers but without a firm political base. Therefore, in my opinion, he is a very weak leader,” Gamage told Al Jazeera.

“If the protesters could challenge [the] all-powerful Rajapaksas, he knows it is not difficult for the masses to rise up against him. He knows he was not elected by the people. This is not his comfort zone. And I don’t think of this as a defeat in our struggle. We have already won our struggle.”

She said that if he delivers reforms and relief to the masses, Wickremesinghe could calm unrest and buy himself time.

“Our next option [to remove him] would be the next election,” Gamage said.

Source: Aljazeera

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Sri Lanka upgraded to Tier 2 in human trafficking report

Sri Lanka has been upgraded to Tier 2 in the annual human trafficking report issued by the United States.

The report says the Government of Sri Lanka does not fully meet the minimum standards for the elimination of trafficking but is making significant efforts to do so.

However, the Government demonstrated overall increasing efforts compared with the previous reporting period, considering the impact of the COVID-19 pandemic on its anti trafficking capacity; therefore Sri Lanka was upgraded to Tier 2.

These efforts included slightly increasing investigations, including of several Sri Lankan officials allegedly involved in child trafficking, and establishing a specialized unit to strengthen trafficking investigations.

The Government identified more victims, including among migrant workers exploited abroad.

The Government also increased coordination among agencies to further implementation of the 2021-2025 national action plan (NAP).

The Government expanded its trafficking hotline services to include online support for referrals.

In addition, the Government secured a new shelter location to accommodate victims of crime, including trafficking victims.

However, the report says the Government did not meet the minimum standards in several key areas.

The Government prosecuted fewer trafficking cases, and sentences for convicted traffickers remained inadequate. Law enforcement efforts against labor trafficking were disproportionately low compared with the number of identified labor trafficking victims.

The capacity of local officials to identify trafficking victims remained low, especially among women in commercial sex. The Government did not effectively address vulnerabilities to trafficking faced by migrant workers, including high worker-paid recruitment fees, largely unregulated sub-agents, and policies and procedures that undermined safe and legal migration.

Source: Colombo Gazette

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UN experts sound alarm on economic crisis in Sri Lanka

Independent Experts today expressed alarm about record high inflation, rising commodity prices, power shortages, crippling fuel crisis and the economic collapse in Sri Lanka, as the country grapples with unprecedented political turmoil.

This crisis has had a serious impact on the enjoyment of human rights for the entire population, the experts said.

“Time and again, we have seen the grave systemic repercussions a debt crisis has had on countries, exposing deep structural gaps of the global financial system, and affecting the implementation of human rights,” said Attiya Waris, UN independent expert on foreign debt and human rights.

Sri Lankan President Gotabaya Rajapaksa stepped down on 15 July, after fleeing the country as protestors stormed key government buildings in the capital Colombo. New leadership has been elected by the Parliament today.

Mass protests broke out in March following heavy shortages of food, fuel, medicines, and other essential items compounded by a series of ill-conceived economic reforms like tax cuts and servicing debt payments that ate into the country’s forex reserves. Prolonged disrupted access to food and healthcare has severely affected people with illnesses, pregnant women and lactating mothers who are in serious need of life-assistance.

Earlier this year, UN experts urged the Sri Lankan government to guarantee the fundamental rights of peaceful assembly and expression during peaceful protests as thousands of people gathered in front of the President’s office in Colombo, demanding his resignation over corruption and mishandling of the economic crisis. On 9 May, the UN High Commissioner for Human Rights Michelle Bachelet condemned the violence which erupted across the country, killing at least seven people.

As foreign reserves dried up, unable to make interest payments on the loans, the country defaulted on the debt of USD 51 billion in May 2022. After suspending all debt payments, the government took steps to restructure the country’s debt with the International Monetary Fund (IMF). In June, IMF staff noted that significant progress had been made on the staff level arrangement on the Extended Fund Facility.

“Any response towards mitigating the economic crisis should have human rights at its core, including in the context of negotiation with the IMF”, Waris said.

The UN experts noted that the issue of rising institutional debt had been flagged in a previous country visit report to Sri Lanka in 2019. The report found that debt repayments were the country’s largest expenditure, and emphasised the need for complementary alternatives and pursuit of less harmful policy options.

In July 2022, inflation in the country hit a record high of 54.6 per cent while food inflation rose to 81 per cent. The snowballing economic and debt crisis was deepened by the government’s hasty and botched agricultural transition. Under such conditions, the World Food Programme has launched an emergency response, warning that nearly 62,000 Sri Lankans were in need of urgent assistance.

“Sri Lanka’s economic collapse needs immediate global attention, not just from humanitarian agencies, but from international financial institutions, private lenders and other countries who must come to the country’s aid,” the experts said.

Source: Colombo Gazette

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Galle Face protests to continue till RW goes home

Addressing reporters, the protesters said that Wickremesinghe does not have the support of the people to continue in office.

They warned that if they could send former President Gotabaya Rajapaksa home then they can do the same with Ranil Wickremesinghe.

The protesters also urged the public to continue to ensure the protests are peaceful.

Wickremesinghe was elected President by Parliament today securing 134 votes.

MP Dullas Alahapperuma secured 82 votes while MP Anura Kumara Dissanayake secured just 03 votes.

Of the 225 members of Parliament 223 had cast their votes of which four were declared invalid.

Ranil Wickremesinghe, National Peoples Power (NPP) Leader Anura Kumara Dissanayake and MP Dullas Alahapperuma had been nominated for President.

Source: Colombo Gazette

Is India gaining over China in crisis-hit Sri Lanka?

During the ongoing anti-government protests in Sri Lanka, protesters shouted slogans targeting former president Gotabaya Rajapaksa and his family. But they also raised chants against India.

Slogans like – “Don’t sell the country to India and the US”; “India: Sri Lanka is not another state”; and “India don’t exploit Sri Lanka’s situation” – could be widely heard during the demonstrations.

But while anti-Indian sentiments like these still persist, how Sri Lankans view India might be changing as the country grapples with political and economic chaos.

Sri Lanka is in the midst of a deep and unprecedented economic crisis that has sparked massive protests, and forced its president to quit after fleeing the country.

Over the years, Sri Lanka has built up a huge amount of debt – to the point that it is now struggling to buy essentials such as food, fuel and medicine.

Protesters blame Mr Rajapaksa and his family, who fled to Singapore last week, for the situation. The parliament has begun the process of electing a new president and MPs are expected to vote on Wednesday.

Some sections of the Sri Lankan polity have always viewed with suspicion the presence of its bigger and powerful neighbour, India. I have seen several anti-India protests in Sri Lanka over the years by majority Sinhala nationalists and Left-wing parties.

But when Sri Lanka suddenly found itself in a deep economic mess a few months back, it turned to India and the Bharatiya Janata Party (BJP) government in Delhi responded with financial help.

This was not the first time though – in fact, no other country or institution has helped Sri Lanka as much as India in the past year.

Experts say that Sri Lanka’s desperate financial need, in a way, has helped Delhi regain its influence in the island-nation of 22 million people after China made inroads by offering loans and other forms of financial aid for infrastructure projects in the past 15 years.

“India has played a very crucial role, especially at this critical juncture. We have gone through an immense crisis as a country, and India has come forward and supported us,” Sajith Premadasa, Sri Lanka’s main opposition leader, told the BBC.

Source: Colombo Page