• Govt. informs IMF and other creditors that agreement with EXIM Bank in framework
• IMF continues to demand appointment of advisory comm. for Constitutional Council
• Govt. hopeful that finalising deal with China will help release IMF’s second EFF tranche
• Jaishankar cancels visit to Eastern Province, leaves Sri Lanka a day earlier post-IORA
• RW to meet Xi this week while debt talks proceed amid stalemate on Chinese Shi Yan 6
• Govt. turns to electoral reforms yet again despite Dinesh’s report; Opposition agitated
• RW-Basil talk of referendum and support; SLPP considers action against party dissidents
• Dilith officially launches party by opening headquarters, promises a safe space for all
• Dhammika expresses interest in contesting Prez Polls, but wants 51% assured votes
• UNP gears for annual convention; denies media reports, says no changes to positions

The Ranil Wickremesinghe Government – including President Wickremesinghe himself – was caught unawares this past week with the announcement that the China EXIM Bank had reached an agreement with Sri Lankan authorities over a deal regarding debt restructuring. 

With much of the media rushing to break the news, Finance Ministry officials, who were in Morocco attending the annual meeting sessions of the International Monetary Fund (IMF) and World Bank, had found themselves having to clarify to both the IMF and other creditors that no final agreement had been reached but rather that a framework had been agreed upon. The IMF as well as other creditors had asked the Sri Lankan Government for details on the agreement reached with China.

Certain diplomatic circles were noted as remarking that China had certainly caught the US and the Europeans unaware with the announcement. Having been the focus of international media questions over apparent delays in restructuring Sri Lanka’s debt, China making this announcement ahead of the other countries left many of them red-faced. One European diplomat, at a function this past week, was heard commenting that “China always has a way of turning the table on the rest of the world”.

It is evident that China, which has been gathering much flak over its failure to officially commit to Sri Lanka’s debt restructuring programme, wanted to beat the other countries in the debt talks. While the Paris Club consortium on Sri Lanka has cited end October as the timeline to reach a final stage on Sri Lanka’s debt restructuring programme and has continuously claimed that the programme cannot proceed without China’s commitment to restructure Sri Lanka’s debt, China’s move has now put the onus back on the other creditors.

While the Finance Ministry released a statement clarifying its stance, several visiting foreign ministers had to be reassured during bilateral meetings with the Sri Lankan Government that no special deal had been reached with China.

The Finance Ministry last week stated that it had reached an agreement on the key principles and indicative terms of a debt treatment with the EXIM Bank of China and that the agreement in principle covered approximately $ 4.2 billion of outstanding debt, which constitutes a key step towards restoring Sri Lanka’s long-term debt sustainability and will pave the way to a prompt economic recovery.

“In the next few weeks, the Sri Lankan authorities and China EXIM Bank will actively work on formalising and implementing the agreed parameters of the debt treatment,” the statement further said.

It was a Bloomberg news report that stated that China had said that one of its financial institutions had reached a preliminary agreement with Sri Lanka on resolving China-related debt.

Chinese Foreign Ministry Spokesperson Wang Wenbin was also quoted at a press briefing in Beijing as saying: “Since last year, China’s relevant financial institutions have been in close touch with Sri Lanka on the debt issue involving China, engaged in active bilateral consultations, and provided a financing support document to Sri Lanka in a timely manner to help it obtain loans from the IMF. The Chinese financial institution has taken part in all the creditors’ meetings as an observer and maintained friendly communication with other creditors to share with them the progress of the debt treatment.”

He had then stated that in late September, as official creditor, the EXIM Bank of China had tentatively agreed with Sri Lanka on the debt treatment, adding: “We are also glad to see that other creditors are having discussions with Sri Lanka as well over solutions to its debt issue.”

However, Wenbin had reiterated China’s continued call for multilateral creditors to also take part in Sri Lanka’s debt restructuring programme. “We will continue to support Chinese financial institutions in actively consulting with Sri Lanka. We are ready to work with relevant countries and international financial institutions to jointly play a positive role in helping Sri Lanka navigate the situation, ease its debt burden, and achieve sustainable development. We call on multilateral institutions and commercial creditors to take part in Sri Lanka’s debt restructuring based on fair burden-sharing,” the Chinese official had said.

RW China bound

President Wickremesinghe meanwhile is to leave for China this week on his first official visit since assuming office to participate in the conference to mark the 10th anniversary of the Belt and Road Initiative (BRI). 

Wickremesinghe is to attend the conference in China on Tuesday (17) and Wednesday (18). The President is also scheduled to meet Chinese President Xi Jinping.

Most importantly, the Sri Lankan Government is hopeful that a final commitment on the Chinese commitment to Sri Lanka’s debt restructuring programme can be reached during this visit.

IMF’s 2nd tranche

Sri Lanka therefore expects the Executive Board of the IMF to clear the second tranche of the fund’s Extended Fund Facility (EFF) for the country to be disbursed following a deal reached between Sri Lanka and China.

However, the IMF continues to demand the appointment of an advisory committee for the Constitutional Council, which had even figured during discussions in Morocco. The Sri Lankan Government had maintained that the appointment of such a committee was a matter for the Parliament.

The IMF has also stated that the full economic recovery of Sri Lanka is not assured yet despite early signs of stabilisation as high-frequency economic indicators of the country continue to provide mixed signals.

At the launch of the IMF’s ‘World Economic Outlook for 2024’ on Tuesday (10), IMF Research Department World Economic Studies Division Head Daniel Leigh had said that the people of Sri Lanka had shown remarkable resilience in the face of enormous challenges. He had further noted that Sri Lanka had made commendable progress in implementing difficult but much-needed reforms while these reforms were already bearing fruit as the economy was showing tentative signs of stabilisation.

Nevertheless, he had noted that despite early signs of stabilisation, full economic recovery of Sri Lanka was not yet assured as “growth momentum remains subdued with real GDP contracting in the second quarter by 3.1% on year-on-year basis. High-frequency economic indicators continue to provide mixed signals. So, continuing with sustained reforms is going to be critical to put the economy on a path towards lasting recovery and stable and inclusive growth.”

Meanwhile, Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weersasinghe had said that Sri Lanka hoped to come to an agreement to receive the second tranche under the EFF, but had not confirmed a date. He had noted that the first review was to be finalised by this month and the said agreement with the IMF would take place next month. “We are hoping that we should be able to make good progress in debt restructuring in the near term and have the Domestic Debt Optimisation (DDO) also completed.”

It is also learnt that State Minister Shehan Semasinghe, who was in Morocco to attend the IMF and World Bank annual meetings, had held several discussions with IMF officials as well as Paris Club officials to discuss the IMF’s review on Sri Lanka as well as the country’s debt restructuring programme.

Pvt. creditors respond

Meanwhile, Sri Lanka’s private creditors had sent a proposal on restructuring $ 12 billion of overseas debt, including a new type of bond designed to ease repayments in case of future economic pressure, said two sources with direct knowledge of the matter.

A Reuters report stated that the proposal sent on 2 October provided a write-down or haircut on both capital and interest, according to the sources who declined to be named because the talks were private.

It foresees issuance of regular sovereign bonds and also of so-called Macro-Linked Bonds (MLBs), which will automatically lower coupon payments starting in 2027 if Sri Lanka fails to meet some of the economic targets linked to its IMF programme.

Vessel trouble

However, the Sri Lankan Government is very likely to face some heat from the Chinese Government over the controversy surrounding the Chinese research vessel, Shi Yan 6.

The Sri Lankan Government has not granted permission yet for the vessel to dock in Sri Lanka this month, with the debate continuing over the dates for the ship to arrive in Sri Lanka.

The Shi Yan 6 has however entered the Indian Ocean while the Sri Lankan Government is still looking at implementing the reviewed Standard Operating Procedures (SOPs) to vet foreign warships, aircraft, and Marine Scientific Research (MSR) ships, which was approved by the Cabinet but has once again been lost in the fog of bureaucracy, with its implementation remaining uncertain.

Nevertheless, China’s vessel trouble is likely to figure in the discussions President Wickremesinghe will have in Beijing this week. With China sending out positive signs in its commitment to Sri Lanka’s debt restructuring programme, it will be a hard task for Sri Lanka to balance China’s interests as well as those of regional partners.

Jaishankar’s early departure

The early departure of Indian External Affairs Minister Dr. S. Jaishankar from Sri Lanka last week was quite a hot topic in political circles.

Jaishankar, who arrived in Sri Lanka to attend the Indian Ocean Rim Association (IORA) meeting in Colombo, was expected to visit the proposed Indian project sites in the Eastern Province. However, the Indian Minister had not made the visit to the east and had left for India a day earlier than initially planned.

It is leant that Jaishankar had to return to India to attend to diplomatic matters due to the heightening conflict in Israel and Palestine.

However, addressing the IORA meeting, Jaishankar made an interesting comment, which was similar to a warning. He had said that in making the Indian Ocean a free, open, and inclusive space, based on the UN Convention on the Law of the Sea (UNCLOS) as the constitution of the seas, the member states should be equally clear where the dangers were – be they in hidden agendas, in unviable projects, or in unsustainable debt. 

Meanwhile, President Wickremesinghe last week stated that the Government was keen to proceed with a systematic development plan for the Trincomalee Port prepared by a Singaporean company. During a visit to the east last week, the President had unveiled an ambitious 10-year initiative aimed at boosting agriculture and tourism in the Eastern Province, with a particular focus on the development of Trincomalee.

Foreign policy focus

Meanwhile, President Wickremesinghe’s foreign policy agenda was at the forefront last week as Sri Lanka assumed the position of IORA Chair. With Sri Lanka in the process of formulating a fresh foreign policy, the President has stated on several occasions that Sri Lanka must develop a fresh identity, which is expected to be one based on the Indian Ocean with a greater emphasis towards Asia as a whole. 

As part of IORA, the visiting foreign affairs ministers were hosted by the President to dinner at the President’s House. Along with the Bangladeshi and Malaysian Foreign Ministers, India’s External Affairs Minister was also in attendance. While the focus was certainly on Dr. Jaishankar’s comments over the role of India in the region, another global power was in the room. 

The Chinese Ambassador, who was also in attendance, was a focus of attention due to the revelation made earlier in the day that China had reached an agreement with Sri Lanka over the debt restructuring. The Ambassador certainly made it clear during conversations that China was committed to assisting Sri Lanka; however, no mention was made of the news that emerged earlier that day. 

Meanwhile, the Indian External Affairs Minister was seen discussing the recent outbreak of violence in Israel and Gaza. This topic was certainly a focus over the past week in Colombo as well. 

President Wickremesinghe, speaking at the dinner following the conclusion of the Galle Dialogue, stated that the Israel-Palestine issue could no longer be resolved with a two-state solution and said that it would now require a minimum four-state solution. Elaborating, the President explained that alongside Palestine as a whole, the issues of Gaza, Israel, the West Bank, and even Lebanon would need to be looked at individually. 

These comments will certainly grab the attention of many nations, as the preferred path of discussion when dealing with the conflict has been the reiteration of the need for a two-state solution. However, with the conflict now focusing on Gaza and given the sporadic attacks in Lebanon, the President appealed to the international community to take upon itself the responsibility of coming up with a new sustainable solution.

Briefing ministers

President Wickremesinghe had also last week briefed the Cabinet ministers about the heightening tensions in Israel and its global impact. The President had warned that global oil prices could see a drastic increase resulting in an uptick in local oil prices as well.

He had also urged local authorities to take necessary steps to ensure the safety of Sri Lankan migrant workers in Israel. It was further decided to provide security to Israel nationals who are currently in Sri Lanka as tourists and on business.

Postponing polls?

Meanwhile, the Government’s move to propose changes to the parliamentary electoral system has resulted in talk in political circles on whether it was part of a move to postpone or delay the holding of national-level elections, including a Presidential Election due next year.

Justice Minister Dr. Wijeyadasa Rajapakshe had recently submitted a Cabinet paper proposing the introduction of a new mixed electoral system to elect Members of Parliament (MPs). According to the proposal, 160 members will be elected from the electorates while another 65 members will enter the House under the Proportional Representation (PR) system.

Many Opposition politicians have pointed out that Prime Minister Dinesh Gunawardena had headed a Parliamentary Select Committee back during the 2002/2004 Government led by Wickremesinghe as the then Prime Minister on proposing electoral reforms and that this committee had presented a report.

Rajapakshe, speaking on the need for electoral reforms, had told the media last week: “That is why the Cabinet subcommittee is appointed to look into the resolution I presented.”

The parliamentary Opposition parties have however called for a transparent and collaborative mechanism in order to achieve the best results.

Basil’s message 

Meanwhile, news of Sri Lanka Podujana Peramuna (SLPP) National Organiser Basil Rajapaksa proposing to President Wickremesinghe to hold a referendum on the abolition of the Executive Presidency in the event Wickremesinghe fails to garner public popularity by resolving the economic issues faced by the country by the time of the next Presidential Election had made its way to a group of Opposition parliamentarians from a group of SLPPers. Wickremesinghe had reportedly noted that he could obtain the support of parties in the Northern and Eastern Provinces. 

It is learnt that the duo had also discussed the possibility of introducing a new constitution in the event a referendum were to be held on the Executive Presidency and Wickremesinghe received his anticipated outcome.

However, Basil had pointed out that Wickremesinghe could not receive the full support of the SLPP due to several reasons – the support extended by RW to dissident SLPPers and the sidelining of some SLPP seniors.

These issues had been discussed during a recent discussion between Wickremesinghe and Basil, while the issue of giving ministerial portfolios to a group of SLPP MPs to get their support for the Government had also been among the topics discussed.

Meanwhile, the rift between some SLPP MPs and President Wickremesinghe has once again surfaced in the public domain. Senior SLPP MPs who have not been given Cabinet portfolios have even threatened to vote against the Budget next month.

Nevertheless, SLPP MP S.M. Chandrasena had insisted that the SLPP will not attempt to topple the Government of President Wickremesinghe while admitting that a number of SLPP MPs were unhappy with the President, especially as they felt they had been sidelined by Wickremesinghe.

Acting against dissidents

The SLPP meanwhile is looking at initiating legal action against the party’s dissidents in Parliament following the recent Supreme Court ruling that resulted in Environment Minister Naseer Ahamed losing his parliamentary seat. The Supreme Court recently upheld the decision by the Sri Lanka Muslim Congress (SLMC) to suspend him following his defection to the Government from the Opposition.

SLPP General Secretary MP Sagara Kariyawasam had told the media that some party members had violated party discipline and had even joined the Opposition. He had further stated that while explanations had been called from the errant MPs at the time of defection, the matter of initiating legal action would be further discussed in the party.

However, the SLPP will not be able to initiate legal action against some MPs like Wimal Weerawansa, Udaya Gammanpila, and Vasudeva Nanayakkara, since they had aligned with the SLPP only for the polls and were not members of the party.

Nevertheless, SLPP dissidents like Dullas Alahapperuma, Dilan Perera, Anura Yapa, Nimal Lanza, and others who are members of the party and have defected to the Opposition could face litigation if the SLPP decides to proceed with it. SLPP dissident MP G.L. Peiris however told the media last week that the Supreme Court ruling against SLMC’s Ahamed would not have an impact on the dissidents.

Meanwhile, the Supreme Court on Friday (13) determined that the decision of the ‘Ape Jana Bala Pakshaya’ to cancel the party membership of MP Ven. Athuraliye Rathana Thera was in contravention of the law. The court had issued this ruling when the petition filed by Ven. Rathana Thera was taken up for hearing. The thera had sought a ruling from the court that the ‘Ape Jana Bala Pakshaya’ decision to cancel his party membership was in contravention of the law.

Dilith launches party

The past week also saw a new development in the local political scene, when businessman Dilith Jayaweera officially launched his political party, the Mawbima Janatha Pakshaya (MJP), by opening the Party Headquarters in Colombo 8.

Addressing the event held to mark the launch of the party, which was originally formed by former Parliamentarian Hemakumara Nanayakkara, Jayaweera said that he strongly believed the country must become a centre point for entrepreneurs.

He noted that the MJP would work tirelessly to ensure a sufficient flow of foreign income to the country through the promotion of an entrepreneur-friendly mindset, thus encouraging the thousands of youth currently leaving the country to stay on and provide their services to the nation.

According to Jayaweera, the MJP will fill a clear void in the Sri Lankan political space that demands a political entity with a vision to achieve short-term and long-term economic, social, and political sustainability that will in turn result in a happier nation.

Speaking on the future plans and prospects of his party, he said that “the setting up of the Mawbima Janatha Pakshaya Headquarters marks a milestone in the party’s journey towards empowering Sri Lankans, especially our youth and women, to hone their creativity and contribute to building a Sri Lankan State with an entrepreneurial mindset”. 

“I believe that it is crucial that we transcend the current divisive rhetoric used in political spaces, creating animosity between communities on ethnic or religious basis purely for selfish political gain,” he said, adding: “We must create a safe space for individual communities to be able to voice their concerns and opinions and be able to develop a national consciousness comprising all these elements.”

Dhammika’s aspirations

Meanwhile, businessman Dhammika Perera last week expressed his desire to contest the next Presidential Election by telling the media that he would put forward his candidacy only if he was assured of 51% of the votes. According to him, a consensus among a majority of the political parties over his candidature would give a big boost to his chances at the election.

Perera was appointed to Parliament through the SLPP National List. He has further stated that he had stepped down as chairman of around 18 leading companies owned by him following his appointment to Parliament.

SJB’s Canadian dynamic

The main Opposition Samagi Jana Balawegaya (SJB) is meanwhile preparing a policy platform and manifesto that it says it will seek to implement in the near future. Issuing a statement, the SJB said its policy platform was being developed through close interaction and continuous dialogue with varied and relevant stakeholders. 

“Thus far the SJB has engaged numerous worker unions, business chambers, entrepreneurial associations, and professional organisations. The project to generate a viable plan for sustainable economic growth and human development in Sri Lanka requires a multi-pronged approach that considers the overlapping issues related to education, healthcare, business regulation, taxation, security and defence, and social welfare and pensions, all with facets that are interrelated. Public policy must consider such intersections. Sri Lanka’s foreign policy must be informed by both strategic imperatives and local political/social dynamics, which shape Sri Lanka’s relationships within the region as well as perceptions about our nation-state beyond,” the statement said. 

The SJB pointed out that for too long Sri Lankan policy had veered from one extreme to another, captive to the whims of singular leaders and cabals of special interests. The SJB emphasised that the Canadian dynamic might be useful in informing Sri Lanka’s own position in terms of its immediate neighbourhood and strategic alliances and that understanding how to position itself within the unfolding geostrategic maze was critical to succeeding in this new era.

A workshop titled ‘Policymaking and Governance: Navigating Geopolitical and Economic Challenges’ was organised by the National Council of Professionals on Thursday (12) as the first step in the programme, with a keynote address by Canadian academic and public intellectual Dr. Irvin Studin, who is the President of The Institute for 21st Century Questions, a leading Canadian think tank. 

Opposition and SJB Leader Sajith Premadasa, addressing the gathering, stressed on the significance of assembling a policymaking team with diverse backgrounds and experiences for a successful governance structure. 

Other notable speakers were MP Eran Wickramaratne and former Dean of the Law Faculty and former Vice Chancellor of the University of Colombo Prof. Savithri Goonesekera.

No changes in UNP

The United National Party (UNP) is preparing for its annual convention this week. With the party having spent the last few months attempting to revive the grassroots organisations through islandwide Balamandalas, the leadership has now decided that this is the moment the re-launch of the UNP will take place. 

Speaking during a meeting of party seniors, President Wickremesinghe stated that the UNP was in the unique position of being able to rebuild the party identity to suit the 21st century and growing global trends. 

Media reports earlier last week had suggested that plans to change the party leadership structure had been shelved. The President was quick to crack down on the stories, warning all the seniors that internal meetings must remain internal. 

It was believed that the party’s general secretary post would be subjected to a change at the convention and that the main contender for the post was former Assistant Leader Ravi Karunanayake. Later on, there had been a proposal to appoint Karunanayake as deputy leader of the party. However, it had finally been decided that there would be no changes to party positions any time soon. 

One UNP senior was heard commenting after the meeting that following the party defeat in 2020, the seniors were ready to work together. “Now that there is an opportunity to regain power, others are looking out only for themselves,” the senior had said. It had been agreed that the seniors must work together, while providing space for new faces if they were to regain the party’s lost ground.

Meanwhile, the party convention, which will be held on Saturday (21), is being touted as a re-launch of the UNP with a promise of a new look and message which has not been seen before. While some seniors had been apprehensive over the path being taken, it appears as though the leadership is comfortable with undergoing a revamp.