Category: News

Sri Lanka has reached a staff level agreement for take forward a program with the Internal Monetary Fund, Senior Mission Chief Peter Breuer said.

The IMF’s board will formally approve the review based on several prior action including a budget for 2025.

“Sri Lanka’s recent Agreement in Principle with bondholders is an important milestone putting Sri Lanka’s debt on a path towards sustainability,” the statement said.

“The critical next steps are to complete the commercial debt restructuring, finalize bilateral agreements with official creditors along the lines of the accord with the Official Creditor Committee and implement the terms of the other agreements.”

The full statement is reproduced below:

Colombo, Sri Lanka – November 23, 2024: An International Monetary Fund (MF) team led by Peter Breuer, Senior Mission Chief for Sri Lanka, visited Colombo from November 17 to 23, 2024. After constructive discussions in Colombo, Mr. Breuer and Deputy Mission Chief Ms. Katsiaryna Svirydzenka issued the following statement:

“We are pleased to announce that the IMF team reached staff-level agreement with the Sri Lankan authorities on the third review under the 4-year Extended Fund Facility (EFF) arrangement. The arrangement was approved by the IMF Executive Board for a total amount of SDR 2.3 billion (about US$3 billion) on March 20, 2023.

“The staff-level agreement is subject to the approval by IMF management and the IMF Executive Board, contingent on: (i) the implementation by the authorities of prior actions including the submission of a 2025 budget consistent with program objectives; and (ii) the completion of financing assurances review, which will focus on confirming multilateral partners’ committed financing contributions and whether adequate progress has been made with the debt restructuring to give confidence that the restructuring will be concluded in a timely manner and in line with the program’s debt targets.

“Upon completion of the Executive Board review, Sri Lanka would have access to SDR 254 million (about US$333 million), bringing the total IMF financial support disbursed under the arrangement to SDR 1,016 million (about US$1,333 million).

“Sri Lanka’s ambitious reform agenda supported by the EFF is delivering commendable outcomes. The economy expanded on average by 4 percent y-o-y in the four quarters ending in June 2024. High-frequency indicators point to continued expansion across all sectors. Average headline and core inflation remained contained at 0.8 and 3.8 percent during the third quarter. Gross official reserves increased to US$6.4 billion at end-October 2024 with sizeable foreign exchange purchases by the Central Bank. Public finances have strengthened following substantial fiscal reforms.

“Program performance was strong, with all quantitative performance criteria and indicative targets (IT) for end-June 2024 met, as well as the ITs for end-September 2024, except for the IT on social spending. Most structural benchmarks due before October-2024 were either met or implemented with delay; some benchmarks are delayed because of the election cycle.

“The new government’s commitment to the program objectives has enhanced confidence and ensures policy continuity. Sustaining the reform momentum is critical to safeguarding the hard-won gains of the program and putting the economy on a path towards lasting recovery and stable and inclusive growth. Since the crisis has affected Sri Lanka’s entire population, it will be important to ensure that the benefits from economic growth are shared appropriately.

“Maintaining macroeconomic stability and restoring debt sustainability are key to securing Sri Lanka’s prosperity and require persevering with responsible fiscal policy. Continued revenue mobilization efforts and spending restraint are needed to prepare the 2025 budget in line with program parameters. Revenue administration reforms and efforts to improve tax compliance will help to ensure that the burden stemming from the crisis is shared proportionately to taxpayers’ ability to contribute. Avoiding new tax exemptions will help reduce fiscal revenue leakages, corruption risks and build much needed fiscal buffers, including for social spending and to support Sri Lanka’s most vulnerable. Maintaining cost recovery in fuel and electricity pricing and resolving legacy debts will help minimize fiscal risks arising from state-owned enterprises.

“The government has an important responsibility to protect the poor and vulnerable at this difficult time. It is important to redouble efforts to meet the program’s minimum spending target on social spending and to improve targeting, adequacy, and coverage of social safety nets, particularly Aswesuma.

“While inflation has decelerated faster than expected, continued monitoring is warranted to ensure sustained price stability and support macroeconomic stability. Against ongoing global uncertainty, it remains important to continue rebuilding external buffers through strong reserves accumulation.

“Sri Lanka’s recent Agreement in Principle with bondholders is an important milestone putting Sri Lanka’s debt on a path towards sustainability. The critical next steps are to complete the commercial debt restructuring, finalize bilateral agreements with official creditors along the lines of the accord with the Official Creditor Committee and implement the terms of the other agreements. This will help restore Sri Lanka’s debt sustainability.

“The new government’s mandate will reinvigorate governance reforms addressing corruption risks, rebuilding economic confidence, and making growth more robust and inclusive.

“The IMF team held meetings with His Excellency President and Finance Minister Anura Kumara Dissanayake, Honorable Labor Minister and Deputy Minister of Economic Development Prof. Anil Jayantha Fernando, Honorable Deputy Minister of Finance and Planning Dr. Harshana Suriyapperuma, Senior Economic Advisor Duminda Hulangamuwa, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, Secretary to the Treasury Mr. K M Mahinda Siriwardana, and other senior government and CBSL officials. The team also met with Parliamentarians, representatives from the private sector, civil society organizations, and development partners.

“We would like to thank the authorities for the excellent collaboration.”

Chinese Ambassador to Sri Lanka Qi Zhenhong during his visit to the island nation’s Northern Province, which is close to India, said ethnic minority Tamils have made ‘a correct decision’ in helping ruling Marxists-leaned National People’s Power (NPP) to win the last week general elections.

Sri Lanka’s North is the closest Sri Lankan landmass to the South Indian state of Tamil Nadu and Northern Tamils have been more close to India due to Hinduism religion, Tamil language, and the culture.

Historically, Northern Tamils have voted for their own ethnic minority leaders, but they mainly voted for the ruling party this time.

Though the NPP got lower votes, they won five out of 12 in Northern Province, giving an unprecedented win for a main political party that was also backed by ethnic majority Sinhalese.

Ambassador Zhenhong’s visit came four days after the election.

“I believe that the Tamil community has made a correct decision,” Zhenhong told reporters on November 19.

“We can see the NPP right first, even in Jaffna district. And this shows that the Tamil community has surpassed its traditions and embraced a bigger picture in looking to the future.”

“We see a new change. It shows that all communities, all ethnic groups and all religions in the country are now working together in solidarity, and I believe that it is for the better future of the country.”

“This afternoon I visited Point Pedro and I was impressed by the slogan written there which is ‘Unity in diversity is the strength of Sri Lanka’. I think this is very correct and I think this is where the hope lies. And this recent general election perfectly reflected this slogan.”

Ambassador Zhenhong’s comments, political in nature, come during his visit to Jaffna in Sri Lanka’s Northern region where India has already started direct flights and ferry between South India and Sri Lanka’s North.

Foreign policy analysts said foreign diplomats usually do not directly comment on local politics, though there have been some instances of political interference by foreign diplomats in the past.

The key minority party in the North, Ilankai Tamil Arasu Kadchi (ITAK) which won six seats in the 2020 parliamentary polls, only won two seats in the Province.

Ministers in the previous government have said India has raised concerns over increasing Chinese investments and activities in its backyard of Sri Lanka’s north citing security concerns.

PEOPLE-TO-PEOPLE CONNECTION

“Today I am here without a special purpose. Today we are here to see how is the life going in the North since recently, specially to see the lives of our brothers and sisters in the Northern province,” Zhenhong said.

“This year for the first time Jaffna supported a party from the South, the NPP, to win the election for the first time in the history.”

“All these show that both Jaffna and the whole Northern Province are making changes and all these make our visit more meaningful,” he said.

China has invested in sea cucumber plants in the North and assured an export market for the products. Some fishermen have gradually shifted to sea cucumber farming due to poor fish catch in the Northern sea amid bottom trawling by Indian fishermen.

China also is in the process of providing dry rations, housing units, and fishing nets for Northern people. The Embassy has also started a scholarship programme for the undergraduate students in the University of Jaffna.

Sri Lankan government had to cancel a renewable energy project won by a Chinese firm through a proper tender process after India complained of security threats, Sri Lanka Foreign Ministry officials have told EconomyNext.

The previous government banned Chinese vessels coming to Sri Lanka for research purposes after security concerns raised by India and the United States.

However, that one-year temporary ban ends next month. Sri Lanka’s new government under Anura Kumara Dissanayake has said they will decide on the research ship after the November 14 general elections.

India in 2014 raised security concerns over a Chinese nuclear submarine docking in Colombo port, where India accounts over 70 percent of the transshipment volume of the port.

Three month later, then President Mahinda Rajapaksa lost his bid for a third term to his own party secretary. After the defeat, Rajapaksa accused the key Indian intelligence service behind his defeat.

A group of civil society activists today lodged a complaint with the Criminal Investigation Department (CID) against newly elected Jaffna District Independent MP Dr. Archchuna Ramanathan.

The complaint was filed by the civil society activists requesting the CID to investigate certain controversial comments made by the parliamentarian in a video posted on the social media platform Facebook.

A video of the independent MP went viral on social media yesterday (21) which showed him seated in the seat reserved for the Leader of the Opposition in the House and refusing to move despite repeated requests by the parliamentary staff, during the inaugural session of the 10th Parliament.

The MP’s behavior and comments were the subject of intense discussion even on social media platforms.

Dr. Ramanathan was elected to Parliament representing Jaffna District Independent Group No. 17 from the Jaffna District.

Sri Lanka’s Marxist-leaned President Anura Kumara Dissanayake promised to prevent politicians using racism as well as communal and religious slogans to capture state power in future.

Dissanayake’s National People’s Power swept the parliament election held last week to record a landslide win with 159 seats in the 225-member parliament.

For the first time in Sri Lankan history, a political party was backed by all Sinhala, Tamil, Muslim, and Catholic communities during the election with the majority of them backing the NPP.

The NPP won 21 out of 22 electoral districts and 150 out of 160 electorates, the official election results showed. A Marxists party led coalition has won national elections for the first time in Sri Lanka’s history.

Dissanayaka in his policy statement during the inaugural session of the new parliament said when racism becomes a theme of a political camp; the definite consequence is counter racism from opposition political camps.

“Racism does not remain in one place. One portion of racism will nurture and grow the other portion of racism. We have experienced this in our long history, politics, and society,” Dissanayake told the parliament while addressing the new parliament in which his party had 156 new legislators compared to the last parliament.

“Although we were in different provinces, although we were far apart in cultural views, although we spoke different languages, although we practiced different religions, this election has shown that we have converged into focusing on one purpose and lined up for that,” he said.

“This election has shown that a very strong opportunity has now been created to build national unity, which has been a long-cherished wish in our country.”

“We can have different political ideologies, but I also say one thing responsibly. We will not give in to racist politics in our country again.”

Previous president Gotabaya Rajapaksa used racism against Muslims after the April 2019 Easter Sunday attack. His government before the 2020 parliament election ordered forced cremation of Muslim and Catholic victims of Covid-19 despite heavy criticism from the international community.

The island nation also has seen a 26-year civil war as a result of successive governments’ communal-based decisions while depriving the rights of ethnic minority Tamils. That war killed more than 100,000 people with thousands still missing amid a large number of human rights violations.

The island nation also has seen riots targeted ethnic minority Tamils, Muslims, and Catholics, mainly for political reasons in the past.

He said his government will not allow religious extremism to rise its head “at any cost”.

“Our people have been affected enough by communal conflicts. This land has been soaked with blood. Rivers have been filled with people’s tears. Suspicion, distrust, and anger have been there between us. Today, our responsibility as representatives of this parliament is to not create a state like this for our future children,” he said.

“We have the responsibility to do politics with whatever slogans, it could be economy, it could be democracy. You can use anything you want. But we will not allow the creation of communal and religious slogans to capture political power in the country.”

The Colombo Magistrate’s Court today (21) issued an arrest warrant against former Minister Douglas Devananda after he failed to appear before the court to testify in an ongoing case.

The case pertaining to a complaint lodged by Devananda with the Criminal Investigation Department (CID) in 2016, accusing Wellawatta-based businessman Subramaniam Manoharan of issuing two fraudulent cheques, each valued at Rs. 10 million, was taken up before the court today.

Despite being summoned to testify in court today, former Minister Devananda was absent. While his attorney claimed he was unwell, no medical documentation was submitted to substantiate the claim, Ada Derana reporter said.

Given the lack of credible justification for his absence, the Magistrate ordered the issuance of warrants to arrest and produce Devananda in court.