Category: Featured Headlines

The Government of Sri Lanka is optimistic of succeeding in its plan to restructure its debt with bilateral and multilateral lenders if its current attempts to restructure the debt with the Chinese Government materialises, the Treasury told The Sunday Morning Business.

Speaking to The Sunday Morning Business, Treasury Secretary S. R. Attygalle stated that if the Government of China were to extend its support to Sri Lanka, and given the existing supporting ally, the Government of India, other lenders would also be willing to help Sri Lanka restructure its debt repayment.

“India has supported us, and similarly the Cabinet requested China to restructure the debt. We will see how it goes; when these two Governments do so, certain others will also follow,” Attygalle said.

United National Party (UNP) Leader and former Prime Minister Ranil Wickremesinghe, in an interview held last week for international news agency WION, opined that Sri Lanka would not be restructuring its debt with the Chinese Government.

“If China restructures its debt, it will also have to do so for a large number of countries on the Belt and Road Initiative, so I don’t think there will be restructuring on the debt, because you can’t restructure the debt of one country and not on the others,” Wickremesinghe highlighted.

Meanwhile, responding to this claim by Wickremesinghe and others in opposition, Attygalle said that there could be different forms of restructuring debt; for example, one could be given the option of not settling payments now but doing so after two years and so on.

“If the lender is willing to give, then what is the problem? It’s his money and he is saying to pay later. These are bilateral loans with China and if the lender is willing to postpone, there is no problem,” Attygalle stressed.

On 9 January, President Gotabaya Rajapaksa put forward this request at a meeting held with Chinese Foreign Minister Wang Yi.

“The President pointed out that it would be a great relief to the country if attention could be paid to restructuring debt repayments as a solution to the economic crisis that has arisen in the face of the Covid-19 pandemic,” the President’s Office said.

The statement also said China was asked to provide “concessional” terms for its exports to Sri Lanka, which amounted to around $ 3.5 billion last year, without providing further details.

Further, Rajapaksa also offered to permit Chinese tourists to return to Sri Lanka provided they adhered to strict Covid regulations.

Subsequent to this announcement, Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal on 12 January stated that the Sri Lankan Government was presently in negotiations with China to obtain a loan to cushion the effect of the existing debt repayments to China.

According to Cabraal, the Government’s strategy is to restructure the country’s debt structure in a manner that does not inflict pain on investors who kept faith in the country. Cabraal noted that the Government would implement its debt restructuring process while considering the interests of investors.

China is Sri Lanka’s fourth biggest lender, behind international financial markets, the Asian Development Bank (ADB), and Japan. According to official data, China has lent Sri Lanka over $ 5 billion (£ 3.7 billion) in the last decade for projects including roads, an airport, and ports.

Sri Lanka has also received billions of dollars of soft loans from China but the island nation has been engulfed in a foreign exchange crisis, which some analysts opine have pushed it to the verge of default.

Sri Lanka’s debt-ridden government is now negotiating a fresh financial relief package from Japan amounting to between $2billion and $3.5 billion similar to Indian assistance of US$ 900 million granted to Sri Lanka recently, with the aim of overcoming the current economic crisis.

The exact amount of the planned swap of the loan into dollars is yet to be finalised as it depends on the outcome of the ongoing negotiations, a senior official who wished to remain anonymous told the Business Times.

Japan has historically been a major source of development aid for Sri Lanka, providing the country not just with financial but also technical assistance.

The Japanese loan will further deepen the bilateral relationship between the two states, which has been amicable under the present government, he said.

He added that for Sri Lanka the loan offers the opportunity to restructure its financial liabilities on more favourable terms.

The loan from Japan may be from a Japanese agency or institution and it will be issued in Japanese yen and carry an interest rate of just 0.05 per cent, informed sources said.

The Finance Ministry will also enter into foreign financing agreements with foreign development partners including Japan and lending agencies to support the public investment programme this year.

Sri Lanka anticipates more financial commitment considering the urgent needs of the country to support the budgetary activities, he pointed out.

Sri Lanka faces one of its worst economic crises, with foreign reserves which stood at around $3.1 billion, enough for a few months of imports.

It also has foreign debt obligations over $6 billion this year, including repayment of bonds worth $500 million in January 18 and $1 billion in July.

The cash strapped government is to pursue further loans from other multilateral lending agencies (such as the World Bank) and other bilateral agencies, particularly those in India and China.

For the development support it will seek access to financial assistance from multilateral lending agencies and foreign governments.

The Finance Ministry has requested Japan to restructure (Sri Lanka’s) debts and access to preferential credit for imports of essential goods, as the island nation struggles in its worst economic crisis,

Under the Indian line of credit, Sri Lanka is to purchase 500 mini buses for commuter transport services and 750 jeeps for the Police Department.

India’s External Affairs Minister Dr S. Jaishankar held a virtual meeting with Finance Minister of Sri Lanka Basil Rajapaksa on January 15, 2022, where both sides exchanged New Year greetings and conveyed wishes on the festival of Pongal celebrated both in India and Sri Lanka.

Furthermore, to help Sri Lanka overcome its economic challenges, India under the SAARC currency swap arrangement has made an extension of USD 400 million to Sri Lanka and provided a deferral of ACU (Asian Clearing Union) settlement of USD 515.2 million by two months, said the Ministry of External Affairs in a statement.

The two Ministers also reviewed the progress in extending the Indian credit facility of USD 1 billion for importing food, essential items and medicine and USD 500 million for importing fuel from India.

Jaishankar also brought up the issue of Indian fishermen detained in Sri Lanka. He urged the Government of Sri Lanka to ensure the early release of the detained fishermen on humanitarian considerations.

Jaishankar, during the meet, said, that India will continue to extend a helping hand to Sri Lanka amid these tough times of the COVID-19 pandemic.

“Dr Jaishankar conveyed that India has always stood with Sri Lanka, and will continue to support Sri Lanka in all possible ways for overcoming the economic and other challenges posed by COVID-19 pandemic. As close friends and maritime neighbours, both India and Sri Lanka stand to gain from closer economic interlinkages.”, said the statement.

Notably, this meet is followed by Rajapaksa’s visit to India last month.

The Ministry in the statement also said, “Mr Rajapaksa recalled India’s longstanding cooperation with Sri Lanka and deeply appreciated the gestures of support. He welcomed Indian investments in Sri Lanka in a number of important spheres including ports, infrastructure, energy, renewable energy, power and manufacturing and assured that a conducive environment will be provided to encourage such investments. In this context, both Ministers noted that the recent steps taken by the Government of Sri Lanka for jointly modernizing Trincomalee Oil Tank Farms will boost the confidence of investors, apart from enhancing Sri Lanka’s energy security.”

As per the statement by MEA, the two Ministers agreed to remain in close touch for guiding mutually beneficial bilateral economic cooperation towards long-term economic partnership for shared progress and prosperity.

Canada on Friday (14) warned its nationals visiting and living in Sri Lanka of a looming economic crisis that could lead to shortages in food, medicine and fuel and also contribute to deterioration in the security environment.

The Canadian government in its travel advisory issued via its official Twitter account also warned of possible poor delivery of public services including healthcare due to the economic crisis.

Sri Lanka is facing an unprecedented economic crisis due to heavy debt and bad policies in the past. The island nation, which thrived under British colonial rulers before independence in 1948, is grappling with food shortages due to insufficient dollars for imports and lower harvest in its farmlands due to the government’s controversial change in its fertilizer policy.

Though the government has assured no shortages, already the 80 billion US dollar economy is seeing queues for kerosene, cooking gas, rice, milk powder, sugar, and wheat flour among many other commodities.

Prices of many essential goods have skyrocketed in the last six months with inflation hitting record highs and double digits, resulting in a negative rate of returns for risk-free investments.

The Canadian government advised its citizens to take measures due to limited access to resources which “could also contribute to a deterioration in the security environment”.

“Keep supplies of food, water and fuel on hand in case of lengthy disruptions. Long line-ups may be experienced at grocery stores, gas stations, and pharmacies. Monitor local media for information related to food and fuel shortages.” it said.

Canada is the first country to issue a travel advisory on Sri Lanka’s over economic instability and its possible impact on its travellers.

The President Gotabaya Rajapaksa-led ruling Sri Lanka Podujana Peremuna (SLPP) coalition is facing a twin crisis of dent and forex. It has to pay around 6.9 billion US dollars in foreign loans this year while it’s forex reserves were at just 3.1 billion US dollars by end December.

The government shrugged off possible sovereign debt default concerns and requests to seek International Monetary Fund (IMF) assistance. The government has also claimed that it has already been restructuring debts.

Bayern, a Brandenburg-class frigate of the German Navy reached the Colombo Harbour on Saturday (15).

The Commander of the Frigate and the Crew were warmly welcomed in Colombo by the German Ambassador to Sri Lanka and the Sri Lanka Navy.

F217 “Bayern”, was commissioned on 15th June 1996 for the German Navy.

236 soldiers work on board a Type 123 frigate. As on any other naval ship, sea watches lasting several hours ensure 24-hour operation on board.

Since their commissioning, the four ships of the F123 class have primarily been used for submarine hunting.

They can use both their bow sonar and two Sea Lynx on-board helicopters. These extend the ships’ anti-submarine range with their diving sonar and their torpedoes. With this focus capability, the Brandenburg-class warships ideally complement the 124-class frigates, whose main task is long-range air defense.

The four Brandenburg-class frigates have powerful radar systems for sea and airspace surveillance and fire control for use with weapons.

Sonar, systems for electronic warfare as well as telecommunications and data transmission systems complete the equipment. The well-equipped radio room in particular allows the Brandenburg class to also take on management tasks.

Dimensions:
139.0 m length (over all)
16.7m wide
6.3m draft
4,900 t displacement

Drive:
Type CODOG (combined diesel engine or gas turbine drive)
2 x gas turbine
2 x diesel engines
Total output: 38,000 kW (51,700 hp)
2 propellers
Speed: more than 29 knots

Sensors:
1 × SMART-S multifunction radar
1 × airspace surveillance radar LW 08, range: more than 260 km
2 x fire control radar STIR 180
1 × bow sonar DSQS-23BZ
1 x video and infrared target tracking MSP 600
1 x EK system FL 1800 S (electronic reconnaissance/electronic combat)
2 × navigational radar

Weapons:
1 x main gun 76 mm compact, range: more than 18 km
2 x 27mm MLG auto cannons naval light gun
4 x 12.7mm heavy machine guns
2 x launchers for anti-ship missiles RGM-84 Harpoon, range more than 220 km
1 x VLS Mk41 vertical launch system for NSSM and ESSM anti-aircraft missiles, range: more than 50 km (ESSM)
2 x RIM-116 RAM short-range anti-aircraft launchers Rolling Airframe Missile
2 x torpedo tube set for lightweight torpedo Mk46
4 x MASS decoy launcher

Crew and Others:
Regular crew: 214 soldiers
Additional personnel (for on-board helicopters): 18 soldiers
2 x dinghy model Boomeranger
2 x Sea Lynx Mk88A onboard helicopters (onboard for mission only)

The Central Bank of Sri Lanka (CBSL) printed Rs. 1,400 billion (1.4 trillion) last year, the bank’s Economic Research Department Director Anil Perera told the media on Friday (15).

Speaking at the same forum, CBSL Governor Ajith Nivard Cabraal admitted that Sri Lanka had not printed such a large amount of rupees before.

However, he argued that if Sri Lanka had not printed the amount, the country may have faced more pressure due to the economic climate.

This was as island-wide inflation calculated by the National Consumer Price Index (NCPI) shot up to 11.1% in November 2021. The NCPI also hit double digits for the first time since it was introduced in 2014.

Opposition politicians and economists have criticised the State for excessive money printing over the last two years.