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Sri Lanka being fleeced through debt restructuring, says Economic Analyst

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Gihan Pathirana

There isn’t a significant difference between the debt restructuring proposals made by private bondholders and the government of Sri Lanka, Economic Analyst Dhanusha Gihan Pathirana told The Island.

On 16 April 2024, the Sri Lankan government announced that the country’s debt restructuring process with private bondholders had hit a roadblock and that despite “constructive discussions”, the two sides did not come to an agreement on “restructuring terms.” The Ministry said that the Steering Committee comprises 10 of the largest bondholders and that the Ad Hoc Group controls “approximately 50 percent of the aggregate outstanding amount of ISBs.” These bondholders represent about 12 billion U.S dollars of the country’s total debt.

“When one looks at the announcement, one would feel that there is a significant difference in the proposals by private bondholders and the government of Sri Lanka. Verite Research has found that there isn’t a significant difference between the proposals made by private bondholders and the government of Sri Lanka,” he said.

The average interest rates for commercial loans are about 5 to 6 percent. The Ad Hoc Group of Bondholders, which consists of some of the country’s biggest private holders of debt, in its proposal has called the South Asian nation to issue a “Macro-Linked Bond” (MLB) as a part of new securities that will be offered to those who hold existing bonds.

“The Ad Hoc Group has suggested Sri Lanka pays an interest rate of 9.75 percent for the MLBs if Sri Lanka grows, on average by 5.3 percent, in the coming five years. The government has agreed to go up to 9 percent. You can see the difference here is minute,” he said.

He said that if Sri Lanka has to pay private bondholders over 9 percent interest when the average growth rate is around 5.3 percent from 2024 to 2028, the interest rate is almost double that of growth rate.

“One of the economic principles is that growth rate and interest rates must be roughly equal. If the profit rate is significantly higher than the growth rate, there will be significant inequality. Thus, the proposals of the bondholders and the government is a violation of basic economic principles,” he said.

Sri Lanka is trying to restructure about 25 billion dollars of its debt, although the total foreign debt is about 50 billion dollars. Sri Lanka continues to pay about 11 billion dollars of debt from multilateral organizations.

“But we are paying them. This is one of the points China raises. What the Chinese ask is why aren’t the multilateral agencies taking a haircut for the loans they have given,” he said.

The bond holders have agreed to give a 28 percent haircut to the debt they hold. However, in 2001 Argentina imposed a roughly 75 percent haircut on its creditors while Greece received a 64 percent haircut in 2012. Sri Lanka is trying to restructure about 25 billion dollars of its debt, although the total foreign debt is about 50 billion dollars. Sri Lanka continues to pay about 11 billion dollars of debt from multilateral organizations.

“Look at what has happened to Greece and Argentina even after such a large haircut. The debt to GDP ratio of Greece was about 160 percent in 2012. Even with a haircut which was over 50 percent of its GDP, Greece again has a debt to GDP ratio of about 160 percent,” he said.

On the other hand, if the GDP of the country picks up and goes above 98.9 billion dollars in 2028, Sri Lanka will virtually get no haircut from private bond holders.

“Imagine if we continue to grow at 5.3 percent, the haircut for private creditor debt will drop to about six to seven percent. The IMF says our GDP will be at about 80 billion by 2028. The Ad Hoc Group says, if the GDP is over 96 billion, they want Sri Lanka to pay an interest rate of 9.75 percent. This is simple,” he said.

Pathirana said the Sri Lankan government, too, has asked for a very small haircut, with a proposal that is identical with the one presented by the debt holders.

“The government wants to show us that it’s bargaining. Unfortunately for us, this is all very performative. What I want people to understand is, if Greece and Argentina are still in trouble despite massive haircuts, what is the fate of Sri Lanka that is asking for a very small haircut?” he asked.

When countries restructure, the concept of net present value is used, he said. The country will probably get a five-year period where we won’t have to repay debt from private creditors. However, once Sri Lanka starts to pay back loans it will have to pay 1.3 billion dollars as interest for the loans, which is subjected to another four percent interest.

“This is what we call ‘poli pita poli gahanawa’ (interest on top of interest). They are fleecing us,” he said.



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US sinks Iranian warship off Galle returning from Indian naval exercise

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IRIS Dena (F75)

Of 180 member crew, 30 rescued by Sri Lanka Navy

Iran warship IRIS Dena (F75), returning home after participating in the Indian International Fleet Review, and MILAN 2026 international naval exercises, has been sunk off Sri Lanka. The US, Russia and Iran were among 74 participants.

Speculation is rife that the US attacked the vessel in international waters as part of the continuing offensive action under Operation Epic Fury, launched on 28 February. Before the attack in the Indian ocean, President Trump declared that the Iranian Navy Headquarters and nine Navy vessels had been destroyed.

The ill-fated Moudge-class frigate participated in the Indian exercises with the US Navy’s Arleigh Burke-class guided-missile destroyer USS Pinckney (DDG-91) and the Marshal Shaposhnikov, a Udaloy-class frigate of the Russian Navy. Sri Lanka also participated in the exercises. SLNS Sagara and Israeli built Fast Missile Vessel Nandimithra represented Sri Lanka. Forty two warships and submarines and 29 aircraft had been involved.

At the time of the attack, the domestically built vessel was crewed by 180 officers and men.

The US Embassy here did not respond to The Island media query whether the US sank IRIS Dena . The Island was unable to get in touch with Iranian Ambassador in Colombo Alireza Delkhosh though he earlier indicated his availability later in the day.

Minister of Foreign Affairs, Foreign Employment and Tourism, Vijitha Herath, told the Parliament yesterday that the Sri Lanka Navy and the Sri Lanka Air Force had acted in less than an hour of receiving the distressed signal at 5.08 am.

According to the Minister, the first naval craft was dispatched by 6 am, followed by a second vessel at 7 am, while Air Force units joined the mission, including the deployment of a surveillance aircraft to support search operations.

Approximately 180 personnel were believed to have been on board the stricken vessel. Of them, around 30 were reported to be in critical condition.

“To save the lives of those 30 persons, we intervened immediately,” Minister Herath said, adding that the rescued crew members were being transported to Karapitiya Hospital for urgent medical treatment. Some had already arrived by the time of his statement.

SLPP MP Namal Rajapaksa asked whether the Iranian ship had been attacked within Sri Lanka’s Exclusive Economic Zone (EEZ).

Responding to questions raised by Opposition MPs, including NDF Badulla District MP Chamara Sampath Dassanayake, who alleged that the Iranian vessel may have been struck in Sri Lankan waters, the Minister said the ship had been outside Sri Lanka’s maritime boundary when it issued the distress call.

MP Dassanayake queried whether the frigate had been hit as part of the ongoing military escalation involving the United States and Israel against Iran. There was no immediate confirmation from the government regarding the cause of the emergency.

Minister Herath stressed that Sri Lanka’s intervention was guided solely by humanitarian considerations and international obligations.

“We are bound by the International Convention on Maritime Search and Rescue (SAR) of 1979, which we have signed,” he told Parliament.

Under the convention, a signatory state is required to respond to maritime emergencies, regardless of nationality, the cause of the incident, or whether it occurs beyond its own territorial waters.

“According to this convention, if a vessel, or its crew, encounters danger beyond our territorial limits, we are obligated to intervene and protect those lives on humanitarian grounds,” Minister Herath said, adding Sri Lanka had acted immediately to prevent loss of life and had taken all urgent and necessary measures as a responsible state.

The Minister noted that the incident highlighted broader regional security vulnerabilities in maritime safety amid escalating tensions in the region. “A regional military situation would also have an impact on our country. The government’s position is that a negotiated solution must be pursued,” he said.

He also disclosed that President Anura Kumara Dissanayake had held a telephone discussion on Tuesday night with the leadership of the United Arab Emirates regarding the evolving regional situation.

Rescue operations were continuing at the time of going to press.

By Saman Indrajith and Shamindra Ferdinando

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Justice Kumudini complains of male domination at senior levels, absence of a woman head of BASL

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Supreme Court Justice Kumudini Wickramasinghe

Judge of the Supreme Court Justice Kumudini Wickramasinghe has recently presented a stark analysis of the legal profession’s gender disparity, noting that in spite of women entering the legal field in substantial numbers, their representation dwindles at senior levels. She has highlighted critical statistics and the fact that only two women currently serve in the Supreme Court, none in the Court of Appeal, and that there has never been a woman President of the Bar Association of Sri Lanka (BASL).

“Inclusive leadership is not satisfied by entry-level participation,” Justice Wickramasinghe said. “It concerns who occupies the apex of institutional authority, who shapes doctrine, who speaks for the profession. These figures are not merely statistics; they are indicators of work yet unfinished.”

Justice Wickramasinghe said so at a seminar organised on the eve of International Women’s Day by the Bar Association of Sri Lanka (BASL), in collaboration with the Sri Lanka Women Lawyers’ Association (SLWLA). She underscored the need to address the systemic barriers preventing women from reaching the apex of the legal profession. Justice Wickramasinghe addressed the gathering as the Chief Guest.

BASL President Rajeev Amarasuriya, in his address, framed inclusivity not as charity or tokenism, but as “structural fairness.” He raised an important question being ‘who bears the responsibility of inclusivity’ and addressed the vital role of leadership in inclusivity. Furthermore, Amarasuriya challenged the profession to address the “gap between what we see coming into the profession and what we see at the top,” and clarified that such disparity did not stem from a lack of competence or commitment but from deep rooted practices and structural issues.

A dynamic panel discussion, moderated by Attorney-at-Law Tanushka Gunawardane, explored the multifaceted nature of inclusive leadership. The panel featured Justice Wickramasinghe, Constitutional Council Member Professor Wasantha Seneviratne (joining online), Senior Instructing Attorney Shiranthi Gunawardhana, and corporate leader Yanina Weerasinghe.

Professor Wasantha Seneviratne distinguished between mere representation and true participation, stating that inclusion becomes meaningful only when women have the “agency and authority to make decisions.” She emphasised that inclusive leadership is both a moral obligation and a pragmatic governance strategy.

Senior Instructing Attorney Shiranthi Gunawardhana shared personal anecdotes from her 50-year career, urging senior lawyers to act as mentors rather than gatekeepers. She stressed the importance of creating space for young female lawyers by offering flexibility and support to help them balance professional and personal responsibilities.

Yanina Weerasinghe, Head of Legal at Brandix, argued that true inclusion is measured by influence, not optics. “Diversity is being present; inclusivity is being influential,” she explained, warning against tokenism and calling for “cerebral opportunities” where women are selected, based on talent, and given a genuine voice in decision-making.

Justice Wickramasinghe addressed the relationship between judicial hierarchy and inclusion, asserting that authority and accessibility can coexist. “A judge can be firm in decisions while remaining approachable,” she said, adding that power exercised with transparency and humility strengthens, rather than weakens, institutional legitimacy.

The seminar also heard from Dilani Yatawaka, Managing Director/CEO of Ideal Motors, who shared her perspective as a female leader in the male-dominated automotive sector. She reinforced the critical role of supportive superiors and societal encouragement to enable women to ascend the career ladder while managing family responsibilities.

BASL Women Lawyers’ Professional and Career Development Committee Chair Indika Nagaratne Koththagoda in her welcome address said that the distinguished gathering was honoured to have Her Ladyship Justice Kumudini Wickramasinghe, Judge of the Supreme Court of Sri Lanka, as the Chief Guest and a key panellist and also welcomed the other panellists Attorneys-at-Law Professor Wasantha Seneviratne, Ms. Shiranthi Gunawardena and Yanina Weerasinghe for agreeing to share their insights on the subject during the ensuing panel discussion to be moderated by Attorney-at-Law Ms. Tanushka Gunawardane.

In her closing remarks, Nalani Manatunga, Co-Chairperson of the BASL Women Lawyers’ Professional and Career Development Committee, challenged the audience to reflect on the true meaning of leadership. “A position gives authority, but leadership gives direction,” she said. “Inclusive leadership is not about occupying space; it’s about creating space. Let our leadership not be measured by the chairs we occupy, but by the doors we leave open.”

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No qualified printer to head Government Printing Department

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A crisis was prevailing at the Government Printing Department due to the absence of a permanent Government Printer, Parliament was told yesterday, raising concerns over confidentiality, quality control and national security.

NDF MP Ravi Karunanayake demanded to know what steps the government had taken to fill the long-standing vacancy at the department, describing the situation as a serious administrative lapse.

“The Government Printing Department is a very important and closed service category institution. However, it has been functioning without a permanent Government Printer for some time,” Karunanayake said.

The MP pointed out that the department handles highly sensitive material, including documents related to defence and national security, as well as other classified publications.

“The non-availability of a permanent Government Printer affects the quality, confidentiality and sustainability of the work there. Has the Government conducted an audit on the possible issues arising from this situation? What immediate action has been taken to resolve this crisis?” he asked.

Responding on behalf of the Government, Prime Minister Dr Harini Amarasuriya said the vacancy had been filled on a temporary basis following a Cabinet decision.

She said an experienced officer from the Sri Lanka Administrative Service had been appointed on contract as Acting Government Printer to ensure operational continuity and maintain security standards in relation to sensitive printing tasks.

The Prime Minister acknowledged that the issue reflected broader systemic weaknesses in public service recruitment and professional development that had persisted for years.

“To bridge these gaps, the Government is initiating specialised training programmes and offering international scholarships for high-performing students to build future technical capacity,” she said.

Chief Government Whip and Health and Mass Media Minister Dr Nalinda Jayatissa said that under existing service minutes, more than two decades of experience were required for an officer to qualify for the top post, and that there were currently no internal candidates eligible for appointment.

He said that the department was facing a leadership crisis and administrative instability due to the lack of a permanent, qualified Government Printer.

By Saman Indrajith

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