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State Minister Cabraal dispels fears about Sri Lanka’s debt service capacity

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State Minister of Money and Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal has said nobody should harbour fears of Sri Lanka’s ability to service its debt. Fears being expressed in some quartes are unfounded he has said, issuing a media statement.

Following is a statement issued by the State Minister of Money & Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal on 30th October 2020 “With the spread of the COVID-19 pandemic, all countries including Sri Lanka, observed a contraction in economic activity, reduction in foreign exchange earnings, decrease in revenue collection, and increase in health and welfare related expenditure. However, the prompt and measured policy support provided by the Government and the Central Bank enabled Sri Lanka to contain the unfavourable effects of Covid-19 to a great extent, and return the economy to near-normalcy by mid-May 2020. In fact, most economic activities have displayed a notable revival from May onwards, and this recovery is on-going. The recent detection of a new Covid cluster is now being decisively addressed by the Government, and this wave is also expected to be short-lived. Accordingly, the expansion of the fiscal deficit and the increase in debt levels in 2020, should not be generalised as a prolonged debt distress, but rather as a “one-off” deviation from the clear fiscal consolidation path that has been well articulated in the new Government’s policy framework.

“The election of a new President in mid November 2019 and the formation of a single-party Government with a sizable majority in August 2020, has enable the new Government to address the uncertainties in the political and policy spheres observed during the period 2015 to 2019. Consequently, Sri Lanka has been able to address public health concerns swiftly, as well as take difficult economic decisions with greater confidence. For example, when the Government was of the view that it was necessary to conserve forex, given the likelihood of low foreign exchange earnings due to the pandemic, and the need to prioritize foreign debt service obligations, the Sri Lankan authorities imposed restrictions on non-essential imports from March 2020. Such decisive and bold action, along with the reduction in global petroleum prices, resulted in a substantial saving of nearly US$ 3 billion in terms of expenditure on merchandise imports in the first nine months of the year, compared to the same period of the previous year. This saving, along with the better-than-expected outcomes in terms of merchandise exports, services exports other than tourism, and workers’ remittances, is now projected to compress the external current account deficit to below 1.5% of GDP in 2020.

“It would also be noted that capital flows and official reserves were also affected during the early months of the global outbreak of Covid-19. However, growing business confidence due to decisive action by the Government and the Central Bank has enabled the country to stabilize the exchange rate with only a marginal depreciation of around 1.5% so far this year, even while the Central Bank was able to purchase/absorb US$ 300 million from the domestic foreign exchange market during the year. As a result, official reserves remain close to US$ 6 billion, after settling foreign debt service repayments of around US$ 4 billion thus far during the year, including the repayment of the matured International Sovereign Bond of US$ 1 billion in October 2020. In the meantime, it would be further noted that the Sri Lankan authorities are presently negotiating a loan of USD 700 million from the China Development Bank which is expected to be at an interest rate and terms of repayment that are significantly more favourable than the USD 1 billion Sovereign Bond that was just re-paid. In addition, an attractive, exchange rate risk-free, Forex SWAP facility has been introduced for any foreign investor who invests in Sri Lankan government securities, which is expected to boost foreign exchange inflows particularly from the Middle-East, in the period ahead.

 

“In terms of growth performance, Sri Lanka is once again set to embark on a growth path, following the setback in the first half of 2020 caused by the pandemic. The formulation of the new Government Cabinet and State Ministerial structure, with clear performance indicators has been geared towards improving the efficiency and effectiveness of the economy. These new governance structures are bound to enhance agriculture and agro-based and mineral-based industries, increase export opportunities, as well as facilitate large projects within the Port City, Hambantota Port, and dedicated industrial zones. The expected revitalization of state owned enterprises, together with the private sector-led growth projects would also revert the Sri Lankan economy to the high growth path that was observed prior to 2015 whereby annual growth rates of over 6.5% were regularly recorded.

“In the meantime, Sri Lanka’s entire local debt stock of about Rs. 7.7 trillion (USD 42 billion) as at end July 2020 is being rolled-over and re-priced now at interest rates which are almost half of what was paid in 2019, while the Rupee remains stable. It may also be noted that a new trend has been established where greater reliance is being placed on domestic financing, and that strategy has already improved the “domestic: foreign” ratio of the debt from 51:49 at end 2019 to 56:44 now, which trend the authorities are keen to improve further in the period ahead. It is therefore clear that the Government’s commitment and support towards better debt management, both directly and indirectly, has already started to take effect.

“Sri Lanka is justifiably proud of its immaculate debt service record, without a single default. It would also be noted that Sri Lanka has experienced similar challenging circumstances previously, with high levels of debt. For instance, during 2001-2004, the country’s debt to GDP ratio was well over 100%, and by end 2005, it was at 91%. Nevertheless, Sri Lanka was able to gradually reduce the debt to GDP ratio to just 72% by end 2014 through decisive and innovative action.”



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Govt. confident of 2/3 majority despite NPP split speculation

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Anura / Harini

By Shamindra Ferdinando

The ruling NPP yesterday (21) dismissed claims of a widening rift, within the government, over the proposed 22nd Amendment. Asked whether the NPP was concerned over a section of the Opposition alleging Prime Minister Dr. Harini Amarasuriya and two dozen MPs taking a view contrary to that of the party in this regard, authoritative party sources said some persons were propagating speculation for their own interest.

Declaring that there was absolutely no issue regarding the controversial Amendment, sources emphasised once it was tabled in Parliament, it would be passed with 2/3 majority.

Sources dismissed claims that out of its 159-member parliamentary group a section of NPPers was opposed to the government move. According to an influential Opposition activist, there are 57 JVPers and 66 NPPers in the government group and the rest contested the last parliamentary polls, having aligned with the JVP.

Ministerial sources told The Island that the government was confident of going ahead with the 22nd Amendment and Judicature (Amendment) Bills. Sources said that the NPP was not bothered about the Opposition protests in and outside Parliament.

Speaker Dr. Jagath Wickremaratne is expected to disclose the confidential ruling that he received from the Supreme Court in respect of more than 65 petitions for and against the 22nd Amendment and Judicial Amendment Bills. The enactment of the 22nd Amendment would pave the way for extending the retirement age of Supreme Court judges, from 65 to 67 years, and Court of Appeal judges, from 63 to 65 years.

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Justice Corea appointed Acting President of the Court of Appeal

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Court of Appeal Judge M. Sri Mevan Anthony Edirimannasuriya Corea receives his letter of appointment

President Anura Kumara Dissanayake has appointed Court of Appeal Judge Mayadunna Sri Mevan Anthony Edirimannasuriya Corea as the Acting President of the Court of Appeal.

The appointment has been made as President’s Counsel Nalin Rohantha Abeysuriya, who currently serves as President of the Court of Appeal, will be overseas until the 24th.

Accordingly Justice Mayadunna Corea was sworn in as Acting President of the Court of Appeal before President Anura Kumara Dissanayake at the Presidential secretariat last morning (21).

Secretary to the President Dr Nandika Sanath Kumanayake was also present at the occasion.

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Protest against setting up of cement factory in highly populated area near BIA

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The cement factory premises located in close proximity to a school and the lagoon

… school alleges deception

What began quietly as a single-storey tourist hotel, on the edge of Katunayake-Seeduwa has, five years later, morphed into a looming five-storey cement factory and with it, a storm of fear, anger and unanswered questions.

At a media briefing held on 19 September at St. Thomas International School, Seeduwa, the community finally found its voice. The gathering included priests, school principals, environmental defenders, and parents whose children study within a few hundred metres of the site.

The briefing was led by Rev. Fr. Jude Chrishantha Fernando, Director of National and Archdiocesan Catholic Social Communications, Rev. Fr. Nilantha Heshan, Director of the Archdiocesan Sethsarana Institute, Dinusha Nanayakkara, Convener of the Archdiocesan Committee for the Protection of Muthurajawela, and Attorney-at-Law Ms. Isuri Rodrigo.

Their message was clear: This is not a campaign against development.

“We Are Not Against Cement. We Are Against Deception.”

“Cement is an essential raw material for the country. We have no opposition to any such factory or production plant,” they told the media. “But what we cannot agree to is a project of this magnitude, in this location, without any proper environmental assessment.”

The speakers alleged a textbook case of deception, obtaining approvals for a low-impact tourist hotel, in one of the most densely populated educational zones in the Katunayake-Seeduwa Municipal Council area, and then transforming it into a heavy industrial plant.

“In an area where thousands of schoolchildren study, to show one thing on paper and build another is a highly fraudulent procedure. It is clear that the real environmental damage and the truth have been hidden from the people,” they said.

With the sea and lagoon winds that sweep across Seeduwa, experts fear these fine particles will not stay confined to the factory walls. They will drift across classrooms, homes, and the Katunayake Free Trade Zone, where thousands of workers, representing all 25 districts of Sri Lanka, work every day.

“The risk is not local. It is national. We are talking about a future generation of children with respiratory illnesses, and workers developing chronic breathing disorders,” one speaker warned.

Rev. Fr. Jude Chrishantha Fernando, Director of National & Archdiocesan Catholic Social Communications, responding to journalists

Then there is the proximity that defies logic, just 500 metres from the Bandaranaike International Airport.

The panel presented a scientific concern that has aviation experts worried: a significant drop in air quality around the airport and its runway, and the severe risk to highly sensitive aircraft engines when they ingest air mixed with cement dust. What is at stake, they argued, is not just health but the economy itself.

“When you weigh it deeply, the economic contribution of an international airport is far higher than that of a cement factory. If international airlines start to avoid Katunayake due to safety and air quality concerns, it will be a fatal blow to our country’s economy,” they emphasised.

A few minutes away lies another victim the Negombo Lagoon and the Muthurajawela wetlands, Sri Lanka’s largest and most sensitive coastal ecosystem.

The panel warned that cement dust settling on the mangrove system could degrade water quality, disrupt the delicate salinity balance, and directly interfere with fish breeding grounds. For the fishing communities of Negombo, whose lives depend on the lagoon, this is an existential threat.

“The lagoon is a nursery. If its water quality drops, fish will not breed. If fish do not breed, an entire fishing community collapses,” they said.

The speakers alleged that while the developers claim to have approvals from various state institutions, many of the mandatory clearances, particularly comprehensive Environmental Impact Assessments and feasibility reports, have not been obtained.

They stressed they are not calling for an end to investment, but for it to be done right.

“We have no objection to this factory being started in another suitable location where it will not cause these environmental impacts, based on proper feasibility and assessment reports. Stop this construction here and move it,” was the unanimous demand.

The appeal has now been directed again to the President, the government, and all responsible state institutions and officials.

As the briefing ended, one image lingered — a school playground, a lagoon, and a towering cement structure rising between them. It is a scary picture for the people of Seeduwa; they asks a simple question: What price are we willing to pay for development that doesn’t breathe?

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