Category: Featured Headlines

Fitch Ratings has downgraded Sri Lanka’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘RD’ (restricted default) from ‘C’.

KEY RATING DRIVERS

Grace Period Ends: The downgrade of Sri Lanka’s LTFC IDR to ‘RD’ follows expiry of the 30-day grace period on coupon payments that were due on 18 April 18 2022 on two international sovereign bonds.
On 12 April 2022 the Ministry of Finance made a statement that it had suspended normal debt servicing of several categories of its external debts, including bonds issued in the international capital markets and foreign currency-denominated loan agreements or credit facilities with commercial banks or institutional lenders. Following this announcement, we downgraded the LTFC IDR to ‘C’ on 13 April 2022.

Fitch has downgraded Sri Lanka’s foreign-currency issue ratings to ‘D’ from ‘C’, given the default on the senior unsecured foreign-currency bonds and the cross-default clauses triggered in the other rated international foreign-currency sovereign bonds.

Local Currency Debt Not Affected: The rating action applies only to the government’s long-term external debt obligations. We have affirmed Sri Lanka’s Long-Term Local-Currency IDR at ‘CCC’, as the government has continued to service local-currency debt and we assume this will continue. We have also affirmed Sri Lanka’s Short-Term IDRs at ‘C’ and the Country Ceiling at ‘B-’.

ESG – Governance: Sri Lanka has an ESG Relevance Score of ‘5’ for Political Stability and Rights as well as for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as is the case for all sovereigns. These scores reflect the high weight that the World Bank Governance Indicators have in our proprietary Sovereign Rating Model. Sri Lanka has a medium World Bank Governance Indicator ranking in the 46th percentile, reflecting a recent record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.

ESG – Creditor Rights: Sri Lanka has an ESG Relevance Score of ‘5’ for Creditor Rights as willingness to service and repay debt is highly relevant to the rating and is a key rating driver with a high weight. The downgrade of Sri Lanka’s rating to ‘RD’ reflects a default event.

China fully relates to the difficulties and challenges facing Sri Lanka and stands ready to play a constructive role in its steady economic and social development, says the Foreign Ministry Spokesperson of China, Wang Wenbin.

Answering questions directed by media, the Foreign Ministry Spokesperson said that with regard to Sri Lanka’s debt to China, the country supports relevant financial institutions in having consultations with Sri Lanka to seek a proper settlement.

China stands ready to work with relevant countries and international financial institutions and continue to play a positive role in easing Sri Lanka’s debt burden and helping it achieve sustainable development, he added.

In the meantime, Wenbin stated that he hopes and believes that Sri Lanka will work in the same direction and make independent efforts to uphold the legitimate rights and interests of foreign investment and financing partners, and maintain stability and credibility of its investment and financing environment, the Spokesperson emphasized.

The State of Emergency imposed by President Gotabaya Rajapaksa earlier this month, has lapsed with effect from last night.

The President’s Office said that the State of Emergency lapsed last night (20th May).

President Gotabaya Rajapaksa had declared a State of Emergency on 6th May.

The State of Emergency gave the security forces sweeping powers to maintain law and order.

Issuing a gazette notice on 6th May, the President said that he is of the opinion that by reason of a public emergency in Sri Lanka, it is expedient, so to do, in the interests of public security, the protection of public order and the maintenance of supplies and services essential to the life of the community.

The gazette says the President, by virtue of the powers vested in him by Section 2 of the Public Security Ordinance (Chapter 40), as amended by Act, No. 8 of 1959, Law No. 6 of 1978 and Act, No. 28 of 1988, do by the proclamation declare that the provisions of Part II of that Ordinance, shall come into operation throughout Sri Lanka with effect from 06th May, Two Thousand and Twenty Two.

Counterterrorism and protecting human rights has been a long standing dichotomy on a global scale. The same fate was experienced in the Sri Lankan context with the civil war and internal insurrections. Among all counterterrorism measures, the Prevention of Terrorism Act (Temporary Provisions) (PTA) of No. 48 of 1979 has been the most debated. The PTA was enacted on July 15, 1979 as a temporary urgent bill. It was presented to the Parliament by President J.R. Jayewardene, debated and passed within one day. Although President Jayewardene presented the Bill to deal with terrorism in North, ironically first to be detained under the Act were two Sinhalese activists of the opposition. Thus since its enactment the PTA has had ulterior motives. All in all the PTA is yet another embodiment of horrors of undemocratic and unfettered executive powers. Despite several attempts to amend or repeal this draconian piece of legislation it has existed, causing grave human right violations in the country, particularly targeting minorities, political opponents, activists and journalists. Beyond such egregious and inhumane violations, the research has shown its larger impact on socio-economic conditions as well. The most recent attempt in answering constant international and domestic aversion to the Act has been the PTA Amendment Bill of 2022.

President Gotabaya Rajapaksa appointed a committee in June 2021 to make recommendations to the cabinet sub-committee to review the PTA. In the process of the committee deciding whether to amend the existing law or to draft a new legislation, they also looked at the Counter Terrorism Bill formulated under the previous government. Meanwhile in August 2021, the president appointed an Advisory board on the PTA to make recommendations and advise him. The first report of the committee was handed over to the president in November 2021 without taking measures to publicise it. The Bill was tabled in Parliament on February 10, 2022 amid heavy criticism of minority MPs and civil society activists. Furthemore it is evident that the government is attempting to pass a pretense legislation in haste to rescue GSP+ granted by the European Union (EU) and face UN Human Rights Council However, (un)fortunately after the bill was tabled the EU noted its concern over leaving out crucial amendments. The Human Rights Commission of Sri Lanka, despite stripping off its independence under the 20th Amendment, advocated for the repeal of the Act with the tabling of the Bill.

In analysing the provisions of the Bill it is apparent that many controversial and undemocratic provisions of the Act that led to serious human right violations have been left out and ignored. Firstly the Bill has completely refrained from addressing key provisions that outright violate the freedom from arbitrary arrest, detention and punishments and the right to a fair and due process. Under S. 16 of the PTA confessions and statements by suspects are made admissible in contrary to the requisites of the Evidence Ordinance. For example under the Evidence Ordinance confessions made to a police officer or while in police custody are inadmissible, however the PTA allows them. The Act further puts the burden of proof on the suspect to prove that a statement is obtained under inducement, threat or promise.

The Bill has not amended the initial period of 72 hours after arrest and before producing a suspect before a magistrate whereas under the general law, the maximum period in custody before being produced is 24 hours. However, the Bill has amended the S.9 of the PTA where the period of 18 months of detention without bail is now 12 months, has imposed a duty on Magistrate to visit the suspect and has made it a requisite to inform HRCSL on such detentions. While the latter amendments are commendable yet there is much space to progress such as making it mandatory for the Magistrate to direct the suspect to judicial medical officer and IGP if he or she is subjected to torture. Furthermore under the Bill the Minister can still decide the detention place of the suspect. The case studies have consistently shown how the freedom from torture has been inhumanely violated to obtain confessions while detaining suspects for longer periods of time, yet these provisions have not been answered adequately by the Bill.

There is no provision in the PTA to inform the suspects about their charges, causes and rights at the time of arrest. Although it is required under the general law the PTA has remained exceptional, and still remains so under the Bill. This is a violation of Article 13(1) of the Constitution and Sri Lanka’s international obligation under Article 9(2) of the ICCPR, where any person arrested has to be informed of the reason for arrest. Another leeway for torture under the PTA is the unfettered powers granted to investigating officers under S.6 including to take suspects from place to place, seizure and search. While these powers should be exercised while ensuring human rights and international standards, many case studies reveal the contrary. However the Bill has not addressed this section at all.

It is noted that many extravagant additions in the Bill such as right to be represented by lawyer and right to challenge the decision in the Supreme Court by way of Writ have always existed. And when everything boils down to ground realities the situation can be entirely different. For example there are many case studies on how lawyers rejected certain detainees due to outside pressure. Therefore the PTA is not an answer on paper. The PTA does not only violate freedom from torture or even freedom from arbitrary arrest but it also has a ripple effect on freedom of expression, right to privacy, freedom of movement and freedom of assembly. Therefore the government should take the amendments seriously without attempting to fool the crowd.

Source:Ground Views

CHENNAI: Several Indian investors based in Tamil Nadu are keen to invest in Sri Lanka as they see the current economic crisis as an opportunity, said Sri Lankan Deputy High Commissioner Dr. D. Venkateshwaran in an EXCLUSIVE interview with Daily News Business.

The Deputy High Commissioner said he will also talk to major companies including pharma, motor, car component manufacturers, trade chambers, to have their future expansions, fresh investments or value-added investments in Sri Lanka. They could start manufacturing in Sri Lanka and use the FTA and re-export to the region (including Pakistan) and he got a positive feedback from them.’

“I will be visiting the southern states to woo investments into Sri Lanka. An investor forum is also being planned next month in this regard,” he said.

He said that the investor community has taken the appointment of new Prime Minister Ranil Wickremesinghe as a very positive step towards reactivating the Sri Lankan economy.

“The new PM has already taken some steps in the right direction and the Indian government is to support this initiative and have already sent fertiliser which will solve the ‘paddy fertiliser shortage issue for the Yala season’ almost immediately. I must also recall that power cuts are happening all over the world and also Indian fuel prices are more than Sri Lanka. We also see the Sri Lankan rupee stabilizing and expect some of the commodity prices to come down. It’s now time for the Sri Lankan politicians and also the business community to support the new PM to take the country back to its pre covid position. He also said that even with the escalating construction costs Sri Lanka real estate projects are far cheaper to India and Sri Lankan companies should market them to the Indian market more aggressively. With an increasing number of real estate projects getting developed, there is an oversupply of real estate inventory in Sri Lanka. With the economic crisis hitting Sri Lanka, the purchasing propensity of Sri Lankans is at its abysmal low. In this situation, Sri Lankan developers will have to explore international marketing channels for their projects and India is the best choice.

“The Sri Lanka government recently announced a new legislator to make ‘Sri Lanka’ the second home and further relaxed regulation for foreigners to purchase apartments. The Sri Lanka Real Estate sector should ‘cash’ on this and commence aggressive road shows to woo Indians to buy property in Sri Lanka. Sri Lanka being close to India is easier for Indians to invest in a second home in Colombo.

Hence, selling Sri Lankan real estate to Indians is a low hanging fruit for Sri Lankan real estate developers.”

“As per an Asia-Pacific Wealth Report, Indians were the highest investors in foreign real estate, with a 50% market share and the top destinations attracting Indians are Dubai, the United Kingdom, The Netherlands, Germany, USA, and Australia topping the charts. According to a 2019 report, over 3,000 Indian families own some of the most luxurious properties in London’s most influential addresses,” said economics, investment analyst and CEO, Inspiredge Ltd, Sumit Bothra from Chennei.

“As aspirations grow, we have noticed that the income brackets that can afford a piece of real estate abroad has also widened over the last five years,” he added.

The technical discussions between Sri Lanka and the International Monetary Fund (IMF) on a potential loan programme will come to a close on May 24, IMF Spokesman Gerry Rice said.

Rice, addressing a virtual IMF briefing on Thursday (20), said that the agency is closely monitoring the events that are unfolding in the crisis-hit island nation.

Rice affirmed that the IMF remains committed to help Sri Lanka in line with the policies of the agency and that it would engage with the stakeholders in support of a timely resolution of the crisis that is being faced.

Commenting on the status of the economy, Rice said the IMF is concerned about the current economic crisis.

“We are concerned…especially, the hardships being endured by the people of Sri Lanka and especially many of those people poor and vulnerable. So, we are clearly monitoring the political and economic developments very closely,” Rice said.

Further, Rice said an IMF team has been engaged in technical discussions on the authorities’ request for an IMF-supported programme and the IMF has asked for the programme.