Lanka Free Library

COLOMBO (News 1st); The United Nations team in Sri Lanka and non-governmental organisations launched a joint Humanitarian Needs and Priorities (HNP) Plan today (9), calling for US$47.2 million to provide life-saving assistance to 1.7 million people worst-hit by the economic crisis over a four-month period, from June to September. This directly responds to the Government UN calls for US$ 47 Mn for Sri Lanka assistance

ECONOMYNEXT – Cash-strapped Sri Lanka’s former Finance Minister Basil Rajapaksa vacated his parliamentary seat on Thursday (09) downplaying his role in the country’s worst ever forex crisis, without ruling out a comeback, and likening the Rajapaksa family to India’s RSS.

Exactly one month after his older brother and then Prime Minister Mahinda Rajapaksa resigned against a backdrop of bloody violence, the younger Rajapaksa announced his departure from the legislature Thursday morning at the Sri Lanka Podujana Peramuna (SLPP) headquarters where he fielded questions from reporters eager to press him on his part in the ongoing calamity.

Rajapaksa appeared to be in a beaten-but-not-defeated mood as he attempted to use humour to deflect questions about his responsibility and, at one point, even seemed to shift the blame to the very people who had voted for his party, the SLPP.

“No, I’m not passing the buck to the people. But yes, they do hold some responsibility for electing us to power. If, as you say, we passed the buck, then those who gave us the buck in the first place are also responsible,” said Rajapaksa, quickly recovering from a question that had visibly agitated him

It was the one moment in the hour-long press briefing in which he lost his cool.

The former finance minister’s ouster was one of the key demands of Sri Lanka’s protesting public. Among the anti-government slogans shouted at protests islandwide was the earworm “Kaputu kaak, kaak, kaak” followed by a chorus of “Basil, Basil, Basil, Basil.” The somewhat elitist meme originated from a video in which Rajapaksa was heard using the Sinhala word for crows, “kaputas”, in the plural form, at a discussion held in English, for which he was relentlessly mocked on social media.

Asked to comment on his “new brand”, Rajapaksa claimed that he had made the singsong protest slogan his phone’s ringtone.

“I mean, it’s not a bad animal, really. I hold no grudge against any being. I do not seek vengeance.

“It’s my ringtone now. The phone goes ‘Basil Basil’ when it rings.

“The first bit is played back at a lower volume,” he added with a chuckle.

On more serious matters, Rajapaksa was no less facetious. When questioned about the erosion of Rajapaksa popularity, he said: “I think we can see that our family is better at politics than at governance.”

The former minister and architect of the SLPP said that there are such cases globally.

“India’s RSS has been around for years, but they do not govern directly. The BJP has taken on that role,” he said.

However, he does not foresee an immediate end to the Rajapaksa dynasty.

“Sri Lankans elected a Rajapaksa president three times: twice with Mahinda Rajapaksa, and once with Gotabaya Rajapaksa,” he said.

As for his own plans, the youngest Rajapaksa sibling said though he has retired from governance, he will continue to play an active role in politics. His resignation from the SLPP’s national list slot, he said, was for someone the party deems suitable to take his place.

Speculation has been rife that that someone will be businessman Dhammika Perera. Rajapaksa’s answers to questions about Perera’s entry to active politics were vague, at best.

“I don’t know about that. That is a decision that’s up to the party.”

However, he did say later on that if Perera wishes to implement some of the plans he had proposed for the country, there is no reason he should not be given an opportunity to do so. The same is true, he said, for anyone from the ‘aragalaya’, Sri Lanka’s youth-led protest movement.

“I invite anyone from the Aragalaya to take my place,” he said.

Regarding the economic crisis and the immense hardships imposed on the public, apart from a hurried “apology” at the end of the press briefing for any mistakes made during his tenure as Finance Minister, there was no heart-rending mea culpa from the former MP.

He brushed aside any suggestion from the journalists present that he and the Rajapaksa administration had been the authors of the agony the people were now feeling.

“I’m no longer finance minister.

“Since 1951, this country has been run the same way, on debt. No government has tried to change this. After my appointment, I tried to some extent enable the people to stand on their own feet.

“It may or may not have worked, but if there is something this country is getting now [in terms of financing], it is only what I was able to secure as finance minister,” he said.

Pressed for more honesty, Rajapaksa claimed the crisis was already there when he came on board as finance minister. He forcefully rejected suggestions by journalists that his government was responsible for the erosion of Sri Lanka’s foreign reserves which had stood at seven billion US dollars in late 2019 when his brother President Gotabaya Rajapaksa was sworn in.

“There was no seven billion dollars when I came on. I do not accept that reserves went down to zero under me. There were no reserves when I was appointed,” he said, adding that fertilizer and other essentials were being purchased today with loans that he had helped secure.

Rajapaksa said the government had been divided on approaching the IMF for assistance, and that reconciliation between two pro and anti-IMF camps had to be achieved.

“I sent the first letter to the International Monetary Fund (IMF). It was after that that two IMF officials came and met me and President Rajapaksa,” he said.

President Rajapaksa had earlier said in a televised address to the nation that it was a mistake to not go to the IMF. Former Finance Minister Rajapaksa, however, in some apparent revisionism said that the president had in fact said the IMF should’ve assisted Sri Lanka sooner.

There has been speculation that the proposed 21st amendment to Sri Lanka’s constitution is being delayed due to machinations by Basil Rajapaksa against a provision to ban duel citizens from entering parliament. Rajapaksa is a US citizen and visits that country regularly. Some former influential government ministers who now function as independent MPs in parliament famously called him the “Ugly American” and accused him of carrying out a US agenda, a claim which Rajapaksa rejects.

“Personally I’m opposed to the 21st amendment,” he said, but added quickly that it was not due to personal reasons.

A constitution must serve the public interest, he said. “We can’t take the power given by 6.9 million voters to one leader and confer that on someone who only managed over 250,000 votes,” he said, referring to Sri Lanka’s newly sworn in Prime Minister Ranil Wickremesinghe.

“I definitely support certain aspects of the 21st amendment, such as the provisions on independent commissions.

“I don’t know if the amendment will pass,” he said, adding however that decentralisation of power to benefit the public is important.

If the executive presidency is to be abolished, Rajapaksa said, Sri Lana’s provincial council system – a legacy of the 1987 India-Sri Lanka Accord – must be reformed in the interest of maintaining the island nation’s sovereignty and unitary character.

Though he would personally have voted against it, he said, the decision to vote for the amendment or not remains with the party, which he says he will continue to work with.

Basil Rajapaksa leaves parliament, which he entered as an unelected MP via the national list, with Sri Lanka’s economy freefalling around the hapless and increasingly desperate citizenry.

He, however, believes he did his best.

“I think I did [do something] to the best of my ability. But I couldn’t do everything the people had expected,” he said.

Asked if his resignation was a permanent one, Rajapaksa said: “If the people decide so, perhaps; but if they want me back, I’m ready for that too.”

“I know it’s going to be even more difficult going forward. We must all work together. We’re ready to extend any help to the present administration and whoever may be coming next,” the former minister said.

He expressed hope that global conditions will also improve, facilitating Sri Lanka’s recovery.

“I hope the Ukraine crisis is resolved and tourism will pick up again.

As he stood up to leave the briefing he said: “I would also like to express my sincere apologies to the people if there were any mistakes made.” (Colombo/Jun09/2022)

ECONOMYNEXT – Sri Lanka’s President Gotabaya Rajapaksa met envoys of India, China, and Middle Eastern countries and asked for assistance amid the island nation’s worst-ever economic crisis that is now facing a looming food shortage.

The President’s Media Division (PMD) on Thursday said Rajapaksa met envoys of the Middle East, India, and China early on Thursday.

“President Rajapaksa requested the diplomats to extend all possible assistance for Sri Lanka in resolving the existing situation,” the PMD said in a statement.

“He also expressed his appreciation for the assistance provided by those countries so far.”

Rajapaksa separately in his official twitter said: “I requested their assistance in resolving the existing crisis, while briefing them on the current economic, social and political situation of Sri Lanka. Appreciate their positive response.”

Sri Lanka has run out of foreign currency reserves and already defaulted on sovereign debts. The island nation has also started talks with the International Monetary Fund (IMF) for a loan while it has also started foreign debt restructuring.

The country has been seeking for kindness and bridging finance in the form of credit lines to fund the imports including fuel, cooking gas, medicines, and food to weather the hardest period of the economic crisis.

Economists have predicted the crisis to prolong for years until Sri Lanka manages to earn surplus dollars by boosting exports, tourism, and remittances while maintaining prudent fiscal reforms.

The economic crisis hit the ground after President Rajapaksa’s fertilizer ban sharply reduced agriculture production and a sovereign debt default amid delays in IMF talks.

Rajapaksa’s failure in maintaining appropriate economic policies including fiscal reforms to raise government revenue accelerated the pace of the crisis. (Colombo/June 09/2022)

ECONOMYNEXT – When Ranil Wickremesinghe was appointed Sri Lanka’s Prime Minister for a record sixth time on May 12, some hoped he could use his international relations and economic expertise to ensure the supply of essentials like fuel, cooking gas, and medicines as well as uninterrupted power supply.

However, queues for gas and fuel have become longer in the one month since Wickremesinghe took over the challenge to stabilize the economy.

Though Sri Lanka earns about a billion US dollars in exports, about 500 million remittances (about half comes through unofficial channels) and about 300 more from services, and most debt repayment is suspended, the country is faces forex shortages with a failed float

Monetary stability is yet to be restored with money still being printed and a surrender requirement in place.

Transport has become a challenge with fuel prices skyrocketing in rupee terms as the rupee collapsed after to two years of mis-targeted interest rates in the worst currency crises in the history of the country’s Latin America style central bank.

People are struggling to manage their daily meals with the currency collapse putting food out of the reach of the less affluent. Many elders are finding it hard to ensure a continuous supply of medicine.

Wickremesinghe began by telling the truth about the island nation’s real economic situation. He publicly spoke about external debt, the importance of seeking help from the International Monetary Fund (IMF) and working with international partners like India, China, and Japan.

Almost four weeks after his appointment, Wickremesinghe is struggling to deliver on the essentials for the public, as monetary stability continues to elude the country and foreign exchange shortages persist.

Here are some of the key questions and answers on Wickremesinghe’s statements and his role as the new prime minister of Sri Lanka since May 12.

What did Wickremesinghe say before becoming the prime minister?

He advocated for IMF assistance to face the economic crisis. He accurately predicted power cuts, the dollar shortage, and difficulties in importing essentials. The leader of the United National Party (UNP) for the past 26 years called on the Government to place its top priority on resolving the economic crisis and warned that a delay would make recovery difficult. He has also predicted the situation yet to come if the number of persons losing employment increases, companies collapse, and food problems. He said Sri Lanka should not have suspended debt payment and gone to the IMF earlier when the country was still creditworthy. Wickremesinghe also said both the government and opposition should join hands to come out of the crisis.

What was the reality when the new prime minister took over?

Four days after his appointment as the “crisis prime minister”, Wickremesinghe found the Sri Lankan economy was “extremely precarious”.

In country with a soft-pegged exchange people suffer when the currency collspses, and budgets become almost impossible to manage though inflation can bring in nominal revenues as long as salaries are not hiked.

He wanted to establish a national assembly or political body with the participation of all political parties to find solutions to the present crisis. He proposed an all-party government and some new parliament committees to make the president and cabinet accountable to parliament. He also promised to bring in a new constitutional amendment to reduce the powers of President Gotabaya Rajapaksa whose stubborn and wrong policy decisions and mismanagement has been blamed for Sri Lanka’s ongoing crisis.

He promised to build a nation “without queues for kerosene, gas, and fuel; a nation free of power outages; a nation with plentiful resources where agriculture will flourish; a nation where the future of the youth is secure; a nation where people’s labour need not be wasted in queues and in struggles; a nation where everyone can lead their lives freely with three square meals a day”.’

Wickremesinghe said the budgets revenue numbers were inflated and the actual revenue would be 30 percent below target and expenses would be higher and the deficit would be wide.

Wickremesinghe soon realised that the reality was much worse than what he had expected, a close ally told EconomyNext.

“This is the reason he warned of power cuts likely to be increased to 15 hours a day, though it hasn’t happened so far,” the ally said asking not to be named.

“The situation is getting worse. There is no foreign currency to buy food from September onwards. We may face an acute food shortage in September because we have not produced adequate rice in the last year and this year,” the source said.

Up to June most food imports were coming freely as open account imports were allowed. But from June 07 open account imports were banned at the request of the central bank creating questions whether the formal banking system can give dollars in time.

Wickremesinghes fiscal fixes

The new premier is now trying to come up with a budget where capital spending is cut and has to spend more money as a safety net to the people pushed deeper into poverty by central bank money printing.

However, Wickremesinghe has raised Value Added Tax (VAT) to 12 percent from 8 percent and a telecommunication levy to 15 percent to increase government revenue. More taxes are planned from Otober

The government is also in the process of cutting its expenditure as much as possible.

However 695 billion supplementary estimate is planned.

He has proposed privatisation of loss-making state carrier SriLankan Airlines.

Fuel prices have been adjusted to a market rates. Wickremesinghe told the media that he would be compelled to permit printing money in order to pay state-sector employees and to pay for essential goods and services.

Wickremesinghe also predicted what he said would be the most difficult two months through July, but attempted to reassure the public that Sri Lanka’s foreign allies will assist. They have already pledged their support, he said.

Since his takeover, Wickremesinghe has been doomsaying about a looming food shortage, starvation, a complete lack of dollars for imports, extended power cuts, and a longer than expected recovery time from the crisis.

He said the situation will worsen further before recovery starts.

What has happened now?

Opposition members and political analysts observe that there has been hardly any change since Wickremesinghe took over.

In fact, many say the number and length of the queues for cooking gas and fuel have multiplied, though power cuts have reduced with rains coming back,

Some political analysts say the hopes of Wickremesinghe reviving the economy are fading because he has not been able to live up to the expectations of the common man, who had believed the new prime minister would bring in more dollars to the country, and ensure required policy changes to drive the economy in a different direction for a sustainable debt repayment and growth.

A quick wrap of an IMF program has not also materialized as a debt re-structuring effort takes time.

Why is there a delay in the implementation of Wickremesinghe’s promises?

Political analysts say the lack of a majority for Wickremesinghe in parliament and some major differences between him and President Rajapaksa’s Sri Lanka Podujana Peremuna (SLPP) on policies has got in the way of political reforms.

There has been no consensus on the constitutional amendment, which is key for political stability.

A former SLPP cabinet minister told EconomyNext that some international partners have indirectly indicated they are waiting for political stability after a constitutional amendment to help Sri Lanka.

Some SLPP members are not in favour of the new amendment – the 21st – because it will force former finance minister Basil Rajapaksa out of parliament due to his duel citizenship and President Rajapaksa to lose the powers he has been enjoying so far.

Wickremesinghe is also being criticized for taking up the post unconditionally in a move to protect the Rajapaksas from being forced out of politics.

That had discouraged some key opposition parties from backing him. Few of them are ready to back Wickremesinghe as long as Rajapaksa remains a powerful president.

COLOMBO (News 1st); The Parliament granted its approval for the  supplementary estimate of Rs. 695 billion which was presented by the Prime Minister Ranil Wickremesinghe in his capacity as the Minister of Finance. Moreover, approval was also granted at a meeting of the Parliamentary Finance Committee Chaired by Parliamentarian Anura Priyadarshana Yapa yesterday (7). The supplementary Supplementary estimate approved in Parliament

COLOMBO (News 1st); Prime Minister Ranil Wickremesinghe says that discussions are underway with India to purchase fuel and coal as the Line of Credit granted by the nation is coming to an end.  The Prime Minister, pointing out that Sri Lanka does not have fuel and coal to generate electricity, in addition to having a fertilizer, medicine I will not be responsible if a blackout is caused: Ranil

ECONOMYNEXT – A Sri Lankan body which has interest in transport and logistics has proposed a 20 step action plan to reduce the island nation’s fuel import bill and save up to 1 billion US dollars that can allocate for other essential imports easing the burden on the general public.

Sri Lanka is going through its worst economic crisis in the history and is facing long
term shortages of essential medicine, fuel and gas with a looming food shortage in the near future.

In 2022 from January to March, Sri Lanka has spent 1.4 billion US dollars in importing fuel to the country, which is 37 percent of the last year’s total fuel imports. The government expects the fuel bull for this year to be in the range of 6-7 billion US dollars.

Issuing a statement Sri Lanka Society of Transport and Logistics (SLSTL) said fuel for transport at current prices costs more than all other consumer imports including food, milk, medicine, household goods, LP gas and others.

In order to curtail the higher import cost of fuel, the state-run Ceylon Petroleum Corporation (CPC) has increased price of fuel three times to record high in the first four months of 2022.

“The government has not presented the country with a plan on how to deal with this crisis, where the reduction of fuel imports is necessary,” the SLSTL said in a statement.

It has proposed a short term action plan to reduce the current import cost to the Minister of Transport, Highways, and Media on June 4, 2022, at a workshop organised by the Ministry.

“The proposed plan would reduce oil imports for transport which cost us 4 billion US dollars a year or approximately two shiploads per week. The target is to reduce this figure by 500 million US dollars to 1 billion, which will depend solely on the government’s wiliness to implement the plan and the leadership they will provide in the implementation process,” the SLSTL said.

In its 20-point action plan, the SLSTL, emphasizes the importance of public transportation to reduce the fuel consumption by the private owned vehicles.

Since mid-February, motorists are forced to wait in long queues for hours due to fuel shortage with the government authorities citing panic buying and fuel hoarding as the reasons for the scarcity.

The SLSTL said, the government should prioritize importing diesel over petrol and improve the
distribution process to enhance the public transport and to adapt smart technology to avoid fuel
queues.

It also suggested that the government should impose a three-month restriction on the use of private cars on specific days of the week by the last digit of the registration number of cars, SUVs, pickups, and vans which consume 51 percent of the fuel used for passenger transport.

It also urged to impose restrictions on cars, vans, and SUVs carrying less than three passengers entering areas that experience regular traffic congestion. (Colombo/June 07/2022)

ECONOMYNEXT – Blaming poor foreign policy on the country’s international “marginalisation”, Sri Lanka Prime Minister Ranil Wickremesinghe on Monday (07) criticised the unilateral cancellation of projects funded by friendly nations like Japan and India.

“Japan is our long time friend; a nation that has helped our country greatly. But they are now unhappy with us due to the unfortunate events of the past. Our country had failed to formally notify Japan of the suspension of certain projects.

“Sometimes the reasons for these suspensions were not even stated. Some projects undertaken by Japan in our country were halted halfway through based on the reports of a single individual,” he said, speaking in parliament on Tuesday (07).

Wickremesinghe was ostensibly referring to Sri Lanka’s termination of a Japan International Cooperation Agency (JICA)-funded light railway transit (LRT) project, which analysts say soured relations between the two countries. The cancellation of a trilateral deal with India and Japan to develop the Eastern Container Terminal (ECT) of the Colombo Port did not help matters.

Wickremesinghe recently met Japanese Ambassador to Sri Lanka Mizukoshi Hideaki, one of the first envoys the newly sworn in PM called on in early May.

“Japan and India had agreed to supply us with two LNG power plants. The Ceylon Electricity Board (CEB) stopped those two projects without any justifiable reason,” Wickremesinghe told parliament.

“Japan had agreed to provide about 3 billion dollars worth of projects to our country by 2019. All of these projects were put on hold for no reason.

“I urge the Parliamentary Committee on Public Finance to conduct an inquiry into the suspension of such valuable projects granted to us by our long-time allies for unstated reasons,” he said.

Despite alienating these friendly nations, the PM said, India has offered to help Sri Lanka in the face of the growing crisis.

“We express our respect and gratitude to them during this difficult time.  We are also working to re-establish old friendships with Japan.

“We call on the International Monetary Fund (IMF) to hold a summit to help unite our lending partners. Holding such a conference under the leadership of India, China and Japan will be a great strength to our country.  China and Japan have different credit approaches. It is our hope that some consensus on lending approaches can be reached through such a conference,” he said.

Commenting on a swap facility from China, Wickremesinghe said one of the conditions that came with the facility was that the funds could only be used if Sri Lanka had  enough foreign reserves for three months.

“We have not had foreign exchange reserves for three months since the loan was taken.  Our former officials took loans to deceive the country.  We will not be debt free under that condition. We have requested the Chinese government to consider removing that condition from the agreement that has been signed with them.

“We urge the Chinese government to look into the matter favourably,” he said. (Colombo/May07/2022)

COLOMBO (News 1st); A report by the Food and Agriculture Organization of the United Nations & the World Food Program has revealed that Sri Lanka will experience a further deterioration of food security over the next few months. “The domestic agricultural production and rising international prices, compounded by the ongoing economic crisis, are expected to Sri Lanka will experience further deterioration of food security – UN FAO Report

ECONOMYNEXT –  Sri Lanka is considering to grant tax relief and other benefits like housing loans for expatriate workers who sends their earnings through the official bank network Minister of Labour and Foreign Employment said.

Money is moving to unofficial channels such as Undiyal at higher premiums because the central bank is printing money creating forex shortages in the official banking system and exchange controls have been placed forcing them to go a free market at higher rates.

Sri Lanka’s official remittances have fell 52 percent in April to 249 million US dollars, compared to a year ago while they have fallen by 57 percent to 1 billion US dollars in the first four months of 2022, compared to the same period last year.

Manusha Nanayakkara, the newly appointed Minister of Labour and Foreign Employment has planned ambitious 500 million US dollar per month to boost foreign currency liquidity in the country.

“If we can increase it back up to 500 million US dollars, with these expatriate workers sending the money legally, we can solve some fundamental problems in the country,” Nanayakkara told a weekly cabinet briefing.

Nanayakkara said, the discussion is being held to give expatriate workers tax reliefs, duty relief, interest free housing loans to encourage them.

“And we will also start giving them discount cards to increase their trust and send money through legal procedures,”Nanayakkara said.

Sri Lanka is grappling with its worst economic crisis in the history. The dollar shortages have led to long queues for fuel and cooking gas. The dollar shortage has also deprived people of adequate medicines, cement, milk powders, and some foods which are imported.

“To solve the economic crisis we have at the moment, while getting the income of exports, one of the main ways to increase the foreign currency without taking loans is by increasing the foreign remittances,” Nanayakkara said.

“Due to various reasons, with these remittances not coming through legal channels. The remittances we had around 600 – 700 million US dollars has gone down to around 230 million US dollars by March, 2022.”

Until this month, a part of the unofficial remmittances were going for open account imports including for imports of oil. However buraucrats prefer money to come through the monopoly of the banking system.

Banking system also has a high transactions costs of about 10 to 15 rupees between buy and selling rates. (Colombo. June 07/2022)