While the country prepares to celebrate yet another Sinhala and Tamil New Year with many being in holiday mode with the second consecutive long weekend for the month, the Ranil Wickremesinghe Government has entered the most crucial phase of the debt restructuring programme as well as the deal reached with the International Monetary Fund (IMF).
Discussions to finalise the debt restructuring plan with bilateral creditors are continuing. However, it is the finalising of the debt restructuring plan with the private creditors that has posed a challenge to the Government, with the International Sovereign Bond (ISB) holders seeking an assurance from the Government on restructuring local debt as well. However, the Government, it is learnt, is not too keen to go down this path given the adverse impact it could have on the country’s banking system.
Meanwhile, Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe has stated that Sri Lanka’s Treasury bond holders who consent to the voluntary Domestic Debt Optimisation (DDO) will come under debt exchange where new bonds will be issued to replace old bonds.
In an interview with BBC Sinhala on Tuesday (4), he observed that Sri Lankan authorities would present the debt exchange option to T-bond holders who are willing to participate in the voluntary DDO where the authorities will issue new bonds for old bonds. However, he said that this would be done while maintaining the stability of the banking system.
At the creditor presentation held last month, it was revealed that Sri Lanka would only consider Treasury bills held by the CBSL (about 62.4% of the total T-bills or $ 7.1 billion) for treatment to create some fiscal space while a voluntary DDO operation without coercion is envisaged where the Sri Lankan Government and its advisors will initiate consultations with major T-bond holders to gauge options and constraints. The authorities plan to finalise the DDO operation by May 2023.
“The DDO will help reduce the efforts required from external creditors to restore debt sustainability but taking into account financial stability objectives,” the Government told creditors.
Nevertheless, the Wickremesinghe Government is focused on meeting the end April deadline set by the IMF to receive Sri Lanka’s debt restructuring plan.
It is in such a backdrop that President Wickremesinghe last week stated during a meeting that once Parliament approved the IMF agreement, the main points of the agreement would be passed into law. According to the President, the agreement with the IMF will be presented to Parliament for a vote on whether to support it and following this, the key points of the agreement will be enacted into law.
The vote on the IMF agreement is expected to take place during the next parliamentary sessions.
The President also indicated that the Prevention of Terrorism Bill, the Truth and Reconciliation Commission, and the Anti-Corruption Bill would be submitted to Parliament by June.
“We aim to present the basic aspects of the agreement in May, with information about the programme being disseminated to rural sectors after the New Year,” Wickremesinghe further observed at the meeting.
He added that the country had no intention of seeking IMF assistance for the 18th time.
However, a financial analyst last week noted that Sri Lanka was likely to take at least another four years to gain international market access as the country needs to achieve macroeconomic stability for rating agencies to start raising its credit ratings.
Recovery time
Senior Financial Analyst and former CEO of Fitch Ratings Sri Lanka Ravi Abeysuriya has said that although some bankrupt countries in the past have gained market access through reforms in a short time period of six months, in the case of Sri Lanka, it cannot obtain market access that soon.
“In Sri Lanka, we cannot expect that (market access) very soon because our (Sri Lanka’s) political stability is in question as many say the current Government is not appointed through a mandate,” he has added.
Meanwhile, the World Bank’s Sri Lanka Development Update (SLDU), ‘Time to Reset,’ has projected that the country’s economy could contract by 4.3% in 2023, as demand continues to be subdued, job and income losses intensify, and supply-side constraints adversely affect production.
“The economic crisis in Sri Lanka has had deep impacts with over half a million jobs lost and 2.7 million additional people falling into poverty between 2021 and 2022,” World Bank Country Director for the Maldives, Nepal, and Sri Lanka Faris H. Hadad-Zervos has stated. “The prolonged recovery from the scarring effects of this crisis in addition to a slow debt restructuring process, limited external financing support, and an uncertain global environment pose significant risks to the country’s economic growth.”
“The current crisis is not a temporary liquidity shock that can be resolved by external financing support from outside. Instead, the crisis provides a unique opportunity to implement deep and permanent structural reforms that may be difficult in normal circumstances,” Hadad-Zervos has further stated. “Sri Lanka can use this opportunity to build a strong and resilient economy.”
It is in such a backdrop that a senior fellow at the New York-based think tank Council on Foreign Relations (CFR) and former Official of the US Treasury Department Brad Setser has noted that even though the IMF programme on Sri Lanka normally anchors the debt restructuring process, the IMF’s targets here are so soft and are not really of much use (apart from limiting debt service) as there are no explicit targets for external debt or Net Present Value (NPV) reduction.
Nevertheless, State Minister Dilum Amunugama told Parliament last week that tougher conditions were initially put forward by the IMF for Sri Lanka to obtain the Extended Fund Facility (EFF), but the Government of Sri Lanka was able to soften them down to the current level through discussions.
He noted that the IMF had wanted Sri Lanka to close down loss-making State-Owned Enterprises (SOEs), cut down on State sector workers, and abolish the pension scheme as initial conditions under the EFF. “But the intervention of the Sri Lankan Government, the President, and the other officials who were involved in the IMF discussion was able to soften down the conditions to some extent to the current level,” he told the House.
Meanwhile, State Minister of Finance Ranjith Siyambalapitiya also noted in Parliament last week that a total of 450 SOEs had incurred a loss of Rs. 2,894 billion between the years of 2012 and 2022, with the highest being recorded in 2020.
According to him, the relevant SOEs have incurred a loss of Rs. 183 billion in 2012, Rs. 186 billion each in 2013 and 2014, Rs. 271 billion in 2015, Rs. 180 billion in 2016, Rs. 260 billion in 2017, Rs. 265 billion in 2018, Rs. 268 billion in 2019, Rs. 436 billion in 2020, Rs. 337 billion in 2021, and Rs. 322 billion in 2022.
Siyambalapitiya further noted that the restructuring of SOEs was being carried out by a local company named Public Enterprise Holding Company Limited without any political interference.
India and Japan
The Economic Times has meanwhile reported that India and Japan have jointly agreed to cooperate with Sri Lanka to bolster regional connectivity in the strategic Indo-Pacific, amid China’s aggressive military manoeuvring in the resource-rich region. The report stated that the US, India, and several other world powers had been talking about the need to ensure a free, open, and thriving Indo-Pacific.
Indian High Commissioner to Sri Lanka Gopal Baglay has reportedly stated that India and Japan share wide-ranging interests in a peaceful, progressive, and prosperous Indo-Pacific region. He has made these remarks at an event here in the presence of Japanese envoy Mizukoshi Hideaki, the Economic Times report has noted.
Asserting that Sri Lanka is an important member of the Indian Ocean Rim Association (IORA) countries, Baglay has said there is a great deal of opportunity for India, Japan, and Sri Lanka to work together for the prosperity of people here and the benefit of all sides.
Japanese Ambassador Hideaki has stated that during Japanese Prime Minister Fumio Kishida’s recent visit to India, the two countries exchanged views on cooperation with Sri Lanka and agreed to work closely.
“I believe that connectivity is the best area to showcase how two countries can bring tangible benefits to the entire region including Sri Lanka. To this end, perspectives and insights from countries in the region are critical, and this report precisely addresses that,” he was quoted as saying in the report.
However, the Japanese envoy during a recent event noted that Japanese businesses were losing confidence in Sri Lanka.
Anti-corruption focus
The Government seems to have adopted a two-pronged approach in honouring the commitments to the IMF, with focus also being placed on anti-corruption legislation. The Cabinet has already approved the draft of the Anti-Corruption Bill.
Former President Chandrika Bandaranaike Kumaratunga, during whose regime the existing Commission to Investigate Allegations of Bribery or Corruption (CIABOC) Act No. 19 of 1994 was introduced, had recently claimed that the proposed bill did not include any provision to prevent people from engaging in acts of corruption.
“The provisions of the bill focus on what to do when someone is identified as a crook, but there is nothing to prevent people from engaging in such acts. Corruption has become a key feature in Sri Lanka since 1977 despite some efforts by political leaders; 75% in Parliament (75% of parliamentarians) are crooks,” she has been quoted as saying in the media.
Meanwhile, Justice Minister Dr. Wijeyadasa Rajapakshe has called on the critics of the proposed Anti-Corruption Bill to present their suggestions to improve it.
Rajapakshe has pointed out to the media that if the provisions contained in the proposed Anti-Corruption Bill were not sufficient to eliminate corruption, as claimed by certain parties, the critics should work to suggest which provisions should be included.
“Every bill is subjected to amendments at the committee stage, so if there are any amendments to be made, they can be considered when this bill is tabled in Parliament. Also, if someone says that this bill is not good, they should assign reasons. If they say that its provisions are not sufficient, they must also say that such and such provisions should be included in it. It is not reasonable for them to merely criticise it without pointing out what the lapses are,” Rajapakshe has stated.
He has further noted that the CIABOC can seek the assistance of the Attorney General to file cases at any time. “There were issues as to whether the Attorney General’s Department could appear for bribery cases or not. That is because there is no clear provision in the existing act for the Attorney General to appear in bribery cases. In such cases, the CIABOC has no ability to go alone and argue, especially in serious cases. Therefore, through this bill, we have introduced provisions to give the CIABOC the constitutional right to seek the assistance of the Attorney General at any time.”
Rajapakshe has added that acts of corruption cannot be eliminated just because the legal provisions are there and noted that politicians and the general public also have a great responsibility towards it.
Cabinet appointments delayed
The appointment of new members to the Cabinet of Ministers is expected to be further delayed. The new Cabinet appointments were earlier expected to take place after finalising the IMF deal towards the end of April.
It is learnt that the ‘high demand’ for Cabinet portfolios among some members of the ruling Sri Lanka Podujana Peramuna (SLPP) and main Opposition Samagi Jana Balawegaya (SJB) has posed a headache for President Wickremesinghe in finalising his new Cabinet.
While several senior SLPP MPs – to whom the President has already said he was unable to grant Cabinet appointments – have openly stated they had no intention of accepting portfolios, SLPP National Organiser Basil Rajapaksa has requested President Wickremesinghe to accommodate six SLPP MPs in the new Cabinet.
The issue, however, is that the SJB MPs who have expressed interest in joining the Government have also demanded Cabinet portfolios. Also, if all those requesting portfolios are accommodated in the Cabinet, President Wickremesinghe will definitely become the president with the largest cabinet in the world.
The final result of the ongoing chaos is that the President has decided to postpone the appointment of new members to the Cabinet.
Keeping it together
Meanwhile, the SJB leadership is currently focused on rallying the party members together in order to prevent any defections to the Government.
Opposition and SJB Leader Sajith Premadasa on Monday (3) had hosted the party’s parliamentary group for a dinner at the Monarch Imperial in Thalawathugoda in a bid to address the longstanding grievances of party members.
It is learnt that Premadasa had requested the parliamentary group to stand united and to not leave the SJB to join the Government since the party had a vision for the future.
It is in such a backdrop that SLPP MP Mahindananda Aluthgamage has claimed that he has a list of the names of the SJB MPs who are preparing to join the Government. He told Parliament last Tuesday (4) that there was a deep rift in the SJB. He said that a number of SJB members, including Hirunika Premachandra, had questioned the leadership of SJB Leader Premadasa.
However, when SJB MP Lakshman Kiriella dismissed Aluthgamage’s claims saying that not a single SJB MP would join the Government, Aluthgamage challenged the senior SJBer to be prepared to resign from his parliamentary seat if even one SJB MP joined the Government.
A recent news report in an English daily newspaper that noted that the SJB Leader was losing his grip on the party resulted in Premadasa and his loyalists taking to social media to dismiss the news report. The news report had claimed that a group of senior SJB members were displeased about the influence wielded by Premadasa’s wife and sister in affairs of the party. Premadasa’s sister had also denied the news report, claiming that her only engagement in politics has been as a private citizen.
However, the internal clash in the SJB over joining the Wickremesinghe-led Government continued last week, with comments made by SJB General Secretary Ranjith Madduma Bandara against SJB MP Dr. Rajitha Senaratne in the media resulting in the conflict coming out in the open.
Senaratne last week made a public statement that the SJB should join the Government as a party. Madduma Bandara however denied this statement, claiming that neither the SJB nor any of its MPs would join the Government.
The SJB General Secretary had further stated that it was Senaratne, who had earlier claimed that monies of the Rajapaksas were being stashed away in Dubai, who was now trying to join a government of the Rajapaksas. Madduma Bandara had questioned what he had referred to as Senaratne’s double standards.
It is in such a backdrop that some media reports stated that the SJB leadership had decided to suspend Senaratne from the party. It is learnt that Premadasa has been under pressure by some members of the SJB to act against Senaratne for making a statement at the Party Headquarters that the SJB should join the Government and that he was prepared to take over the Health Ministry.
Bribing MPs
Meanwhile, Premadasa has also accused the Government of conspiring to destroy the main Opposition SJB by trying to split the party.
“I have got information that they (the Government) are ready to pay Rs. 200 million for an MP to cross over. I don’t know if this Government is crazy. What’s happening now is that segments from the Government are joining the Opposition,” he has said, while addressing a gathering in Dehiwala recently.
“They say the Government doesn’t have money to hold elections, but they have money to bribe MPs to cross over to protect the Government,” he has further said.
He has also challenged the Government to try and bribe SJB MPs if possible and that the SJB did not have members who could be bought for money.
The SJB has also denied reports that its members, parliamentarians Dr. Harsha de Silva, Kabir Hashim, and Eran Wickramaratne, were ready to join the Government in the near future.
SJB Chief Organiser MP Tissa Attanayake has said that those parliamentarians whose names were mentioned in the reports would never cross the floor leaving the SJB. He has noted that it is not necessary to be in the Government to support the good decisions taken by the Government and that the SJB is continuing to do so.
Government members have however responded saying that no Opposition MP has been offered money and that a large group of the SJB parliamentary group wanted to join the Government without any cash payments.
President Wickremesinghe meanwhile has been invited to join the SJB by being appointed to a top slot in the party. The invitation was extended by SJB MP Ashok Abeysinghe. The MP had further noted that the SJB was not prepared to take the deputy leadership of a party (United National Party – UNP) that has only one parliamentarian in the House. “Ranil Wickremesinghe can become the deputy leader of the SJB if he likes,” Abeysinghe had said.
Abeysinghe had made these comments in response to a recent statement made by UNP Deputy Leader Ruwan Wijewardene that the UNP was prepared to appoint SJB Leader Premadasa as the deputy leader of the UNP.
Retribution
The ongoing clashes within the SJB have provided fodder to the ruling SLPPers, who continue to publicly highlight the split within the SJB.
It is in such a backdrop that SLPP MP Rohitha Abeygunawardena had claimed that Opposition Leader Premadasa was paying for the sin he had committed when he broke away from the UNP to form the SJB.
Abeygunawardena told the media last week that Premadasa had earlier wanted to destroy the UNP, but now some of his SJB MPs were going to join the Government.
According to the SLPP MP, with the country stabilising and the economy recovering, it appears the SJB is nearing its end, with its members deserting him and returning to Sirikotha (the UNP Headquarters).
Another senior SLPP MP, Johnston Fernando, has meanwhile stated that all SJB MPs joining the Government should be given portfolios in order to get their support to rebuild the country.
Gearing for May Day
Meanwhile, the SJB had last week met to discuss the party’s plans to mark the upcoming May Day. During the discussion, it was the opinion of many SJBers to hold the party’s May Day rally in Colombo. Among the venues that were discussed to hold the rally were Campbell Park and Hyde Park.
However, when the SJB had reportedly looked at booking the Campbell Park for the party’s May Day rally, it was learnt that the SLPP had already requested the ground to hold the ruling party’s May Day rally.
It is also learnt that the SLPP is also focused on holding a successful May Day rally as a way of boosting the confidence and morale of SLPPers. The May Day rally of the SLPP is being organised by Basil.
The SJB MPs’ group however had then decided to look at Hyde Park for the party’s rally in the event Campbell Park was not available. The SJB MPs are to meet once again tomorrow (10) under the patronage of the party leadership to discuss the preparations for the May Day rally.
SLPP’s standing
The SLPP, especially the Basil loyalists, are focused on party reforms and are engaged in holding meetings at electoral level despite the postponement of Local Government Elections.
It was SLPP Media Secretary Sanjeewa Edirimanna who had said that while the party would witness a drop in its vote bank, there was a formidable opponent in the current political platform who could overtake the SLPP at polls. Edirimanna had made this comment during a party meeting in the Biyagama electorate.
He had noted that the people who had attended the Biyagama meeting were those who understood the importance of gratitude, which was also a lesson taught by Lord Buddha.
Referring to the Janatha Vimukthi Peramuna (JVP) and its growing popularity in the electorates, Edirimanna had noted that while there was an increase in its popularity, even if it recorded a 100% increase in its vote bank, the JVP would only poll 402 votes in the Pahala Biyanwila electorate.
Supporting RW
Amidst the SLPP’s reforms programme, a group of SLPPers, especially those in the Government, has expressed their desire to support President Wickremesinghe as the candidate of the SLPP at the next Presidential Election.
It was SLPP MP Minister Kanchana Wijesekera who noted that a majority of the SLPP MPs were of the view that Ranil Wickremesinghe should be the next president. During a political talk show, Wijesekera had stated that the matter had been discussed among various party members.
He had further noted that it was uncertain as to which election would be held next, but the SLPP would take a suitable decision at the time of an election.
Meanwhile, Cabinet Spokesman Minister Dr. Bandula Gunawardena had told the media last week that no proposal has been made by the SLPP so far about Wickremesinghe being nominated as the party’s next presidential candidate. However, Gunawardena has stated that President Wickremesinghe through his recent actions has won over the people as the most suitable person to carry out the revival of the country.
SLPP General Secretary and MP Attorney-at-Law Sagara Kariyawasam said that such a decision has not been made yet and that the party will make the decision when it is necessary to be made.
“There are several rumours being circulated within the political arena that the SLPP is going to support President Wickremesinghe in the Presidential Election, which is to be held next year (2024). Not only the name of the President, but the names of several other senior members of the SLPP are also among the rumoured presidential candidates, but the party has not made a final decision about the presidential candidate of the SLPP,” he said.
However, the SLPP currently seems to be split into three groups – Basil and group, Namal and group, as well as the group that supports President Wickremesinghe.
LG Polls
While the Local Government Elections continue to be in limbo, the Election Commission continues to remain hopeful of holding polls this year.
Election Commission Chairman Nimal Punchihewa has stated that the commission is keenly awaiting a discussion with Prime Minister Dinesh Gunawardena to take a final decision on holding the delayed Local Government Elections.
Punchihewa has also told the media that he had not received responses to the letters sent by the commission to the Finance Minister and the Finance Ministry Secretary seeking funds to hold the Local Government Polls.
The Treasury has provided only Rs. 165 million to hold Local Government Polls up to now from the Rs. 10 billion allocated for the Election Commission for the purpose from the Budget 2023. The Election Commission Chairman has noted that the Rs. 165 million included the Rs. 40 million given to the Government Printer and Rs. 25 million to the Police Department.
However, State Finance Minister Shehan Semasinghe has noted that the Government is finding it difficult to release the funds required to hold the Local Government Elections. “The country’s economy is yet to stabilise to its fullest potential. Therefore, the Government is still finding it difficult to release the money required for holding the Local Government Elections.”
Semasinghe has told the media that the Government is finding it “extremely difficult” to make mandatory payments such as the repayment of multilateral loans, the salaries and pensions of public servants, and the welfare allowances such as the Samurdhi allowance.
“The economy has not yet recovered to the expected level. We still find it extremely difficult to meet the mandatory expenses. The Election Commission will have to discuss with the relevant authorities and come to a consensus. As the Government, we need the full stabilisation of the economy,” he has stated.