Features

Domestic Debt Restructuring – An Alternate View

Published

2 years ago

2023/10/1

by Romesh Bandaranaike, Ph.D.

There have been substantial and wide spread criticisms of the recently instituted Domestic Debt Restructuring (DDR) scheme carried out by Central Bank of Sri Lanka (CBSL), to reduce the Sri Lanka Government’s requirements for funding. In this article I argue that the scheme, as structured and carried out by CBSL, is appropriate, given the ground realities in the country, and that the critics have ignored a number of factors which forced CBSL to design the scheme as it did. I then suggest additional steps the Government could take to further improve its financial position in connection with past Bond issues.

The DDR Scheme

Faced with massive shortfalls in revenue, the Government recently carried out a “restructuring” of the debts it owed on Sri Lanka Rupee denominated Treasury Bills and Bonds in an effort to substantially improve Government finances, including the funds needed to service these Bills/Bonds. The two key elements of the DDR are a) Converting all Treasury Bills presently owned by CBSL to longer term Treasury Bonds, thereby substantially delaying the payment dates on these Bills; and b) Effectively “forcing” the Employees Provident Fund (EPF) and other superannuation funds to exchange most of the Bonds they hold for 12 year Bonds with somewhat lower interest payments.

They did this by threatening to increase the tax rates that EPF pays on its annual income to 30% from the present 14%, if they did not accept the Bond exchange. Since such an increase was financially worse for EPF compared with the Bond exchange, EPF opted for the latter.

CBSL estimates that the scheme would reduce the Gross Financing Needs (GFN) of the Government by 1.5%, 1% by the CBSL Bill-Bond exchange and 0.5% by the EPF Bond exchange.

The Criticisms

The principal criticisms of the DDR, from the public, Trade Unions, Economic Think Tanks, and numerous “Experts,” is that the entire burden of the DDR is being placed on the backs of the retirement savings of “poor workers” who are the members of EPF.

CBSL has justified the proposed increase in the tax rates for EPF and other superannuation funds to 30% from the present 14% on the basis that the banks have to pay the higher tax rate of 30% plus VAT. Dr. Wijewardena, a former CBSL Deputy Governor, has written several articles criticizing CBSL for not presenting the correct picture in this regard and not disclosing full information on the impacts of the restructuring on EPF members’ returns. Dr. W’s main argument is that, in the case of the banks, the tax rate applies to “net interest”, whereas, in the case of the EPF, it applies to “gross interest.” For the banks, net interest is interest earnings on its loans less the interest it pays to depositors.

In the case of EPF, Dr. W points out that EPF is not allowed to subtract the interest it pays to EPF account holders to determine its income and tax liability, and that CBSL comparison of bank and EPF tax rates is therefore misleading. In a subsequent article by Dr. W, he criticizes CBSL/EPF for not fully disclosing the cost to EPF holders of accepting the proposed DDR compared with an increase in EPF’s tax rate to 30% and the justification for accepting the Bond exchange rather than the tax increase to 30%. He goes on to add that CBSL has a conflict of interest as both the developer of Government policy and as the administrator of EPF.

My Responses to the Criticisms

The criticism that the entire burden of the DDR is on the backs of workers is factually incorrect. As stated above, two-third of the 1.5% reduction in GFN (1%) is being achieved by exchanging the Treasury Bills held by CBSL for long term Bonds. Only 0.5% of the reduction is from the exchange of Bonds held by the EPF and other superannuation funds. In other words, 67% of the restructuring cost is borne by CBSL (in effect by all citizens), while only 33% is borne by EPF account holders. Furthermore, only workers in the formal private sector contribute to the EPF/ETF, while workers in the informal private sector (e.g. farmers, fishermen, small transporters, traders and construction workers) and Government employees do not.

As a result, only about 25-30% of the workers in the country have EPF accounts. Therefore, 70-75% of workers in the country will not suffer any burden due to the EPF bond restructuring. Finally, the workers with EPF accounts also include middle and senior management of companies who cannot be called “poor workers” as referred to in the various criticisms of the present DDR scheme. It is true that this category may only be a very small percentage of those holding EPF accounts. However, their account balances are likely to be very much higher than other EPF members and the impact of the restructuring on them will be proportional to these balances.

It would be ideal if the EPF could release statistics in this regard which will allow an assessment of this element. For example, the fraction of the total EPF funds held by those with EPF balances of over Rs 5 million (say), since such persons cannot be classified as “poor workers.” Workers who have balances in EPF/ETF, built up as a result of deductions from their salaries and additional higher contributions from their employers, at least have a retirement fund they can turn to, even if it is somewhat less because of the DDR. It could conceivably be argued that the 70-75% of workers who do not have such balances, mostly working in the informal sector, are worse off or poorer than those with EPF balances. This would be a justification for placing the burden of part of the DDR on EPF account holders rather than on other, even “poorer”, workers.

In response to Dr. W’s criticisms that EPF and bank tax rates are not comparable the way CBSL has done; each year, EPF determines a percentage it will pay/accrue to the account of each EPF account holder based on the earnings by the EPF that year. This percentage is not an interest similar to that paid by banks to its depositors and is not a cost that is deductible by EPF to calculate its tax liability each year. It is simply a percentage decided by the EPF administrators to allocate the profits after tax earned by the EPF during the year. Calling this percentage an “interest” is a misnomer. Account holders in EPF are akin to shareholders in banks and not depositors.

The amounts credited by EPF to a member’s account each year, based on EPF’s earnings during the year, is not a cost incurred by EPF in generating these earnings. It is something closer to a dividend paid by a bank to its shareholders in the form of additional shares. If EPF is allowed to determine its tax liabilities by subtracting these accrued amounts, banks should be able to deduct dividend costs in determining their tax liabilities. Dr. W’s criticism of the non-comparability of bank and EPF tax rates cannot be sustained.

Dr. W uses CBSL/EPF’s own numbers on the differences in returns under the two scenarios EPF has been offered and simply multiplies it by the total EPF Bond holding value to arrive at the cost to EPF of accepting the Bond exchange. This is something that could have readily been done by anyone and Dr. W’s implication that CBSL/EPF is hiding/not fully disclosing something in its statement cannot be sustained.

The CBSL/EPF analysis is simply to show that the return to EPF is better under the scenario where it accepts the DDR option, compared to rejecting the DDR option and being subject to a 30% tax rate. This information is more than sufficient for EPF to recommend to its Board that it should accept the DDR. Dr. W than goes into the past history of taxation rates applicable to the EPF and points out that as originally envisaged EPF earnings were to be tax exempt.

He shows calculations of the losses to EPF holders of the present DDR, compared with a situation if EPF earnings were tax exempt. This is a straw man put up by Dr. W to be knocked down as part of his criticism of CBSL/EPF. It is the tax rates that are applicable to EPF today, before the DDR, that are relevant and it would have been nonsensical for CBSL to show calculations based on what if the tax rates were those that existed many years ago.

With respect to the criticism that CBSL has a conflict of interest in both being the administrator of EPF and the policy advisor recommending the DDR, I do not see any conflict. CBSL, as advisor to the Government, has made the DDR proposal which allows EPF to choose between two options, accept the proposed DDR Bond exchange or reject it and be subject to a 30% tax rate. As the administrator of the EPF, CBSL has simply analysed these two options and clearly shown that the EPF is better off accepting the Bond exchange compared with rejecting it and being subject to a 30% tax rate.

Other Relevant Issues

It is telling that none of those criticizing the present process have offered any viable alternative DDR arrangement to achieve the same objectives as the present exercise. In saying this, I am ignoring the suggestions by some parties who say there would be no need for the exercise if “The money stolen by the Rajapaksa’s is recovered” or “The large corruption in Government is reduced,” and so on. Such actions, even if they were possible, are not alternatives, because they cannot be achieved in the short or medium term, which is one of the key objectives of the DDR. Verite Research did, some time ago before the announcement of the present DDR, present some analysis on a possible DDR which included sharing the cut across all Bond holders, but, for the reasons I refer to below, this is not a viable arrangement.

CBSL in its original presentation to the Cabinet, and subsequently to the public, argued that it would be prudent to exclude the Banks from the DDR exercise, because these institutions were already under stress as a result of COVID related business failures and because the banks would also be taking a hit from the future restructuring of USD Bonds, some of which are held by them.

CBSL was of the view that such an exclusion was essential to ensure financial system stability. None of those criticizing the present DDR arrangements have objected to this and I concur with that view. Even if the banks are able to bear the burden of some restructuring of the domestic bonds they hold, bank stability is also dependent on public perception, and excluding them from the DDR has certainly had a positive impact on such perception.

There are two unstated conditions applicable to the DDR exercise which have received no mention in the ongoing discussions. First, the DDR should be concluded in a short time frame since it will be a pre-condition to the restructuring of foreign currency debt. Second, it must be carried out in a legally valid manner. A Government Bond is a legal contract between the Government and the holder of the Bond.

The Government is legally obligated to pay the interest coupon and the principal of the Bond on specified dates according to this legal contract. The Government has no legal authority to change the conditions of this Bond. It could, of course, pass a new law in Parliament giving itself the authority to make changes to existing Bonds. In doing so, however, if all Bond holders are not treated equally (in particular, if the bank holdings of Bonds are excluded), there are bound to be legal challenges in the Courts to any such changes, and the changes may well be struck down by the Courts.

Even if such changes are not struck down, this process can take considerable time to be determined and would not be achievable in the time frame required for the DDR process to be concluded as discussed previously. The present DDR has finessed the issue of different treatments of Bond holders by making it “voluntary”, albeit by holding a gun to the head of the EPF and superannuation funds in the manner detailed earlier. This is draconian, but effective.

As per CBSL statistics presented in connection with the original DDR proposal, the total outstanding amount of Treasury Bonds at that time was Rs. 8,700 billion. Of this amount Rs 1,644 billion is held by “Others”, after excluding the banks and EPF and superannuation funds being subject to the DDR. Even if the banks are excluded from the DDR to ensure “financial system stability” reasons mentioned previously, it would have been ideal if the “Others” holding the Rs 1,644 billion in outstanding Bonds were subject to some “restructuring”, in the form of cuts in coupon rates and/or face value, or an extension of the tenor of these Bonds.

If this was done, the benefit of these cuts could have been passed on in the form of a reduction in the burden passed onto EPF and superannuation funds. However, such an unequal treatment where some Bond holders (the banks) are excluded, even if the necessary legislation is passed, would certainly have resulted in legal challenges which would, at the least, have delayed the process as I have pointed out earlier, or even been found unconstitutional by the Courts.

Further Actions in Respect of Bonds

Very high yield rate Bonds (over 20% yield) were issued by the Government during the period prior to the announcement of the DDR (April 8, 2022 to March 13, 2023) as a consequence of severe financial shortages faced by the Government. Bidders for these Bonds added a premium to the bid yield rates, expecting a future restructuring of these Bonds as part of the DDR they knew was coming. By being excluded from the DDR, these Bond holders have enjoyed a “windfall profit.” It is not possible to specifically target these Bonds for a cut in coupons or face value, because many of the original holders may have sold some of these Bonds and have already earned the windfall profits.

[The buyers of the Bonds would only receive a “normal” profit in the form of coupon payments and final redemption.] Furthermore, in the case of individual Bond holders, their windfall profit would be in the form of a capital gain, which only attracts a tax rate of 10%. Corporates/ banks in the same situation would be paying a tax of 30% on their capital gains. I propose that the Government should “claw back” some of these profits by imposing a special windfall tax rate of 50% applicable to all profits derived from these Bonds. If the original purchaser has not sold the Bonds, the coupon interest and the capital gains on final face value redemption should also be taxed at 50%.

There would be some complications in structuring this tax, since some high yield Bonds may have changed hands within the period that high yield Bonds were still being issued, which means that the initial purchaser would only have made a small capital gain and the next buyer would still be enjoying the high coupon rate or subsequently selling the Bond for a large capital gain. A proper structuring of the 50% windfall tax can ensure that the taxes fall on those making the windfall profits. A tax of the type proposed will clearly be borne by the wealthy, who would have been the purchasers of these Bonds, and go some way towards balancing the burden imposed on less wealthy parties as a result of the DDR.

To place this suggestion in perspective, between April 8, 2022 and March 13, 2023 all Bonds issued by CBSL had yield rates in excess of 20%. The total face value of such Bonds was Rs 1,233 billion. The weighted average yield on these Bonds was 27.89% and the weighted average coupons in these Bonds was 19.09%. The latest four-year Bond yield rate is approximately 15% and this is likely to drop further.

As a result, any seller today of an average high yield Bond would make a significant capital gain on the sale and would need to pay substantial taxes to the Government at the proposed 50% windfall tax rate. As per CBSL statistics in the original CBSL presentation to the Cabinet, approximately 63.5% of all Bonds at that time were held by the banks and the “Other” category. If this percentage is also applicable to the high yield Bonds referred to above, the banks and the “Other” category would be holding Rs 777 billion of these Bonds.

Advocata has recently analysed EPF’s Bond portfolio prior to the DDR Bond exchange and concluded that EPF’s share of high yield Bonds was proportionately much less than for other Bond holders. Therefore, banks and “Others” would probably be holding even more than the above mentioned Rs 777 billion in such high yield Bonds which, in turn, will mean that a 50% windfall tax on the profits from these Bonds will result in substantial tax revenues for the Government.

An aside at this point is that for some unclear reason there is no withholding tax (WHT) applied to the interest earnings on Bonds as in the case of interest earnings from deposits in banks and finance companies. I have made inquiries as to why this is so from several senior Government officials and have not received any explanation for the practice.

It may well be that some Bond holders do not even have income tax files and that they are evading all taxes payable on Bond interest. Since Bond holders are all likely to be at the highest tax bracket given the minimum sizes of Bond investments, I suggest that a WHT of 30% be applied to all Bond interest payments. Holders are free to file tax returns and seek a refund if they have been taxed in excess of their liability due to such a WHT. I have been told there is some complication in applying WHT to Bond interest held by foreigners. If that is indeed the case, foreign holdings of Bonds could be excluded.

Conclusions

The economy of the country is in dire straits as a result primarily of bad/foolish policies of recent past Governments (including those by CBSL under its previous two Governors and Monetary Boards at that time) coupled with the endemic corruption inherent in the system. The present Governor of CBSL and his professional colleagues are facing very difficult conditions and are striving to get the country’s finances back on track.

I can understand trade unions, workers and other similar entities objecting to the implementation of policies which directly impact them, irrespective of whether such policies are needed to solve the country’s issues. But, why is it that so called “experts” and think tanks do not recognize the ground realities of what is practically achievable and support the efforts of CBSL rather than criticizing these efforts in print and at discussion forums?

(The author is an economist with wide experience in policy formulation and implementation in the Ministry of Finance and has worked at CEO level in both public and private sectors.

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Features

Educational reforms under the NPP government

Published

15 hours ago

2026/01/6

Sahan Weerasooriya

PM Amarasuriya

When the National People’s Power won elections in 2024, there was much hope that the country’s education sector could be made better. Besides the promise of good governance and system change that the NPP offered, this hope was fuelled in part by the appointment of an academic who was at the forefront of the struggle to strengthen free public education and actively involved in the campaign for 6% of GDP for education, as the Minister of Education.

Reforms in the education sector are underway including, a key encouraging move to mainstream vocational education as part of the school curriculum. There has been a marginal increase in budgetary allocations for education. New infrastructure facilities are to be introduced at some universities. The freeze on recruitment is slowly being lifted. However, there is much to be desired in the government’s performance for the past one year. Basic democratic values like rule of law, transparency and consultation, let alone far-reaching systemic changes, such as allocation of more funds for education, combating the neoliberal push towards privatisation and eradication of resource inequalities within the public university system, are not given due importance in the current approach to educational and institutional reforms. This edition of Kuppi Talk focuses on the general educational reforms and the institutional reforms required in the public university system.

General Educational Reforms

Any reform process – whether it is in education or any other area – needs to be shaped by public opinion. A country’s education sector should take into serious consideration the views of students, parents, teachers, educational administrators, associated unions, and the wider public in formulating the reforms. Especially after Aragalaya/Porattam, the country saw a significant political shift. Disillusionment with the traditional political elite mired in corruption, nepotism, racism and self-serving agendas, brought the NPP to power. In such a context, the expectation that any reforms should connect with the people, especially communities that have been systematically excluded from processes of policymaking and governance, is high.

Sadly, the general educational reforms, which are being implemented this year, emerged without much discussion on what recent political changes meant to the people and the education sector. Many felt that the new government should not have been hasty in introducing these reforms in 2026. The present state of affairs calls for self-introspection. As members affiliated to the National Institute of Education (NIE), we must acknowledge that we should have collectively insisted on more time for consultation, deliberations and review.

The government’s conflicts with the teachers’ unions over the extension of school hours, the History teachers’ opposition to the removal of History from the list of compulsory exam subjects for Grades 10 and 11, the discontent with regard to the increase in the number of subjects (now presented as modules) for Grade 6 classes could have been avoided, had there been adequate time spent on consultations.

Given the opposition to the current set of reforms, the government should keep engaging all concerned actors on changes that could be brought about in the coming years. Instead of adopting an intransigent position or ignoring mistakes made, the government and we, the members affiliated to NIE, need to keep the reform process alive, remain open to critique, and treat the latest policy framework, the exams and evaluation methods, and even the modules, as live documents that can be made better, based on constructive feedback and public opinion.

Philosophy and Content

As Ramya Kumar observed in the last edition of Kuppi Talk, there are many refreshing ideas included in the educational philosophy that appears in the latest version of the policy document on educational reforms. But, sadly, it was not possible for curriculum writers to reflect on how this policy could inform the actual content as many of the modules had been sent for printing even before the policy was released to the public. An extensive public discussion of the proposed educational vision would have helped those involved in designing the curriculum to prioritise subjects and disciplines that need to be given importance in a country that went through a protracted civil war and continue to face deep ethno-religious divisions.

While I appreciate the statement made by the Minister of Education, in Parliament, that the histories of minority communities will be included in the new curriculum, a wider public discussion might have pushed the government and NIE to allocate more time for subjects like the Second National Language and include History or a Social Science subject under the list of compulsory subjects. Now that a detailed policy document is in the public domain, there should be a serious conversation about how best the progressive aspects of its philosophy could be made to inform the actual content of the curriculum, its implementation and pedagogy in the future.

University Reforms

Another reform process where the government seems to be going headfirst is the amendments to the Universities Act. While laws need to be revisited and changes be made where required, the existent law should govern the way things are done until a new law comes into place. Recently, a circular was issued by the University Grants Commission (UGC) to halt the process of appointing Heads of Departments and Deans until the proposed amendments to the University Act come into effect. Such an intervention by the UGC is totalitarian and undermines the academic and institutional culture within the public university system and goes against the principle of rule of law.

There have been longstanding demands with regard to institutional reforms such as a transparent process in appointing council members to the public university system, reforms in the schemes of recruitment and selection processes for Vice Chancellor and academics, and the withdrawal of the circular banning teachers of law from practising, to name a few.

The need for a system where the evaluation of applicants for the post of Vice Chancellor cannot be manipulated by the Council members is strongly felt today, given the way some candidates have reportedly been marked up/down in an unfair manner for subjective criteria (e.g., leadership, integrity) in recent selection processes. Likewise, academic recruitment sometimes penalises scholars with inter-disciplinary backgrounds and compartmentalises knowledge within hermetically sealed boundaries. Rigid disciplinary specificities and ambiguities around terms such as ‘subject’ and ‘field’ in the recruitment scheme have been used to reject applicants with outstanding publications by those within the system who saw them as a threat to their positions. The government should work towards reforms in these areas, too, but through adequate deliberations and dialogue.

From Mindless Efficiency to Patient Deliberations

Given the seeming lack of interest on the part of the government to listen to public opinion, in 2026, academics, trade unions and students should be more active in their struggle for transparency and consultations. This struggle has to happen alongside our ongoing struggles for higher allocations for education, better infrastructure, increased recruitment and better work environment. Part of this struggle involves holding the NPP government, UGC, NIE, our universities and schools accountable.

The new year requires us to think about social justice and accountability in education in new ways, also in the light of the Ditwah catastrophe. The decision to cancel the third-term exams, delegating the authority to decide when to re-open affected schools to local educational bodies and Principals and not change the school hours in view of the difficulties caused by Ditwah are commendable moves. But there is much more that we have to do both in addressing the practical needs of the people affected by Ditwah and understanding the implications of this crisis to our framing of education as social justice.

To what extent is our educational policymaking aware of the special concerns of students, teachers and schools affected by Ditwah and other similar catastrophes? Do the authorities know enough about what these students, teachers and institutions expect via educational and institutional reforms? What steps have we taken to find out their priorities and their understanding of educational reforms at this critical juncture? What steps did we take in the past to consult communities that are prone to climate disasters? We should not shy away from decelerating the reform process, if that is what the present moment of climate crisis exacerbated by historical inequalities of class, gender, ethnicity and region in areas like Malaiyaham requires, especially in a situation where deliberations have been found lacking.

This piece calls for slowing-down as a counter practice, a decelerating move against mindless efficiency and speed demanded by neoliberal donor agencies during reform processes at the risk of public opinion, especially of those on the margins. Such framing can help us see openness, patience, accountability, humility and the will to self-introspect and self-correct as our guides in envisioning and implementing educational reforms in the new year and beyond.

(Mahendran Thiruvarangan is a Senior Lecturer attached to the Department of Linguistics & English at the University of Jaffna)

Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies

by Mahendran Thiruvarangan

Features

Build trust through inclusion and consultation in the New Year

Published

15 hours ago

2026/01/6

Sahan Weerasooriya

Looking back at the past year, the anxiety among influential sections of the population that the NPP government would destabilise the country has been dispelled. There was concern that the new government with its strong JVP leadership might not be respectful of private property in the Marxist tradition. These fears have not materialised. The government has made a smooth transition, with no upheavals and no breakdown of governance. This continuity deserves recognition. In general, smooth political transitions following decisive electoral change may be identified as early indicators of democratic consolidation rather than disruption.

Democratic legitimacy is strengthened when new governments respect inherited institutions rather than seek to dismantle them wholesale. On this score, the government’s first year has been positive. However, the challenges that the government faces are many. The government’s failure to appoint an Auditor General, coupled with its determination to push through nominees of its own choosing without accommodating objections from the opposition and civil society, reflects a deeper problem. The government’s position is that the Constitutional Council is making biased decisions when it rejects the president’s nominations to the position of Auditor General.

Many if not most of the government’s appointments to high positions of state have been drawn from a narrow base of ruling party members and associates. The government’s core entity, the JVP, has had a traditional voter base of no more than 5 percent. Limiting selection of top officials to its members or associates is a recipe for not getting the best. It leaves out a wide swathe of competent persons which is counterproductive to the national interest. Reliance on a narrow pool of party affiliated individuals for senior state appointments limits access to talent and expertise, though the government may have its own reasons.

The recent furor arising out of the Grade 6 children’s textbook having a weblink to a gay dating site appears to be an act of sabotage. Prime Minister (and Education Minister Harini Amarasuriya) has been unfairly and unreasonably targeted for attack by her political opponents. Governments that professionalise the civil service rather than politicise them have been more successful in sustaining reform in the longer term in keeping with the national interest. In Sri Lanka, officers of the state are not allowed to contest elections while in service (Establishment Code) which indicates that they cannot be linked to any party as they have to serve all.

Skilled Leadership

The government is also being subjected to criticism by the Opposition for promising much in its election manifesto and failing to deliver on those promises. In this regard, the NPP has been no different to the other political parties that contested those elections making extravagant promises. The problem is that the economic collapse of 2022 set the country back several years in terms of income and living standards. The economy regressed to the levels of 2018, which was not due to actions of the NPP. Even the most skilled leadership today cannot simply erase those lost years. The economy rebounded to around five percent growth in the past year, but this recovery now faces new problems following Cyclone Ditwah, which wiped out an estimated ten percent of national income.

In the aftermath of the cyclone, the country’s cause for shame lies with the political parties. Rather than coming together to support relief and recovery, many focused on assigning blame and scoring political points, as in the attacks on the prime minister, undermining public confidence in the state apparatus at a moment when trust was essential. Despite the politically motivated attacks by some, the government needs to stick to the path of inclusiveness in its approach to governance. The sustainability of policy change depends not only on electoral victory but on inclusive processes that are more likely to endure than those imposed by majorities.

Bipartisanship recognises that national rebuilding and reconciliation requires cooperation across political divides. It requires consultation with the opposition and with civil society. Opposition leader Sajith Premadasa has been generally reasonable and constructive in his approach. A broader view of bipartisanship is that it needs to extend beyond the mainstream opposition to include ethnic and religious minorities. The government’s commitment to equal rights and non-discrimination has had a positive impact. Visible racism has declined, and minorities report feeling physically safer than in the past. These gains should not be underestimated. However, deeper threats to ethnic harmony remain.

The government needs to do more to make national reconciliation practical and rooted in change on the ground rather than symbolic. Political power sharing is central to this task. Minority communities, particularly in the north and east, continue to feel excluded from national development. While they welcome visits and dialogue with national leaders, frustration grows when development promises remain confined to foundation stones and ceremonies. The construction of Buddhist temples in areas with no Buddhist population, justified on claims of historical precedent, is perceived as threatening rather than reconciliatory.

Wider Polity

The constitutionally mandated devolution framework provided by the Thirteenth Amendment remains the most viable mechanism for addressing minority grievances within a united country. It was mediated by India as a third party to the agreement. The long delayed provincial council elections need to be held without further postponement. Provincial council elections have not been held for seven years. This prolonged suspension undermines both democratic practice and minority confidence. International experience, whether in India and Switzerland, shows that decentralisation is most effective when regional institutions are electorally accountable and operational rather than dormant.

It is not sufficient to treat individuals as equal citizens in the abstract. Democratic equality also requires recognising communities as collective actors with legitimate interests. Power sharing allows communities to make decisions in areas where they form majorities, reducing alienation and strengthening national cohesion. The government’s first year in office saw it acknowledge many of these problems, but acknowledgment has not yet translated into action. Issues relating to missing persons, prolonged detention, land encroachment and the absence of provincial elections remain unresolved. Even in areas where reform has been attempted, such as the repeal of the Prevention of Terrorism Act, the proposed replacement legislation falls short of international human rights standards.

The New Year must be one in which these foundational issues are addressed decisively. If not, problems will fester, get worse and distract the government from engaging fully in the development process. Devolution through the Thirteenth Amendment and credible reconciliation mechanisms must move from rhetoric to implementation. It is reported that a resolution to appoint a select committee of parliament to look into and report on an electoral system under which the provincial council elections will be held will be taken up this week. Similarly, existing institutions such as the Office of Missing Persons and the Office of Reparations need to be empowered to function effectively, while a truth and reconciliation process must be established that commands public confidence.

Trust in institutions requires respect for constitutional processes, trust in society requires inclusive decision making, and trust across communities requires genuine power sharing and accountability. Economic recovery, disaster reconstruction, institutional integrity and ethnic reconciliation are not separate tasks but interlinked tests of democratic governance. The government needs to move beyond reliance on its core supporters and govern in a manner that draws in the wider polity. Its success here will determine not only the sustainability of its reforms but also the country’s prospects for long term stability and unity.

by Jehan Perera

Features

Not taking responsibility, lack of accountability

Published

15 hours ago

2026/01/6

Sahan Weerasooriya

While agreeing wholeheartedly with most of the sentiments expressed by Dr Geewananda Gunawardhana in his piece “Pharmaceuticals, deaths, and work ethics” (The Island, 5th January), I must take exception to what he stated regarding corruption: “Enough has been said about corruption, and fortunately, the present government is making an effort to curb it. We must give them some time as only the government has changed, not the people”

With every change of government, we have witnessed the scenario of the incoming government going after the corrupt of the previous, punishing a few politicians in the process. This is nothing new. In fact, some governments have gone after high-ranking public servants, too, punishing them on very flimsy grounds. One of the main reasons, if not the main, of the unexpected massive victory at the polls of this government was the promise of eradication of corruption. Whilst claiming credit for convicting some errant politicians, even for cases that commenced before they came to power, how has the NPP government fared? If one considers corruption to be purely financial, then they have done well, so far. Well, even with previous governments they did not commence plundering the wealth of the nation in the first year!

I would argue that dishonesty, even refusal to take responsibility is corruption. Plucking out of retirement and giving plum jobs to those who canvassed key groups, in my opinion, is even worse corruption than some financial malpractices. There is no need to go into the details of Ranwala affairs as much has been written about but the way the government responded does not reassure anyone expecting and hoping for the NPP government to be corruption free.

One of the first important actions of the government was the election of Ranwala as the speaker. When his claimed doctorate was queried and he stepped down to find the certificate, why didn’t AKD give him a time limit to find it? When he could not substantiate obtaining a PhD, even after a year, why didn’t AKD insist that he resigns the parliamentary seat? Had such actions been taken then the NPP can claim credit that the party does not tolerate dishonesty. What an example are we setting for the youth?

Recent road traffic accident involving Ranwala brough to focus this lapse too, in addition to the laughable way the RTA was handled. The police officers investigating could not breathalyse him as they had run out of ‘balloons’ for the breathalyser! His blood and urine alcohol levels were done only after a safe period had elapsed. Not surprisingly, the results were normal! Honestly, does the government believe that anyone with an iota of intelligence would accept the explanation that these were lapses on the part of the police but not due to political interference?

The release of over 300 ‘red-tagged’ containers continues to remain a mystery. The deputy minister of shipping announced loudly that the ministry would take full responsibility but subsequently it turned out that customs is not under the purview of the ministry of shipping. Report on the affair is yet to see the light of day, the only thing that happened being the senior officer in customs that defended the government’s action being appointed the chief! Are these the actions of a government that came to power on the promise of eradication of corruption?

The new year dawned with another headache for the government that promised ‘system change.’ The most important educational reforms in our political history were those introduced by Dr CWW Kannangara which included free education and the establishment of central schools, etc. He did so after a comprehensive study lasting over six years, but the NPP government has been in a rush! Against the advice of many educationists that reforms should be brought after consultation, the government decided it could rush it on its own. It refuses to take responsibility when things go wrong. Heavens, things have started going wrong even before it started! Grade Six English Language module textbook gives a link to make e-buddies. When I clicked that link what I got was a site that stated: “Buddy, Bad Boys Club, Meet Gay Men for fun”!

Australia has already banned social media to children under 15 years and a recent survey showed that nearly two thirds of parents in the UK also favour such a ban but our minister of education wants children as young as ten years to join social media and have e-buddies!

Coming back to the aforesaid website, instead of an internal investigation to find out what went wrong, the Secretary to the Ministry of Education went to the CID. Of course, who is there in the CID? Shani of Ranjan Ramanayake tape fame! He will surely ‘fix’ someone for ‘sabotaging’ educational reforms! Can we say that the NPP government is less corrupt and any better than its predecessors?

by Dr Upul Wijayawardhana