Category: News

“To change and uplift the current situation of the country, give the ruling power to Tamil leaders and Tamil parties for one year,” Tamil Eelam Liberation Organisation(TELO), Leader MP Selvam Adaikalanathan said.

He said that they will provide equal services to the public without division as Tamil and Sinhala communities. For years Sinhala leaders have been ruling the country. However, with the current situation in the country, we urge everyone including the Sinhala community to support us by electing us to change the current situation in the country.

“The Tamil community did not elect President Gotabaya Rajapaksa as President of the country as they were aware that he cannot rule the country properly. Further, the Tamil-speaking people in the country are severely affected due to the ruling power of the President, as they have failed to pay attention to the concerns of the Tamil community in the country,” he said.

Further, he added that the people who will come into power in future should assure that they will provide justice for the lives of missing persons and people who have been arrested for a long period without charge under the Prevention of Terrorism Act.

Meanwhile, the Tamil National Alliance and all other Tamil parties who represent the Tamil community in Parliament should think about the state of the country and sign the No-Confidence Motion against the Government and impeaching the President.

The International Monetary Fund (IMF) has agreed to consider a request by Minister of Finance M.U.M. Ali Sabry (President’s Counsel) for a Rapid Financing Instrument (RFI), following representations made by India’s Minister for Finance and Corporate Affairs Nirmala Sitharaman on behalf of Sri Lanka, despite it being outside of the standard circumstances for the issuance of a RFI.

Both Finance Ministers held discussions with IMF Managing Director (MD) Kristalina Georgieva yesterday (19).

In a Tweet issued yesterday, Advisor to the Finance Minister Shamir Zavahir said that although Sabry had made a request for a RFI to mitigate the current supply chain issues, the IMF was initially of the view that it does not meet their criteria.

“However, India subsequently made representations on a RFI for Sri Lanka as well, and the IMF may consider this request due to the unique circumstances,” he added.

Meanwhile, in a press release issued yesterday, the Indian Finance Ministry said that during the meeting between Indian Minister for Finance and Corporate Affairs Nirmala Sitharaman and Georgieva on 18 April, Sitharaman had indicated that the IMF should support and urgently provide financial assistance to Sri Lanka.

“Georgieva particularly brought reference to the help India is providing to Sri Lanka during their difficult economic crisis and assured Sitharaman that the IMF would continue to actively engage with Sri Lanka.”

A statement by the Finance Ministry said that after Ali Sabry had made a request for a RFI, the IMF had informed Ali Sabry that India had also made representations on behalf of Sri Lanka about a RFI. The IMF had further informed Ali Sabry that they would consider the request, despite it being outside of the standard circumstances for the issuance of a RFI. The RFI provides rapid support for all member countries facing an urgent balance of payments related need and can be used in a wide range of circumstances.

Furthermore, Zavahir said that the negotiations with the IMF had started on a “positive note.”

“They see the recent steps taken to increase the interest rates, and calling for Requests for Proposals (RFPs) for the appointment of international financial and legal advisors, as good first steps towards a possible restructuring programme. In any event, the IMF appears to be positive towards granting an Extended Fund Facility (EFF). Ideally if this can be expedited, it can help stabilise things in the short term till long term solutions kick in,” he noted.

Minister Sabry is due to hold discussions throughout the week with other IMF officials and the World Bank.

Sri Lanka says it has requested emergency financial help from the International Monetary Fund (IMF) as bailout talks got under way on Monday.

The global financial organisation will consider providing the assistance after representations by neighbouring India.

Meanwhile, a leading rating agency warned Sri Lanka will see “a series of defaults” on its foreign debts after officials said it would halt payments.

It comes as Moody’s downgraded its assessment of bonds sold by Sri Lanka.

Sri Lankan officials, led by finance minister Ali Sabry, are in Washington this week for talks with the IMF as the South Asian nation faces its worst economic crisis in more than 70 years.

At a meeting, the IMF “commended on the steps already taken by [Mr Sabry] to mitigate the financial situation in Sri Lanka,” the country’s finance ministry said in a statement.

“[The] Minister of Finance has made a request for a Rapid Financing Instrument (RFI) with the IMF. IMF has subsequently informed Minister Sabry that India had also made representations on behalf of Sri Lanka for an RFI,” it added.

“It had been communicated that IMF will consider the special request made despite it being outside of the standard circumstances for the issuance of an RFI.”

A RFI is usually granted to an IMF member nation with “urgent” funding needs, because of sharp commodity price rises, natural disasters or conflicts. It does not require the country to have a plan to restructure its economy.

Last week, the Sri Lankan government said it would temporarily default on $35.5bn (£27.3bn) in foreign debt as the pandemic and the war in Ukraine made it “impossible” to make payments to overseas creditors.

On Monday, Sri Lanka’s finance ministry confirmed that it would miss $78m in interest rate payments on international sovereign bonds.

A spokesperson told the BBC this was “in line with the government policy decision” to pause foreign payouts.

If the overdue interest rate payments are not made within a 30-day grace period, it would mark Sri Lanka’s first default on its foreign debt since its independence from the UK in 1948.

Asked if payment would be made within the grace period, the spokesperson said: “A decision in this regard will be published in due course”.

The country has seen mass protests in recent weeks as it suffers food shortages, soaring fuel prices and major power cuts as its reserves of foreign currencies are running low.

The latest rating from Moody’s suggests that overseas bonds issued by Sri Lanka are “likely in, or very near default”.

The rating agency said the country’s move to stop some payments “will lead to a series of defaults with the first coupon payments for the government’s international bonds coming due today, April 18, 2022.” A coupon is the interest payment due on a bond.

Moody’s added that the non-payment was “unlikely to be cured during the grace period”, as a debt restructuring programme with the IMF “will take time”.

Last week, two other major credit rating agencies also warned that Sri Lanka was on the brink of defaulting on its debts.

Credit ratings are intended to help investors understand the level of risk they face when buying a financial instrument, in this case a country’s debt – or sovereign bond.

International sovereign bonds make up the largest share of Sri Lanka’s foreign debt.

They are held by countries including China, Japan and India as well as major investment firms such as BlackRock, UBS and Allianz.

Meanwhile, the Colombo Stock Exchange is scheduled to remain closed all this week, due to the “present situation in the country”.

In the backdrop of public protests in Sri Lanka, Harsha De Silva, MP of the opposition Samagi Jana Balawegaya, spoke to TOI in Colombo:

How would you sum up the crisis?
It is a political, economic and social crisis like never before.

What were the early warning signs that the government missed?
Immediately after the presidential election in 2019, ahead of the parliamentary election, they cut taxes by almost a third. The rating agencies changed their outlook from ‘stable’ to ‘negative’, but the government ignored it and started printing currency. And the downgrades kept coming. Denial was their strategy. And it blew up into this.

Did the government fail to seek the right advice?
Absolutely. While we were in an unstable macro situation, unable to control inflation and exchange rates, besides being in the middle of a pandemic, the president, against expert advice, banned import of chemical fertilisers. And now the harvest of tea, export crops, plantation crops, grains and rice are down by 50%. IMF was willing to give us reserves to try and hold the Sri Lankan rupee at 230 (against the US dollar), which they said was the level it was going to fall to. But then it kept dropping and today we are at 330. The government was utterly negligent, inconceivably idiotic. This is a case study of how not to run a country.

Why did the government delay approaching the International Monetary Fund?
I don’t understand why they delayed it. Every independent economist in Sri Lanka and abroad advised the president that he should do it (approach the World Bank). But certain people, particularly, former central bank governor Ajith Nivard Cabraal (who resigned on April 4) and Basil Rajapaksa (former finance minister) thought they had some home-grown solution. I think they misdiagnosed the problem; or they diagnosed it, but didn’t want to accept the reality. They kept saying this is a liquidity problem. There was also a liquidity problem, but the bigger problem was a solvency problem. These people have been utterly negligent.

Do you think there should be war-like action?
Yes. The only positive thing is that they have now appointed a professional as the governor of the central bank (P Nandalal Weerasinghe). The first thing he did after taking charge was to raise key interest rates by 700 basis points (7 percentage points) – a first. And, the opposition, not wanting to play politics at this time, supported him. A three-member advisory group on multilateral engagement and debt sustainability to advise the president has been constituted. It includes former governor of the central bank Indrajit Coomaraswamy, former chief economist of World Bank Shanta Devarajan and former director of the Institute of Capacity Development of the IMF Institute Sharmini Coorey.

Do you think India should help more? If so, how?
As a citizen of Sri Lanka, I must tell you the people of our country are thankful to the people of India. They have come to our help when we needed it the most. If India didn’t postpone what are called these Asian clearing union credits, that is payment for goods purchased coming due, we would have defaulted on some other loan three months ago. They have given us credit to buy food and medicine, given us credit to buy fuel. It is embarrassing for us to ask for food and medicines from anyone. It is tough for us, but we will come out of this and we will rise much faster.

Why did the opposition reject the president’s move to form a unity government involving opposition members?
The country is saying ‘Go home Gota’. How can we go against such sentiments? We said we are willing to take over the government and turn around the situation. We have the skills, the people, the connections. The way out now is by invoking the 21st amendment of the constitution to abolish the executive presidency. For this we need the support of two-thirds in parliament and a referendum. If Gotabaya agrees to that, a pathway will open to reset the economy. The referendum can happen along with a general election. Crises create opportunities. This is a good time to fulfil the promise of almost every presidential candidate since 1994 – Chandrika, Mahinda, Sirisena – to get rid of this concentration of power in one individual.

Can you give us a preview of the economic blueprint your team is working on?
First, we need to stabilise the macro-economy. We need to rein in inflation, hold the currency and have some meaningful intrastat. We should restructure jobs. We should revise taxes, rationalise expenditure, remove the stranglehold of government in the market by liberalising the trade and investment policy. We should focus on social safety banks because lower income people are getting hammered.

Sri Lanka is a country which has lived through multiple catastrophes since winning its independence from Britain in 1948.

Most calamitously, there were three decades of civil war between the majority Sinhalese and the minority Sri Lankan Tamils.

Yet throughout this troubled history, the government in Colombo has never reneged on its debts.

But with protesters on the streets complaining about soaring food and fuel prices and the leadership of the ruling family, the finance ministry felt it had few other choices but to suspend payments.

It stressed the country’s uninterrupted record of paying its way through thick and thin, adding that to continue to do so ‘was no longer tenable.’

Sri Lanka is no Argentina, which has formally defaulted on its debt nine times since 1827 and twice in recent decades.

As the country seeks to deal with what IMF boss Kristalina Georgieva describes as ‘crisis on top of crisis’ – the pandemic followed by the war in Ukraine – it decided it has no other choice but to try to reshape the financial and economic landscape.

In spite of past strife, Sri Lanka with its highly talented, well-educated government elites, is not the first nation which would be thought of as sparking a global meltdown.

Its difficulties, however, mirror a huge build-up of debt, social inequality, poverty and hunger across emerging markets and the developing world during Covid.

The Western nations have been so focused on their own health and economic disruption in the pandemic that the rest of the world barely has received any attention.

A report, just compiled by the UN trade and development arm Unctad, warns ‘we are on the brink of a global debt crisis.’

Before the Ukraine war, developing countries were on average spending 16pc of export earnings on servicing debt. The figure among smaller and island states is twice that.

To place matters in perspective, Germany’s debt obligations when they were reorganised (effectively written off) by its creditors in 1953 never exceeded 3.4 per cent of exports.