Category: News

The National People’s Power (NPP) MP Anura Kumara Dissanayake said today that they were not prepared to accept any proposal such as an interim government unless President Gotabaya Rajapaksa resigns from being the President.

He told Parliament that any proposal that are being made while President Rajapaksa in power, would not alleviate people’s violent protests, as one of the key demands of the people was President to quit from the post.

He said none of the proposals made by the President was effective in resolving the burning issues of the people and added that people strongly demand that the President should “go home”.

“Resigning from the Cabinet or forming an interim government were not the solutions to the current issues,” he said.

MP Dissanayake said they were ready to make proposals or accept any mechanism proposed to resolve the crisis on condition that the President should resign from the post in the first place.

New Zealand Prime Minister Jacinda Ardern said Sri Lanka is experiencing an incredibly tumultuous period as island-wide protests continue amid an economic crisis.

Economic blunders have been compounded by the pandemic, resulting in soaring inflation and a shortage of food, fuel and medical supplies, the Newshub reported.

“In terms of the foreign policy implications for New Zealand that’s where I am looking to receive an additional briefing over the coming 24 hours from the ministry,” Prime Minister Jacinda Ardern said.

The protests are calling for a change in the leadership of the Sri Lankan government, which stands accused of mismanaging public funds.

New Zealand Sri Lankans are signing a petition calling for the NZ Government to condemn the actions of the Sri Lankan leadership.

When asked if she condemned Sri Lanka’s leadership, Ardern stopped short but acknowledged the growing frustration of Sri Lankan people.

“It is a very tumultuous time politically and domestically in Sri Lanka,” she said.

The President of Sri Lanka, Gotabaya Rajapaksa, imposed a 36-hour curfew and a social media blackout in response to the protests.

New Zealand Foreign Minister Nanaia Mahuta has also weight weighed in, saying: “New Zealand strongly upholds democratic values and institutions, including free speech and the right to peacefully protest.”

She said Aotearoa New Zealand was monitoring the unfolding economic, political and security situation in Sri Lanka closely – and encouraged all parties to continue to work on a peaceful solution.

The protest is drawing attention from around the world with the diaspora also taking to the streets in the US, Australia and New Zealand.

Sri Lanka’s State Ministry of Production, Supply, and Regulation of Pharmaceuticals said that government hospitals are running short of 40 different medicines due to the present crisis.

Secretary to the State Minister Dr. Saman Ratnayake told News 1st that stocks of 60 different medicines will only last for another week, and less than a month.

However, facilities have been arranged for pharmaceutical importers to import medicines under the Indian Credit Line.

In addition, The Bank of Ceylon and People’s Bank have decided to open Letters of Credit valued at USD 7 Million each.

However, health professionals have warned that the entire health system would collapse within the next week if the crisis is not resolved.

Dr. Senal Fernando, the Secretary of the Government Medical Officer’s Association speaking to reporters said the GMOA has decided to declare a health emergency across Sri Lanka.

Following the mass resignation of the Sri Lankan cabinet, there is no proper authority to be held responsible for the crisis, said one local doctor who took part in a protest outside of the capital, Colombo.

According to local doctors, medication required for the daily clinics, diabetes patients, as well as heart patients is in short supply, while medical equipment is also scarce.

Sri Lanka imports most of its pharmaceuticals from Asian nations such as India, China, Pakistan, and Bangladesh.

Due to the foreign exchange crisis, the importation of pharmaceuticals is in limbo, as the country needs to source an additional USD 20 Million to avert a major crisis

Sri Lanka’s rupee has plunged to a record low to become the world’s worst-performing currency, as President Gotabaya Rajapaksa struggles to contain a worsening economic and political crisis.

The Sri Lankan rupee was hovering near SLRs300 per US dollar on Wednesday, down 32 per cent year to date and lagging even Russia’s rouble, after Rajapaksa ended emergency rule just days after it was imposed.

Sri Lanka is facing a foreign exchange crisis as its government grapples with looming debt payments, widespread protests and an economic emergency.

The backpedal on the emergency decree from Rajapaksa’s government came after his new finance minister, Ali Sabry, quit less than 24 hours into the job.

Sabry’s resignation was the latest in a rush of departures. The country’s entire cabinet quit over the weekend following nationwide protests over severe food and power shortages as well as runaway inflation.

Central bank governor Ajith Nivard Cabraal, who was scheduled to oversee a policy meeting on Thursday, also resigned on Monday.

The hollowing out of Rajapaksa’s administration has stoked concerns over the country’s ability to secure help from the IMF to avoid defaulting on looming international bond payments.

Previous finance minister and the president’s brother Basil Rajapaksa had been preparing to fly to Washington to discuss terms with the IMF prior to his resignation over the weekend.

“Things don’t look good. So much depends on whether they can get any IMF funding,” said Steve Cochrane, chief Asia-Pacific economist at Moody’s. “A stable government matters.”

Cochrane said raising interest rates could help curb inflation and potentially bolster the rupee. “But there are other factors driving inflation that the central bank has little control over,” he added, including commodity prices pushed up by Russia’s invasion of Ukraine, supply chain constraints and lack of foreign reserves to pay for imports.

Analysts said markets were focused on a $1bn sovereign dollar bond repayment due on July 25. On Wednesday, that bond was trading well below face value at a record low of $0.58, as doubts mounted over Sri Lanka’s ability to come up with enough dollar funding to make the payment.

As finance minister, the president’s brother oversaw a regime of drastic tax cuts that prompted global rating agencies to repeatedly downgrade the country’s sovereign credit rating, leaving it frozen out of international debt markets.

That forced Sri Lanka to make interest payments on its sovereign bonds from dwindling foreign reserves, which have come under pressure during the coronavirus pandemic. The tourism sector, one of the island nation’s main revenue generators, has been hit particularly hard.

The IMF estimated in late February that Sri Lanka had only about a month worth of foreign reserves left.

“With the government in disarray, the prospects of securing an IMF package look bleak,” said Alex Holmes, Asia economist at Capital Economics. “That again elevates the chances that the government will eventually have to resort to a sovereign default”.

(Financial Times)

A wave of resignations of ministers and officials in Sri Lanka has raised policy uncertainty at time when the country is reeling from a currency crisis and shortages and has debt repayments, Moody’s, a rating agency has said.

“Protracted political uncertainty is likely to hinder progress in obtaining external financing from key development partners or attracting foreign direct investment, or both, because of Sri Lanka’s reliance on capital inflows to repay its sizeable foreign-currency obligations,” Moody’s said.

“The difficult political environment could also weigh on policymaking and the economy’s recovery from the pandemic, compounding challenges to fiscal consolidation and government efforts to shore up reserves to service its external debt obligations.”

Sri Lanka’s cabinet resigned after protests broke out around the country. The central bank Governor and Treasury Secretary also resigned.

The full statement is reproduced below:

Resignations of key officials raise policy uncertainty,
compounding external liquidity and fiscal difficulties

On 3-4 April, all of Sri Lanka’s (Caa2 stable) cabinet, with the exception of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa, tendered their resignations, along with the governor of the central bank.

The resignations were partly a response to rising public dissatisfaction and social tensions over high inflation, shortages of essential items and lengthy power cuts, increasing political and policy uncertainty at a time when Sri Lanka is experiencing a severe external liquidity and fiscal crisis and a deteriorating macroeconomic environment.

The government declared a state of emergency and imposed a two-day countrywide curfew on 2-3 April after protesters demanding the president’s resignation stormed his home.

Protracted political uncertainty is likely to hinder progress in obtaining external financing from key development partners or attracting foreign direct investment, or both, because of Sri Lanka’s reliance on capital inflows to repay its sizeable foreign-currency obligations.

The difficult political environment could also weigh on policymaking and the economy’s recovery from the pandemic, compounding challenges to fiscal consolidation and government efforts to shore up reserves to service its external debt obligations.

Intensifying social unrest and sporadic curfews are likely to further strain the tourism industry, delaying the recovery in tourism receipts that were a crucial part of the government’s plans to bolster foreign-currency inflows before the pandemic.

An extended period of political uncertainty could also delay ongoing discussions to secure external financing from development partners, deter foreign direct investment and prolong negotiations with the IMF over potential policy or financing support.

Sri Lankan authorities recently signaled their willingness to engage the IMF for support because of the country’s dwindling foreign-exchange reserves buffer.

Sri Lanka’s foreign-exchange reserves were around $2 billion as of the end of February 2022, well below the government’s annual external debt repayments of $6 billion-$7 billion through to at least 2025 and covering less than two months of imports. Very low foreign-exchange reserves in turn have led to broad restrictions on imports (among other measures to preserve foreign-exchange resources) and shortages of several essential items such as fuel and milk powder.

Inflation rose to double digits in November 2021 and reached 17.5% year on year in February 2022.

Meanwhile, Russia’s military conflict with Ukraine (Caa2 rating under review for downgrade) is exacerbating Sri Lanka’s external difficulties, mainly via a higher energy and food import bill. Fuel imports accounted for 18% of total imports in 2021 and agricultural imports 8%. Higher inflation is likely to prompt further policy rate hikes, which will raise government borrowing costs and further weaken debt affordability.

The Central Bank of Sri Lanka raised its main policy rate by 100 basis points to 10.5% in early March 2022 and its policy rate is now 200 basis points above a low of 8.5% in 2020-21, although it remains below the 15% rate that preceded aggressive rate cuts following the coronavirus outbreak.