• Financial advisor Lazard leading discussions with ISB representatives on debt
• Common working group to discuss with bilateral creditors and on local debt
• China continues to insist on multilateral debt restructuring; India, Japan silent
• Vote on Sri Lanka’s agreement with IMF during House sessions after New Year
• Govt. working to provide debt restructuring plan by end April to meet IMF target
• Cabinet approves Anti-Corruption Bill, RW calls for PSC to probe economic crimes
• SLPP tries to take credit for IMF deal saying it was initiated by Basil and not RW
• NPP’s Vijitha says approaching IMF was mooted first by Basil as Finance Minister
• GL issues ultimatum to Treasury Secy. to issue funds; SJB and NPP file petitions 
• Basil asks LG members to continue duties in defunct bodies, plans SLPP campaign

The Ranil Wickremesinghe Government received a much-sought-for reprieve last week following the official announcement of the International Monetary Fund (IMF) of granting an Extended Fund Facility (EFF) to Sri Lanka and the allocation of the first tranche of the $ 2.9 billion facility to the Government.

It was ironic to see reports of Sri Lanka’s improved standing in the Happiness Index the same week as the IMF announcement on Sri Lanka. The World Happiness Report 2023 released on Monday (20) had ranked Sri Lanka at the 112th position. Sri Lanka’s position in the index had improved from the 2022 index where it was ranked 127th. Neighbouring India was ranked 126th and Pakistan at 108th.

Despite the initial jubilation, with some Government supporters even lighting firecrackers to celebrate the announcement, the Wickremesinghe Government is well aware of the challenges that are ahead. It would be pertinent to state that the next round of hurdles will be a far worse testing ground for Sri Lanka since it involves the finalising of the country’s debt restructuring plan.

Financial advisor Lazard is currently leading the discussion on debt restructuring with the representatives of International Sovereign Bond (ISB) holders while a common working group of the Government is to engage with the bilateral creditors and the local debtors.

The Government is working towards meeting the end of April target set by the IMF to receive Sri Lanka’s debt restructuring plan. Once the debt restructuring plan is handed over to the IMF, it will be up to the fund to check if it is in line with the debt sustainability plan of the IMF for Sri Lanka.

The Government, it is learnt, is looking at three main components in the debt restructuring programme – 1. Haircut – reduction in capital, 2. Coupon – focus on interest rates and negotiating to reduce interest rates, and 3. Re-profiling – push the maturity date and seek a grace period for repayment.

A highly-placed Government source told ‘The Black Box’ that while the debt discussions with bilateral creditors were aimed at re-profiling and moratoriums, a combination of all three factors was being considered for ISBs and local creditors.

The debt restructuring programme is in fact the key component of Sri Lanka’s economic recovery plan since it will be the make-or-break factor that will decide if the country will have to continue to depend on foreign loans or be able to function on its revenue that is generated.

The challenge of finalising the debt restructuring programme was also emphasised by the IMF last week. 

“Having obtained specific and credible financing assurances from major official bilateral creditors, it is now important for the authorities and creditors to make swift progress towards restoring debt sustainability consistent with the IMF-supported programme. The authorities’ commitments to transparently achieve a debt resolution, consistent with the programme parameters and equitable burden sharing among creditors in a timely fashion, are welcome,” the IMF stated last week.

However, as stated by President Ranil Wickremesinghe last week, Sri Lanka’s agreement with the IMF is to be presented to Parliament for a vote. The vote, it is learnt, is to take place during the latter part of the parliamentary sessions that are due in April, following the Sinhala and Tamil New Year.

Meanwhile, President Wickremesinghe last week noted that Sri Lanka would no longer be considered a bankrupt nation and has expressed hope that the Sri Lankan Rupee will gradually come down to around Rs. 200 or Rs. 185 after the IMF deal.

Referring to the recent performance of the Sri Lankan Rupee, CBSL Governor Dr. Nandalal Weerasinghe has said that the rupee had experienced some fluctuations against the US Dollar in the past two weeks, but assured that the dollar crisis was now resolved. He had further affirmed that there were adequate foreign exchange reserves to support the essential sectors of the country.

Chinese stance

The Chinese Government continues to push for multilateral creditors to also agree to a restructuring of debt – a topic the Chinese continue to push in discussions with Sri Lanka.

Chinese Foreign Ministry Spokesperson Wang Wenbin said last week: “We think this is good news and believe this will better help Sri Lanka address the crisis and get out of the difficult situation. The Export-Import Bank of China has provided financing support documents to Sri Lanka to help it address the debt issues swiftly and effectively, which fully speaks to China’s sincerity and effort to support Sri Lanka in achieving debt sustainability. 

“China stands ready to work with relevant countries and international financial institutions and continues to play a positive role in helping Sri Lanka navigate the situation, easing its debt burden and helping it achieve sustainable development. In the meantime, we call on commercial and multilateral creditors to take part in Sri Lanka’s debt restructuring under the principle of fair burden-sharing.”

Indo-Lanka ties

External Affairs Minister S. Jaishankar has recently asserted that it is natural for India to stand by Sri Lanka during its difficult time as “blood is thicker than water”.

“Blood is thicker than water. It was natural for India to see what it could do to stand by Sri Lanka at this very difficult time,” the Indian media has quoted Jaishankar as saying.

India’s NDTV has reported that in the time of crisis, India has time and again stood by the countries surrounding it following its ‘Neighbourhood First’ policy.

India, under its ‘Neighbourhood First’ policy, has always come forward to help debt-ridden Sri Lanka, and, in the latest instance, New Delhi also distributed rations in Kalmunai recently.

Jaishankar had made these observations during his speech at the inauguration of an exhibition featuring the work of Sri Lankan architect Geoffrey Bawa in New Delhi recently.

However, the Wickremesinghe Government had last week made arrangements to pay $ 121 million of the IMF’s first tranche of $ 333 million as the first instalment of the Indian credit line obtained by Sri Lanka during the height of the economic crisis.

IMF credit

Meanwhile, the announcement of the IMF facility also saw Opposition and Sri Lanka Podujana Peramuna (SLPP) MPs making various statements on the matter. While some Opposition and Government side legislators commended President Wickremesinghe for securing the IMF facility, some other MPs in the SLPP, especially loyalists of SLPP’s National Organiser Basil Rajapaksa, claimed that it was Basil who had initiated the move to seek IMF assistance for Sri Lanka during the onset of the economic crisis.

National People’s Power (NPP) MP Vijitha Herath also told Parliament last week that it was Basil during his tenure as Finance Minister who had decided to approach the IMF for assistance and that it had not been initiated by Wickremesinghe. However, a group of other SLPP MPs commended Wickremesinghe, while stating that it was the SLPP’s decision to support his presidency that had yielded benefits for the country.

Meanwhile, Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva has appreciated President Wickremesinghe’s commitment to get the IMF EFF approved for Sri Lanka. “Relieved @IMFLive has approved #SriLanka EFF facility. The commitment of Pres @RW_UNP to get the job done is appreciated notwithstanding our political differences. Professionalism of Gov @cbsl and ST in the process must be commended. If the previous lot did this in 2020 our people would not have suffered this way. We could have come out w much less pain. Their arrogance n greed finally bankrupted us. Let’s look forward. Debt restructuring will be hard. Reform is key. Sustainable solution is to break down walls n build bridges to the world,” de Silva tweeted.

However, de Silva also noted last week that President Wickremesinghe had not tabled in the House the Letter of Intent with regard to the IMF agreement despite stating that he had tabled three documents in Parliament. 

Speaking during the debate on the IMF agreement, the SJB MP had said the Letter of Intent signed by the Finance Minister and the Governor of the Central Bank of Sri Lanka (CBSL) was the most important document and that there was no point debating the agreement without it.

Nevertheless, the most interesting incident related to the IMF deal had taken place in Parliament on Tuesday (21) when SLPP dissident MPs Wimal Weerawansa and Udaya Gammanpila had accidently got in the wrong elevator and ended up in the Government side lobby of the House. Weerawansa and Gammanpila had reportedly gotten into the elevator to reach the Chamber while being engrossed in conversation and had realised that they had taken the wrong one when the door had opened to the Government lobby.

Several Government members in the lobby at the time had asked the two MPs what they were doing on the Government side and both Weerawansa and Gammanpila had explained that they had missed the elevator and walked over to the Opposition side in smiles. 

Focus on reforms

IMF’s Senior Mission Chief for Sri Lanka Peter Breuer meanwhile stated last week that the reform programme supported under the EFF arrangement was built on strong policy measures and priorities, including revenue-based fiscal consolidation accompanied by stronger social safety nets, fiscal institutional reforms, and cost recovery-based energy pricing in order to ensure the State’s ability to support all of its essential expenditure; the restoration of public debt sustainability including through debt restructuring to ensure the stable financing of the Government’s operations; a multi-pronged strategy to restore price stability and rebuild reserves under greater exchange rate flexibility in order to alleviate the burden of inflation, particularly on the poor, to foster an environment of investment and growth, and to ensure Sri Lanka’s ability to import essential goods; policies to safeguard financial sector stability in order to ensure that the financial sector can play its key role in supporting economic growth; and structural reforms to address corruption related vulnerabilities and to enhance growth.

The IMF is to conduct an in-depth governance diagnostic exercise, which will assess corruption and governance-related vulnerabilities in Sri Lanka and provide prioritised and sequenced recommendations, thereby making Sri Lanka the first country in Asia to undergo such an exercise.

IMF Managing Director Kristalina Georgieva said last week that ongoing efforts to tackle corruption in Sri Lanka should continue, including revamping anti-corruption legislation. “The ongoing efforts to tackle corruption should continue, including revamping anti-corruption legislation. A more comprehensive anti-corruption reform agenda should be guided by the ongoing IMF governance diagnostic mission that conducts an assessment of Sri Lanka’s anti-corruption and governance framework. The authorities should step up growth-enhancing structural reforms with technical assistance and support from development partners.”

The IMF Chief also focused on public sector reforms: “Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities. Institutions and governance frameworks require deep reforms. For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported programme with strong ownership for the reforms is critical.”

Anti-Corruption Bill

The Wickremesinghe Government however moved ahead with anti-corruption legislation, with Cabinet last week approving the proposed Anti-Corruption Bill.

It is learnt that Attorney General Sanjay Rajaratnam, PC had stated that the proposed bill was not inconsistent with the Constitution in February this year.

A draft of the bill seen by ‘The Black Box’ states: “An act to give effect to certain provisions of the United Nations Convention Against Corruption and other internationally-recognised norms, standards and best practices; to provide for the establishment of an independent commission to detect and investigate allegations of bribery, corruption, and offences related to the declaration of assets and liabilities and associated offences, and to direct the institution of and institute prosecutions for offences of bribery, corruption, and offences related to the declaration of assets and liabilities and other associated offences; to promote and advance the prevention of corrupt practices; to educate and raise awareness amongst the public to combat corruption; to repeal the Bribery Act No.11 of 1954, the Commission to Investigate Allegations of Bribery or Corruption Act No.19 of 1994 and the Declaration of Assets and Liabilities Law No.1 of 1975 and for matters connected therewith or incidental thereto.”

The Government is hopeful of moving the proposed bill in Parliament next month.

Delays over PSC

This past week also saw President Wickremesinghe in front of the media on several occasions, having successfully obtained the IMF agreement. 

While the greater focus of the media questioning was on the IMF and what it meant for the country going forward, there was one nagging question: “What about accountability for those responsible for this crisis?”

In an interview with a foreign media organisation, Wickremesinghe was asked why he had not taken any action with regard to the allegations that former President Gotabaya Rajapaksa and his Government were responsible for the economic crisis.

Responding to the question, the President had explained that his main focus was ensuring stability, recovery, and growth for the national economy. As for these allegations, the President had explained that Parliament had oversight on public finances and it was their responsibility to investigate these claims. He had further stated that he had requested the Opposition to appoint a Parliamentary Select Committee (PSC) to enquire into these allegations. However, to date the Opposition has failed to present a motion calling for the establishment of a PSC to investigate these claims. 

In December last year, it was in response to a request made by Opposition MP Kabir Hashim that the President had stated that he did not object to appointing a Presidential Commission of Inquiry; however, he further noted that it would be better that Parliament investigate this matter through a PSC.

New Cabinet members

Following the IMF deal, talk of appointing new members to the Cabinet has once again taken over the local political arena.

SLPP’s Basil had reportedly discussed with President Wickremesinghe last week about the appointment of a new cabinet of ministers since the country had secured the IMF deal. It is learnt that Wickremesinghe had once again pointed out that SLPP MPs facing allegations of bribery and corruption could not be given new appointments, to which Basil had said that arrangements could then be made to forward a new list containing names of six SLPP MPs to be appointed to the Cabinet.

However, it is still unclear whether the President had agreed to it.

Nevertheless, Wickremesinghe had informed several of his confidantes that steps would be taken to appoint a few new members to the Cabinet.

It is in such a backdrop that several senior SLPP figures like Namal Rajapaksa and Mahindananda Aluthgamage have stated that they will not accept Cabinet portfolios.

No polls

The Election Commission last week announced that the Local Government Polls would once again not be held on the dates set out by the commission, with the deadline set by the Election Commission to receive the printed postal ballot papers for the Local Government Elections expiring on Tuesday (21) with the Government Printer not dispatching the papers to the commission.

Election Commission Chairman Nimal Punchihewa had also said: “The department has printed ballot papers related to 17 districts. It was more than a month ago that we made a request to Government Printer Gangani Liyanage that those ballot papers be given to us. However, we are yet to receive them and I do not know how far it is ethical for them to withhold them. If those ballot papers are released, postal voting can be held at least in those 17 districts.”

When asked as to whether the existing legal provisions allow for the postal voting to be held in only 17 districts, he had told the media that there was no legal barrier to doing so. “Postal voting can be held in a few districts and then in the rest.” 

However, the Election Commission stated on Thursday (23) that it had decided not to hold the postal voting on 28, 29, 30, and 31 March and 1 April. The commission also stated that it will not be able to conduct the Local Government Polls as announced on 25 April.

Government Printer Gangani Liyanage has meanwhile stated: “We have not received any money. Finance, Economic Stabilisation, and National Policies Ministry and Treasury Secretary Mahinda Siriwardana had informed the Mass Media Ministry Secretary that our request had been forwarded to the subject Minister (Wickremesinghe).”

When questioned on whether funds would be released to the Government Printer and for the holding of Local Government Elections, State Minister of Finance Ranjith Siyambalapitiya has stated: “I am not aware of it as of now. This is a matter to which I should respond responsibly and I will be able to make a comment later.” 

Liyanage has also said that the problematic situation that had arisen with regard to the Local Government Elections could have been avoided if the Election Commission had set the dates for the election knowing for certain that the Finance Ministry and the General Treasury would release the necessary funds, including those for printing ballot papers.

The Department of Government Printing has further stated that the Election Commission has the authority to contact the Finance Minister and intervene in obtaining the required funds. Liyanage had stated that it was not her but the Election Commission that had the capacity to do so. She said that the role of the Government Printer was only to do the printing work and to hand it over to the Election Commission after receiving the necessary funds.

Meanwhile, speaking during a virtual media briefing held in that regard, IMF’s Mission Chief for Sri Lanka Masahiro Nozaki also commented on the Local Government Elections and said that the IMF did not intervene in election-related processes. “The fund has never recommended postponing the LG Elections in Sri Lanka,” he said.

Meanwhile, former Election Commissioner and National Delimitation Committee for Local Authorities Chairman Mahinda Deshapriya had also commented on the holding of Local Government Elections recently, stating that it was not appropriate for Local Government Polls to be delayed. 

“As the term of office of Local Government bodies expires on Sunday (19 March), it is essential that polls are conducted as soon as possible,” he has told the media.

He has further stated that it is not appropriate to run Local Government bodies for a long time under the control of officials.  

Opposition action

Opposition political parties meanwhile issued a seven-day ultimatum to the Finance Ministry and Treasury Secretary to allocate funds to hold the Local Government Polls.

The Opposition parties stated that a joint request would be made to the Supreme Court to take action against Ministry of Finance and Treasury Secretary Mahinda Siriwardana on the charges of contempt of court if he did not comply with the interim order issued by the Supreme Court preventing him from withholding the funds allocated in the Budget 2023 for election purposes within seven days starting from Monday (20).

“Siriwardana has not acted on the Supreme Court’s order yet. That is the cause of this indefinite situation. Considering this situation, all political parties in the Opposition have made a decision to plead to the court that he has acted in contempt of court and to request the Supreme Court to take necessary action if he does not act on the SC’s interim order within seven days. This is a very rare incident. Usually, there are many differences among political parties, but the political parties representing the Opposition have come to an agreement to initiate this action without any difference,” Prof. G.L. Peiris explained.

However, the SJB and NPP on Tuesday (21) filed separate petitions before the Supreme Court accusing Siriwardana of acting in contempt of court. The parties had alleged that Siriwardana had failed to act in accordance with the interim order delivered by the Supreme Court on 3 March directing him not to withhold funds to conduct the Local Government Polls. 

Udaya’s question

Dissident MP of the governing party, Udaya Gammanpila, has said that people are now agitated because of the postponement of the Local Government Elections.

“When the Government postponed the local authorities election stating that it had no money to spend for elections, we suggested printing money for holding the elections. The Government’s immediate response was that it could not print money because of the Staff-Level Agreement with the IMF. However, the Government has printed currency notes worth Rs. 113.5 billion on a single day, i.e. 15 March. 

“According to the press release issued by the Central Bank, it has purchased Treasury bills for Rs. 113.5 billion. When the Central Bank purchases Government securities, new currency notes will be added to circulation. That is called ‘money printing’. If the Government can print currency worth Rs. 113.5 billion in a day, how can it say that it can’t print money worth Rs. 9 billion for holding elections?

“Interestingly, according to the media release, the Central Bank holds Government securities worth Rs. 2,640 billion. It was only Rs. 1,773 billion when the present Central Bank Governor assumed office. It means he has printed a staggering Rs. 867 billion worth currency notes. Meanwhile, they tell us they are not in a position to print Rs. 9 billion for the election,” Gammanpila had charged.

Basil’s proposal

SLPP theoretician and National Organiser Basil Rajapaksa has informed the party’s Local Government members to continue serving as councillors of the respective Local Government bodies although their terms have come to an end.

Basil had arrived at this decision during a recent meeting at the Party Headquarters with the SLPP Local Government members, where the discussion had focused on the party’s future course of action as well as the impending Local Government Elections.

He had pointed out that it was better for the outgoing councillors of Local Government bodies to continue functioning as public elected representatives if the Local Government Elections were being delayed and public sector officials were appointed to head the defunct Local Government bodies.

Meanwhile, SLPP General Secretary Sagara Kariyawasam had stated that it was appropriate for the defunct Local Government bodies to operate in such a manner and that legal advice was also being sought to explore if there was any legal action required to be taken to ensure the fact.

Basil had also directed the party’s Local Government members as well as new candidates to hold public meetings in their respective electorates in addition to participating in the SLPP’s district-level meetings.

Basil had planned several more such meetings with outgoing Local Government councillors as well as SLPP candidates at the impending Local Government Elections to further formulate the party’s future plans.

Verbal clash

Meanwhile, Basil had also lost his cool with SLPP members and former Moratuwa Mayor Saman Lal Fernando during a meeting held at the party’s Nelum Mawatha Headquarters.

The audio of a heated argument that had taken place between Basil and Fernando last week made rounds on social media. It was claimed that the clash had taken place during a meeting on Thursday (23).

The voice of an individual believed to be Basil is heard severely reprimanding Fernando over his actions that had been to the detriment of the party while also blaming his actions for arson attacks and damage caused to public property during the anti-Government protests last year.

The voice of an individual believed to be that of Fernando is heard saying that he could not be deterred by Basil’s words and that he would not leave the party.

HR issues

The US State Department in its annual Country Reports on Human Rights Practices released by US Secretary of State Antony J. Blinken had stated that significant human rights abuses were recorded in Sri Lanka in 2022.

The 2022 Country Reports on Human Rights Practices noted there were reports that members of the security forces, primarily Police, committed numerous abuses.

From March through July the country experienced civil unrest driven by an economic crisis, including power cuts, soaring food prices, and a fuel shortage. Demonstrations called for the resignation of then President Gotabaya Rajapaksa and other Rajapaksa family members from Government leadership, as well as for political and economic reforms.

Significant human rights issues included credible reports of: unlawful and arbitrary killings, including extrajudicial killings; torture and cruel, inhuman, or degrading treatment or punishment by the Government; harsh and life-threatening prison conditions; arbitrary arrest and detention; transnational repression against individuals in other countries; serious problems with the independence of the Judiciary; arbitrary and unlawful interference with privacy; restrictions on freedom of expression and media, including violence and threats of violence against journalists, unjustified arrests of journalists, and censorship; serious restrictions on internet freedom; substantial interference with the freedom of peaceful assembly and freedom of association, including overly restrictive laws on the organisation, funding, or operation of nongovernmental organisations and civil society organisations; restrictions on freedom of movement; serious Government corruption; serious Government restrictions on or harassment of domestic and international human rights organisations; lack of investigation and accountability for gender-based violence, including but not limited to domestic and intimate partner violence and sexual violence; crimes involving violence targeting members of national, racial, and ethnic minority groups; crimes involving violence or threats of violence targeting lesbian, gay, bisexual, transgender, queer, and intersex persons; laws criminalising consensual same-sex sexual conduct between adults, even if the laws were not enforced; and restrictions on workers’ freedom of association.

The report noted that the Government had taken minimal steps to identify, investigate, prosecute, and punish officials who committed human rights abuses or engaged in corruption, and there was impunity for both.