Uditha Jayasinghe

IMF Provisionally Agrees on $2.9-Billion Loan for Sri Lanka

The agreement is subject to approval by IMF management and its executive board, and is contingent on Sri Lankan authorities following through with previously agreed measures.

Colombo: Sri Lanka has reached a preliminary agreement with the International Monetary Fund (IMF) for a loan of about $2.9 billion, the global lender said on Thursday, as the country seeks a way out its worst economic crisis in decades.

The agreement, which Reuters first reported on Wednesday, is subject to approval by IMF management and its executive board, and is contingent on Sri Lankan authorities following through with previously agreed measures.

“The staff level agreement is only the beginning of a long road for Sri Lanka,” senior IMF official Peter Breuer told reporters in the commercial capital Colombo.

“Authorities have already begun the reform process and it must continue with determination.”

The IMF requires receiving financing assurances from Sri Lanka’s official creditors, besides ensuring efforts are made to reach a collaborative agreement with private creditors.

“Debt relief from Sri Lanka’s creditors and additional financing from multilateral partners will be required to help ensure debt sustainability and close financing gaps,” the IMF said in a statement.

The IMF programme, spread over 48 months, will aim to raise government revenue to support fiscal consolidation, introduce new pricing for fuel and electricity, hike social spending, bolster central bank autonomy and rebuild depleted foreign reserves.

“Starting from one of the lowest revenue levels in the world, the programme will implement major tax reforms. These reforms include making personal income tax more progressive and broadening the tax base for corporate income tax and VAT,” the statement said.

“The programme aims to reach a primary surplus of 2.3% of GDP by 2024,” it added.

Creditor collaboration

President Ranil Wickremesinghe, who also serves as the country’s finance minister, on Tuesday presented an interim budget aimed at clinching the deal with the IMF.

The budget revised Sri Lanka’s deficit projection for 2022 to 9.8% of the gross domestic product from 8.8% earlier, while outlining fiscal reforms, including a hike in value-added taxes.

Sri Lanka needs to restructure nearly $30 billion of debt, and Japan has offered to lead talks with the other main creditors, including regional rivals India and China.

“If creditors are not willing to provide assurances, it would deepen Sri Lanka’s crisis and undermine repayment capacity,” Breuer said, adding that it was in the interest of all creditors to collaborate.

Sri Lanka will also need to strike a deal with international banks and asset managers that hold the majority of its $19 billion worth of sovereign bonds, which are now classified as in default.

The debt-laden country has been seeking up to $3 billion from the IMF in a bid to escape its worst economic crisis since independence from Britain in 1948.

Sri Lankans have faced acute shortages of fuel and other basic goods for months, leaving it in political turmoil and hit by runaway inflation, which is now at almost 65% year-on-year.

(Reuters)

Dinesh Gunawardena to Be Named Sri Lanka’s Next Premier

Four political sources said that Sri Lanka’s new president will appoint senior lawmaker Dinesh Gunawardena as the crisis-hit country’s next prime minister.

Colombo: Sri Lanka’s new president will appoint senior lawmaker Dinesh Gunawardena as the crisis-hit country’s next prime minister, four political sources said on Thursday, July 21.

President Ranil Wickremesinghe is slated to appoint his new cabinet on Friday, a day after he was sworn into Sri Lanka’s highest office following mass protests that forced predecessor Gotabaya Rajapaksa to flee the country and resign.

(Reuters)

Sri Lanka: Acting President Ranil Wickremesinghe Declares Emergency

A government notice was released late on Sunday.

Colombo: Sri Lanka’s acting President Ranil Wickremesinghe has declared a state of emergency, according to a government notice released late on Sunday, as his administration seeks to quell social unrest and tackle an economic crisis gripping the island nation.

“It is expedient, so to do, in the interests of public security, the protection of public order and the maintenance of supplies and services essential to the life of the community,” the notification stated.

Sri Lanka’s ousted president Gotabaya Rajapaksa, who fled overseas this week to escape a popular uprising against his government, has said he took “all possible steps” to avert the economic crisis that has engulfed the island nation.

Gotabaya Rajapaksa’s resignation was accepted by parliament on Friday. He flew to the Maldives and then Singapore after hundreds of thousands of anti-government protesters came out onto the streets of Colombo a week ago and occupied his official residence and offices.

Sri Lanka’s parliament met on Saturday to begin the process of electing a new president, and a shipment of fuel arrived to provide some relief to the crisis-hit nation.

Wickremesinghe, an ally of Rajapaksa, is one of the top contenders to take on the presidency full-time but protesters also want him gone, leading to the prospect of further unrest should he be elected.

(Reuters)

Sri Lankan Parties Seek Interim Government With New PM as IMF Talks Loom

Sri Lanka is facing an economic crisis running short of power, fuel, food and medicines due to a lack of foreign exchange for imports.

Colombo: Three political parties that recently withdrew from Sri Lanka’s ruling coalition have proposed forming an interim government with a new prime minister replacing President Gotabaya Rajapaksa’s older brother, they said on Monday, April 11.

Facing an economic crisis and dragged down by debt, the island nation of 22 million people is running short of power, fuel, food and medicines due to a lack of foreign exchange for imports. It has reached out to the International Monetary Fund (IMF) and countries such as India and China for urgent financial help.

Prime Minister Mahinda Rajapaksa called for patience and announced the reinstatement of a critical fertiliser subsidy for farmers.

“The president and I are spending every moment to formulate solutions on how to get Sri Lanka out of this current crisis”, he said in a televised address, as protesters camped outside the president’s office for the third consecutive day.

President Rajapaksa dissolved his cabinet last week and called for a unity government to help tackle the crisis, as 41 lawmakers walked out of the ruling coalition to become independents in the 225-seat parliament. The government has said it retains a majority in the house.

Three parties represented by 16 of the lawmakers told reporters that they had met the president and the prime minister and that more talks were scheduled for Tuesday.

“The main proposal is to have an all-party committee to make key decisions and the appointment of a new prime minister and a limited Cabinet,” said Udaya Gammanpila, chief of the Jathika Hela Urumaya party.

“We want this before a new election. We have to reverse shortages and stabilise the economy.”

Sri Lanka’s next parliamentary election is not due until 2025.

The Sri Lanka Freedom Party (SLFP), with 14 lawmakers, said the independents would speak with other political parties to come to a consensus, as the government prepares to hold loan discussions with the IMF next week.

“Talks with the IMF will need a stable government capable of implementing clear policies”, SLFP General-Secretary Dayasiri Jayasekera said. “This is necessary to repair the economy and bring relief to the people.”

Fertiliser subsidy

In his address, the prime minister said the government would reintroduce a critical fertiliser subsidy to assist farmers who have been hit by crop losses after a ban on chemical fertilisers last year.

“This is not the time to move farmers to total organic fertilisers”, he said.

Sri Lanka typically allocates about 36 billion Sri Lankan rupees ($114 million) for fertiliser subsidies, according to the agriculture ministry, which supports over 2 million farmers.

The government suspended the fertiliser subsidy last year in an attempt to shift Sri Lanka’s agriculture completely to organic farming, which drew heavy criticism from farmer unions, opposition politicians and academics.

Sri Lankans holding street demonstrations for more than a month have focused their anger on the Rajapaksa dynasty. The president has already dropped his brother Basil Rajapksa as the finance minister, while his nephew quit as the sports minister last week along with other members of the cabinet.

Also Read: ‘Go Home, Gota’: Huge Protest in Sri Lanka Mounts Pressure on Rajapaksa to Quit

“We are working to resolve power cuts and shortages of fuel, cooking gas and medicines as much as possible in the next few days”, Prime Minister Rajapaksa said.

The government is now looking for external assistance of about $3 billion over the next six months to help restore supplies of essential items. It is also seeking to restructure international sovereign debt and seek a moratorium on payments.

J.P. Morgan analysts estimate Sri Lanka’s gross debt servicing would amount to $7 billion this year, with a current account deficit of around $3 billion. The country held $1.9 billion in foreign reserves at the end of March.

($1 = 315.0000 Sri Lankan rupees)

(Reuters)

Sri Lanka Begins Trials Connected to 2019 Easter Bombings Case

In the trial, former national police chief Pujith Jayasundara is charged with failing to act on repeated intelligence warnings of a possible terror attack.

Colombo: A Sri Lankan court on Monday began the first of three trials connected to bombings that killed nearly 270 people on the island in 2019, amidst appeals for greater accountability from victim support groups.

In this trial, former national police chief Pujith Jayasundara is charged with failing to act on repeated intelligence warnings of a possible terror attack.

A total of 855 charges of murder and attempted murder were read out as Jayasundara stood in the dock at the back of the courtroom. A total of 1,215 witnesses have been listed to give evidence but not all may be called, his lawyer said.

“Our position is the former police chief is not guilty. He did not intentionally aid or abet the attacks and there was no omission on his part that caused the attacks,” attorney Ranjith Dehiwala told Reuters.

Former defence secretary Hemasiri Fernando, the top official in the defence ministry at the time, faces similar charges in a trial beginning later on Monday. Neither he nor his lawyer could be reached for comment.

Both men are out on bail.

The trial of 24 men accused of carrying out the attacks begins on Tuesday.

Police filed over 23,000 charges against those suspects, including conspiring to murder, aiding and abetting the attacks, and collecting arms and ammunition. The group also includes Mohammad Naufer, who officials say masterminded the attacks and is linked to Islamic State.

The string of attacks carried out on 21 April 2019, Easter Sunday, targeted three churches and three hotels, killing 267 people, including at least 45 foreign nationals. The attacks, the worst in Sri Lanka’s turbulent history, also injured about 500 people, mostly belonging to the island’s minority Christian community.

On Sunday, dozens of Catholic community members held protests and laid flowers at multiple events organized to remember those lost in the attacks.

Participants appealed to the government to support survivors and ensure the trials are allowed to proceed without political interference.

“We want genuine justice from this process. That is what we are appealing for the officials to deliver. We have been waiting a long time and we want the real people responsible held accountable for what happened,” said Eranga Gunasekera, a member of a victims support group, during a remembrance ceremony held in Colombo.

(Reuters)