Sri Lanka unlikely to seek IMF bailout;Cabinet fails to reach consensus

Sri Lanka is unlikely to seek a bailout from the International Monetary Fund (IMF) with the Cabinet failing to reach a consensus last evening.

Government sources told Daily Mirror last night that most members of the Cabinet did not support seeking financial support from the IMF.

Sources said that a majority in the Cabinet are against the pre-conditions expected to be proposed by the IMF for the funding.

As a result, Government sources said that Sri Lanka is most likely to decide not to seek an IMF bailout.

IMF’s mission chief for Sri Lanka, Masahiro Nozaki had told Daily Mirror via email in late December that the staff is still ready to discuss the option if requested.

Nozaki said a staff team from the IMF visited Colombo from December 7–20 to conduct the 2021 Article IV consultation with Sri Lanka.

Under Article IV of the IMF’s Articles of Agreement, the IMF holds regular bilateral discussions with all member countries to review economic developments and policies.

Following approval by IMF Management the IMF’s Executive Board discusses a Staff Report based on these discussions, Nozaki said.

The Cabinet had last month also discussed an IMF bailout but had not reached a decision at that meeting if to seek financial support from the global agency.

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“My Removal Is Like Winning A Lottery: This Will Be A Turning Point In Politics”: Susil Responds

My removal was like winning a lottery, former State Minister Susil Premajayantha said commenting on President Gotabhaya Rajapaksa’s decision to sack him from the government portfolio.

“This will be a turning point in politics. I have served as a Cabinet Minister under three presidents since 2000. I have been the General Secretary of the UPFA for nearly 10 years. I have led the party to many election victories . So, we are not newcomers to politics,” Premajayantha added.

He said those who are not even suitable to be employed as sanitary workers have been given important positions in the Government.

“The President can appoint or remove anyone from any position. That’s not a problem. Our primary duty is to speak on behalf of the public. I voiced the sentiments of the people,” Premajayatha added.

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Deals China strikes with Selendiva will be declared null and void without compensation

Wijeyadasa writes to Chinese President:
SLPP MP Dr. Wijeyadasa Rajapakshe has in a letter to Chinese President Xi Jinping said any transactions that China enters into with Selendiva Investment Company will be annulled ab initio without any compensation.

In his 45-point letter, Rajapakshe has said that when the present administration ceases to hodl power, the people will call upon the new government to revisit all agreements and contracts entered with foreign nations during the last 15 years. If these agreements are not in compliance with best practices they can be cancelled.

Rajapakshe has also claimed that most of the projects carried out with Chinese funds have been wasteful and large commissions have been paid to the corrupt politicians and officials to secure such projects.

“Transactions you have secured through corruption will be cancelled and we hold no liability to pay back any loans obtained for such contracts. In the event of any restructuring, under no circumstances the period of any agreement will be permitted to exceed a period of 15 years from the date of the inception of such contracts,” he said.

The MP has said that China has assisted Sri Lanka greatly in the past decades in economic, military and diplomatic spheres, but that has changed in recent times.

“The longstanding relations of ours have turned into a different course since your country launched “One Belt-One Road” policy on the pretext of strengthening the foreign policy and economic strategy of China. It is manifestly visible that your friendship with us is no more genuine and candid; instead you use our relations to achieve your ambition of becoming the world power at the stake of lives of our innocent people. Further you are dismantling the peace in our region as well as in the world by making our nation the first victim of your power struggle with other nations of powers that be.”

Rajapakshe has said that since Sri Lanka has got close to China, other major powers in the world, too, are making various demands from Sri Lanka. “Moreover, due to our overreliance on China, other friendly nations have moved away from us, isolating the country in the international sphere.”

Full text of MP Rajapakshe’s letter to the Chinese President

 

 

 

 

USD 5.5 m from Russia via WFP to boost sustainable school nutrition systems

The Russian Federation has transferred USD 5.5 million to the World Food Program (WFP) in order to provide financing of the projects related to the development of sustainable school nutrition systems in Sri Lanka.

Ambassador of Russia in Sri Lanka Yury B. Materiy said yesterday the support was in line with the policy of strengthening cooperation with Sri Lanka in the interest of sustainable development.

Sri Lanka and Russia in October last year successfully concluded the 10th Round of Bilateral Political Consultations in Moscow.

During the meeting, the two sides reviewed existing multifaceted relations between Sri Lanka and Russia encompassing political, economic and cultural spheres as well as people–to-people contacts.

In discussions, the two sides also referred to cooperation in defence, education, connectivity and tourism, and in combating COVID-19, among others.

Recalling the longstanding historic relations and strong partnership between the two countries, both sides reaffirmed cooperation on issues of mutual interest in multilateral fora.

The discussion also focused on regional and international issues of mutual interest. Both sides are looking forward to the celebration of the 65th anniversary of diplomatic relations between Sri Lanka and Russia this year.

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More concerns raised over Trinco oil tank farm

The opposition says the present government must reveal its stance pertaining to the agreement Sri Lanka has reached with the Lanka Indian Oil Company which is due to expire at the end of the year.

Speaking during a media briefing in Colombo today, Parliamentarian Kabir Hashim said the government should reveal whether it will retake the filling stations that are operated by Lanka IOC limited at present.

Meanwhile, MP Hashim said the Minister of Energy had claimed that India is investing USD 500 million in the Trincomalee Oil Tank farm.

MP Hashim said despite such claims, India is only granting a loan and in return the government is handing over oil tanks in Trincomalee.

He said the Trincomalee Oil Tank farm is a national asset adding it plays an important part in the country’s fuel security and national security.

MP Kabir Hashim also noted that the present administration received a mandate from the people only after it claimed that the oil tanks and the filling stations operated by India will be taken back and the agreements will be cancelled.

MP Hashim said therefore the government should reveal its stance to the public.

Meanwhile, Parliamentarian Lakshman Kiriella says the present administration which took 80 percent of current loans should take measures and pay back.

MP Kiriella said the loans were used in projects that did not help the government generate profits. He said projects such as the Hambantota Harbour, the Airport and Lotus Tower have become a burden on the country.

MP Kiriella noted that since the government is struggling to pay back the loans, it is planning to sell national assets.

He said preparations have been made to sell further 15 to 20 acres of prime land in Colombo. The Parliamentarian noted that the government is also planning to sell the Bogambara stadium in Kandy.

He said a seven acre plot of land, which the previous government prepared to construct, cinemas, open air theatres and many other facilities will be sold in the near future.

He said the project was due to receive funding from Japan, although the present government is planning to sell the plot of land.

MP Lakshman Kiriella said those in the government promised to safeguard national assets but are now on a selling spree.

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Chinese Organic Fertilizer: Court lifts enjoining order preventing payment

The Colombo Commercial High Court on Monday (3) lifted the enjoining order issued against Qingdao Seawin Biotech Group Co., Ltd, its local agent and People’s Bank.

Sri Lanka’s Fertilizer companies informed the court that they have reached a settlement with regard to the controversial Chinese Organic Fertilizer shipment.

The motions were filed by Colombo Commercial Fertilizer and Ceylon Fertilizer Corporation.

The terms that the plaintiff companies and the defendants, namely Qingdao Seawin Biotech Group Co., Ltd, its local agent, and People’s Bank, have agreed to for the settlement are as follows.

1. People’s Bank would release 75% of the consignment value to Qingdao Seawin Biotech Group Co., Ltd in terms of the Letter of Credit.

2. Qingdao Seawin Biotech Group Co., Ltd will obtain and provide certification for the raw material ingredients, and arrange fresh samples of a new consignment of organic fertilizer to be tested.

In terms of the contract, the samples should be free of pathogens and to ship the consignment only after the tested samples have been found to be in compliance with the Plant Protection Act, No. 35 of 1999, and after an Import Permit is obtained for the bulk shipment.

3. The amount released by People’s Bank will be set off after Qingdao Seawin Biotech Group Co., Ltd has shipped the second consignment.

The plaintiffs say that they agreed to withdraw the action against the defendants, subject to the aforementioned terms.

Both parties have agreed to issue a statement noting that the first shipment was returned due to the absence of an Import Permit.

Attorney-at-Law G.G. Arulpragasam, appearing for the third defendant in the action, the local agent for the Chinese Company, said that his client will retain the right to file legal action to seek payment for damages caused by the false and malicious allegations mentioned in the complaint against Qingdao Seawin Biotech Group Co., Ltd.

The complainants stressed that if such action is made, submissions will be made as well.

Deputy Solicitor General Susantha Balapatabendi, appeared for the complainants while Counsel Kushan De Alwis appeared for People’s Bank and Counsel Nihal Fernando appeared for Qingdao Seawin Biotech Group Co., Ltd.

Wang Yi On Possible ‘Damage Control’ Mission? By Sulochana Ramiah Mohan

China’s State Councillor and Foreign Minister Wang Yi visiting Sri Lanka next week will be symbolic, as the diplomatic row between Sri Lanka over the fertiliser issue and India (over China making inroads in the north of Sri Lanka) escalates.

Yi would be the first high-profile visitor to Sri Lanka in 2022, scheduled between 8-9 January,in the wake of the prolonging fertiliser dispute between China and Sri Lanka. The Chinese Embassy in Colombo said Yi will pay an official visit to Sri Lanka to launch the celebration of the 65th Anniversary of China-Sri Lanka diplomatic relations but it has a lot more to be resolved as China has stepped up to slap further sanctions on Sri Lanka over the fertiliser dispute and if it’s not in their favour.

Last week, the Chinese gave over 100 motorcycles to the Sri Lankan Police. They’ve also offered US$ 1.5 billion under a Yuan currency swap. They also gave Rs. 19.6 million to Samagi Jana Balawegaya’s medical equipment donation programme. These are to reassert its strength in the country, which is crumbling due to a difficult geopolitical scuffle they are facing. China has intensified their stronghold in Sri Lanka making sure that the Island will not turn its back on them.

Colombo will be the last stop of Yi’s first foreign visit in the New Year.He would arrive to resolve a slew of issues and offer a massive package of engagements. It would be another new beginning for Sino-Lanka relationship amidst worries of geopolitical constraints India would face while China strengthen its ties here.

From 4 to 7 January 2022, Yi is expected to tour the African region, including Eritrea, Kenya, and the Comoros, before moving onto the Maldives and Sri Lanka. These are China’s vital nodes in their maritime silk route agenda.

About Wang Yi

Yi is a native of Beijing. He served as the Director of the Ministry of Foreign Affairs’ Department of Asian Affairs for nineyears. He graduated from the Department of Asian and African Languages of Beijing and his knowledge of African and Asian affairs areunrivalled. He is a key strategist in guiding the Chinese Embassy in Colombo on their diplomatic moves. He has visited Colombo four times before, and his trip to the city became symbolic with the launch of the Belt and Road Initiative (BRI), in which he plays a larger role connecting the string of pearls.

China Making Inroads in the North?

Chinese Envoy Qi Zhenhong recent visit to the Northern Province was symbolic by all means. China usually deals with the Government and through government entities. They don’t directly mingle with communities and never have with the Tamils of Sri Lankato start with.

Their strategic decision to embrace the Tamils in the North was not realistic. They entered when the region is having a major dispute with Tamil Nadu fishermen. The Northern Tamil fishermen have actually briefed the Chinese on their plight. China provided them with fishing nets and dry rations that cost millions of rupees, indicating that they are providing the nets because Indian fishermen had destroyed the local fishermen’s nets.

The Chinese envoy approached Minister of Fisheries Douglas Devananda through government contacts, and this is how their presence in the northern territory came to be. Devananda’s understanding of geopolitics may be limited, but it has heightened tensions in India. China took advantage of the situation, according to geopolitical experts, by exploiting the local fishermen’s grievances that Devandanda’s EPDP members went after.

“The fishermen issue is a long standing unresolved issue and we are having discussions with the Indian Government over it. I have been to New Delhi to discuss the issue and we have agreed on many issues and also focused on the difficulties in executing those matters,” TNA MP M.A. Sumanthiran said during a zoom meeting with Tamil Nadu-based media outlet Puthidyathalamurai.

He said the TNA wants to resolve issues, but that’s between India and Sri Lanka. the MP said people of the North and East know the connections between India and Sri Lanka and the northern people know that the Chinese visit was purely part of their geopolitical interests and to annoy the Indians.

Also throughout the Chinese visit, TNA Leader R. Samapanthan said the TNA has no objection with diplomats visiting the North andEast as the Tamil people’s political solution lies with India, whilereminding that China never gave its opinion on Sri Lanka’s national problem. He recalled that China voted against Tamil aspirations at the UNHRC session and did not take any interest in resolving the Tamil issue politically and that their wanting to embrace Tamils now is purely a geopolitical move.

The Chinese envoy and his team not only visited Jaffna and Point Pedro but also Mannar. From Mannar they hopped onto a Navy boat to Ram Sethu (Adam’s bridge) and had a short voyage to the third dune on the sea between India and Talaimannar. There are 16 dunes out of which eight belongs to Sri Lanka and the other eight belonging to India. The Chinese also used drones to take photos and videos of the area.

The Chinese envoy and his group were reported to have visited Kachchativu, alleged some Tamil Nadu Media, but the Sri Lanka Navy and Minister Devananda told Ceylon Today that this was not the case. However, the diplomatic spat between India and China is still on going and it’s centred in Sri Lanka.

Fertiliser Quagmire

Wang’s visit to Sri Lanka also coincides with an unresolved dispute over the contaminated Chinese fertiliser shipment that Sri Lanka has rejected. It was local academics/scientists, who are not politically inclined,who gave the report on the samples sent by Qingdao Seawin Biotech. The Department of Agriculture refused to allow the shipment to enter the country as it is processed garbage from China. Because of the dispute, China eventually banned the State-run People’s Bank from doing business with the country. The Government has not shown any interest in getting this matter sorted and safeguarding the State bank’s reputation. However, China is worried about their international reputation and soon sued Sri Lanka and claimed USD 8 millionin compensation. The Court will hear the case on 6 January 2022.

Rather than remove the contaminated fertiliser, the Chinese went to the local Court and filed a complaint through their local agentChelina Capital.

Qingdao Seawin refused to accept responsibility and instead blacklisted People’s Bank with the backing of the Chinese Embassy and powerful politicians. For nearly two months, the issue has remained unresolved. The Chinese have not adjusted to the situation, despite the Government wanting both parties to reach an amicable agreement.

Local newspapers quoted that the shipment from China was deemed an illegalimportation in the absence of a valuable Protection of Phytosanitary Certificate (PPC) from the Chinese company. This was revealed by a top official of the Ministry of Agriculture. As a result, the National Plant Protection Organisation (NPPO), who lacks the legal authority to inspect the fertiliser, issued a non-compliance notice to its Chinese counterpart after sample testing. But China is adamant to accept the fault. They have been forcing Sri Lanka to consider the fertiliser or pay compensation so that their international image is not tarnished over a minor fertiliser issue.

During his visit in January 2020, Yi called Sri Lanka a strategic partner for China and assured that China will continue to support Sri Lanka’s interests. He also said China would always respect Sri Lanka’s sovereignty and pledged that no ‘interference’ in the country’s internal affairs would be tolerated. During his meeting with President Gotabaya Rajapaksa and his brother, Prime Minister Mahinda Rajapaksa, Yi said that China’s policy toward Sri Lanka had always been consistent and that it would continue to be Sri Lanka’s ‘reliable friend’. All of this, however, is now a distant memory, asChina has checkmated Sri Lanka over the dispute.

Treading Carefully

Despite the fact that it is not widely publicised, the current crisis between China and Sri Lanka is deep but subtle, and Wang’s visit would resolve all outstanding issues, it is expected.

Nonetheless, Sri Lanka views China as a reliable and long-term development partner. Wang announced a new USD 1 billion concessionary long-term loan, as well as China’s agreement to a phased-out debt repayment schedule starting in 2020. China offered a 10 billion Yuan (1.5bn USD) swap beginning of 2021.

These were offers to show that China would stand by Sri Lanka and not allow “outside influences” to ‘interfere’ in its internal matters. It means, China would protect Sri Lanka from others who do politics with Sri Lanka whereas China’s interest is only economical.

Aside from the economic interest, China has demonstrated beyond a shadow of a doubt that it wants Sri Lanka to be protected from its enemies. These countries are keeping a close eye on China’s activities in Sri Lanka and the Indo-Pacific region, where the Chinese are constructing artificial islands similar to the one they built in Sri Lanka – the Port City.

A Report on the Findings and Recommendations from the Meetings of the Advisory Council was released by China. At the Meeting of the Advisory Council of The Belt and Road Forum for International Cooperation 2021, Yi spoke highly of the fruitful achievements in Belt and Road cooperation over the past eight years.

Wang took stock of international developments and China’s foreign relations during 2021, including great endeavours made on nine fronts, and put forth six priorities of Chinese Diplomacy in 2022.

India dispatched Foreign Secretary Harsh Vardhan Shringla and Army Chief General MM Narvane to strengthen India’s ties with Sri Lanka. According to Indian Media, India has focused its entire attention on Sri Lanka’s North and East. While Sri Lanka has welcomed both India and China, it will need to tread carefully in the coming years to avoid upsetting either party andturning the island into a battleground, rather than a place where they can benefit from their common interests.
(ameisulo@gmail.com)

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‘There is no money left’: Covid crisis leaves Sri Lanka on brink of bankruptcy

Sri Lanka is facing a deepening financial and humanitarian crisis with fears it could go bankrupt in 2022 as inflation rises to record levels, food prices rocket and its coffers run dry.

The meltdown faced by the government, led by the strongman president Gotabaya Rajapaksa, is in part caused by the immediate impact of the Covid crisis and the loss of tourism but is compounded by high government spending and tax cuts eroding state revenues, vast debt repayments to China and foreign exchange reserves at their lowest levels in a decade. Inflation has meanwhile been spurred by the government printing money to pay off domestic loans and foreign bonds.

The World Bank estimates 500,000 people have fallen below the poverty line since the beginning of the pandemic, the equivalent of five years’ progress in fighting poverty.

Inflation hit a record high of 11.1% in November and escalating prices have left those who were previously well off struggling to feed their families, while basic goods are now unaffordable for many. After Rajapaksa declared Sri Lanka to be in an economic emergency, the military was given power to ensure essential items, including rice and sugar, were sold at set government prices – but it has done little to ease people’s woes.

Anurudda Paranagama, a chauffeur in the capital, Colombo, took on a second job to pay for rising food costs and cover the loan on his car but it was not enough. “It is very difficult for me to repay the loan. When I have to pay electricity and water bills and spend on food, there is no money left,” he said, adding that his family now eats two meals a day instead of three.

He described how his village grocer was opening 1kg packets of milk powder and dividing it into packs of 100g because his customers could not afford the whole packet. “We now buy 100g of beans when we used to buy 1kg for the week,” said Paranagama.

The loss of jobs and vital foreign revenue from tourism, which usually contributes more than 10% of GDP, has been substantial, with more than 200,000 people losing their livelihoods in the travel and tourism sectors, according to the World Travel and Tourism Council.

The situation has got so bad that long queues have formed at the passport office as one in four Sri Lankans, mostly the young and educated, say they want to leave the country. For older citizens, it is reminiscent of the early 1970s when import controls and low production at home caused severe shortages of basic commodities and caused long queues for bread, milk and rice.

The former central bank deputy governor WA Wijewardena warned the struggles of ordinary people would exacerbate the financial crisis, which would in turn make life harder for them. “When the economic crisis deepens beyond redemption, it is inevitable that the country will have a financial crisis too,” he said. “Both will reduce food security by lowering production and failing to import due to foreign exchange scarcities. At that point, it will be a humanitarian crisis.”

One of the most pressing problems for Sri Lanka is its huge foreign debt burden, in particular to China. It owes China more than $5bn in debt and last year took an additional $1bn loan from Beijing to help with its acute financial crisis, which is being paid in instalments.

In the next 12 months, in the government and private sector, Sri Lanka will be required to repay an estimated $7.3bn in domestic and foreign loans, including a $500m international sovereign bond repayment in January. However, as of November, available foreign currency reserves were just $1.6bn.

In an usual approach, government minister Ramesh Pathirana said they hoped to settle their past oil debts with Iran by paying them with tea, sending them $5m worth of tea every month in order to save “ much needed currency”.

The opposition MP and economist Harsha de Silva recently told parliament that foreign currency reserves would be -$437m by January next year, while the total foreign debt to service would be $4.8bn from February to October 2022. “The nation will be totally bankrupt,” he said.

Central Bank Governor Ajith Nivard Cabraal made public assurances that Sri Lanka could pay off its debts “seamlessly” but Wijewardena said the country was at substantial risk of defaulting on its repayments, which would have catastrophic economic consequences.

Meanwhile, Rajapaksa’s sudden decision in May to ban all fertiliser and pesticides and force farmers to go organic without warning has brought a formerly prosperous agricultural community to its knees as many farmers, who had become used to using – and often overusing – fertiliser and pesticides, were suddenly left without ways to produce healthy crops or combat weeds and insects. Many fearing a loss decided not to cultivate crops at all, adding to the food shortages in Sri Lanka.

The government made a dramatic U-turn in late October and farmers are now struggling to cover the high costs of imported fertiliser without help.

“The costs of cultivating paddy [wheat] have gone up astronomically … The government has no money for fertiliser subsidies. Many of us farmers are reluctant to invest money because we don’t know if we will make any profit,” said one farmer, Ranjit Hulugalle.

In an attempt temporarily to ease the problems and stave off difficult and most likely unpopular policies, the government has resorted to temporary relief measures, such as credit lines to import foods, medicines and fuel from its neighbouring ally India, as well as currency swaps from India, China and Bangladesh and loans to purchase petroleum from Oman. However, these loans provide only short-term relief and have to be paid back quickly at high interest rates, adding to Sri Lanka’s debt load.

Anushka Shanuka, a personal trainer, was among those who used to have a comfortable life but now is struggling to get by. “We can’t live the way we used to before the pandemic,” he said, saying the prices of vegetables had gone up by more than 50%.

“The government promised to help us but nothing came, so we are just managing the best we can. I don’t know how much longer we can go on like this.”

Source:UK Guardian

PM’s Office responds to reports on prime minister resigning

The Prime Minister’s Office today rejected the media reports that Prime Minister Mahinda Rajapaksa is to resign from his position.

“There is absolutely no truth to the reports published on mainstream media and social media, over the past couple of days and today (03), claiming that Prime Minister Mahinda Rajapaksa will resign from his position,” the PM’s Media Secretary said.

Issuing a statement, Rohan Weliwita further said that they strongly reject such false reports indended to mislead the people of the country.

Sri Lanka to receive $ 1 billion loan from India to alleviate food and medicine shortages

India has reportedly agreed to provide a $ 1 billion loan to Sri Lanka, as a solution to the dollar shortage, for the import of essential food items and medicines.

According to government sources, the loan will be given not as cash but as a loan facility for goods imported from India, Sinhala daily Lankadeepa reported.

It is learned that in addition India has agreed to provide US $ 500 million loan for fuel purchases and US $ 400 million as an exchange loan.

The loan facility will be provided as a result of a discussion held by the Minister of Finance Basil Rajapaksa with the Indian authorities during his recent visit to India.

Meanwhile, government sources said that a loan of US $ 1.500 billion was received from China recently and that a loan of US $ 500 million is to be received from Qatar on a one-year repayment basis.