Author: Branita

The Birmingham Metropolitan Police have started a special inquiry after a Sri Lankan athlete and a senior official went missing following the fifth day’s events of the 22nd Commonwealth Games in England on Tuesday.

According to Ada newspaper, initial reports indicate that a female judoka and the manager of the Sri Lanka Judo Team have disappeared from the Sri Lankan camp.

The two Sri Lankans are reported to have disappeared soon after the female judoka lost her first-round event yesterday.

The Sri Lankan Team Management have immediately informed the relevant authorities about their disappearance.

As a result, the Chef-de-Mission of the Sri Lankan contingent Maj. Gen (retired ) Dampath Fernando has acquired all passports of the Sri Lankan contingent to avoid further issues.

Sri Lanka are fielding a 110-member strong contingent and 51 officials for the Commonwealth Games with the Judo Team consisting of three Men and two Women.

The Sri lankan contingent has been granted a 180-day Visa for the Commonwealth Games.

Source: Newswire

The Samagi Jana Balawegaya (SJB) led by Opposition Leader Sajith Premadasa has accepted President Ranil Wickremesinghe’s invitation to meet on 5 August to discuss the implementation of a national all-party program.

Confirming the party’s attendance, SJB General Secretary Ranjith Madduma Bandara clarified the invitation was not to hold discussions to form an all-party Government but to merely discuss the possibility of formulating a national all-party program to revive the country.

When asked if the SJB is willing to join hands with the Government, Madduma Bandara said the decision will depend on what is discussed.

Previously, the SJB had stated they are willing to consider joining a national Government depending on the proposals put forward.

As early as March this year, Wickremesinghe had stressed the need to implement a program with a national consensus to rebuild the country. At the time, Wickremesinghe noted that such a program was more important than forming a national Government.

Premadasa appeared to agree when earlier this week he suggested that a National Integration Program must be implemented to solve the crisis.

The President’s Media Division on 20 July confirmed President Wickremesinghe had extended an invitation to all parties to hold talks. In the invitation, Wickremesinghe said initial plans required to implement a systematic economic reform program are being formulated, while preliminary measures are also being undertaken for the creation of economic stability.

“However, it is my opinion that a program needs to be implemented with the participation of all political parties represented in Parliament, expert groups, civil society organisations and all related parties to overcome the challenges before us successfully,” he noted.

Meanwhile responding to President Wickremesinghe’s letter, Tamil National Alliance (TNA) Leader R. Sampanthan has expressed the party’s fullest support for the formulation and implementation of a national all-party program. “All national issues must be addressed and resolved,” Sampanthan said.

According to reports, Wimal Weerawansa’s National Freedom Front has also agreed to meet Wickremesinghe to discuss the matter.

Source: Daily FT

The Sri Lankan government is using emergency regulations to harass and arbitrarily detain activists seeking political reform and accountability for the country’s economic crisis, Human Rights Watch said today. Since Ranil Wickremesinghe was sworn in as president on July 21, 2022, the police and military have sought to curtail protests through the intimidation, surveillance, and arbitrary arrests of demonstrators, civil society activists, lawyers, and journalists.

Anti-government protests in Colombo and elsewhere in the country led then-President Gotabaya Rajapaksa to flee the country before resigning on July 15. On July 22, President Wickremesinghe ordered security forces to disperse protesters and break up their main site in central Colombo. The police have subsequently targeted perceived protest leaders for arrest and detention.

“The Sri Lankan government’s crackdown on peaceful dissent appears to be a misguided and unlawful attempt to divert attention from the need to address the country’s urgent economic crisis,” said Meenakshi Ganguly, South Asia director at Human Rights Watch. “Sri Lanka’s international partners should be clear that they need to be working with a rights-respecting administration to address Sri Lanka’s deeply rooted economic problems.”

Security forces injured more than 50 people in the July 22 early morning raid on the main janatha aragalaya (people’s struggle) site in Colombo. Security forces assaulted and beat three journalists from Xposure News – Chaturanga Pradeep Kumara, Rasika Gunawardana, and Shabeer Mohammed – and at least one other journalist, Jareen Samuel of the BBC, during the raid. Wickremesinghe berated foreign diplomats for criticizing the security forces’ use of excessive force and took no action to hold those responsible to account.

A number of Buddhist monks and Christian clergy had joined the protests. The media reported that the Colombo Magistrates’ Court on July 25 had issued a travel ban on Father Jeewantha Peiris, a Catholic priest who had been prominent in the protests, and several others. Two days later police visited Father Peiris’s church and said that they had orders to arrest him. In a July 31 statement, 1,640 members of the Catholic clergy condemned targeting the priest, saying that they had all backed the protests.

On July 26, the authorities arrested another prominent protester, Dhaniz Ali, from an international flight about to depart from Colombo. On July 27, unidentified men in civilian clothes abducted Veranga Pushpika, a former student activist and journalist who had also been active in the protests, from a bus in Colombo. Police did not disclose his whereabouts to lawyers or the Human Rights Commission for several hours before acknowledging his arrest.

Human rights defenders said that the police sought to obstruct defense lawyers from meeting with four protesters who had been arrested after they handed over to the police a large sum of money taken from the president’s official residence after protesters had occupied it.

Lawyers and media organizations told Human Rights Watch that they have experienced increased intimidation, including threats of violence and surveillance. In one episode, a group of men claiming to be police officers, but not wearing uniform, visited the office of an online publication, Xposure News, on July 27 and demanded that a security guard identify people shown in photographs and show them CCTV footage.

On July 31, a student protester said in a statement on Facebook that he had been detained and interrogated for three hours by security force personnel who warned him that they could plant drugs on him and arrest him. Police summoned the social media activist Rathidu Senarathna, known as “Ratta,” on August 1 and arrested him after questioning. A Colombo magistrate also issued a foreign travel ban on Senarathna and 11 others suspected of illegal assembly and causing damage to property. On August 2, the authorities seized the passport of a British national, Kayleigh Fraser, who had posted about the protests on social media.

The authorities arrested at least seven people for the July 9 arson attack on Wickremesinghe’s private residence. Activists said that at least some of those detained were known to have been bystanders. Police are investigating a hotel that allegedly provided food to protesters and have raided, sometimes without warrants, the homes or workplaces of several protesters who are in hiding.

In a statement, 175 Sri Lankan human rights defenders and civil society organizations expressed concern about “disturbing developments of abduction, arrest, intimidation, and reprisals against protesters.” Members of the Catholic clergy said the government should “stop the repression of those involved and supporting the Aragalaya and focus on listening to grievances and aspirations of people and take actions to address both immediate and long-term problems.”

Under the state of emergency that President Wickremesinghe declared on July 18, the period that a person may be detained before being brought before a magistrate has been increased from 24 to 72 hours. The authorities have been granted sweeping additional powers of search and arrest, and the military has been empowered to detain people for up to a day without disclosing their detention. These provisions increase the risk of torture and enforced disappearance.

Under international human rights law, protections against torture, the excessive use of force, and other fundamental rights must never be violated, including during a state of emergency. Provisions of the state of emergency contrary to international standards should be immediately revoked, Human Rights Watch said.

The emergency regulations also introduce extreme new sentencing rules for several offenses, including damage to property and trespassing, which can now result in a life sentence and carry a minimum term of 20 years in prison. Among the offenses subject to harsher sentencing is a provision of the penal code that has previously been used to prosecute same-sex conduct. The decree provides that bail will not be available for those accused of offenses under the emergency regulations.

The state of emergency also gives the president and the police broad powers to ban public gatherings, allows the police or military to order anyone to leave any public place or face arrest, and makes it an offense to cause “disaffection” or to spread “rumors.” These provisions are vague, overly broad, and disproportionate in violation of the rights to freedom of expression, peaceful assembly, association, and movement.

In a statement following the assault on protesters on July 22, the European Union noted that it “expects the new Government to work in full compliance” with its human rights commitments, made in exchange for tariff free access to the EU market under the bloc’s GSP+ program. The World Bank said in a statement that the government should address “the root structural causes that created this crisis to ensure that Sri Lanka’s future recovery and development is resilient and inclusive.” Earlier, the United States Senate Foreign Relations Committee stated that any agreement with the International Monetary Fund “must be contingent on … strong anti-corruption measures and promotion of the rule of law.”

“The people of Sri Lanka are reeling under an economic crisis that has plunged millions into food insecurity, the closure of schools, and shortages of medicine, fuel, and other necessities,” Ganguly said. “The government needs to end its repressive policies and practices and act urgently to address people’s basic needs, win public trust, and uphold the rule of law by holding those responsible to account.”

With the whole world watching the deteriorating political, economic and humanitarian situation unfolding in Sri Lanka, and while we pray for swift solutions to food, fuel and medical shortages, there is now an opportunity to reinvent how countries like ours recover from crippling debt and re-emerge as healthy, functioning economies.

Sri Lanka is in a difficult position. Corrupt governments have mismanaged the nation’s finances and agreed to predatory loans with exploitive interest rates. Having absconded from the country they ravaged, they have now left millions of everyday Sri Lankans on the hook for their crimes and ineptitude.

In the case of Sri Lanka, the country has external borrowings of over $ 50 billion (60% of GDP) that it cannot service, crucially over 40% of that is to private creditors, many of whom are charging predatory interest rates. The loans from multilateral institutions (over 20% of external debt) and bilateral arrangements (30%) are on more concessionary payment terms.

The traditional solution, to turn to the IMF, will likely result in crippling austerity measures and the selling off of our national assets and resources, leaving us even less able to revive our economy on our own steam. This is unacceptable and I would suggest not inevitable.

Sri Lanka is not the only country in this position. It is the canary in the coal mine. The pandemic, the war in Ukraine and resulting inflation have hamstrung several nations in the global south who may soon be facing their own disasters. The instability this will cause will be detrimental to global politics and economies writ large. Problems like these are not isolated and do not stay put. They travel, taking their consequences with them across the planet.

The solutions to these troubles are as unique and complicated as each individual country, but what they all share is some measure of debt cancellation and delayed or restructured repayment. I am not suggesting Sri Lanka default on its external loans to other governments or multilateral institutions.

I am suggesting that instead of thinking in the short-term and selling off our assets, the very things that could be used to revive the economy, we declare null and void the remainder of the debt to extortionary private lenders, and instead create a plan for how Sri Lanka’s people and resources can work to revive the economy and repay those restructured multilateral loans and bilateral loans from our allies. Taking a genuinely non-aligned position in the geopolitical battles between larger nations is a prerequisite to request assistance from across the world.

The benefits to this are myriad. First and foremost, it gives Sri Lankans a chance at long-term independence and prosperity, and shields against climate change. There have been 16 rounds of standard IMF bailout packages since 1965 and they have all failed to deliver sustainable solutions. The current model of prioritising benefits to lenders rather than local populations is wrongheaded and it simply doesn’t work.

The IMF should bail out people, not accommodate corporations. If they did, the people would, in time, be able to pay back their loans. Sri Lanka is rich in resources and assets which can be leveraged to create a booming economy. The issue is not insolvency, it is illiquidity.

Secondly, we must take a progressive stand against the ability of exploitative private creditors to make deals with corrupt leaders who ultimately are not held responsible for the outcomes.

By including private creditors, such as world’s largest asset manager, Black Rock, in IMF debt restructuring negotiations, they are being rewarded for their destructive lending practices, and are encouraged to continue, causing generations-worth of economic damage to struggling nations. Sri Lanka should default on loans to predatory private creditors, and it should do so jointly with other low-income countries.

Yes, the lenders will sue. There is no international court that can force countries to pay them back, but the loans are subject to the laws in which the lenders are based, most often New York and London, and they may pursue claims to overseas assets. This is our opportunity to mobilise for greater economic fairness and to campaign for changes to these laws for the better.

Currently countries in economic hardship do not have the bankruptcy protections granted to businesses. If the owners of a company that cannot pay its bills can be shielded from its creditors to avoid destitution, then surely a country that supports the lives and welfare of millions of people should be entitled to the same protections.

If low-income countries default together, we shine a light on this issue and put pressure on the United States and United Kingdom Governments to enact legislation that will protect distressed governments. The change required is systemic and necessitates that we stand together and that new models work for the people. Yes, this will be a fight, but a fight worth engaging in, and one in which there will be support from around the world.

Debt cancellation is not a fairy tale. It can and has happened, to greater and lesser extents, and it can happen for Sri Lanka, but the call needs to come from the people. The current Government will not engage in this type of structural change without pressure. The people need to demand it. They need to demand fairness and the opportunity to thrive.

Debt cancellation in these circumstances is justice. I would encourage every Sri Lankan, and every citizen of countries in similar straits, to consider the idea. Talk about it with your friends and family. Discuss it within Sri Lankan civil society. Demand that our leaders fight for it. The diaspora wants to help and will speak up within their countries calling for their governments to support these ideas. If Sri Lankans ask for it, organisations like Debt Justice UK, Asian Peoples’ Movement on Debt and Development, Jubilee USA, and others, can support the fight.

The whole planet is in recovery mode. Now is the time for large-scale change based on reframing what economic justice looks like. Debt is not a moral issue. Allowing people to suffer and die is a moral issue.

Written by Charith Gunawardena

Fitch Ratings said it was keeping a Rating Watch negative on Sri Lanka’s DFCC Bank amid a currency crisis that has triggered dollar shortages and sovereign default while there are also mounting bad loans.

The Rating Watch Negative “reflects the potential for the bank’s creditworthiness to deteriorate relative to other entities on our Sri Lankan national rating scale,” Fitch said.

“This is because of heightened stress on the bank’s funding and liquidity, and its exposure to the sovereign via investment in foreign-currency instruments that raise risks to its overall credit profile.

“We believe that the sharp rise in inflation, depreciation of the local currency, and other factors can distort the bank’s underlying financial position in the current operating environment.”

Sri Lanka is gripped by the worst currency crisis in the history of the island’s intermediate regime central bank. Sri Lanka’s economists got the ability to trigger a balance of payments deficits and currency crises with the setting up of a soft-pegged central bank in 1950.

In 2022 the rupee collapsed to 360 to the US dollar from 200 as an attempt was made to float the currency with a surrender rule.

Fitch said the bank’s foreign-currency funding and liquidity position was significantly challenged and vulnerable to sudden shocks amid weaker credit sentiment though the bank was successful in securing USD150 million of term funding in 2021, Fitch said.

“We believe further access to such funding would be difficult, similarly to peers, given the sovereign’s debilitated credit profile,” the agency said.

As customer repayment capacity weakens due to the economic conditions Fitch said, it expects DFCC’s impaired (stage 3) loan ratio to increase in the near to medium term.

” Impaired loans at end-2021 were 6.2% of total assets together with a further 2.2% of assets in US dollar-denominated sovereign bonds and Sri Lanka Development bonds, the share of which is estimated to have reduced in 1H22,” the rating agency said.

The agency said that sovereign default together with increasing economic challenges poses significant downside risks to DFCC’s profitability, to the extent that the bank may become structurally unprofitable.

“Earnings pressure is already evident in the bank’s operating profit/risk-weighted asset ratio that declined to 0.6% by end-1Q22 (end-2021: 1.7%) as credit costs eroded 83% of the bank’s pre- impairment profits”

The full statement is reproduced below:

Fitch Maintains DFCC Bank’s National Rating of ‘A+(lka)’ on Watch Negative

Fitch Ratings – Colombo – 28 Jul 2022: Fitch Ratings has maintained DFCC Bank PLC’s National Long-Term Rating of ‘A+(lka)’ on Rating Watch Negative (RWN). Fitch has also maintained DFCC’s senior and subordinated debt ratings of ‘A+(lka)’ and ‘A-(lka)’, respectively, on RWN.

KEY RATING DRIVERS

RWN Maintained: The RWN on DFCC’s National Long-Term Rating reflects the potential for the bank’s creditworthiness to deteriorate relative to other entities on our Sri Lankan national rating scale. This is because of heightened stress on the bank’s funding and liquidity, and its exposure to the sovereign via investment in foreign-currency instruments that raise risks to its overall credit profile.

We believe that the sharp rise in inflation, depreciation of the local currency, and other factors can distort the bank’s underlying financial position in the current operating environment.

Foreign Currency Liquidity Constraints: We believe DFCC’s foreign-currency funding and liquidity position is significantly challenged and vulnerable to sudden shocks amid weaker credit sentiment. The bank was successful in securing USD150 million of term funding in 2021, but we believe further access to such funding would be difficult, similarly to peers, given the sovereign’s debilitated credit profile.

Weakening Operating Environment: Our assessment of Sri Lankan banks’ operating environment (OE) reflects the pressure on the banks’ already stressed credit profile following the sovereign’s default on its foreign-currency obligations. It also captures the rapid deterioration in the broader economy, including increased interest rates, high inflation, and acute currency depreciation. The economic slump has limited DFCC’s operational flexibility.

Increasing Asset-Quality Pressure: Fitch expects DFCC’s impaired (stage 3) loans ratio to increase in the near to medium term as borrower repayment capacity weakens due to the rapidly deteriorating economic conditions. The bank’s exposure to the government’s foreign currency-denominated instruments, although small relative to peers, adds to asset-quality pressure. Impaired loans at end-2021 were 6.2% of total assets together with a further 2.2% of assets in US dollar-denominated sovereign bonds and Sri Lanka Development bonds, the share of which is estimated to have reduced in 1H22.

Capital Buffers Under Pressure: Fitch expects increased asset-quality risks, and weaker earnings retention alongside bloated risk-weighted assets from the Sri Lankan rupee’s sustained depreciation, which will exert significant pressure on the bank’s capitalisation metrics in the near term. This is despite the bank’s lower exposure to foreign currency-denominated government securities than that of peers. Capital raising continues to be a challenge for the bank, as seen in its recently concluded rights issue that was undersubscribed.

Credit Costs to Erode Earnings: We believe that sovereign default together with increasing economic challenges poses significant downside risks to DFCC’s profitability, to the extent that the bank may become structurally unprofitable. Earnings pressure is already evident in the bank’s operating profit/risk-weighted asset ratio that declined to0.6% by end-1Q22 (end-2021: 1.7%) as credit costs eroded 83% of the bank’s pre-impairment profits.

Economic Volatility Weighs on Business Model: We believe that DFCC’s business profile, like most domestic peers, is highly vulnerable to the intensifying risks in the domestic market, given the high concentration of its business profile on the weak and unstable Sri Lankan economy. This could limit the bank’s ability to generate and defend business volume. The rapidly deteriorating OE is likely to derail the bank’s aspiration of reaching LKR1 trillion asset base by 2025.

High-Risk Profile: DFCC’s elevated risk profile, similar to local peers, stems from its main exposure to high-risk customer segments with weak credit quality, as reflected in the ‘ccc’/negative OE.

This is further exacerbated by DFCC’s exposure to the government’s foreign currency-denominated instruments, albeit lower relative to peers, making the bank vulnerable to the sovereign’s repayment capacity and liquidity position.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The RWN reflects rising risks to the bank’s rating from funding stresses, which could lead to a multiple-notch downgrade. We expect to resolve the RWN when the impact on the issuer’s credit profile becomes more apparent, which may take more than six months.

Developments that could lead to a multiple-notch downgrade include:

– funding stress that impedes DFCC’s repayment ability;

– significant banking-sector intervention by authorities that constrains the bank’s ability to service its obligations;

– a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation;

– Fitch’s belief is that DFCC has entered into a grace or cure period following non-payment of a material financial obligation.

A downgrade of the sovereign’s Long-Term Local-Currency Issuer Default Rating (CCC)could also lead to a downgrade of the bank’s rating.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

There is limited scope for upward rating action given the RWN

OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS

SENIOR DEBT

DFCC’s outstanding senior unsecured debentures are rated at the same level as its National Long-Term Rating under Fitch’s criteria. This is because the debt ranks equally with the claims of the bank’s other senior unsecured creditors.

SUBORDINATED DEBT

DFCC’s Basel II- and Basel III-compliant Sri Lankan rupee subordinated debt is rated two notches below the National Long-Term Rating anchor. This reflects Fitch’s baseline notching for loss severity for this type of debt and our expectations of poor recoveries.

There is no additional notching for non-performance risks, as the notes do not incorporate going-concern loss-absorption features.

OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES

The senior and subordinated debt ratings will move in tandem with the bank’s National Long-Term Rating.

Source: Economy Next

The head of the President’s Media Division had a brief discussion with protesters at Galle Face today, in a personal capacity.

The Director General of the President’s Media Division Dhanushka Ramanayake, who was appointed to the post just this week, met the protesters while on his way to the Presidential Secretariat.

Ramanayake was passing Galle Face when he recognised some of those protesting at the Galle Face protest site today.

He had stepped out of his vehicle and spoke to some of the protesters.

Ramanayake had made inquiries about the demands of the protesters, which included some clergy.

Dhanushka Ramanayake had attended some of the protests staged at Galle Face against former President Gotabaya Rajapaksa.

Source: Colombo Gazette