Category: Sri Lanka

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Crisis-hit Lanka seeks foreign investments

The Minister said that the government is talking with several countries to get funds as soon as possible….reports Asian Lite News

 Sri Lanka is looking for investors that can bring in more than $2 billion into the central bank, Finance Minister Ali Sabry said.

Sabry said that the next few months will be difficult for Sri Lankans, reports Xinhua news agency.

“There is a need to attract investments in U.S. dollars into Sri Lanka’s central bank,” he said.

The Minister said that the government is talking with several countries to get funds as soon as possible.

“If that effort is successful and money comes to the central bank, it will help stop the depreciation and stabilise the rupee,” he said.

Amid the ongoing economic crisis, the Sri Lankan government decided last week to suspend repayment for all debts for an interim period till it has an orderly and consensual debt restructuring programme supported by the International Monetary Fund.

ALSO READ: Lankan exporters can now pay diesel in US dollars

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China assured help to resolve crisis: Mahinda

Sri Lankan Prime Minister Mahinda Rajapaksa

Facing mounting demands to step down by protestors for three weeks continuously, Sri Lankan Prime Minister Mahinda Rajapaksa has said China has assured help to solve the urgent economic crisis in the country.

Rajapaksa on Friday said in a telephone conversation with Chinese Prime Minister Li Keqiang, who assured him that China will support Sri Lanka for economic and social stability.

“Had a very productive conversation with Chinese Premier Li Keqiang. I reiterated #SriLanka’s gratitude to #China for the longstanding friendship and for assuring support to address some of the crucial needs affecting peoples’ livelihoods and well-being in these difficult times,” the Sri Lankan Prime Minister tweeted following the telephone conversation with his Chinese counterpart.

The Sri Lankan Prime Minister’s Office said the Chinese Premier made this comment in a phone conversation with Rajapaksa on Friday.

The Prime Minister’s Office issuing a statement said Li Keqiang has noted that China understands the difficulties and challenges that Sri Lanka was facing, and it will do its best to uplift the livelihoods of the people of Sri Lanka.

“We understand the difficulties you are going through. We will work together to avoid these difficulties,” the Prime Minister’s Office added.

Chinese Prime Minister has guaranteed that both the Sri Lankan and Chinese governments will work together in solving the urgent financial issues, the Prime Minister’s Office said.

The two leaders also discussed on further talks on the Free Trade Agreement, reducing Sri Lanka’s trade deficit, and attracting more Chinese tourists to the country.

Chinese leader’s assurance comes in the wake of Beijing’s pledge on Thursday of an urgent emergency humanitarian aid of RMB 200 million which would be provided to Sri Lanka, China International Development Cooperation Agency had announced that the humanitarian aid will include rice, medicines, production materials and other essentials, the Foreign Affairs Ministry said on Friday.

However, China has been keeping mum on the request of Sri Lanka, one of the members of 146 Belt and Road initiative, for debt rescheduling and $2.5 billion assistance.

ALSO READ: Lankan exporters can now pay diesel in US dollars

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PM Rajapaksa expresses distress over Rambukkana violence

Sri Lanka police imposed a curfew in the Rambukkana Police Division until further notice following unrest in the country with the clash between protesters and police in the city….reports Asian Lite News

Sri Lankan Prime Minister Mahinda Rajapaksa on Wednesday said that he is deeply distressed following the violence that took place in Rambukkana town.

Taking to Twitter, Rajapaksa urged the protestors to engage in their civic right with equal respect and honour.

“Deeply distressed following the tragedy in Rambukkana. I have every confidence that a strict, impartial investigation will be carried out by @SL_PoliceMedia who’ve always served #lka with utmost honor. I urge protesters to engage in their civic right with equal respect & honour,” Rajapaksa tweeted.

Sri Lanka police imposed a curfew in the Rambukkana Police Division until further notice following unrest in the country with the clash between protesters and police in the city.

“Police curfew has been imposed in the Rambukkana Police Division until further notice,” Police spokesperson said.

This action comes after one person died and 24 people were injured by the gunshot after the protesters and police clashed in Rambukkana town of Sri Lanka on Tuesday afternoon.

The protesters were agitating in Rambukkana against the decision of increasing the fuel prices again, Daily Mirror reported.

According to the publication, in the videos, the protestors were seen carrying the wounded people and rushing them to the hospital.

A protestor, in a video, also blamed the police for this incident. They have surrounded the Rambukkana Police Station and are hurling stones at the building, as reported by Daily mirror.

Earlier, Sri Lankan police had shot tear gas at the protesters to disperse them after the 15-hour protest against the fuel price hike, the report added.

On Monday, the Ceylon Petroleum Corporation (CPP) decided to increase fuel prices. A litre of petrol 92 octane has been increased by Rs 84 while a litre of petrol 95 octane by Rs 90, a litre of Auto Diesel by Rs 113 and a litre of super diesel has been increased by Rs 75.

Meanwhile, the US ambassador to Sri Lanka, Julie Chung called for restraint and calm after reports of violence emerged from the town.

“I am deeply saddened by the horrible news coming out of Rambukkana. I condemn any violence – whether against protesters or police – and call for restraint and calm from all sides. A full, transparent investigation is essential and the people’s right to peaceful protest must be upheld,” Ambassador Chung tweeted.

Sri Lanka is facing its worst economic crisis since independence with food and fuel shortages, soaring prices and power cuts affecting a large number of the people, resulting in massive protests over the government’s handling of the situation.

The economic situation has led to huge protests with demands for the resignation of Prime Minister Mahinda Rajapaksa and President Gotabaya Rajapaksa. (ANI)

ALSO READ: IMF lauds steps taken by Lanka to stabilise economy

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One dead, 12 injured in protests in Lanka

The police first used tear gas to disperse the crowd and later opened fire, killing one and injuring 12 others….reports Asian Lite News

One person was killed while 12 others were injured as police fired upon protesters who took to the streets in Central Sri Lanka against the overnight fuel price hike in the crisis-hit island nation.

Protests erupted around the country on Tuesday after the state-owned Ceylon Petroleum Corporation (CPC) increased fuel prices to record high w.e.f. Monday midnight.

In Rambukka, 85 km from Colombo, protesters demanded fuel stored at filling stations at old rates. They later blocked all the roads and railway lines in Rambukka, completely cutting off the access to the city.

The police first used tear gas to disperse the crowd and later opened fire, killing one and injuring 12 others.

The police said they had to open fire as the protesters had turned violent.

“The protesters had blocked the railway track with a fuel tanker. The crowd tried to set the tanker on fire and the police had to shoot to control the mob,” SSP Nihal Thalduwa, media spokesman, said.

The country’s public transportation system came to a complete standstill after protesters around the nation blocked roads in major cities throughout the day.

Private bus owners withdrew their buses in protest against the fuel price hike, demanding the government to step down.

The CPC earlier announced LKR 84 increase in 92 octane petrol, matching the IOC price at LKR 338 per litre. Diesel price was also raised to LKR 289, an increase of LKR 113.

Following the fuel price hike, the country’s bus fair was increased by 35 per cent while the rates of a number of food items were also raised.

Fuel prices have been northbound with the depreciation of the Sri Lankan rupee against the US dollar since early March, the time when the US dollar allowed free floating.

ALSO READ: The fall of Lanka: A lesson for debt-trapped nations

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The fall of Lanka: A lesson for debt-trapped nations

Countries in the African continent cumulatively owe China a debt of $145 billion, while a sizeable payment of $8 billion needs to be made in the present year…reports Asian Lite News

Last year in September, Sri Lanka’s precariously maintained economy reached the verge of collapse, and the Rajapaksa led government was forced to declare a state of economic emergency in the island nation. Sri Lanka is currently faced with the worst financial crisis it has seen since its independence in 1948.

The South Asian country, since then, attempted to handle the crisis, by way of controlling the supply chain of staple food items, as well as price control to keep inflation in check; however, at this point in time, the island stands at the brink of economic ruin, both on the domestic front as well as on the international platform- unable to control inflation and incapable of repaying public debt.

At the heart of the country’s crisis lies the acute shortage of foreign currency, as well as the massive amounts of foreign debt it has raked up over the years.

When the Rajapaksa government came to power in 2019, they inevitably inherited the pre-existing debt problem that the country was facing under the previous government’s failing regime, only made worse by the Covid-19 pandemic in the following year.

The country’s primary source of revenue dried up, as tourism took an astounding hit following the global Covid-19 crisis and the subsequent travel restrictions; it was only a matter of time before the already indebted country fell.

The government’s inability to effectively deal with the breakdown of the economy — with scarce foreign reserves left to import even food or fuel — has left the population disgruntled, disillusioned by the government, and vulnerable to ruin.

In late January, 2022, when the country was spending the last of its foreign currency to pay off $500 million of sovereign debt, the people were left exposed to domestic economic upheaval as prices of basic commodities continued to soar, with Colombo’s inability to tackle the crisis on the domestic front and protect its citizens.

However, it is of interest to note that while the pandemic proved to be the final nail in the coffin for the island state, Sri Lanka has long been hailed as a “country trapped in debt”, with no viable plan of action in place to ever pay off the huge loans it has amassed over the years.

The executive director at the Institute of Policy Studies of Sri Lanka went on record, noting that the country has seen government after government issuing sovereign bonds, with no realistic concerns of payment of said bonds. Their entire foreign currency reserve has been built on virtually unsustainable borrowing from all across the world.

But this is not the first time that Sri Lanka’s debts have brought the country in hot waters. Back in 2017, Sri Lanka was brought to limelight following the Hambantota Port controversy. The port, which was constructed with Chinese investments and loans north of $1 billion, failed to see much business generated in the 7 years since being opened.

The Sri Lankan government found itself backed into a corner with no realistic possibility of being able to repay the loan to China, eventually reached the controversial decision to give the major ownership of the port to China (a hefty 70 per cent) on a 99-year lease in order to raise the required money for repayment.

The Hambantota Port incident has emerged as a global prime example of what happens when smaller, middle to low-income countries decide to get into bed with the dragon.

While the port was just the beginning, the country’s current financial ruin has cemented the eventual outcome of countries which become debt-ridden to China; if anything, Sri Lanka’s crisis should serve as a very real warning call to all countries dependent on Chinese influx of investment.

Xi Jinping’s bid to gain legitimacy on the global stage and to sculpt China into a world power has been streamlined by the country’s adoption of an intensive soft power policy. As part of this geopolitical strategy, Xi’s pet project introduced in 2013, the Belt and Road Initiative, has amassed 146 countries as signatories up until March, 2022.

As the frontrunner of the soft power policy being employed by the People’s Republic of China, BRI agreements typically result in massive amounts of investments and loans being funnelled into the economies of the signatory states; as China’s interfering presence continues to quietly creep into the country’s affairs under the guise of bringing in resources and business.

While China only makes up 10 per cent of Sri Lanka’s total debt amount, its debt-trap policy is widely recognized by economists and policy experts all across the world. With China’s habit of swooping in and offering loans worth undisclosed amounts to countries that can rarely afford to repay them, its good Samaritan facade cracks as the world grows increasingly suspicious of its intentions.

China’s position as a leading global lender is undeniable, however, the conditions of bilateral loan agreements signed with China are such, that the accompanying non-disclosure agreements ensure the restriction on the rest of the world from finding out the total debt owed China cumulatively, let alone that owed by a single nation.

A study reported that the total Chinese investment in Sri Lanka vis-a-vis infrastructure stood at a whopping $12.1 billion between 2009-2016; however, owing to a lack of clarity regarding what qualifies as a BRI project, there is no official data which can reliably give an estimate of Chinese investment in the country.

Sri Lanka, while mismanaged by its own government, doesn’t even fall into the bracket of nations that are in over their heads with China, in terms of debt. Middle and low-income economies are often left struggling to repay their debts, and inevitably fall victim to interference and influence, unable to resist the pressure from Beijing.

A study in 2020 found that the country had given loans and trade credit to over 150 countries around the globe, totalling an amount of nearly $1.5 trillion.

China’s lending mechanism has often been called out for its tendency to dole out “secret loans”, leading to a hidden-debt problem, where neither the debtors nor international organisations knows exactly how much money is owed to China, and under what terms.

Following the pandemic, more countries have continued to fall for China’s superficially attractive loans and aid. Defaulting on loan repayments could possibly allow China to have control over the borrowing nations’ economic and foreign policies, making it a topic for international concern.

Quick to jump to countries’ aid, China also comes strapped with interest rates that are fourfold as compared to those of the World Bank or IMF.

Termed as “debt-trap diplomacy”, this concept has long been associated with China’s lending practices, where smaller countries fall victim to untenably large loans which they’re unable to repay; resulting in undue political and financial leverage the creditor nation comes to hold over the country.

China’s Belt and Road Initiative alone has raked up $385,000,000,000 in hidden debts from lower-and middle-income countries who are signatories of the project.

More than 40 countries have debt exposure the size of 10 per cent their GDP as a consequence of these hidden debts. Djibouti, Laos, Zambia and Kyrgyzstan’s debts are as high as at least 20 per cent of their annual GDP.

Consequences of China’s duplicitous investments aren’t just limited to the debtors’ economies, as indigenous populations often perceive Chinese backed industries and businesses to be harmful for local interests. Nepal, one of the BRI’s signatories, has been facing large-scale protests against Chinese involvement in the country for years now; subsequently, other South-Asian countries such as Myanmar and Laos have also been vocal about locals being exploited over Chinese interests in the country.

China has also climbed the ladder to become Africa’s largest trading partner, and its no surprise that regions containing more Chinese funded projects are more likely to observe civil protests against these investments.

Countries in the African continent cumulatively owe China a debt of $145 billion, while a sizeable payment of $8 billion needs to be made in the present year.

It’s imperative for low-income nations to proceed with more caution, as Sri Lanka’s case clearly depicts China’s inflexibility to aid a falling ally, as they refused the island’s request to restructure the debt payments to be made to China.

Countries across the African and Asian continents are already entrapped with crushing amounts of debt to the People’s Republic that they cannot hope to repay in the foreseeable future, however, the example of Sri Lanka calls for attention for states to recognize the glaring reality — that the choice to get in deeper with the PRC can only result in the eventual ruin of their economic, and national integrity.

ALSO READ-Shehbaz seeks Xi’s support on Karachi rail project

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New Cabinet in Lanka

President Gotabaya and Prime Minister Mahinda will continue, while some new faces will be taken in as Cabinet ministers, reports Ashoke Raj

Amid the ongoing anti-government protests in Sri Lanka following the economic and political crisis, President Gotabaya Rajapaksa is all set to draft fresh blood in the council of ministers in the island nation while it has been learnt that the size of the Cabinet would remain small to ensure smooth functioning of the government.

The swearing-in of the ministers would be taking place today amid spiralling protests against the government.

“New cabinet is to be sworn in today. President and PM (Mahinda Rajapaksa) to continue. Some new and young faces will be taken in as Cabinet ministers,” a ruling party MP told ANI.

Sources also told ANI that in the recent meeting, the “President told the members of his political alliance to constitute a limited Cabinet to run the government”.

The entire Sri Lankan Cabinet resigned in the first week of April due to massive anti-government protests.

An opposition party in Sri Lanka opposed the decision of the President to appoint a new Cabinet with inexperienced ministers.

President is, incidentally, constituting a new Cabinet seemingly under the pressure of the protesters in the country and also ahead of the Parliament session.

Sri Lankan Parliament is going to meet on April 19 with new Cabinet ministers while the Opposition is likely to step up pressure on the back of the mounting protests.

In the last Parliament session, ruling party MPs had said, “President is not going to resign from his post before completing his tenure.”

Sri Lanka is facing a foreign exchange shortage, which has affected its capacity to import food and fuel. The shortage of essential goods forced Sri Lanka to seek assistance from friendly countries.

The economic situation has led to huge protests with demands for the resignation of Prime Minister Mahinda Rajapaksa and President Gotabaya Rajapaksa.

Earlier, Prime Minister Mahinda Rajapaksa in a special address to the nation had requested people to remain patient and stop taking to the streets in order to enable the government to resolve the situation.

Stock market closing

Sri Lanka’s largest business group Ceylon Chamber of Commerce has opposed a decision by the Securities and Exchange Commission (SEC) to close the stock market for five working days.

By shutting down the stock market, potential sellers are prevented from exiting the market at the time and price of their choice, and potential buyers are prevented from acquiring shares, the Chamber said on Sunday.

“All investors will be unable to carry out valuations and mark to market their respective investment portfolios,” Chairman of the Chamber, Vish Govindasamy said in a letter to SEC Chairman Viraj Dayaratne.

Govindasamy said there are circuit breakers in place to arrest a sharp movement in market indices, and the Chamber believes that there is no need to close the market in this manner sending out a wrong signal to all investors across the globe, Xinhua news agency reported.

“Therefore, we earnestly request you to reconsider this move and direct the Colombo Stock Exchange to operate freely even amid challenging market conditions safeguarding its reputation as an investor-friendly stock market,” he added.

On Saturday, the SEC announced that it had decided to direct the Colombo Stock Exchange to temporarily close the stock market for a period of five business days starting April 18.

The SEC said it would be in the best interests of investors as well as other market participants if they are afforded an opportunity to have more clarity and understanding of the economic conditions presently prevalent, in order for them to make informed investment decisions.

The Colombo Stock Exchange has been adversely affected by the economic woes in the South Asian country and the index has fallen 26 per cent by the end of March compared to the end of 2021.

ALSO READ-India boots China out of 3 Lankan energy projects

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India boots China out of 3 Lankan energy projects

The projects, initially awarded to China were cancelled and an MoU was signed with India when New Delhi said their security would be under threat if those projects were handled by China, reports R. R. M. Lilani

Following the announcement by the Sri Lankan government that it has defaulted on its $51 billion foreign debt, India says it is willing to commit another $2 billion loan to the island nation, piquing China’s interest in the country and jeopardizing its ambitious BRI roadmap.

India also took over three solar hybrid power projects in Sri Lanka’s Northern Province, which would be installed on three islands. It was initially awarded to China, but Sri Lanka cancelled the deal and signed a Memorandum of Understanding with India when India said their security would be under threat if those projects were handled by China. It was tit-for-tat when China allegedly lobbied against India developing the East Container Terminal at the Port of Colombo, which Sri Lanka eventually cancelled.

Currently, the Sri Lankan government has sent a team of financial experts to the International Monetary Fund in Washington, D.C., including former Justice Minister turned Finance Minister Ali Sabry, to seek between $3bn to $4bn bailout, but India has come out to bail out Sri Lanka further sidetracking China, which has remained silent on the Rajapaksas’ plea to restructure debt payments to them.

China has also announced plans to provide a $1 billion loan in addition to the $1.5 billion loan it has provided since the Covid-19 situation paralysed the country’s economy but the long wait continues.

Unavoidable shockwaves have suffocated China’s BRI initiatives in Pakistan, the Maldives, Bangladesh, and Nepal. Nepal’s financial crisis is on the verge of meltdown.

The US has accused China of using “debt diplomacy” to increase the reliance of developing countries on Beijing in recent years. These countries are at a crossroads in their economic development. Both Sri Lanka and Pakistan, which are caught up in China’s Belt and Road Initiative, are in dire financial straits as inflation rises. As of now, China has made no revenue-generating investments in these two countries, indicating that Chinese President Xi Jinping is adamant about providing more funds to these two failing states. China has yet to follow through on a promise to re-issue $4bn in loans that Pakistan repaid in late March, and it has yet to respond to Sri Lanka’s request for $1bn in credit support as well as to restructure the past debt repayments plea Sri Lanka tabled last year.

According to the Maritime Executive website, the Chinese Ministry of Commerce (MOFCOM) has put a halt to rapid overseas expansion in its 14th Five-Year Plan (FYP) for 2021 to 2025. China plans to invest $550 billion (including spending in non-BRI countries) during the period, a 25 per cent decrease from the $740 billion spent from 2016 to 2020. Furthermore, Chinese contracting volume is expected to fall from $800 billion in the previous fiscal year to $700 billion in this fiscal year. It goes on to say that this could be BRI’s moment of reckoning.

Despite some success after eight years of implementation, BRI has reached a decision point. Some participating countries are reconsidering some high-profile BRI projects, fearing that the risks may outweigh the benefits.

The website states further, a recent AidData report capturing 13,427 Chinese projects across 165 countries over an 18-year period discovered that 35 per cent of the BRI infrastructure project portfolio has encountered major implementation problems. Corruption scandals, labour violations, environmental hazards, and public protests are among the leading causes. Surprisingly, the researchers discovered that infrastructure projects outside of BRI had fewer implementation issues.

Before the Easter Sunday disaster and the Pandemic, Sri Lanka’s financial situation had been mismanaged for over a decade. But last year’s fertilizer shortages exacerbated by bad policy necessitated more borrowing. Bangladesh also paid a currency swap of USD 2 million. There were no migrant workers bringing in money and no locally produced goods. Sri Lanka, which has a lot of paddy fields, had to import rice from Myanmar, India, and China. These are the main reasons why Sri Lankans took to the streets to demonstrate against the Rajapaksa administration.In addition to that, the East Container Terminal (ECT) that was to be funded and developed by India, Japan and Sri Lanka jointly was called off. The venture was estimated to be around USD 500 million signed in May 2019 before Gotabaya Rajapaksa was elected as the President of Sri Lanka. Following a major protest alleged to be backed by China, the project was shelved.

Many experts say if that project had taken shape in 2020, the ECT would have reaped benefits for Sri Lanka. Also, long before the Chinese arrived, the US-Canada signed a contract for an LNG project at the Hambantota Port, but the former Maithri-Ranil government cancelled it and handed the port over to China on a 99-year lease.

Canada’s Sithe Global Power and the Board of Investment of Sri Lanka (BOI) signed an exclusive MOU in 2012 for the LNG facility, gas pipeline, and 500MW-1000MW power plant project in Hambantota.The total cost of the project was USD1.4 billion. Greenlink Global Consulting Inc (Greenlink), the local partner of Sithe Global Power Development Inc — a wholly owned subsidiary of the Blackstone Group Inc USA — last year wrote to President Rajapaksa, requesting a review of the awarding of the Kerawalapitiya/Hambantota LNG project tender to a Chinese firm. The energy crisis would not have occurred if this LNG project had been completed. This matter has been ignored totally however. In addition, due to the current situation in Sri Lanka, which includes the pandemic, geopolitical tensions, and unrest, China’s $1.4 billion Port City project is facing uncertainty too. There are no signs that international investors have come to invest despite the fact that it has been advertised overseas. The project is expected to cost USD14 billion, with the majority of the money coming from potential investors.

The Chinese reclaimed 269 hectares of land on the Indian Ocean for Sri Lanka and in exchange Chinareceived 116 hectares of the land there on a 99-year lease.

ALSO READ: India building better connectivity among neighbouring nations

Today, the Rajapaksa government wants India to invest in the potential Economic zone of Colombo, which in fact irked the Indians for lending a piece of that land for China on 99-year lease. They are unsure of the Port City Commission and which way it would serve the Chinese and the other investors in parallel. However, India has taken the lead in assisting Sri Lanka, and in addition to the new $2 billion loan plan, India has also sent a consignment of 11,000 MT rice, which arrived two days ago under the previous $1 billion concessional Indian Credit Facility, and was ceremonially handed over to the Sri Lankan government by officials from the Indian High Commission. In addition to the consignment, the Credit Facility has received 5000 MT of rice in the last few days. With this, the Indian State Trading Corporation has delivered 16,000 MT of rice out of a total of 40,000 MT that will be imported from India.

On March 17, 2022, the Government of Sri Lanka and the State Bank of India signed a $1bn credit facility agreement. Rice delivery was enacted in less than a month after the agreement was signed. The supply is part of India’s multi-pronged support for Sri Lanka over the last few months, which includes timely fuel deliveries, other forms of economic and forex assistance, and so on, according to the Indian High commission.Meanwhile, the India Sri Lanka Foundation’s (ISLF) ‘Sinidu’ Project, which aims to meet the sanitary needs of underprivileged women, has received funding of Rs 500, 000 for the production of low-cost sanitary napkins using Indian machines. According to India, the ISLF has funded over 300 projects totalling SLR.150 mn, with 20 projects currently in the works in the areas of research, art and culture, social work, science and technology, and so on.

Apart from that, the USD 500mn worth of fuel that has arrived in Sri Lanka in the last 50 days totals nearly 200,000 MT, including a consignment of 40,000 MT by Indian Oil Corporation in February 2022, which was delivered outside the line of credit facility.

Aside from the $2.5bn loan agreed by Dr. S.Jaishankar, India’s foreign minister, pledged India’s continued support for Sri Lanka’s economic recovery. India’s partnership with Sri Lanka is based on the ‘Neighbourhood First’ approach and the S.A.G.A.R (Security and Growth for All in the Region) doctrine, according to India.

A wide range of bilateral agreements were also signed. The Maritime Rescue Coordination Center; Hybrid Power Projects in Three Islands Off Jaffna; Cooperation in the Development of Fisheries Harbours in Sri Lanka; MOU for the establishment of Modern Computer Labs and Smart Boards with Customized Curriculum Software in 200 Galle District Schools; and MOU between Sushma SwarajInstitute of Foreign Service and Bandaranaike International Diplomatic Training Institute.

The Indian government reclaiming its position in Sri Lanka has been widely interpreted as an attempt to prevent China from making further inroads. India, which is at odds with China on its border, has become part of China’s strategy to be isolated, encircling it with Chinese projects but the chances are slimming. China is being countered by India, the United States, and Japan, and if the China favoured Rajapaksas are ousted in the wake of the national crisis and people’s protests that have lasted more than six days, China’s grip on Sri Lanka could be further weakened.

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Lanka seeks IMF bailout

Sri Lanka has been undergoing a serious economic crisis and foreign reserves stand below $2 billion…reports Asian Lite News

The Sri Lankan government has sent a delegation to the International Monetary Fund (IMF) for discussions over ways to get the lender’s loans.

The delegation, led by Finance Minister Ali Sabry, also includes Governor of the Central Bank, Nandalal Weerasinghe was sent on Sunday. The delegation is to visit the IMF headquarters and hold discussions in the next few days.

Sabry told media they expect to receive around $4 billion from the IMF in five tranches if the discussions are successful, Xinhua news agency reported.

Sri Lanka has been undergoing a serious economic crisis and foreign reserves stand below $2 billion.

Sri Lanka’s Finance Ministry said on Tuesday that the government had decided to suspend normal debt servicing of all affected debts for an interim period till it puts together an orderly and consensual restructuring programme supported by the IMF.

ALSO READ-The long road to Lanka’s $52 billion debt default

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The long road to Lanka’s $52 billion debt default

Currently the nation is supposed to have about $500 million in foreign exchange reserves, which is pennies for a country, a report by Rahul Kumar

Sri Lanka began its Sinhala and Tamil New Year celebrations on a sombre note. In his new year message on Thursday, President Gotabaya Rajapaksa said: “The current economic and global crises have become the biggest challenge faced by us Sri Lankans in our recent history. We should overcome this challenge with unity and better understanding”.

The President’s message came two days after the nation announced that it will default on its $51 billion loans. The island nation’s unprecedented catastrophe is its first such crisis and a big ignominy for the government.

Appeal for loans and aid

The country’s new Finance Minister Ali Sabry said that Sri Lanka needs between $3 billion to $4 billion to pull itself out of the economic crisis and has pinned hope on the International Monetary Fund (IMF) for the same. He also said that some of the money will come from governments and other lenders as well.

Newspaper Ceylon Today said: “Sabry, along with newly appointed central bank Governor Nandalal Weerasinghe, is a key member of Rajapaksa’s team for bailout talks with the IMF. The funds are crucial to the success of a debt restructuring process initiated by the island nation this week after suspending some outstanding loan and interest payments.”

Heightened political activity

The misgovernance and the precipitous decline in Sri Lanka’s fortunes have the opposition baying for the powerful Rajapaksa family. Opposition leader Sajith Premadasa plans to move three motions before the parliament. One is to impeach President Rajapaksa who has stubbornly refused to quit despite public pressure. The second is to move a no-confidence motion against the government and the third is to move the parliament to real the 20th amendment that bestows executive powers on the president undermining the parliament and the prime minister.

Rajapaka’s political allies — the Sri Lanka Freedom Party (SLFP) led by Maithripapa Sirisena also plans to make a clean break from the Rajapaksas. Just a few days earlier Sirisena and his party members were holding talks with the president to convince him to quit and hand over the country to an all-party administration.

The road to bankruptcy

Currently the nation is supposed to have about $500 million in foreign exchange reserves, which is pennies for a country. Because of low forex reserves since the middle of last year, the island nation had to steadily reduce imports of food and other essentials. It also had to reduce oil imports, completely stopping these at times. All these measures eventually lead to shutting down of its only oil refinery, long power cuts, queues for fuel and a collapse of its economy.

The country is facing a food shortage partly because of disastrous governance. Last year the president decided to make Sri Lanka the first organic nation in the world and banned the import of chemical fertilisers. This decision brought down its food production considerably, causing a food crisis and resentment among farmers.


China’s huge infrastructure projects were tom-tommed by the Rajapaksas and brought in large amounts of investments but did not support its economy. Experts say the Chinese investment, also called debt diplomacy, in the Mattala Rajapaksa International Airport (MRIA), the Hambantota port and the Colombo Port City only added to the debt burden of Colombo. Experts add that such mega infrastructure investments for such a small nation are not sustainable.

The April 2019 Sunday Easter bombings by the global terror organisations eroded international tourist confidence leading to a loss of tourism earnings. The Covid-19 virus and the subsequent lockdowns across the world added to the woes, wreaking havoc on the nation’s tourism-based economy putting a complete squeeze on its foreign exchange earnings.

Chinese games

With China not responding to Colombo’s appeals of providing it $2.5 billion in financial aid, Sri Lanka has begun talking to the IMF. During Chinese Foreign Minister Wang Yi’s recent visit to Colombo, Sri Lanka had appealed to the communist leadership for restructuring its loans. Despite the bonhomie between China and the Rajapaksa family, Beijing has simply ignored both the appeals–restructuring loans and releasing financial aid–by a fast friend and ally.

To add to the country’s discomfort, China had in fact sent a ship of contaminated organic fertiliser. After Sri Lanka rejected to take delivery of the poor-quality fertiliser, China anchored the ship in Sri Lankan waters for months in a coercive attempt. Eventually, China levied a fine on Sri Lanka and the ship initiated arbitration proceedings in a Singapore tribunal. India had to step in to provide organic fertiliser to Sri Lankan farmers.

Indian support

The then Finance Minister Basil Rakapaksa flew into Delhi to meet with External Affairs Minister S Jaishankar and Finance Minister Nirmala Sitharaman in October 2021. Soon after his visit, India readied a $1.5 billion line of credit package consisting of food, fuel and other essential items, which have bailed out Sri Lanka till now. Sri Lankan cricketers and opposition leader Sajith Premadasa have acknowledged that India stood by the people of Sri Lanka in its time of need.

Just yesterday, New Delhi said that it is thinking of providing another $2 billion in aid.

Next steps

Sri Lanka now has an enormous burden on its hands. It has to pacify its people and instill confidence among them. It has to reduce the lines for fuel, quickly deliver food to people and bring down prices. All of these measures are to ward off starvation and likely humanitarian problems.

At another level, Sri Lanka also has to improve its governance and strengthen its economy. It will have to generate local employment, begin manufacturing goods, support the farmers with fertilisers, bring in tourists, utilise its vast coastline for marine industry and start to export goods and services that it has not yet tapped.

Meanwhile, people continue to protest and camp at the iconic Galle Face seafront.

(The content is being carried under an arrangement with indianarrative.com)

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Stock exchange to stop trading for 5 days

A supporter of Gotabaya Rajapaksa cheers along the street in Colombo Sri Lanka.

The statement also said that the SEC has “evaluated the impact the present situation in the country could have on the stock market, in particular the ability to conduct an orderly and fair market for trading in securities.”..reports Asian Lite News

In midst of the country’s worst economic crisis, Sri Lanka’s Colombo Stock Exchange (CSE), on Saturday has been directed to temporarily close the stock market for five days starting April 18.

The Securities and Exchange Commission (CSE) of Sri Lanka made the announcement in a statement saying that it is “of the view that it would be in the best interests of investors as well as other market participants if they are afforded an opportunity to have more clarity and understanding of the economic conditions presently prevalent, in order for them to make informed investment decisions.”

“Therefore, acting in terms of the provisions contained in Section 30 of the Securities and Exchange Commission Act No. 19 of 2021, the SEC has decided to direct the CSE to temporarily close the stock market for a period of five business days commencing from 18th April 2022,” the statement read.

The statement also said that the SEC has “evaluated the impact the present situation in the country could have on the stock market, in particular the ability to conduct an orderly and fair market for trading in securities.”

It informed that many other stakeholders of the securities market including the Colombo Stock Brokers Association have also sought the temporary closure of the market on grounds of the ongoing economic crisis in the country.

Sri Lanka’s economy has been in a free fall since the onset of the COVID-19 pandemic, leading to the crash in the tourism sector, which was followed by a crash in the agriculture sector after the government’s move to ban all chemical fertilizers in a bid to make the Island country’s agriculture fully organic.

Sri Lanka is consequently facing a foreign exchange shortage, which has affected its capacity to import food and fuel, as well as resulted in the country defaulting on the entirety of its foreign debt. (ANI)

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