Features
A PATHFINDER PERSPECTIVE ON THE ECONOMY
SRI LANKA HAS TO SET AN URGENT GLIDE PATH TO THE IMF:
The Sri Lankan authorities have been able to achieve stable macro-economic indicators despite the severe economic dislocation caused by the pandemic. Inflation has remained well within the 4-6% target range; and the improvement of the trade deficit has had a positive impact on the current account of the Balance of Payments. In addition, interest rates are at historically low levels and there has been some stability in the exchange rate. As in most other countries, growth has been negative, due to both demand and supply shocks in the domestic economy and the decline of external demand due to the slowdown of the global economy. Sri Lanka’s performance has been better than a number of other countries in the region.
However, the model that has underpinned the significant degree of stability in macro-economic indicators to date, is now coming under considerable pressure. The extremely low interest rates have been maintained through administrative action (financial repression). The under-subscription in bill and bond auctions are signs that this policy is coming under stress in a context where credit to government remains high while private sector credit is picking up. At the same time, the currency has also come under pressure. The SLR has been propped up by restrictions on imports and capital outflows. Recently, a ban has also been imposed on forward transactions in the forex market. Despite (or because of) this, there continues to be stress in the forex market as imports rise with the bounce-back of the economy from its contraction in 2020. In addition, the prices of oil and other key commodity imports have been rising in global markets increasing the demand for dollars in the local forex market at a time when supply remains constrained, due to a shortage of foreign earnings/inflows, borrowed or non-borrowed.
The import and capital restrictions currently in place have a negative impact on growth, employment and incomes at a time when priority needs to be attached to bouncing back from the economic scarring inflicted by the pandemic.
The most imminent threat to macro-economic stability, which can affect the whole economy, comes from the Balance of Payments, the external payments in particular. Sri Lanka’s external debt dynamics are extremely challenging over the next six months and urgent action is needed to address them and mitigate collateral damage which can have wide-ranging social and political ramifications. Gross foreign external reserves amounted to USD 5.7 billion (including USD 400 million in gold) as at December 31, 2020. Total debt-related payments during the next six months (February – July 2021) comprise: an International Sovereign Bond (ISB) maturity of USD 1 billion; SLDB maturities of USD 980 million; and interest payments of USD 482 million. In addition, the Reserve Bank of India (RBI) SARC SWAP of USD 400 million would need to be repaid this month (February 2021). This is intended to be a short term facility and cannot be extended further without staff-level agreement on an IMF Arrangement.
In normal circumstances, the expectation is that SLBDs would be rolled over. However, only 25 percent of the maturities of USD 200 million was rolled over at the last auction. This reflects the severe scarcity of Forex in the market. There is uncertainty, therefore, regarding how much of the maturing SLDBs of USD 980mn can be rolled over during the next six months. Any shortfall will deplete the external reserves. The shortage of foreign exchange is also likely to adversely affect the rollover of short term SWAPs with FCBUs which will be maturing over the next six months.
The upshot of all this is that there is a strong possibility that reserves will fall to extremely dangerous levels within the next six months (by July 2021). Unless there are significant inflows in the meantime, there will have to be severe compression of domestic absorption (consumption and investment), i.e., very painful austerity. Instead of a recovery, the economy could well experience further contraction. It becomes important, therefore, to examine the likelihood of inflows which would serve to offset the heavy debt-servicing burden over the next six months. Sri Lanka’s development partners (multi-lateral and bilateral) are expected to disburse USD 1.7 billion during the course of the whole of 2021. Some of this would be flowing in over the next six months. However, because this is project and programme lending, it would not be possible to utilize this funding to boost the external reserve position. Furthermore, the rating downgrades have meant that Sri Lanka is no longer able to access international capital markets at affordable rates (currently 15 percent) thereby curtailing a potential source of financing.
Specific sources, which have been announced by the authorities to fill the external financing gap, include the following:
* Term loan from the China Development Bank : USD 700 million
– SWAP facility from the People’s Bank of China: Yuan 10 billion; equivalent to USD1.5 billion (this facility could have conditions that will constrain its capacity to bolster usable reserves)
* SWAP facility from the RBI: USD 1 billion (this facility is tied to Port development and removal of some import restrictions complicating the completion of negotiations).
The delay in the completion of these transactions seems to indicate that there are challenges in each of these negotiations. Even if all three of these facilities materialize, it is extremely unlikely that it would be possible to get sustained bilateral support of this nature in the magnitudes required to meet the country’s debt obligations of USD 23 billion over 2021-2025. Hence one needs an approach that unlocks a wider base for sourcing external financing.
The second option is to seek the support of the IMF. This will also serve to leverage a number of other sources of external financing. Over 70 countries have been assisted by the IMF through the Emergency Facilities established by the Fund to provide countries with fast-disbursing financing to address the impact of the pandemic. Sri Lanka would be eligible for USD 800 million from the Rapid Financing Initiative. An arrangement with the IMF can also trigger direct budgetary support from the ADB (USD 500 million) and the World Bank (about USD 300 million). It can also pave the way for a rating upgrade and eventually regaining access to international capital markets.
Anchoring policies to an IMF arrangement would also provide foreign investors with greater confidence to invest in the country. However, in the present global and domestic climate, it is unrealistic to expect that FDI will play a major role in filling the external financing gap, particularly in the short term. It is also noteworthy that it is difficult to utilize FDI to give a direct boost to gross official external reserves as much of it would flow out of the country in the form of imports and other payments incurred by the foreign investor. However, in the medium term, FDI can increase the capacity to service debt by contributing to an increase in the production of tradables which would earn or save foreign exchange.
For IMF support to be secured, there has to be a clear medium term plan to achieve debt sustainability. The Fund’s Articles do not permit it to lend to countries where it cannot certify that the debt is sustainable. At present, the IMF finds itself unable to certify that this is so. All options would need to be considered including fiscal adjustment, as well as a market- friendly re-profiling of Sri Lanka’s external debt through an extension of maturities and some relief on coupon payments. This would serve to create some space both in the Government Budget and the Balance of Payments for growth-oriented stabilization.
It is noteworthy that the IMF is currently advocating and supporting a growth-oriented approach to stabilization with a back loading of adjustment. It must be pointed out, however, that Sri Lanka does not have a painless glide path to stabilize the economy. Kicking the can down the road would only serve to increase the severity of the austerity when it is inevitably imposed.
It is crucial that there is early and decisive action as a very disruptive hard default, involving hair-cuts for creditors, could well be looming on the horizon. There are signs that Sri Lanka is facing solvency rather than liquidity challenges. As experienced in other countries, such a default usually means soaring interest rates, a collapse of the currency and severe belt-tightening, which tends to impact the poor and vulnerable disproportionately with unpredictable social and political ramifications.
The longer-term solution for achieving sustainable debt dynamics involves running a primary surplus in the budget and promoting an accelerated growth trajectory.This involves not only stabilization of macro fundamentals but also structural reforms to increase productivity/competitiveness of the economy. Increasing investment, including FDI, and boosting the production of tradables, particularly exports, need to be an integral part of this narrative. The Pathfinder Foundation set out a roadmap to achieve this in its Report, “Pathfinder Beyond the Box: A New Economic Vision for Post – COVID – 19 Sri Lanka” in May 2020.
Features
Cyclones, greed and philosophy for a new world order
Further to my earlier letter titled, “Psychology of Greed and Philosophy for a New World Order” (The Island 26.11.2025) it may not be far-fetched to say that the cause of the devastating cyclones that hit Sri Lanka and Indonesia last week could be traced back to human greed. Cyclones of this magnitude are said to be unusual in the equatorial region but, according to experts, the raised sea surface temperatures created the conditions for their occurrence. This is directly due to global warming which is caused by excessive emission of Greenhouse gases due to burning of fossil fuels and other activities. These activities cannot be brought under control as the rich, greedy Western powers do not want to abide by the terms and conditions agreed upon at the Paris Agreement of 2015, as was seen at the COP30 meeting in Brazil recently. Is there hope for third world countries? This is why the Global South must develop a New World Order. For this purpose, the proposed contentment/sufficiency philosophy based on morals like dhana, seela, bhavana, may provide the necessary foundation.
Further, such a philosophy need not be parochial and isolationist. It may not be necessary to adopt systems that existed in the past that suited the times but develop a system that would be practical and also pragmatic in the context of the modern world.
It must be reiterated that without controlling the force of collective greed the present destructive socioeconomic system cannot be changed. Hence the need for a philosophy that incorporates the means of controlling greed. Dhana, seela, bhavana may suit Sri Lanka and most of the East which, as mentioned in my earlier letter, share a similar philosophical heritage. The rest of the world also may have to adopt a contentment / sufficiency philosophy with strong and effective tenets that suit their culture, to bring under control the evil of greed. If not, there is no hope for the existence of the world. Global warming will destroy it with cyclones, forest fires, droughts, floods, crop failure and famine.
Leading economists had commented on the damaging effect of greed on the economy while philosophers, ancient as well as modern, had spoken about its degenerating influence on the inborn human morals. Ancient philosophers like Plato, Aristotle, and Epicurus all spoke about greed, viewing it as a destructive force that hindered a good life. They believed greed was rooted in personal immorality and prevented individuals from achieving true happiness by focusing on endless material accumulation rather than the limited wealth needed for natural needs.
Jeffry Sachs argues that greed is a destructive force that undermines social and environmental well-being, citing it as a major driver of climate change and economic inequality, referencing the ideas of Adam Smith, John Maynard Keynes, etc. Joseph Stiglitz, a Nobel Laureate economist, has criticised neoliberal ideology in similar terms.
In my earlier letter, I have discussed how contentment / sufficiency philosophy could effectively transform the socioeconomic system to one that prioritises collective well-being and sufficiency over rampant consumerism and greed, potentially leading to more sustainable economic models.
Obviously, these changes cannot be brought about without a change of attitude, morals and commitment of the rulers and the government. This cannot be achieved without a mass movement; people must realise the need for change. Such a movement would need leadership. In this regard a critical responsibility lies with the educated middle class. It is they who must give leadership to the movement that would have the goal of getting rid of the evil of excessive greed. It is they who must educate the entire nation about the need for these changes.
The middle class would be the vanguard of change. It is the middle class that has the capacity to bring about change. It is the middle class that perform as a vibrant component of the society for political stability. It is the group which supplies political philosophy, ideology, movements, guidance and leaders for the rest of the society. The poor, who are the majority, need the political wisdom and leadership of the middle class.
Further, the middle class is the font of culture, creativity, literature, art and music. Thinkers, writers, artistes, musicians are fostered by the middle class. Cultural activity of the middle class could pervade down to the poor groups and have an effect on their cultural development as well. Similarly, education of a country depends on how educated the middle class is. It is the responsibility of the middle class to provide education to the poor people.
Most importantly, the morals of a society are imbued in the middle class and it is they who foster them. As morals are crucial in the battle against greed, the middle class assume greater credentials to spearhead the movement against greed and bring in sustainable development and growth. Contentment sufficiency philosophy, based on morals, would form the strong foundation necessary for achieving the goal of a new world order. Thus, it is seen that the middle class is eminently suitable to be the vehicle that could adopt and disseminate a contentment/ sufficiency philosophy and lead the movement against the evil neo-liberal system that is destroying the world.
The Global South, which comprises the majority of the world’s poor, may have to realise, before it is too late, that it is they who are the most vulnerable to climate change though they may not be the greatest offenders who cause it. Yet, if they are to survive, they must get together and help each other to achieve self-sufficiency in the essential needs, like food, energy and medicine. Trade must not be via exploitative and weaponised currency but by means of a barter system, based on purchase power parity (PPP). The union of these countries could be an expansion of organisations,like BRICS, ASEAN, SCO, AU, etc., which already have the trade and financial arrangements though in a rudimentary state but with great potential, if only they could sort out their bilateral issues and work towards a Global South which is neither rich nor poor but sufficient, contented and safe, a lesson to the Global North. China, India and South Africa must play the lead role in this venture. They would need the support of a strong philosophy that has the capacity to fight the evil of greed, for they cannot achieve these goals if fettered by greed. The proposed contentment / sufficient philosophy would form a strong philosophical foundation for the Global South, to unite, fight greed and develop a new world order which, above all, will make it safe for life.
by Prof. N. A. de S. Amaratunga
PHD, DSc, DLITT
Features
SINHARAJA: The Living Cathedral of Sri Lanka’s Rainforest Heritage
When Senior biodiversity scientist Vimukthi Weeratunga speaks of Sinharaja, his voice carries the weight of four decades spent beneath its dripping emerald canopy. To him, Sri Lanka’s last great rainforest is not merely a protected area—it is “a cathedral of life,” a sanctuary where evolution whispers through every leaf, stream and shadow.
“Sinharaja is the largest and most precious tropical rainforest we have,” Weeratunga said.
“Sixty to seventy percent of the plants and animals found here exist nowhere else on Earth. This forest is the heart of endemic biodiversity in Sri Lanka.”
A Magnet for the World’s Naturalists
Sinharaja’s allure lies not in charismatic megafauna but in the world of the small and extraordinary—tiny, jewel-toned frogs; iridescent butterflies; shy serpents; and canopy birds whose songs drift like threads of silver through the mist.
“You must walk slowly in Sinharaja,” Weeratunga smiled.
“Its beauty reveals itself only to those who are patient and observant.”
For global travellers fascinated by natural history, Sinharaja remains a top draw. Nearly 90% of nature-focused visitors to Sri Lanka place Sinharaja at the top of their itinerary, generating a deep economic pulse for surrounding communities.
A Forest Etched in History
Centuries before conservationists championed its cause, Sinharaja captured the imagination of explorers and scholars. British and Dutch botanists, venturing into the island’s interior from the 17th century onward, mapped streams, documented rare orchids, and penned some of the earliest scientific records of Sri Lanka’s natural heritage.
These chronicles now form the backbone of our understanding of the island’s unique ecology.
The Great Forest War: Saving Sinharaja
But Sinharaja nearly vanished.
In the 1970s, the government—guided by a timber-driven development mindset—greenlit a Canadian-assisted logging project. Forests around Sinharaja fell first; then, the chainsaws approached the ancient core.
“There was very little scientific data to counter the felling,” Weeratunga recalled.
- Poppie’s shrub frog
- Endemic Scimitar babblers
- Blue Magpie
“But people knew instinctively this was a national treasure.”
The public responded with one of the greatest environmental uprisings in Sri Lankan history. Conservation icons Thilo Hoffmann and Neluwe Gunananda Thera led a national movement. After seven tense years, the new government of 1977 halted the project.
What followed was a scientific renaissance. Leading researchers—including Prof. Savithri Gunathilake and Prof. Nimal Gunathilaka, Prof. Sarath Kottagama, and others—descended into the depths of Sinharaja, documenting every possible facet of its biodiversity.
“Those studies paved the way for Sinharaja to become Sri Lanka’s very first natural World Heritage Site,” Weeratunga noted proudly.
- Vimukthi
- Nadika
- Janaka
A Book Woven From 30 Years of Field Wisdom
For Weeratunga, Sinharaja is more than academic terrain—it is home. Since joining the Forest Department in 1985 as a young researcher, he has trekked, photographed, documented and celebrated its secrets.
Now, decades later, he joins Dr. Thilak Jayaratne, the late Dr. Janaka Gallangoda, and Nadika Hapuarachchi in producing, what he calls, the most comprehensive book ever written on Sinharaja.
“This will be the first major publication on Sinharaja since the early 1980s,” he said.
“It covers ecology, history, flora, fauna—and includes rare photographs taken over nearly 30 years.”
Some images were captured after weeks of waiting. Others after years—like the mysterious mass-flowering episodes where clusters of forest giants bloom in synchrony, or the delicate jewels of the understory: tiny jumping spiders, elusive amphibians, and canopy dwellers glimpsed only once in a lifetime.
The book even includes underwater photography from Sinharaja’s crystal-clear streams—worlds unseen by most visitors.
A Tribute to a Departed Friend
Halfway through the project, tragedy struck: co-author Dr. Janaka Gallangoda passed away.
“We stopped the project for a while,” Weeratunga said quietly.
“But Dr. Thilak Jayaratne reminded us that Janaka lived for this forest. So we completed the book in his memory. One of our authors now watches over Sinharaja from above.”
An Invitation to the Public
A special exhibition, showcasing highlights from the book, will be held on 13–14 December, 2025, in Colombo.
“We cannot show Sinharaja in one gallery,” he laughed.
“But we can show a single drop of its beauty—enough to spark curiosity.”
A Forest That Must Endure
What makes the book special, he emphasises, is its accessibility.
“We wrote it in simple, clear language—no heavy jargon—so that everyone can understand why Sinharaja is irreplaceable,” Weeratunga said.
“If people know its value, they will protect it.”
To him, Sinharaja is more than a rainforest.
It is Sri Lanka’s living heritage.
A sanctuary of evolution.
A sacred, breathing cathedral that must endure for generations to come.
By Ifham Nizam
Features
How Knuckles was sold out
Leaked RTI Files Reveal Conflicting Approvals, Missing Assessments, and Silent Officials
“This Was Not Mismanagement — It Was a Structured Failure”— CEJ’s Dilena Pathragoda
An investigation, backed by newly released Right to Information (RTI) files, exposes a troubling sequence of events in which multiple state agencies appear to have enabled — or quietly tolerated — unauthorised road construction inside the Knuckles Conservation Forest, a UNESCO World Heritage site.
At the centre of the unfolding scandal is a trail of contradictory letters, unexplained delays, unsigned inspection reports, and sudden reversals by key government offices.
“What these documents show is not confusion or oversight. It is a structured failure,” said Dilena Pathragoda, Executive Director of the Centre for Environmental Justice (CEJ), who has been analysing the leaked records.
“Officials knew the legal requirements. They ignored them. They knew the ecological risks. They dismissed them. The evidence points to a deliberate weakening of safeguards meant to protect one of Sri Lanka’s most fragile ecosystems.”
A Paper Trail of Contradictions
RTI disclosures obtained by activists reveal:
Approvals issued before mandatory field inspections were carried out
Three departments claiming they “did not authorise” the same section of the road
A suspiciously backdated letter clearing a segment already under construction
Internal memos flagging “missing evaluation data” that were never addressed
“No-objection” notes do not hold any legal weight for work inside protected areas, experts say.
One senior officer’s signature appears on two letters with opposing conclusions, sent just three weeks apart — a discrepancy that has raised serious questions within the conservation community.
“This is the kind of documentation that usually surfaces only after damage is done,” Pathragoda said. “It shows a chain of administrative behaviour designed to delay scrutiny until the bulldozers moved in.”
The Silence of the Agencies
Perhaps, more alarming is the behaviour of the regulatory bodies.
Multiple departments — including those legally mandated to halt unauthorised work — acknowledged concerns in internal exchanges but issued no public warnings, took no enforcement action, and allowed machinery to continue operating.
“That silence is the real red flag,” Pathragoda noted.
“Silence is rarely accidental in cases like this. Silence protects someone.”
On the Ground: Damage Already Visible
Independent field teams report:
Fresh erosion scars on steep slopes
Sediment-laden water in downstream streams
Disturbed buffer zones
Workers claiming that they were instructed to “complete the section quickly”
Satellite images from the past two months show accelerated clearing around the contested route.
Environmental experts warn that once the hydrology of the Knuckles slopes is altered, the consequences could be irreversible.
CEJ: “Name Every Official Involved”
CEJ is preparing a formal complaint demanding a multi-agency investigation.
Pathragoda insists that responsibility must be traced along the entire chain — from field officers to approving authorities.
“Every signature, every omission, every backdated approval must be examined,” she said.
“If laws were violated, then prosecutions must follow. Not warnings. Not transfers. Prosecutions.”
A Scandal Still Unfolding
More RTI documents are expected to come out next week, including internal audits and communication logs that could deepen the crisis for several agencies.
As the paper trail widens, one thing is increasingly clear: what happened in Knuckles is not an isolated act — it is an institutional failure, executed quietly, and revealed only because citizens insisted on answers.
by Ifham Nizam
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