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Economic crisis: How trade misinvoicing contributed to Sri Lanka’s bankruptcy

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Public interest group points finger at corrupt public-private partnership

By Shamindra Ferdinando

A group representing trade union and civil society collective on Tuesday (07) called for urgent action to tackle the well-organised influential public–private sector partnership engaged in ‘overinvoicing’ and ‘under invoicing, with the blessing of successive governments.

Addressing the media at the Centre for Society and Religion, Maradana, economic analyst Dhanusha Pathirana, civil society activist TharinduUduwaragedara and Attorney-at-Law Lakmali Hemachandra explained how ‘over invoicing’ and ‘under invoicing’ contributed to the economic crisis.

Pathirana asserted that a sharp reduction of capital, as a result of mispricing by importers, in respect of duty/tax free goods and taxable imports, was far more serious than the parking of funds overseas by exporters.

The group underscored the need to examine capital flows through four forms of trade mis-invoicing, namely import over-invoicing and under-invoicing and export over-invoicing and under-invoicing.

Opposition lawmakers Vasudeva Nanayakkara, Wimal Weerawansa and Gevindu Cumaratunga, in Parliament, estimated the stashed amount at over USD 35 bn. The trio has alleged that the Exchange Control Act No 12 of 2017, enacted during the Yahapalana administration allowed exporters to ‘park’ funds overseas.

Dr. Wijeyadasa Rajapakse, PC, has estimated as much as USD 53.5 bn had been ‘parked’ overseas. This claim was made during the committee stage debate on the Appropriation Bill last year.

Pathirana discussed the disclosures made by Global Financial Integrity (GFI), a Washington, DC-based think tank that examined illicit financial flows, corruption, illicit trade and money laundering, pertaining to Sri Lanka.

Commenting on statements made, both in and outside Parliament as regards parking of export proceedings, both Pathirana and Uduwaragedara emphasized that the country suffered much more losses due to capital outflows than ‘parking’ of export proceeds overseas.

They found fault with both importers and exporters, at different levels, and deceitful bureaucracy, that manipulated the entire process, for the benefit of a few, at the expense of the entire country. They stressed that such huge outflows couldn’t be caused by illegal money transferring schemes, such as ‘undial’ and ‘hawala.

Referring to GFI findings that dealt with the 2009-2018 period, Pathirana, formerly of Asia Capital, stressed that the country lost as much as USD 40 bn due to over-invoicing and under-invoicing, in addition to parking of export proceeds, etc.

Secretary General of the Commercial and Industrial Workers Union, Arulingam Swasthika, didn’t join the discussion, as stated by the organizers.

At the onset of the briefing, Uduwaragedara pointed out that the Wickremesinghe-Rajapaksa government was on its knees before the International Monetary Fund (IMF) for USD 2.9 bn bailout package, whereas USD billions ,that could be utilized,remained overseas.

Sri Lanka has secured IMF bailout packages on 16 previous occasions.

The activist said that Justice Minister Wijeyadasa Rajapakse, PC, and Samagi Jana Balavegaya (SJB) heavyweight Patali Champika Ranawaka, in his capacity as the Chairman of the National Council sub-committee on identifying short- and medium-term programmes, related to economic stabilization, acknowledged the disclosures made by the GFI.

Cabinet spokesperson Bandula Gunawardena, too, admitted the issue at hand, though the government was yet to respond to this situation, Uduwaragedara said.

Actually, the government owed an explanation why, in spite of facing such extreme difficulties, those responsible for the revenue collection mechanisms, soft-pedal the issue.

“We are in a desperate situation. But, Parliament, responsible for public finance ,never really intervened in this matter. Parliament not only turned a blind eye to this daylight robbery but encouraged corruption at every level,” Uduwaragedara alleged.

Pathirana pointed out that even after President Gotabaya Rajapaksa’s government restricted imports, in 2021, the import bill remained high. “Our foreign reserves, amounting to USD 7.5 bn, simply evaporated as unscrupulous elements ,engaged in ‘over-invoicing,’ simply stepped up their operations,” Pathirana said.

According to him, even foreign loans, received by Sri Lanka, and foreign remittances, too, were vulnerable to these machinations. Both Pathirana and Uduwaragedara warned that unless remedial measures were taken to tackle corrupt cartels, the USD 2.9 bn received, over a period of four years, wouldn’t make a difference.

Pathirana emphasized that if the government was genuinely interested in breaking up the corrupt networks it could be done.

The public interest group urged the government to launch a comprehensive audit as part of the overall remedial measures. The Central Bank should intervene in this matter, without further delay, Pathirana said.

Uduwaragedara pointed out that those at the helm conveniently failed to act on the shocking disclosures made by Panama Papers (published beginning April, 2016) and Pandora Papers (2021). Referring to a spate of cases, involving Sri Lankans, that had been disclosed by Panama Papers and Pandora Papers, Uduwaragedara stressed that the failure on the part of the government to properly investigate, at least one case, exposed the bitter truth.

The media was told how those who had been exposed, invested in property overseas, ranging from luxury houses to art.

Stressing the urgent need and the responsibility on the part of the government to further strengthen laws to tackle these issues, Pathirana suggested that there should be a wider discussion, regarding writing off debt.

The Island

asked whether they really expected those responsible for the economic ruin here to genuinely address this issue, and anything tangible expected from those at the helm of power. Lawyer Lakmali Hemachandra said that they were still pursuing the issues and no final decision was taken on future course of action.

Pathirana said that Universities should engage in what he called an in-depth study of the growing problem. Referring to former Auditor General Gamini Wijesinghe’s declarations, pertaining to the ongoing crisis, Pathirana suggested that the government should commence an inquiry, beginning 2021.

The group said that this particular issue hadn’t received sufficient attention of the Sinhala media, both print and electronic, hence the need to make the public aware of the continuing threat. In spite of the Central Bank, in July 2006, responding to the threat posed by money laundering and terrorism financing, successive governments never really took concrete measures in that regard.

Towards the end of the discussion, the urgent need to introduce amendments to the Exchange Control Act No 12 of 2017, as part of Sri Lanka’s response to the continuing financial crisis was also taken up. Amendments were necessary to restore the authority exercised by the Central Bank in respect of regulation of foreign exchange, before the enactment of the above controversial piece of legislation by the Yahapalana government.

The group said that wider investigation was required to establish the truth, though the current crisis had been blamed on President Gotabaya Rajapaksa’s policy mismanagements, such as unprecedented tax cuts that caused the loss of revenue to the tune of Rs 600 bn.



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Ex-lawmakers group calls for IPU’s intervention to check “irregularities” in Parliament

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Association of Former Members of Parliament of Sri Lanka has requested the Inter-Parliamentary Union to inquire into, what the group calls, institutional irregularities in Parliament.

The Association cited the decision taken by the Attorney General not to appear for Speaker Dr. Jagath Wickremeratne, in a case filed in the Court of Appeal by sacked Deputy Secretary General of Parliament Chaminda Kularatne, to underscore the need for IPU’s intervention.

The following is the text of the letter signed by former JVP MP Premasiri Manage, on behalf of the Association:  We write to Your Excellency on behalf of the Association of Former Members of Parliament of Sri Lanka, an independent body representing former legislators who have served the Parliament of Sri Lanka across successive administrations. The Association is committed to upholding democratic values, parliamentary traditions, institutional integrity, and the rule of law within Sri Lanka’s governance framework. It is with grave concern that we bring to your attention a series of developments that, in our respectful view, seriously undermine parliamentary democracy, administrative fairness, and institutional independence in Sri Lanka.

1. Unlawful Cancellation of Parliamentary Pensions

The present Government of Sri Lanka has, through actions that we consider both unlawful and unethical, cancelled the pension entitlements of former Members of Parliament. This decision appears to have been taken arbitrarily, without adherence to established legal principles, legitimate expectations, or due process, thereby undermining the dignity and security of those who have served in the national legislature.

2. Illegal and Malicious Interdiction of the Deputy Secretary General of Parliament

We wish to draw urgent attention to the interdiction of the Chief of Staff and Deputy Secretary General of Parliament, which raises serious concerns regarding abuse of authority and interference in administrative due process. According to material presently before the Court of Appeal of Sri Lanka (CA/Writ Application No. 109/2026), the interdiction:

• Was imposed through the Parliamentary Staff Advisory Committee (PSAC), which lacks lawful authority to exercise such disciplinary powers, rendering the action ultra vires;

• Was based on a preliminary inquiry conducted without proper legal mandate, thereby invalidating the process from its inception;

• Was not the result of an independent administrative determination, but was carried out following the direct personal intervention and influence of Speaker, Dr. Jagath Wickramaratne;

• Appears to have been driven by personal and retaliatory considerations, amounting to a malicious exercise of authority rather than a lawful disciplinary process.

Importantly, it is also noted that the Attorney General of Sri Lanka has withdrawn from appearing on behalf of the Hon. Speaker in the related proceedings, reportedly in view of serious procedural irregularities associated with the interdiction process. The Speaker has consequently retained private legal counsel. This development strongly indicates that serious legal and procedural defects exist in the interdiction process, further reinforcing concerns regarding its legality and propriety. It is therefore evident that the lawful disciplinary framework vested in the Secretary General of Parliament was bypassed, resulting in a serious violation of the principles of natural justice, institutional independence, and the rule of law.

3. Discrimination and Harassment within Parliamentary Administration

We are also deeply concerned by credible allegations of discrimination and harassment within the parliamentary administrative structure, which, in our respectful view, have arisen as a result of the interference of the present Speaker in the administrative affairs of Parliament, thereby undermining the independence of the parliamentary administration. These concerns include:

• Discriminatory conduct affecting senior officials, including the Deputy Secretary General;

• Harassment and discriminatory treatment of female staff members within Parliament;

• The resignation of one female officer due to such circumstances;

• Confirmed findings of harassment in respect of another female officer attached to the Information Technology Division, as established by a report submitted by a former High Court Judge.

These incidents indicate a disturbing pattern of administrative misconduct and a failure to ensure a safe, independent, and professional working environment within Parliament.

3. Broader Institutional Concerns

The above matters collectively raise serious concerns regarding:

• The erosion of the independence of parliamentary administration;

• Abuse of authority and concentration of power;

• Undermining of due process and established legal frameworks;

• A broader decline in adherence to democratic governance standards.

 Request for Engagement

In light of the foregoing, we respectfully request that the Inter-Parliamentary Union:

1. Intervene and monitor the situation;

2. Call for reports and clarifications from the Speaker and senior parliamentary administration;

3. Facilitate independent review and observation of relevant judicial proceedings;

4. Promote accountability and restoration of institutional integrity within Parliament.

Given the IPU’s distinguished role in safeguarding parliamentary democracy and promoting good governance worldwide, we firmly believe that your timely engagement will contribute significantly to restoring institutional integrity and public confidence in Sri Lanka’s Parliament.

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Power and Energy Minister, Ministry Secy resign over coal probe

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Power and Energy Minister Kumara Jayakody and Ministry Secretary Prof. Udayanga Hemapala have resigned from their posts.According to the President’s Media Division (PMD), the two officials submitted their letters of resignation to President Anura Kumara Dissanayake this afternoon.

The resignations come in the wake of a Special Presidential Commission of Inquiry appointed to probe possible unlawful activity and financial irregularities in coal procurement and power generation.

The PMD said the decision was taken to ensure that the Commission’s work proceeds without interference or perceived influence from individuals holding office.

Minister Jayakody, in his resignation letter, noted that following the appointment of the Commission, he had requested that investigations into coal imports, since 2009, be referred to the Criminal Investigation Department (CID), describing it as part of the government’s anti-corruption mandate.

He added that the inquiry should be conducted independently and without bias, and said his continued presence in office could be perceived as an obstacle to the process.

Prof. Hemapala, in his resignation letter, said his decision was intended to facilitate the commencement of investigations and ensure a transparent and independent process, the PMD said.

The Special Presidential Commission was recently appointed to examine allegations of irregularities in coal imports and electricity generation over a prolonged period and to recommend corrective measures.

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President appoints Commission to probe irregularities in coal imports from inception of Norochcholai

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President Anura Kumara Dissanayake yesterday appointed a Presidential Commission of Inquiry to investigate alleged irregularities in coal imports and electricity generation, amid concerns over possible financial losses to the State.

The President’s Office said the Commission would examine transactions from the inception of coal-based power generation in Sri Lanka up to April 16, 2026, focusing on operations linked to the CEB-affiliated Lanka Coal Company (Pvt) Ltd., its successors, and private suppliers.

The three-member body is chaired by Supreme Court Justice Gihan Kulatunga, with Court of Appeal Justice Adithya Patabendige and High Court Judge Sanjeewa Somaratne as members. Former Ministry Secretary P.V. Bandulasena has been appointed Secretary to the Commission.

Appointed under the Special Presidential Commissions of Inquiry Act No. 07 of 1978, as amended, the Commission has been mandated to scrutinise procurement procedures, supply chains, quality testing, and operational processes connected to coal imports and utilisation.

The Commission has been tasked with the following mandates:

• To determine whether irregularities or illegal acts occurred in the procurement process for coal imports and to assess any resulting financial loss to the government.

• To investigate whether substandard coal was imported during the relevant period and to examine the entire associated workflow, including procurement, supply, quality testing, operational, and utility processes.

• To ascertain whether electricity generation using imported coal reached the expected levels of efficiency and productivity.

• To investigate whether legal or financial irregularities or illegal acts occurred during the power generation process if substandard coal was indeed utilized.

• To examine whether there were any breaches of expressed terms or conditions in these processes and, if so, whether measures such as withholding payments or other compensatory actions were taken.

• To identify the political authorities, government officials, officers of Lanka Coal Company (Pvt) Ltd, suppliers, or their agents responsible for any such incidents and to recommend future action to be taken against them.

• To propose measures to prevent the recurrence of such alleged malpractices or illegal acts in the future and to ensure proper governance and integrity.

In addition to the above, the Commission will also report on any other alleged malpractices or illegal acts related to coal importation and electricity generation, and recommend preventive measures to address such issues.

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