Category: News

Sri Lanka President Gotabaya Rajapaksa will address the nation on Wednesday (16), his media unit said, as the island nation has been witnessing sharp rise in prices in all essential goods and services following the rupee fall amid public protests.

The content of the speech is expected to be the prevailing situation in the country.

Since the central bank allowed flexibility in the exchange rate on March 8, the rupee has fallen nearly 32 percent so far.

With the rupee fall, prices of fuel, wheat flour, transport, rice parcel, container transport, air tickets, and many other essential goods have been raised and people have started grumbling about the latest cost of living.

The president’s speech also comes as opposition parties have called people to join them for protests against the government’s economic mismanagement and policy failures.

The opposition protests blame Rajapaksa’s Sri Lanka Podujana Party (SLPP)-led government for a messed up fertilizer policy and mismanagement of economic policies.

The main opposition Samagi Jana Balawegaya has planned a protest in Colombo on Tuesday.

The country has seen shortage of fuel, cooking gas, milk powder, sugar, and wheat flour in the recent past mainly due to severe shortage of US dollars as the island nation’s reserves dwindled over 70 percent in the first 11 month of 2021.

The fuel shortage has resulted in extended power cuts across the country.

The Sri Lanka Rupavahini Corporation has requested Rs. 240 million from the Treasury for a period of six months to cover the salaries and other essential expenses of the state-run TV station.

This amount has been requested to cover the salaries and essentials of the employees during the period from last February to next July.

The SLRC has also informed the treasury that due to the decline in the corporation’s revenue, it will not be sufficient to pay salaries and cover essential expenses.

The gap between the corporation’s revenue and expenditure is around Rs. 65 million per month.

The Rupavahini Corporation employs about 862 people and spends around Rs. 90 million a month just to pay their salaries.

The opportunity has also been informed that an additional allowance of Rs. 5,000 has to be paid from January and another Rs. 5 million has to be spent monthly.

Sri Lanka’s finance minister held talks with a top International Monetary Fund (IMF) official on Monday, two sources said, as the island nation seeks help to deal with its plunging reserves, a sliding currency and surging inflation.

IMF Asia and Pacific Department Director Changyong Rhee met Finance Minister Basil Rajapaksa and Treasury Secretary S.R. Atygalle, two finance ministry officials told Reuters.

Sri Lanka is expected to start formal negotiations with the IMF in April on a possible programme that could boost reserves and put growth on a sustainable path.

In Monday’s talks, officials discussed details of the IMF’s latest review of the economy and the assessments outlined by IMF executive directors at an IMF board meeting in late February.

Rhee meets Sri Lankan President Gotabaya Rajapaksa on Tuesday.

“The talks were wide ranging and covered key challenges the economy is facing,” said one of the ministry officials, asking not to be named given the sensitivity of the talks.

“Right now, the focus is on how Sri Lanka can get IMF support. Talks on specific proposals will come later,” the official added, adding that Rajapaksa would brief the cabinet about the talks at a weekly meeting on Monday evening.

Sri Lanka has been hit by a dollar drought with reserves dropping to $2.31 billion in February. The country is struggling to pay for critical imports including fuel, food and medicines.

Chronic shortages have hit Sri Lankans hard with rolling power cuts, long lines at pumps and record levels of inflation.

Last week the Sri Lankan rupee fell 30% after the government allowed the currency to free-float, driving prices even higher.

Sri Lanka’s cabinet sub committees appointed to find way forward to to manage imports from China, Japan, and Middle East met for the first time and explored other methods of importing essential food items, raw materials and industrial goods required for the export-oriented industries amid dollar shortage.

Sri Lanka’s severe dollar shortage has forced the island nation’s central bank to impose ban of several import goods and seek for credit line. India has already given a 1.5 billion US dollar credit line to import fuel, essential foods and medicines.

The three Cabinet Sub Committees, which were appointed by President Gotabaya Rajapaksa last month to negotiate with China, Japan, and the Middle East region on economic matters met for the first time in the parliament last week, the government said in a statement.

The committees met under the Chairmanship of the Foreign Minister G L Peiris.

Cabinet Ministers Bandula Gunawardena, Namal Rajapaksa, Ali Sabry, Ramesh Pathirana and Johnston Fernando, are the members of the Sub Committees.

“The Cabinet Sub Committee on China was briefed on the current progress related to the ongoing negotiations in respect of the proposed China – Sri Lanka Free Trade Agreement, while the Committee agreed to fast-track the possible next steps in consultation with the relevant stakeholders at the earliest,” the government said.

“The Sub Committees have directed the relevant officials to obtain a list of urgent requirements from all Ministries and agencies, which Sri Lanka may solicit from partner countries, to achieve economic stability and quick progress.”

Sri Lanka has been looking to curb imports to preserve US dollars, but the imports hit three-year high as the central bank failed to allow a floating exchange rate under a record low interest rate regime amid excess money printing.

The central bank finally last week allowed flexible exchange rate after raising the key monetary rates by 200 basis points this year. Since then the rupee has plunged around 32 percent and hit a fresh record low on Friday.

A senior International Monetary Fund (IMF) official will be visiting Sri Lanka today (14) and tomorrow (15) to brief President Gotabaya Rajapaksa on the fund’s assessment of the crisis-hit economy, Reuters reported yesterday (13), quoting IMF’s Sri Lanka Mission Chief Masahiro Nozaki.

“While the IMF has not received a request for financial support from Sri Lanka, the staff stands ready to discuss options if requested,” Nozaki told Reuters.

The visit comes ahead of plans by Sri Lanka to hold formal talks with the IMF next month on how to help the country.

The Morning reported last week that Minister of Finance Basil Rajapaksa will visit the US in the first half of April to hold meetings with the IMF and World Bank, armed with an economic recovery and fiscal consolidation plan formulated in Sri Lanka.

Well-placed sources told The Morning that the Finance Minister would most likely depart Sri Lanka on 9 April and the meeting with the IMF is likely to be held on 11 April. Meetings with both organisations will be to obtain their assistance and guidance to overcome the unprecedented economic crisis Sri Lanka is currently experiencing.

A concern voiced by the Government when considering the IMF option has been the conditions that the IMF would impose, particularly with regard to any possible condition about slashing public sector jobs. However, economists have countered by saying that the IMF imposes such harsh conditions only if the Government approaches the IMF without a solid economic regeneration plan of its own. It is to address this concern that the Government has formulated a plan which it hopes to convince the IMF to endorse and support.

The Finance Minister will be accompanied by Finance Ministry and Treasury Secretary S.R. Attygalle. However, Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal, who has been vocally opposed to the option of entering an IMF programme, will not be a part of the visit.

Sri Lanka is facing its worst financial crisis in years with the country struggling to pay for critical imports including fuel, food, and medicines.

In a periodic review released earlier this month, the IMF called on the Government to implement a “credible and coherent” strategy to repay debt and restore macroeconomic stability.