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CBSL Chief: Economy could be stabilised in year or so if …
By Hiran H. Senewiratne
The prevailing Balance of Payments (BoP) crisis could lead to a major social crisis as the available foreign reserves were only sufficient for a few weeks’ imports, Governor of the Central Bank Dr. Nandalal Weerasinghe warned on Monday.
“The economy can be stabilised in the next 12 month if the IMF negotiations and debt restructuring are finalised within the next seven to eight months. Until then we have to support the poor people,” Dr. Weerasinghe said, addressing a seminar on the “State of the Economy and Talks with the IMF”. It was organised by the Press Club, together with the Press Institute, at Colombo Hilton.
The CB Governor said the current BoP crisis would worsen and, therefore the economic pain could only be minimised if essential policies and measures were implemented in an expeditious manner. But “IMF technical level virtual meetings are likely to conclude this week, and thereafter further discussion will take place to finalise everything,” Dr. Weerasinghe said.
Dr. Weerasinghe suggested that the monetary and fiscal authorities tighten the monetary policy by higher margins and fiscal policy by restoring tax rates to pre-2020 levels.
The Governor said, “We have three categories of creditors namely International Sovereign Bonds, which raise short term funds from global markets, which account for 35 percent of the government debt, while other two creditors are Paris Club and non-Paris Club (India and China).
Dr. Weerasinghe said that the country’s debt needed to be brought to a sustainable level. “For that purpose a debt sustainability analysis needs to be drafted with a fiscal policy for the IMF bailout”, he said.
Speaking about the country’s worsening economic fundamentals, Dr. Weerasinghe said: “The nation is currently experiencing a historically low economic growth and falling trend of per capita GDP since 2017 with rising levels of poverty. It is also running the highest fiscal deficits since 1988 with the lowest ever government revenue as a percent of GDP.
“Amid those developments Sri Lanka’ poverty level will increase, unemployment level soar and local industries will have to shut down due to restriction of importation of raw material. Therefore, we have to seek humanitarian assistance from the World Bank, Asian Development Bank and other bilateral and multilateral agencies”, the Governor said.
“We are seeking short-term bridging facilities from official creditors until an agreement is reached with creditors on restructuring,” he said.
In his presentation, Dr. Weerasinghe analysed the links between banking and the currency crises. He pointed out that the problems in the banking sector typically precede a currency crisis with the currency crisis deepening the banking crisis, thus activating a vicious spiral.
Sri Lanka also had the highest-ever government debt which was unsustainable at the moment. Debt dynamics might be worsening in the next few years unless the debt was restructured, he said.
Sri Lanka also recorded the highest rate of inflation in 12 years which was increasing sharply and was experiencing the highest-ever levels of money printing by the CBSL, he added
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French Ambassador pledges support for relief efforts
A meeting between the Secretary to the President, Dr. Nandika Sanath Kumanayake and the French Ambassador to Sri Lanka, Rémi Lambert, was held on Tuesday (09) afternoon at the Presidential Secretariat.
During the discussion, the French Ambassador assured the Secretary to the President that the French Development Agency would extend its support to the Government’s programme for providing relief to those affected by Cyclone Ditwah and for rebuilding Sri Lanka. He further stated that steps are being taken to dispatch a team of experts to the country in the near future.
The Deputy Head of Mission at the French Embassy, was also present on this occasion.
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India extends multi-front support to Sri Lanka’s cyclone relief efforts
India has strengthened its humanitarian support to Sri Lanka in the aftermath of Cyclone Ditwah, providing critical air assets, emergency supplies, engineering equipment and medical aid to bolster national rescue and recovery operations.
India dispatched an additional MI-17 helicopter to assist the Sri Lanka Air Force (SLAF) in ongoing air rescue missions on Tuesday (09). Two MI-17 V5 helicopters of the Indian Air Force had been operating in Sri Lanka from 29 November, conducting around 90 sorties, rescuing approximately 270 survivors, airlifting about 50 tonnes of relief material to inaccessible areas and relief camps and deploying 57 Sri Lankan troops to cut-off locations.
Having completed their flying hours, the two helicopters returned to India on Sunday (08) for mandatory maintenance and a fresh MI-17 aircraft arrived at Katunayake Airport to continue operations alongside the SLAF.
The aviation support comes alongside major maritime assistance. The Indian naval vessel INS Gharial arrived at the Port of Trincomalee on Sunday (08) carrying a 700-tonne humanitarian shipment, marking India’s fifth naval relief consignment to Sri Lanka, apart from 10 aircrafts and 5 helicopters, which have contributed towards rescues and relief operations, since the cyclone.
The shipment included essential food supplies such as pulses, sugar and milk powder, as well as bed sheets, towels, sarees, dhotis and tarpaulins for families displaced by flooding and landslides. The emergency aid is being directed to the hardest-hit districts through local relief agencies.
In a further show of engineering support, India has also handed over a 63-ton Bailey bridge and a consignment of essential medicines to Sri Lankan authorities to restore connectivity and meet urgent medical needs in affected communities.
The cargo was received by General Chaminda Wijerathne of the Sri Lanka Army Headquarters, Sunil Jayaweera, former Director Preparedness of the Disaster Management Centre (DMC), now volunteering in the response and Shan Pathirana, Deputy Director of the DMC Awareness Division.
The handover was facilitated by the Indian High Commission in Colombo.
These coordinated air, sea and engineering initiatives underscore India’s continued commitment to supporting Sri Lanka during its national emergency response and long-term recovery. The assistance forms part of India’s broader partnership to restore essential services, reconnect isolated communities and provide relief to thousands affected by Cyclone Ditwah.
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Relief Cargo from the UAE arrives in Sri Lanka
In a significant gesture of solidarity and support, a relief cargo from the United Arab Emirates has been officially received in Sri Lanka.
The cargo was accepted by key representatives from the Middle East Division of the Ministry of Foreign Affairs, including Ms. Ishara De Silva and Ms. Sajeeda Rasheed, both serving as Assistant Directors.
Joining them were Sunil Jayaweera, a former Director of Preparedness at the Disaster Management Center (DMC), who has returned to volunteer after retirement and . Shan Pathirana, Deputy Director of the Awareness Division at DMC.
The cargo was presented by the Deputy Head of Mission, representing the UAE, highlighting the strong ties and commitment to humanitarian aid between the two nations.
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