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Lanka sovereign bond holders write to the IMF

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ECONOMYNEXT –Sri Lanka’s bondholders have written to the International Monetary Fund expressing their willingness to engage in debt re-structuring talks but also raising matters related to the domestic debt re-structuring and economic assumptions and forecasts.

The group, styling itself as the “Ad Hoc Group of Sri Lanka Bondholders (the Bondholder Group) has written last week to the IMF Managing Director from New York said inter alia that the Bondholder Group through its Steering Committee stands ready to engage quickly and effectively with the Sri Lankan authorities to design and implement restructuring terms that would help Sri Lanka restore debt sustainability and allow the country to re-gain access to the international capital markets during the IMF Programme period.

The letter concluded with the paragraph: Recognizing the important commitments made by India in the India Letter, the Sri Lankan authorities will apply the principle of comparable treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors.

Following is the text of the letter:

NEW YORK, Feb. 3, 2023

Dear Managing Director Georgieva,The Ad Hoc Group of Sri Lanka Bondholders (the “Bondholder Group”) acknowledges the Sri Lankan authorities’ engagement with their official creditors towards a resolution of the current crisis and restoration of debt sustainability.

The Bondholder Group further acknowledges that such engagement has recently resulted in the Government of India (in its letter to the IMF, dated January 16, 2023 (the “India Letter”)) delivering letters of financing assurances, committing to support Sri Lanka and contribute to its efforts to restore debt sustainability by providing debt relief and financing consistent with the IMF Extended Fund Facility Arrangement (the “IMF Programme”) and the IMF Programme targets indicated in the India Letter.

Similarly, the Bondholder Group through its Steering Committee stands ready to engage quickly and effectively with the Sri Lankan authorities to design and implement restructuring terms that would help Sri Lanka restore debt sustainability and allow the country to re-gain access to the international capital markets during the IMF Programme period.

Based on the limited information available to us at this time, including information contained in the India Letter, we understand that the IMF Programme’s debt sustainability targets are identified as

(i) reducing the ratio of public debt to GDP to 95% by 2032,

(ii) limiting the central government’s annual gross financing needs to GDP ratio to 13% in the period between 2027 and 2032, and central government annual foreign currency debt service at 4.5% of GDP in every year between 2027 and 2032 and

(iii) closing of the external financing gap.

The Bondholder Group hereby confirms it is prepared to engage, through its Steering Committee, with the Sri Lankan authorities in restructuring negotiations consistent with the parameters of an IMF Programme and the targets specified therein (the “IMF Programme Targets”), which the Bondholder Group understands to be the targets identified in the India Letter; it being recognized that these negotiations will necessarily be further informed by the receipt of the forthcoming DSA.

We would note that the finalization of an agreement will also be subject to the satisfaction of the following conditions:

The central government’s domestic debt – defined as debt governed by local law – is reorganized in a manner that both ensures debt sustainability and safeguards financial stability.

Assuming that annual gross financing needs should not exceed 13% of GDP in the period between 2027 and 2032, whilst allowing for central government annual foreign currency debt service to reach 4.5% of GDP in every year between 2027 and 2032, domestic gross financing should therefore be limited at 8.5% of GDP for the period 2027-2032.

While we recognize that the determination of the economic assumptions underpinning the IMF Programme Targets is ultimately the responsibility of the IMF and that the overall design of the IMF Programme is one that is negotiated between the IMF and Sri Lanka, it is nevertheless important that the Bondholder Group has the opportunity to express its views on both the economic assumptions underpinning these IMF Programme Targets and the adequacy and feasibility of the adjustment efforts contemplated under the IMF Programme.

When considering any restructuring proposal that is made to the Bondholder Group, it is the Bondholder Group’s intention to take into consideration the extent to which the economic assumptions and the adjustment efforts are consistent with these views.

Recognizing the important commitments made by India in the India Letter, the Sri Lankan authorities will apply the principle of comparable treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors.



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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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