Category: Featured Headlines

Sri Lanka is yet to utilise nearly $ 50 million from the $ 110 million allocation made to the pharmaceutical sector from the $ 1 billion Indian Line of Credit (LOC), The Sunday Morning learns.

Health Ministry Secretary Janaka Sri Chandraguptha confirmed that only around $ 60 million had been utilised from the allocations given to the health sector so far.

“We have called for tenders from private parties too. There is a complex process involving LOC funds. We have submitted documents to the Indian High Commission too,” he said.

The funds allocated from the LOC were distributed among institutes attached to the Ministry including the State Pharmaceuticals Manufacturing Corporation (SPMC), State Pharmaceuticals Corporation (SPC) and private sector, according to Chandraguptha.

For some tenders, the procurement has already been commenced, he said, adding that discussions were ongoing to see the possibilities of importing necessary medical equipment from India. “It is not finalised yet,” he added.

State Minister of Finance Shehan Semasinghe met with the World Bank Vice President for the South Asia Region, Martin Raiser, and a World Bank delegation during the World Bank Annual Meetings 2022, to discuss options available to recover Sri Lanka’s economy.

The discussions were focused on the current creditworthiness of Sri Lanka, which is no longer entitled to source funding through the World Bank’s International Bank for Reconstruction and
Development (IBRD), instead to work with the International Development Association (IDA) rating, which will grant Sri Lanka to obtain concessional loans.

This process, which will entail a “reverse graduation” to IDA, will move Sri Lanka from an IBRD-only country to an IDA country.

However, Sri Lanka will remain listed as a middle-income country.

The IMF/WB also emphasized that access to this potential new concessional funding remains linked to deep reforms, an IMF program, and progress with a comprehensive debt treatment
the process by the authorities of Sri Lanka.

The VP and the WB Delegation said that sustained improvements in economic and social conditions by the Sri Lankan government could pave the way for Sri Lanka to graduate from IDA in the future.

A group of parents have formed the National Parents’ Association (NPA) to “protect the future of the Sri Lankan community” with the aim of actively contributing to any future “aragalaya” (people’s struggle) that may take place, to overcome the socio-economic crisis that has arisen in the country.

Speaking at a media briefing recently, members of the NPA stated that it is the parents who have been most affected due to the prevailing socio-economic crisis. As they cannot fulfil the needs of their children, they said, they have been put in a very stressful situation in the recent past, and that they should therefore, work towards the resolution of the crisis.

“As we felt that we also have some way to contribute to overcoming this crisis, we decided to form the NPA. This consists of the office bearers and an advisory board. It is the parents who are honestly thinking of the wellbeing of their children. Every individual in the society is either a parent, or a child. Therefore, everyone is invited to join us,” they added.

The NPA members also stated that they would expand the organisation by forming branches in all districts in the coming months. By joining hands with other civil organisations that are working towards the resolution of the economic crisis and are engaged in similar struggles, they said, the NPA would also contribute to making the country a better place for the children to live.

The participation of parents in the protests which are being held against the Government’s failure to provide solutions to prevailing issues, including with children, has been talked about in the recent days, following the Police obstructing a peaceful protest at the Galle Face Green in which a number of parents attended with their children on 9 October. The National Child Protection Authority said that it would investigate allegations of parents using their children as human shields at the said protest.

Meanwhile, equating those who take their children to protest demonstrations as being akin to slain Liberation Tigers of Tamil Eelam (LTTE) Leader Velupillai Prabhakaran’s use of children as human shields, President Ranil Wickremesinghe stated on Wednesday (12) that all measures will be taken in consultation with Attorney General Sanjay Rajaratnam (PC) to prevent young children from being brought to protests.

Speaking during a discussion at the Presidential Secretariat on the protection of children’s rights, he said: “Taking children to protest demonstrations should be stopped. They are taking children to protests, not because they cannot be left alone at home, but to be used as a human shield, similar to what Prabhakaran did. The Police should be instructed to prevent such incidents from happening. If this is to continue, everyone will bring their children to protests and even university students will bring children.”

IMF Managing Director Kristalina Georgieva says that the IMF is pressing for a more effective debt resolution mechanism.

“We want the Common Framework to become more predictable with guidelines and able to bring equality of treatment for all creditors, public and private,” she told a news briefing.

She said that the IMF is also looking for ways in which it can expand that kind of donor coordination to middle-income countries, such as Sri Lanka.

“So, we have a lot to do during this week. And it is so important that we do demonstrate we understand the urgency to act, and we understand that acting together makes a difference to the lives of hundreds of millions of people,” she added.

Sri Lanka has to do transformational reforms and improve governance to come out of the current crisis a senor World Bank official said, as the island suffers the worst currency crisis in the history of its intermediate regime central bank.

Sri Lanka’s gross domestic product is expected to shrink to 9.2 percent in 2022 according to World Bank projections after a collapse of the rupee following two year of money printing to support a tax cut, which ended in import controls and default.

Sri Lanka has reached a deal with the International Monetary Fund for a reform program and a loan of 2.9 billion US dollars.

“To come out of the crisis, really fundamental and transformation reforms are needed, because in the past, a lot has gone wrong under difficult circumstances,” Hans Timmer the World Bank’s Chief Economist for South Asia said.

“Sri Lanka came into the crisis because of a lot of external shocks, because some of some internal shocks also but also because of macro-economic management mistakes.”

Sri Lanka is reforming is tax system to boost revenues, and is also trying to trim government spending. With the IMF program Sri Lanka is in talk with creditors to res-structure its debt.

Improving Governance

An important reform was for Sri Lanka to improve governance to make sure that the “system works there is a level playing field and there are fewer opportunities for a mis-use of the system or even corruption,” Timmer said.

“The first priority is to set up a very efficient social safety net and put in place some measures so that a large part of population can become more productive and have access to markets and to finance,” Timmer said.

Before new funding came the Sri Lanka had to do the required reforms, improve governance and also make progress on debt sustainability alongside the IMF program.

Governance of spending, procurement and governance of the financial sector were areas Sri Lanka had to improve, Timmer said.

State enterprise reforms are also required.

Sri Lanka ongoing import controls and permits also have negative effects.

“Anytime you have this kind of restriction and you start introducing a permit system – whether you can import or not – you create opportunities for mis-using that system also,” he said.

Some critics date the corruption that gripped the public sector in the island to the import and exchange controls of the 1970s, where the economy was closed as the Bretton Woods collapsed and money was printed triggering forex shortages.

Sri Lanka has systematically tightened exchange and import controls since an intermediate regime central banks was set up in 1950.

Improving Opportunities

The World Bank played a key role in previous crises in Sri Lanka including in war affected areas and Covid-19 pandemic.

For many year the agency supported education reforms across the country, and focused on improving access to markets.

Helping women participate more in economic activities was an important change that was needed, Timmer said.

New funding could come after the IMF program and required reforms and governance improvements are made.

Sri Lanka’s government has said it is requesting the World Bank to reverse graduate the country from the current more market based lending under the World Bank’s International Bank for Reconstruction and Development to the International Development Association loans given to poorer countries.

“The current situation is difficult for lending and we are discussing with the government all kinds of options on how we can resume lending including whether under certain conditions there could be access to more conditional lending that IDA countries can benefit from,” Timmer said.

“And those are ongoing discussions.”

Though the World Bank has stopped new funding until the required reforms and debt sustainability is reached, it has played a key role in supporting the ordinary public with the procurement of liquefied gas, fertilizer and other emergency relief.

“There is a lot of hardship in Sri Lanka,” Timmer said. “For that reason we reprogramed some of our lending programs that were in the pipeline to provide immediate relief.

“And that focus on the people should also be central when we work together in reforming the economy. Ultimately it is about the people. And give people more opportunities.”

The Paris Club creditor nations last month reached out to China and India seeking to coordinate closely on Sri Lanka’s debt talks, but is still awaiting a reply, a source with direct knowledge of the matter told Reuters on Thursday.

Paris Club officials reached out to two of Sri Lanka’s biggest bilateral creditors after the crisis-hit nation reached a staff-level agreement with the International Monetary Fund board for a $2.9 billion loan in September.

The Paris Club still hasn’t received a reply from either country, the person added, asking not to be named because the talks are private. Officials also met with Indian officials in Washington on the sidelines of the annual meetings of the International Monetary Fund and World Bank. Chinese officials were not present in person.

Sri Lanka is grappling with the worst economic crisis in more than seven decades, with more than a quarter of its population struggling with food shortages, according to United Nations estimates.

The island nation of nearly 22 million people, is seeking an ad-hoc coordination platform to obtain financing assurances from bilateral lenders, which also include Japan.

As a middle-income country, Sri Lanka is not able to apply for relief under the Group of 20 common framework for debt treatments. Its total foreign currency debt of $38.7 billion amounted to 48.2% of GDP, the latest IMF report showed in March.

The person added that India and China might be at odds on who should take the first step to engage in close coordination with the Paris club on Sri Lanka.

The country owes close to $14 billion to a wide range of bilateral creditors, of which 66% is owed to non-Paris Club members, according to Sri Lankan government data.

The country also needs to renegotiate around $12 billion with overseas bondholders after defaulting on its international debt earlier this year.

While the country is promoting the ad-hoc common framework, it is still unclear which country would chair a creditor committee.