India supersedes China as Lanka’s largest bi-lateral creditor

In the last 8-9 months Sri Lanka has been backed into a cul-de-sac; a blind alley that has made it imperative to depend on bi-lateral and multi-lateral lenders. Sri Lanka’s economy has also been challenged with mountains of external debt that remains unrepayable due to decimating foreign reserves. This has sebsequently impeded the country’s capacity to import fuel, essential consumer goods (such as medicine) and food items, in addition to hindering payments for power and gas imports.

The last few years has made it explicitly apparent that China has held the most reigns on the Sri Lankan economy, however, in the last few months India has supplanted China as Sri Lanka’s largest bi-lateral lender, having loaned a total of $968 million USD between April and August. In a bid to fulfill their ‘neighbourhood first’ policy, India has pursued assistance to all their neighbouring countries through financial aid for economic recovery, advancement of science and technology and general development.

Between 2017 and 2021, China and the Asian Development Bank have been Sri Lanka’s most sizeable bi-lateral and multi-lateral donors respectively. However, in a bid to supersede their regional competitor (China), India escalated their loan schemes to provide financial and food security to Sri Lanka. On August 22, India handed over 21,000 tonnes of fertilizer which will contribute to food security. India’s permanent representative to the UN, R. Kamboj stated at the UN General Assembly that India had donated $4 billion USD in food and financial aid.

What does this mean for Sri Lanka? In the arena of Asian politics, the ‘neighbourhood first’ policy has enhanced the regional influence of India and entitled its territorial neighbours to be indebted to India. To the vexation of the Asian hegemon China, India has made it a foreign policy objective to extend its infleunce over the economics and politics of their neighbours. This provokes an intense schism regarding Sri Lanka as India and China remain the island’s largest external creditors.

What of Lanka’s worsening financial crisis?

Sri Lanka is currently in the midst of negotiations with the IMF to secure an Extended Fund Facility, a long-term financial aid package to assist economic recovery in the island. The loan can only be secured on the condition that all of Sri Lanka’s multi-lateral and bi-lateral creditors come to a consensus that debt repayments can be defaulted on until the debt is sustainably restructured.

Crisis-hit Sri Lanka likely to resume China FTA talks along with India’s CEPA: sources

Sri Lanka’s government under President Ranil Wickremesinghe is likely to resume stalled talks on a Free Trade Agreement (FTA) with China along with India’s Comprehensive Economic Partnership Agreement (CEPA), two sources said, as the island nation struggles to find a way out of a currency crisis and sovereign debt default.

Sri Lanka is caught in a geopolitical cold war between China and India with the backing of the United States, analysts say. That cold war has led Sri Lanka to be extremely cautious in dealing with both Asian powers and even to forego some investment opportunities.

However, the economic crisis and sovereign debt default have compelled the island nation to look into all available avenues to ensure more foreign inflows to move away from the crisis.

Wickremesinghe last week told visiting Administrator of the United States Agency for International Development (USAID) Samantha Power that he is focusing on an export-oriented, very competitive market economy for Sri Lanka as the country has the opportunity to supply to South Asia, Southeast and east Asia.

Four days after the meeting with Power, President Wickremesinghe at an official function said the FTA would be revived and upgraded into a comprehensive economic and technological partnership and that his government would focus on the Indo-Sri Lanka projects that were delayed.

“It does not mean Sri Lanka will go only with India. The Chinese FTA talks also will be resumed,” a source close to the president and who is aware of the new developments on international trade told EconomyNext.

Deep pockets

Amid protests by trade unions, Sri Lanka under Wickremesinghe’s premiership in the Yahapalana government suspended a proposed CEPA with India in December 2015 and attempted to enter a new Economic and Technology Cooperation Agreement (ETCA) in 2016. But Wickremesinghe had to suspend ETCA as well in the face of stiff resistance from trade unions.

Similarly, Wickremesinghe had to temporarily stop FTA talks with China in 2018 under the last administration because Beijing disagreed with Colombo’s demand for a review of the deal after 10 years.

“Sri Lanka needs China’s deep pockets and India’s healthy relationship. So one country cannot be compromised with another. They are both important for Sri Lanka to get out of the current crisis,” the source said.

Wickremesinghe publicly said last week that he wants to remove all barriers to trade in negotiations with India.

“I think the future relations of India with its neighbours will be determined by trade integration. Trade integration gives an economic base. Common economic base is a prerequisite for a better national security and better political relations. So, keeping this in mind, we are taking two major steps,” President Wickremesinghe said addressing an event to mark the 75’th anniversary of independence of India.

President Wickremesinghe, however, has so far not commented on the FTA with China.

The Chinese embassy in Colombo declined to comment on resuming FTA talks.

“Both FTA and CEPA would go together,” another source who has knowledge on the FTA with China told EconomyNext.

Source: Economy Next

Military deployed again to maintain law and order

The military has been deployed again to maintain law and order, through a gazette notice issued by President Ranil Wickremesinghe.

The gazette notice issued by the President calls out with effect from today (September 22, 2022) all the members of the Armed Forces for the maintenance of public order in the country.

The security forces had been deployed every month over the past several months to maintain law and order in the entire country.

Human rights lawyer Ambika Satkunanathan tweeted saying that the President has once again used Section 12 of the Public Security Ordinance to call out the armed forces to maintain public order.

She said the President has to only issue a gazette every month to declare the de-facto state of emergency.

Source: Colombo Gazette

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Trinco Port to export its first shipment after 30 years

The Port of Trincomalee will carry out its first export shipment today, after a long lay off of 30 years, the Sri Lanka Ports Authority (SLPA) said.

Accordingly, the first shipment of ilmenite a titanium-iron oxide mineral are scheduled to export to China today, the SLPA said.

Source: Daily Mirror Online

Ambassadors’ Forum on debt restructuring and IMF program kicks off

An Ambassadors’ Forum on debt restructuring and International Monetary Fund (IMF) program commenced a short while ago under the patronage of President Ranil Wickremesinghe.

A total of 16 Colombo-based missions are participating in the forum, the President’s Media Division (PMD).

Meanwhile, six other participants are taking part in the forum from New Delhi virtually, the PMD added.

Earlier this month Sri Lanka reached a preliminary deal with the IMF for a loan of about USD 2.9 billion contingent on it receiving financing assurances from official creditors and negotiations with private creditors.

Source: Adaderana

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GL complains of step-motherly treatment for SLPP rebels MPs in Parliament

SLPP MP Prof. G.L. Peiris yesterday said that the government rebels in the opposition ranks were not given time to speak in Parliament.

Speaking to the media at the Parliament ground, Prof Peiris said that the government accused of suppressing the voices of people has now extended its grip of silencing the critics in Parliament by not allocating time to the opposition MPs to speak in debates.

Prof Peiris said that time in debates was not allocated to 13 SLPP MPs who joined the opposition ranks. “Today the debate in the House was on strategies to increase the national income. MPs of our group are not given time. This is deliberate silencing of the critics of the government.” he said.

It is useless to talk about the privileges of a Member of Parliament if the fundamental right to speak is violated. This is a total disruption of the Parliament democracy.

Prof Peiris said that the MPs who had been deprived of participating in the debates would write to the Commonwealth Parliamentary Association, Inter-Parliamentary Union and the SAARC member nations of the unjust act.

Source: The Island Online

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World’s largest broadcasting union condemns police assault on Sri Lankan journalists

The World Broadcasting Unions – WBU, which is the co-ordinating body of broadcasting unions around the world, has condemned the vicious attack on journalists of MTV Channel (Pvt) Ltd by Sri Lanka Police and security personnel on the 9th of July.

The World Broadcasting Unions has among its membership the largest and most influential unions of broadcast journalists around the world. They include the Asia-Pacific Broadcasting Union, the Arab States Broadcasting Union, the African Union of Broadcasting, the Caribbean Broadcasting Union, the European Broadcasting Union, and International Association of Broadcasting, and the North American Broadcasters Association. The WBU was founded in 1922 and has its headquarters in Toronto, Canada.

The WBU, in an official statement, said that it is closely monitoring the Sri Lankan government’s response to attacks on journalists and attempts to intimidate media organizations.

The WBU called on the government to appoint an impartial body to investigate the incident on 9th July and to ensure that police and security personnel do not intimidate, harass or assault any journalists, or anyone associated with the companies which employ them.

The WBU noted that the Human Rights Commission of Sri Lanka has formally acknowledged the unjustified assault on media personnel by police and security personnel and confirmed that the journalists posed no threat to police and that the assault represented a gross violation of the rights of a free media.

It noted that several members of the senior management of MTV Channel (Pvt) Ltd were arbitrarily summoned by police for questioning with regard to the news report on that day and on the arson attack on the Prime Minister’s residence which took place shortly afterwards.

The WBU said that it is speaking out on these events in direct support of MTV’s parent company, the Capital Maharaja Group, which is a member of the Asia-Pacific Broadcasting Union.

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Approx. 1,200 Northern children still with war shrapnel

Former Eelam People’s Revolutionary Liberation Front (EPRLF) MP Sivasakthy Ananthan yesterday (20) said that around 1,200 war-affected children in the Northern Province are still bearing shrapnel in their bodies and are yet to receive adequate healthcare to cope with their conditions.

Back in 2016, when Ananthan was a MP, during the Budget debates, he pointed out to then-Prime Minister and incumbent President Ranil Wickremesinghe about the difficulties faced by these children and the lack of healthcare facilities for the children and adults bearing pieces of shrapnel. In response, Wickremesinghe had requested Ananthan to initiate a dialogue with the Minister of Health at the time and to submit a report of the numbers affected. Speaking to The Morning, Ananthan said that he had submitted a report including the details of 750 children out of 1,200 in 2016 as requested by Wickremesinghe, but that there was no action taken.

The affected persons had complained to Ananthan that the hospitals in the North were lacking facilities to treat their conditions.

“This situation remains the same. Some children who can obtain financial support have removed the shrapnel from their bodies with the help of Indian doctors, while most are still bearing the shards,” he added.

Ananthan noted that there are children with shrapnel in their heads and spinal areas. To some of them, the doctors have advised that removing such could be a threat to their lives, and therefore, they continue to live with the condition.

“I appeal to President Wickremesinghe to provide assistance to these children. Not everyone is financially stable enough to get the shrapnel removed; thus the Government should help them to survive,” he added.

He also noted that he would reach out to President Wickremesinghe through former Northern Province Chief Minister and incumbent Tamil Makkal Thesiya Kuttani (TMTK) MP C.V. Wigneswaran to highlight this matter.

Meanwhile, Northern Province Governor Jeevan Thiyagarajah, speaking to The Morning, said that the presence of shrapnel does not always translate to the need for removal.

“It is subject to medical advice on the necessity. However, the principal cost must not be a reason not to attend to any removal, particularly for those less resourced. We will revisit this subject and inquire from every healthcare facility on the needs of those they attended to previously,” he added.

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China keeps Pakistan, Sri Lanka waiting on loan deals

(THE HINDU) – China has offered Pakistan’s visiting Army Chief technical help as the country deals with record floods but did not announce any substantial financial assistance that its “all-weather” ally has been seeking.

Both Pakistan and Sri Lanka, facing financial stress, have been engaged in long-running talks with Beijing for assistance, but with negotiations in both cases having made little headway, both countries have turned to the International Monetary Fund (IMF). Their new IMF commitments are now likely to impact their owed payments to China, which has lent the two countries more than $26 billion in the past five years.

Following talks in Xi’an between Pakistan’s Chief of Army Staff General Qamar Javed Bajwa and China’s Defence Minister General Wei Fenghe, the Chinese side expressed willingness to provide technical assistance for flood relief work, Pakistan’s official Inter-Services Public Relations said.

Chinese State media quoted Gen. Wei as calling on both countries “to tide over difficulties together, fully trust each other, and unswervingly support each other’s core interests on the way forward” but did not detail any offers of assistance. Chinese media noted that Beijing had previously provided relief supplies worth $57 million.

Earlier this month, Pakistan’s government assured the IMF it would reduce capacity payments owed to Chinese projects or seek to restructure loans, with over $1.09 billion still owed to Chinese power producers.

Meanwhile, Sri Lanka has been pressing Beijing for a $4 billion loan, but talks that have dragged on for several months appear to have not yielded an agreement. Rather than restructure Sri Lanka’s existing debt, Beijing has indicated it would prefer to instead extend new loans to an already heavily indebted economy.

On September 1, Sri Lanka and the IMF reached a staff-level agreement with the Fund set to support Sri Lanka with an Extended Fund Facility (EFF) of $2.9 billion, contingent upon Sri Lanka’s successful debt restructuring efforts, which will hinge in part on China’s agreeability. Sri Lanka’s creditors also include International Sovereign Bond (ISB) holders, multilateral lending agencies, and other bilateral partners such as Japan and India.

While Japan and India have been very supportive of the IMF process from the beginning, all eyes were on China to see if it would play ball, although some analysts in Sri Lanka expressed hope citing China’s willingness to work on a debt relief deal in Zambia.

In response to Sri Lanka’s IMF agreement, Beijing said as a “traditional friendly neighbor” of Sri Lanka and a “major shareholder” of the IMF, China has “always been encouraging” the IMF and other international financial institutions “to continue to play a positive role in supporting Sri Lanka’s response to current difficulties, efforts to ease debt burden and realize sustainable development.” Sri Lanka is currently in talks with its creditors, with the hope of qualifying for the Fund’s EFF.

Supreme Lanka Coalition’ to join Dullas Alahapperuma?

Discussions are underway regarding the ‘Supreme Lanka Coalition’ working together with the independent group of MPs that quit the government including Dullas Alahapperuma, during upcoming elections, says MP Vasudeva Nanayakkara.

However, the MP claimed that he has no intention of joining ‘Samagi Jana Balavegaya’, the main opposition.

He stated this speaking to the media following a discussion held between the party leaders of the ‘Supreme Lanka Coalition’ yesterday (Sep 20).

In response to a question raised by a journalist, he said that they are not yet ready to contest an election.

Answering a question about whether Kumara Welgama will become a challenge for their coalition, he said: “Chandrika is also there, and Kumara Welgama too. You will see how it goes after we enter the contest. Have to be prepared for the match”.