‘We cheated the IMF 16 times before…we have nothing to hide’ – Bandula

Cabinet Spokesman Minister Bandula Gunawardena has assured that facts about the Extended Fund Facility (EFF) received from the International Monetary Fund (IMF) will not be hidden from the public, emphasizing that a transparent procedure will be followed.

Speaking at the Cabinet briefing this morning (21 March), the Minister said that President Ranil Wickremesinghe too, has assured that once the IMF agreement is signed, all related matters will be presented before the Parliament.

Commenting on the EFF approved by the IMF to Sri Lanka last night (20 March), Gunawardena explained that as per the agreement, regardless of who comes into power within the next 48 months, the relevant Government must act in accordance with the terms of the agreement, despite being surrounded by political opinions, and must implement the programme.

“We have cheated the IMF 16 times before this by not acting in accordance with the conditions we agreed upon. If that happens again this time, the country will fall into a bigger abyss. Therefore, I believe that it is important to focus on creating a national consensus on working in compliance with the programme, as opposed to working in line with political agendas”, he said.

Moreover, the Minister also said that it is of his personal opinion that those political parties who are against the IMF deal propose their alternative suggestions and potential solutions in this regard before the Parliament, after which it can be debated or voted upon.

Sri Lanka must present debt restructuring strategy by end of April – IMF

Sri Lanka, with the help of its legal and financial advisors, must present a debt restructuring strategy before the end of April 2023 in order to reach the International Monetary Fund’s targets to achieve debt sustainability, Peter Breuer, the IMF Asia & Pacific Department’s Senior Mission Chief for Sri Lanka said today.

Addressing a special virtual press briefing this morning, Breuer pointed out that for the IMF to lend to a country, it usually requires a sustainable debt situation.

However, in Sri Lanka’s case, debt is not sustainable yet, but with financial assurances provided by its creditors, it is seen to be sustainable on a forward-looking basis, Breuer said further.

Using this strategy, Sri Lanka should set up talks with its creditors for negotiations on debt restructuring in order to reach the targets set by the IMF, Breuer said, explaining that this it would mean that the island nation’s debt is sustainable.

Joined by IMF’s Senior Mission Chief for Sri Lanka, Peter Breuer and Mission Chief for Sri Lanka, Masahiro Nozaki, the press briefing focused on the IMF-supported 48-month extended arrangement under the Extended Fund Facility (EFF) program of SDR 2.286 billion (approximately USD 3 billion) for Sri Lanka.

As the executive board of the International Monetary Fund green-lighted this extended arrangement on Monday (March 20), Sri Lanka will immediately receive an initial disbursement of USD 333 million (amounting to SDR 254 million) from the EFF arrangement, which is expected to catalyze new external financing including from the ADB and the World Bank.

According to Breuer, the first tranche of the loan is expected to be released in the next couple of days and the disbursements would be subjected to reviews that take place every 6 months.

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Sri Lanka seeks 10-year debt moratorium – AFP

Cash-strapped Sri Lanka is seeking a 10-year moratorium on its foreign debt, President Ranil Wickremesinghe’s office said yesterday on the eve of a desperately needed US $ 2.9 billion International Monetary Fund (IMF) bailout.

Wickremesinghe’s office quoted him as saying the widely expected IMF rescue “will only give us a breathing space where they will say we are no longer bankrupt”.

“All the money we have to repay this year, I hope we will be given at least 10 more years to repay it,” Wickremesinghe told a meeting of students in Colombo on Sunday.

He did not give details of his plans to restructure Sri Lanka’s US $ 46 billion external debt.
Sri Lanka defaulted on its foreign debt in April 2022 as the country plunged into its worst economic crisis, running out of cash to finance even the most essential imports and causing massive social unrest.

Widespread protests over economic mismanagement, acute shortages of food, fuel and medicines and runaway inflation forced Wickremesinghe’s predecessor Gotabaya Rajapaksa to flee the country and resign in July.

The IMF’s executive board was expected to sign off on Colombo’s bailout application later yesterday after a long delay in securing financial assurances from China, Sri Lanka’s largest bilateral lender.

Beijing had said this year it was offering a two-year moratorium on its loans to Sri Lanka but the concession fell short of the IMF expectations for the sustainability of the island’s debt.

Wickremesinghe had said after China agreed to restructure its loans that he expected the first tranche of the US $ 2.9 billion IMF package would be made available within the month.

Officials involved in the negotiations said the terms of debt restructuring must be finalised and agreed by all parties before June, when the IMF was expected to review the bailout programme.

“Sri Lanka will not be able to draw down the second tranche unless a debt restructuring plan is agreed with all creditors,” said one of the officials, who asked not to be identified.

Colombo is also banking on the IMF deal to unfreeze billions of dollars in foreign aid for projects suspended since Sri Lanka defaulted on its loans last year.

The government has already doubled taxes, increased energy tariffs threefold and slashed subsidies in an effort to meet the preconditions of the IMF bailout.

The austerity measures have sparked widespread protests and led to strikes that crippled the health and logistics sectors last week.

Wickremesinghe has said he had no alternative but to go with an IMF programme.

Sri Lanka’s economy shrank by a record 7.8 percent last year, as it grappled with its worst foreign exchange crisis since independence from Britain in 1948.

Wickremesinghe delivers IMF deal for Sri Lanka despite public mistrust

When Ranil Wickremesinghe took over as Sri Lanka’s president in July after a popular uprising ousted his predecessor, the South Asian island nation was engulfed in its worst economic meltdown in 75 years.

Since then, Wickremesinghe has managed to a keep a lid on mass protests, improve supplies of essentials and on Monday, secured a nearly $3 billion bailout from the International Monetary Fund (IMF) that opens the door to restructuring about $58 billion of debt and receive funding from other lenders.

He has done that despite a deeply unpopular government, his own party commanding just one seat in the 225-member parliament and having to rely for support on the party of the man he replaced.

Hours-long power cuts and queues for fuel that led to the downfall of former President Gotabaya Rajapaksa are gone, thanks partly to a fuel rationing system. Tourists are returning, remittances are recovering and foreign exchange reserves are rising, though the economy is still contracting.

But due largely to significant hikes in income taxes and power tariffs that were needed to get the IMF on board, the government of the 73-year-old is no favourite of the people.

According to a “Mood of the Nation” poll run in February by private think-tank Verité Research, the government’s approval rating was 10%, the same as in October but higher than an all-time low of 3% in June, when Rajapaksa was in power. Only 4% were satisfied with the way things were going in Sri Lanka, down from 7% in October but higher than 2% in June.

There are no known approval ratings for Wickremesinghe as president.

“He’s ready to face the people’s anger in the short term, to ensure long-term stability and growth in the country,” said Dinouk Colombage, Wickremesinghe’s director of international affairs.

“Even though the president only has one seat in parliament, him carrying forward his agenda, bringing forth the reforms, once the results start showing, I think the people will come out in open support of him.”

Born into a prominent family of politicians and business-people with large interests in the media, the lawyer and six-time prime minister has little support beyond wealthy urban voters. His ability to make policy depends to a great extent on the support of the Sri Lanka Podujana Peramuna party, largely controlled by the Rajapaksa family.

For now, Wickremesinghe is enjoying that support, and he said on Sunday that his country was on the right track.

“There’s fuel now, there’s electricity, there’s fertiliser and by April, there will be enough rice and other foodstuff,” he said at an event in Colombo.

“We will no longer be declared a bankrupt nation, but a nation that can restructure its debts.”

The bailout is expected to catalyse additional external support, with funding expected from the World Bank and the Asian Development Bank to the tune of $3.75 billion, the IMF said in a statement.

APOLOGY WHERE NEEDED

In recent months, Wickremesinghe successfully negotiated economic support from top lenders China, India and Japan, culminating in the IMF bailout.

He flew to Japan in October to apologise for the cancellation of Japanese-funded projects under Rajapaksa, which convinced Tokyo to back Sri Lanka’s request for the IMF bailout.

The Paris Club of creditors, which includes Japan, earlier this year gave financing assurances to support the IMF deal.

A Japan-funded $1.8 billion light-railway project, which was suspended in 2019, is among infrastructure projects that Sri Lanka is now trying to restart.

But Sri Lanka still needs to renegotiate its debt, a potentially drawn-out process where Wickremesinghe, who is also the finance minister, will have to deal with demands from China, India and other creditors.

He still has to turn around the economy, which shrank 7.8% in 2022 and is expected to contract by 3% this year.

Implementing further reforms under the IMF programme, reducing record-high interest rates and controlling inflation will also continue to pose challenges for Wickremesinghe, who has faced trade union strikes after the tax and power hikes.

Critics say Wickremesinghe’s economy-first approach ignores political and systemic reforms – like stronger anti-corruption measures and more transparency in government decision-making – as demanded by mass protesters who banded together as the “Aragalaya” movement last year.

“One year on, there is no real structural change in governance or system change,” said Bhavani Fonseka, senior researcher at Colombo-based Centre for Policy Alternatives.

“The president does take this line that his priority is addressing the economy over everything else, but you can’t have that silo-ed approach and think people are going to be okay with it.”

A crisis-weary public may still have to absorb years of continuing hardship as Sri Lanka tries to fix its economy during the four-year IMF programme, warned Jayadeva Uyangoda, a senior political analyst.

“Wickremesinghe has managed to neutralise the Aragalaya and that was a major success, but the economic and social crisis goes on,” he said.

“Economic stability will take at least another couple of years.”

Reuters (Source)

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Never recommended postponing LG elections – IMF

The International Monetary Fund (IMF) today said that it did not interfere in the Local Government election processes and had never recommended postponing those elections in Sri Lanka.

Speaking during a press briefing, IMF Mission Chief for Sri Lanka Masahiro Nozaki said that the first tranche of the loan would be released in the next couple of days.

He also said that the disbursement could be converted into rupees and could be used to repay Government loans and other expenditures.

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US welcomes Sri Lanka’s IMF package; Ambassador says structural & lasting reforms are critical

The United States of America has welcomed the approval of Sri Lanka’s IMF package.

“Great news & an important step on the road toward economic recovery,” tweeted US Ambassador to Sri Lanka Julie Chung on Monday (20).

She said that the Sri Lankan government will need to continue reforms and conclude debt restructuring agreements to ensure the program – and the economy – stay on track.

She noted that structural & lasting reforms that address good governance & transparency are critical to ensure all citizens of Sri Lanka can prosper.

IMF Managing Director Kristalina Georgieva also noted that she was very pleased the Executive Board of the IMF had approved about $3 bn of IMF support for Sri Lanka’s economic policies & reforms.

She said that it was an important milestone with International Creditors coming together to help to restore debt sustainability. “Crucial to unlock Sri Lanka’s growth potential,” she added.

The International Monetary Fund said that it will enable an immediate disbursement equivalent to about US $ 333 million for Sri Lanka under EFF program, following Executive Board approval on Monday (20).

The Executive Board of the International Monetary Fund (IMF) approved today a 48‑month extended arrangement under the Extended Fund Facility (EFF) with an amount of SDR 2.286 billion (395 percent of quota or about US$3 billion).

Sri Lanka has been hit hard by a catastrophic economic and humanitarian crisis. The economy is facing significant challenges stemming from pre-existing vulnerabilities and policy missteps in the lead up to the crisis, further aggravated by a series of external shocks.

The EFF-supported program aims to restore Sri Lanka’s macroeconomic stability and debt sustainability, mitigate the economic impact on the poor and vulnerable, safeguard financial sector stability, and strengthen governance and growth potential. The Executive Board’s decision will enable an immediate disbursement equivalent to SDR 254 million (about US$333 million) and catalyze financial support from other development partners.

Following the Executive Board discussion on Sri Lanka, Ms. Kristalina Georgieva, Managing Director, issued the following statement:

“Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities. Institutions and governance frameworks require deep reforms. For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported program with strong ownership for the reforms is critical.

“Ambitious revenue-based fiscal consolidation is necessary for restoring fiscal and debt sustainability while protecting the poor and vulnerable. In this regard, the momentum of ongoing progressive tax reforms should be maintained, and social safety nets should be strengthened and better targeted to the poor. For the fiscal adjustments to be successful, sustained fiscal institutional reforms on tax administration, public financial and expenditure management, and energy pricing are critical.

“Having obtained specific and credible financing assurances from major official bilateral creditors, it is now important for the authorities and creditors make swift progress towards restoring debt sustainability consistent with the IMF-supported program. The authorities’ commitments to transparently achieve a debt resolution, consistent with the program parameters and equitable burden sharing among creditors in a timely fashion, are welcome.

“Sri Lanka should stay committed to the multi-pronged disinflation strategy to safeguard the credibility of its inflation targeting regime. As the market regains confidence, the authorities’ recent introduction of greater exchange rate flexibility will help to rebuild the reserve buffer.

“Maintaining a sound and adequately capitalized banking system is important. Implementing a bank recapitalization plan and strengthening financial supervision and crisis management framework are crucial to ensure financial sector stability.

“The ongoing efforts to tackle corruption should continue, including revamping anti-corruption legislation. A more comprehensive anti-corruption reform agenda should be guided by the ongoing IMF governance diagnostic mission that conducts an assessment of Sri Lanka’s anti-corruption and governance framework. The authorities should step up growth-enhancing structural reforms with technical assistance support from development partners.”

The IMF Executive Board approved Sri Lanka’s program under the Extended Fund Facility (EFF) that will enable Sri Lanka to access up to $7 billion in funding, reported the President’s Media Division.

President Ranil Wickremesinghe has expressed his gratitude for the support of the IMF and other international partners, said the PMD.

It added that the President committed to full transparency in all discussions with financial institutions & creditors, & to achieve sustainable levels of debt through prudent fiscal management & an ambitious reform agenda.

The IMF program is critical to achieving this vision & will help to improve Sri Lanka’s standing in international capital markets, making it an attractive country for investors, talent, & tourists, said the President’s Media Division.

Earlier this month, Sri Lanka received IMF-compatible financing assurances from its official creditors, including Paris Club members, India and China, allowing the IMF to convene an Executive Board and consider Sri Lanka’s request for a loan.

The program is expected to provide much-needed policy space to drive the economy out of the unprecedented challenges and instill confidence amongst all the stakeholders.

Sri Lanka reached a Staff-Level Agreement with the IMF on a four-year program supported by the Extended Fund Facility on 1st September 2022.

The program, amounting to US$ 3bn, is expected to restore macroeconomic stability and debt sustainability while protecting vulnerable groups and safeguarding Sri Lanka’s financial system.

Since September, the Government of Sri Lanka has held official creditor meetings to update stakeholders on the country’s reform agenda and share information transparently as well as engaging with commercial creditors.

IMF to release US $ 333 Mn immediately to Sri Lanka under bailout package

The International Monetary Fund said that it will enable an immediate disbursement equivalent to about US $ 333 million for Sri Lanka under EFF program, following Executive Board approval on Monday (20).

The Executive Board of the International Monetary Fund (IMF) approved today a 48‑month extended arrangement under the Extended Fund Facility (EFF) with an amount of SDR 2.286 billion (395 percent of quota or about US$3 billion).

Sri Lanka has been hit hard by a catastrophic economic and humanitarian crisis. The economy is facing significant challenges stemming from pre-existing vulnerabilities and policy missteps in the lead up to the crisis, further aggravated by a series of external shocks.

The EFF-supported program aims to restore Sri Lanka’s macroeconomic stability and debt sustainability, mitigate the economic impact on the poor and vulnerable, safeguard financial sector stability, and strengthen governance and growth potential. The Executive Board’s decision will enable an immediate disbursement equivalent to SDR 254 million (about US$333 million) and catalyze financial support from other development partners.

Following the Executive Board discussion on Sri Lanka, Ms. Kristalina Georgieva, Managing Director, issued the following statement:

“Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities. Institutions and governance frameworks require deep reforms. For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported program with strong ownership for the reforms is critical.

“Ambitious revenue-based fiscal consolidation is necessary for restoring fiscal and debt sustainability while protecting the poor and vulnerable. In this regard, the momentum of ongoing progressive tax reforms should be maintained, and social safety nets should be strengthened and better targeted to the poor. For the fiscal adjustments to be successful, sustained fiscal institutional reforms on tax administration, public financial and expenditure management, and energy pricing are critical.

“Having obtained specific and credible financing assurances from major official bilateral creditors, it is now important for the authorities and creditors make swift progress towards restoring debt sustainability consistent with the IMF-supported program. The authorities’ commitments to transparently achieve a debt resolution, consistent with the program parameters and equitable burden sharing among creditors in a timely fashion, are welcome.

“Sri Lanka should stay committed to the multi-pronged disinflation strategy to safeguard the credibility of its inflation targeting regime. As the market regains confidence, the authorities’ recent introduction of greater exchange rate flexibility will help to rebuild the reserve buffer.

“Maintaining a sound and adequately capitalized banking system is important. Implementing a bank recapitalization plan and strengthening financial supervision and crisis management framework are crucial to ensure financial sector stability.

“The ongoing efforts to tackle corruption should continue, including revamping anti-corruption legislation. A more comprehensive anti-corruption reform agenda should be guided by the ongoing IMF governance diagnostic mission that conducts an assessment of Sri Lanka’s anti-corruption and governance framework. The authorities should step up growth-enhancing structural reforms with technical assistance support from development partners.”

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Indian military officers in Sri Lanka on study tour

Nineteen officers from the three services of the Indian armed forces reached Sri Lanka on Sunday (19).

The Officers are on a week-long strategic study tour under the 46th Higher Air Command Course.

The delegation consists of selected officers under training for Senior Command and Staff Appointments from the three services.

During the visit, the Officers are scheduled to visit and interact with Sri Lankan Naval Command, Coast Guard and Air Force.

The visit serves as an opportunity to further strengthen India’s defence partnership with Sri Lanka.

Colombo, clothing sector in crisis: 50,000 workers laid off -AsiaNews

There are 300 manufacturing companies that employ 350 thousand workers and produce garments for dozens of major international brands. Trade unions: the companies ‘have also closed entire facilities without even paying the paltry compensation recommended by the government’. The industry accounts for more than 50 per cent of total national export revenue.

About 50 thousand garment workers have lost their jobs due to the economic crisis. The country is home to more or less 300 manufacturing companies that employ 350 thousand workers, who in turn support an estimated 700 thousand family members.

These companies produce garments for dozens of major international brands based in the US and Europe, including Victoria’s Secret, Marks & Spencer, GAP, Tommy Hilfiger and VanHeusen.

Senior manager Nilantha Kaluarachchi, an employee of Export Processing Zone ‘A’ in Biyagama, explained to AsiaNews that ‘several Sri Lankan garment factory owners have not only cut jobs and wages, but also closed down entire facilities without even paying the paltry compensation recommended by the government.

The basic monthly income of many workers struggling with hyperinflation has fallen to around 25 thousand rupees [US]’.

According to the secretary of the Manufacturers’ Association, Dhammika Fernando, ‘there is a reduction of workers in the factories and some companies have downsized their operations, while companies with 400-500 workers are open four days a week. The workers in these factories have to work 10 hours a day without overdoing it’.

“At the last meeting of the National Labour Council it was decided to allow a five-day working week for the rest of the year, provided that no one can be employed on Saturdays. But the garment industry wants to get permission for employees to work on Saturdays,’ Fernando added.

According to the joint secretary of the Free Trade Zone and General Services Employees’ Union, Anton Marcus, ’employers are expecting a series of labour reforms that worry the unions: increasing the number of overtime hours per month from 60 to 75 hours and increasing night shifts for women from 10 to 15 days. This would prevent companies from hiring more workers by making the most of their labour force’.

“About 50 thousand employees in the garment sector have been laid off, their wages vanished overnight after a rapid currency devaluation, even though their work continues to enrich the country’s three major garment factory conglomerates and their important customers, including major international brands,” Anton pointed out.

Most of the workers are also not paid the minimum ’emergency allowance’ of 10 thousand rupees (USD 27), intended to help them overcome the crisis, despite the fact that the current basic wages are heavily devalued. Anton explains that all brands that source in Sri Lanka have been asked to guarantee the monthly payment of the emergency allowance to their supply chain workers.

The operations manager at the Katunayaka Free Trade Zone factory, Dasun Amaranayake, said that ‘some factories give their employees extra support, such as a monthly bonus of 500 rupees (.37) or a food parcel if they have never taken a day off. With wage and benefit adjustments, workers receive between 20,000 and 23,500 rupees (-65) monthly. However, this is an insufficient amount considering that, before the economic crisis, employees’ wages were barely at subsistence level and were then worth between 0 and 5 per month’.

“Employees in the garment sector, mostly women, have migrated from their villages to support their families, and are the basis of an industry that accounts for more than 50 per cent of Sri Lanka’s total export earnings. Yet they have suffered from all the crises that have hit the country in recent years: during the Covid-19 pandemic, the income from this industry was deemed too important to let the workers shut themselves away, causing mass outbreaks in factories and workers’ homes. In the first three months of the pandemic, garment workers lost around 40% of their wages. The government meanwhile is not interested in dialogue between social partners,’ Dasun pointed out.

Attorney General recommendation on tenure of LG bodies expected on Monday (20)

State Minister of Provincial Councils and Local Government, Janaka Wakkumbura said the Attorney General’s recommendation on whether the tenure of the local government institutions will be extended, is expected today (20).

The tenure of 340 Local Government Institutions lapsed on Sunday (19) night, and the matter of extending the tenure was referred to the Attorney General.

The official term of 340 local government institutions ended at midnight on Sunday (19).

Accordingly the tenure of 29 municipal councils, 36 urban councils and 275 pradeshiya sabhas ceased from midnight on Sunday (19).

The tenure of the members of the 340 Local Government Institutions commenced on the 20th of March 2018, after the Local Government Election held on 10th February that year.

The Elpitiya Pradeshiya Sabyha held a separate election and as a result, their official term began in October 2018.

Although the official term of 340 local government institutions was supposed to end on the 20th of March last year, the Minister in charge used his authority in order to extend the term by a year to end in 2023.

Accordingly, the official term of 340 local government institutions ceased on Sunday (19).

The State Minister of Provincial Councils and Local Government Janaka Wakkumbura says that thereafter, all administrative activities of these institutions will be handed over to the commissioners or secretaries.

This is as per the provisions set out in the Local Authorities Elections Ordinance.

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