Category: Featured Headlines

The country of 22 million has suffered months of rampant inflation, severe shortages of essential goods and widespread protests, pushing it to default on its foreign debt in April.

The 37 new state ministers will not accept their modest salaries, but they are entitled to three cars each with fuel, state housing, bodyguards, salaries for personal staff and free stamps, the government said.

On social media, some Sri Lankans vented frustration over the use of public funds.

“No pot to pee… but 37 state ministers!” tweeted user Soraya Deen.

Mirhani Rahees added on the platform: “Spending on these useless state ministers… we have to tighten our belts. There goes my tax money in flames.”

Another user, Krishna Perera, accused the government of having “no commitment to human rights, economic reform, or accountability”.

The new members all come from the coalition of former president Gotabaya Rajapaksa, who fled Sri Lanka in July after protesters overran his official residence, but he returned to the country last week.

Among the new ministers is Rajapaksa’s nephew, Sashindra, who takes the irrigation portfolio.

The 37 new posts are in addition to the 20-member cabinet of President Ranil Wickremesinghe, who took over in late July following Rajapaksa’s exit.

Wickremesinghe, a six-time prime minister, has only one seat in the 225-member parliament and depends on Rajapaksa’s Sri Lanka Podujana Peramuna (SLPP) party, the largest bloc.

Officials close to Wickremesinghe said his attempts to form a broad unity government were yet to materialise as the main opposition Samagi Jana Balawegaya (SJB) had refused to join.

Sri Lanka is in talks with the International Monetary Fund to finalise a $2.9-billion bailout that requires Colombo to raise taxes and privatise loss-making state enterprises — both politically unpopular moves.

In a new report released Tuesday, the UN Human Rights Council urged Wickremesinghe to prosecute those responsible for economic crimes that bankrupted the country.

The report said a culture of impunity for war-time atrocities during the decades-long civil war that ended in 2009 had led to the economic crisis which has undermined the rights of all communities.

Source: RFI

China may become the key factor in deciding the timing of the International Monetary Fund (IMF)’s loan disbursement for Sri Lanka to ease the ongoing unprecedented economic crisis, local and international analysts say.

China has agreed to help Sri Lanka in facing the economic crisis, but so far has not committed for any debt restructuring plan, government officials who are dealing with the debt structuring told EconomyNext.

The completion of debt restructuring – either through a haircut or rescheduling the debts – is mandatory for the approval for the IMF loan from the global lender’s Executive Board.

China has, instead, proposed a refinancing strategy: more lending by China to Sri Lanka in order to repay Beijing’s own debts in the past.

However, this move is not accepted by Western nations that are members of the Paris Club – a group of mostly Western nations which have a well defined and unified process accepted by the IMF for dealing with defaulted nations.

Following the preliminary staff level agreement with Sri Lanka, the IMF last week said even if one creditor does not agree to restructure debt, it would “indeed deepen the crisis here in Sri Lanka and would undermine the repayment capacity”.

Japan is the only country in the Paris Club among Sri Lanka’s main creditors. Other key creditors like India and China are not members.

“The IMF executive board is not likely to agree to disperse the funds until the [Sri Lankan] government is able to present a plan to get its debt back to sustainable levels, which means coming to an agreement with creditors, both private and bilateral,” Akhil Bery, Director of South Asia Initiatives at Washington-based think tank Asia Society Policy Institute, told EconomyNext.

“That means Sri Lanka needs to make progress with its negotiations with China before the executive board votes to release the funds.”

Bery said the worst case scenario for Sri Lanka on debt restructuring with China is that no agreement is reached and Colombo continues to be frozen out of international markets and the economy continues to stagnate with inflation soaring further.

“In a best case scenario, China comes to an agreement with the Paris Club and other creditors on a debt restructuring framework which would unlock the IMF programme as well as additional bilateral and multilateral financing which can help bridge the financing gap,” he said.

Clue from Zambia’s debt restructuring

International analysts say China’s conduct with Zambia’s debt restructuring offers insight on what Sri Lanka can expect in a debt restructuring deal with China.

Zambia defaulted in November 2020 and got an IMF staff-level agreement in December 2021, but got the IMF Board approval only last week with China agreeing only to reschedule its over 5 billion US dollars of loans.

“The two key factors important for the recovery of Sri Lanka’s economic crisis are when will the IMF lend and what does China do,” a London-based debt market analyst told EconomyNext asking not to be named as he is not allowed to speak to the media.

He said China was involved in lending to Ethiopia, Zambia, and Suriname – all of whom defaulted sovereign debts in the last two years.

“China has dragged it in all these other places,” the analyst said.

Beijing has consistently rejected accusations by the US that it had pushed poor countries into a debt trap and says it works out solutions with individual governments when they struggle to repay loans.

“As a traditional friendly neighbor of Sri Lanka and a major shareholder of the IMF, China has been always encouraging the IMF and other international financial institutions to continue to play a positive role in supporting Sri Lanka’s response to current difficulties and efforts to ease debt burden and realise sustainable development,” a spokesman for Chinese Embassy in Colombo said after the IMF comments last week.

“As to the bilateral financial cooperation, shortly after the Sri Lankan government announced to suspend international debt payments in April 2022, Chinese financial institutions reached out to the Sri Lankan side and expressed their readiness to find a proper way to handle the matured debts related to China and help Sri Lanka to overcome the current difficulties,” he said.

“We hope Sri Lanka will work actively with China in a similar spirit and work out a feasible solution expeditiously.”

Chinese Foreign Ministry Spokesperson Zhao Lijian responding to questions raised by journalists at a media briefing last week said China has paid close attention to the difficulties and challenges faced by Sri Lanka.

“We have provided help to Sri Lanka’s socioeconomic development to the best of our capacity. China supports relevant financial institutions in consulting with Sri Lanka for proper solutions. We are ready to work with relevant countries and international financial institutions to continue to play a positive role in supporting Sri Lanka’s response to current difficulties and efforts to ease debt burden and realise sustainable development,” Lijian said.

However, analysts and Western diplomats say Beijing has not committed itself to debt restructuring.

“This means the whole debt restructuring process will get delayed and Sri Lanka may not get the IMF support it desperately needs,” a Western diplomat said.

“If China is going to be stubborn about refinancing, then other creditors also will not agree on a common platform to restructure Sri Lanka’s debt. That will result in more and more consultative processes and time, but more importantly it is going to delay Sri Lanka’s speedy recovery from the economic crisis.”

Sri Lanka has already hired financial and legal advisory firms Lazard and Clifford Chance LLP to support its debt restructuring programme as the country is on the brink of bankruptcy. Lazard was the legal advisor in Zambia’s debt restructuring programme where creditors included China, which did not agree to a haircut.

Local analysts say delay in debt restructuring by China could compel the government to go for a restructuring of local rupee-denominated bonds. They say the government may use maturity extensions, coupon reductions, and principal haircuts in local debt restructuring if they are compelled.

“The principal haircut could trigger a collapse of the banking sector as most of the banks have invested a significant chunk of their savings in government securities,” Sanjeewa Fernando, head of Research at CT CLSA Securities said.

Sri Lanka is expecting to receive lesser votes in the event of a resolution that is not agreed upon with core-sponsors in the upcoming United Nations Human Rights council (UNHRC) due to a change in member countries, Foreign Minister Ali Sabry said on Monday.

The 51st UNHRC session will be held from Sept. 12 – Oct. 7 in Ganeva and diplomats have said Sri Lanka is likely to face a new resolution from the same core sponsors who tabled the resolution in March 2021.

“When we compare the current composition and the 2021 composition, we might mostly get fewer
votes than what we got in 2021,” Minister Sabry told a media briefing on Monday held at the ancient Foreign Ministry building.

In the 2021 UNHRC session, 22 countries voted in favor of passing the resolution which allowed the UN to gather evidence on the past human rights violations committed by Sri Lanka against 11 including China, Pakistan and Bangladesh while 14 countries including India, Nepal and Japan abstained.

Sri Lanka has refused to cooperate with the resolution citing the external evidence gathering is against the country’s sovereignty and thus against the constitution.

Sabry said the island nation will cooperate with resolution as long as they would not compromise with the Sri Lanka’s sovereignty.

“Our focus is to bring lasting solutions and, in that regard, our final program will be a truth seeking
mechanism that is transparent and acceptable by both the victims and alleged perpetrators.” he said.

Sri Lanka’s credibility in addressing the past human rights violations has been questioned as it has repeatedly failed to fulfill South African-style truth seeking mechanism which it originally promised in 2016.

Successive Sri Lankan governments have bought time to address the concerns raised by the international community over its alleged human rights allegations mainly in the final stage of a 26-year civil war in which thousands of ethnic minority Tamils were killed, but the country is yet to fulfill those promised measures.

“We are looking at lasting and wholistic solutions to the grievances of all those who have suffered due
to the conflict,” he said referring to all ethnicities.

Since the last UNHRC session in March, Sri Lanka has gone through a political crisis with the uprising of anti-government protesters that has resulted in the change of government amid resignation of then present Gotabaya Rajapaksa and his brother, then Prime Minister Mahinda Rajapaksa.

The new President Ranil Wickremesinghe has been now alleged of cracking down on protesters.

Experts have previously warned that Sri Lanka will face a tougher session in September as the UNHRC because it has failed to protect and ensure the rights of its citizens.

The United States has said that as a creditor country it will back restructuring Sri Lanka’s debt, the President’s Media Division said today.

US Treasury Secretary Janet Yellen noted critical need for full cooperation of all official creditors in debt negotiations and restructuring through timely participation and equal burden sharing.

These observations were conveyed by the US Treasury Secretary in a communication addressed to President Ranil Wickremesinghe.

The US Treasury welcomed President Ranil Wickremesinghe’s proposal for a Coordination Platform for Sri Lanka’s official bilateral creditors, and has urged engagement in this regard.

Sharing the common goal with Sri Lanka of expediting financing assurances, the US has expressed readiness to join other Paris Club members in this process, in keeping with its principles.

Further the US Treasury has pledged to continue to engage with their other government agencies, as well as the World Bank and Asian Development Bank, to assist the people of Sri Lanka.

The US has supported the people of Sri Lanka inter alia through the provision of school nutrition for children, food vouchers for pregnant women and new mothers, and fertilizer and cash transfers for small and medium scale farmers to increase food production.

The US Department of Treasury has welcomed the Sri Lankan government’s decision, to seek IMF assistance through an Extended Fund Facility (EFF), and thereby the recently concluded staff level agreement.

Tamil Nadu Chief Minister M K Stalin requested the Centre to take up at appropriate diplomatic channels with Sri Lanka and secure the early release of Indian fishermen and their fishing boats.

In a letter addressed to Union External Affairs Minister S Jaishankar, a copy of which was made available to the media here, the Chief Minister thanked him for the support extended through diplomatic channels for the release of 150 Tamil Nadu fishermen, who were apprehended by Sri Lanka over the past 9 months.

“This is also to draw your attention to the apprehension of 12 Indian fishermen along with their Puducherry based mechanised fishing boat on September 6 by the Sri Lankan navy. Of them, 5 are from Tamil Nadu’s Mayiladuthurai district,” he said in the letter.

As of now, 23 fishermen and 95 fishing boats of Tamil Nadu fishermen are still under Sri Lanka’s custody, the Chief Minister said and urged the Union Minister to take steps for the early release of the fishermen and their fishing boats.

(PTI)

The 51st session of the United Nations Human Rights Council will convene between the 12th of September and the 7th of October. Sri Lanka is to send over a delegation headed by Minister of Foreign Affairs Ali Sabry and a team of officials from the Foreign Ministry and the Attorney general’s department.

At the 50th session held in June and July of this year, whilst the UNHRC condemned the supression of protestors, the Sri Lankan delegation headed by foreign minister at the time, G. L. Pieris postulated a rather hapless, pitiful appeal to the UNHRC in Geneva; stating that the country needed the empathy and understanding of the international community and furthermore the space to deal with the present socio-economic issues. In July, the subjects of police brutality, lack of military accountability and the overall collapse of Sri Lankan democracy were raised. It is expected that the delegation heading to Geneva this month will be tasked with addressing similar points of discussion with a focus on how the economic crisis has spiralled into a humanitarian crisis with escalating levels of unemployment and poverty.

Ahead of arriving at the 51st session in Switzerland, Ali Sabry held a press conference to address the most pressing questions regarding the agenda of the Sri Lankan delegation at the UNHRC. Sabry made statements indicating that the fundamental priority of the nation is economic recovery alongside securing the IMF loan, and this will be presented by the delegation at The Council meeting. Sabry also stressed that despite Sri Lanka’s endeavour to build cordial relations with the international community, the country is bound by the constitution; “we are bound to protect the constitution. So whatever the solution wether its acountability or anything else, we have to provide that within the framework of the Sri Lankan constitution”.

The overarching theme of the Sri Lanka UNHRC delegation is pursuing solutions that are purely within the framework of the Sri Lankan constitution. Sabry’s delegation has recieved stringent instructions from the centre not to pursue reccommendations or proposals advanced by the Council if they require action outside the parametres of the sovereignty or constitution of Sri Lanka.

Resolutions 30/1 (2016) and 46/1 (2021) drawn up by the UNHRC suggests that Sri Lanka work with external enmities (such as hybrid courts) to “Promoting reconciliation, accountability and human rights in Sri Lanka”. When questioned about the positon of the visiting delegation, Sabry responded that “we are willing to discuss with the UNHRC but the solution should lie within the constitution” if not, it would have to be disregarded.

The issue was raised of how the UNHRC resolution 30/1 was co-sponsored by the Wickremesinghe adminstration in 2015 but rejected by Gotabhaya government in the latest sessions. What will be the position of the current government, A hybrid or coalition of ministers/politicians from all majority parties? The stand is that any judicial process should be in keeping with the Sri Lankan constitution, any external process that tries to pressurise and take power away from Sri Lankan sovreignty is not agreeable.

The agenda in Geneva will be the implementation of a tangible truth seeking mechanism to implement programs to grant alleged perpetrators and victims of the civil war redemption, in an attempt to work towards post-war recconcilliation.

Ahead of the UN meeting, China has already pledged its support to Sri Lanka at the Council. As the delegation departs for Switzerland today the 5th of September, the nation anticipates exceptional representation at one of the most esteemed gatherings in international politics.