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Harsha warns against potential risks of domestic debt restructuring

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Dr. Harsha de Silva

SJB MP Dr. Harsha de Silva has warned against the potential risks of domestic debt restructuring, stressing the need for extreme caution.

Addressing the media recently, Dr de Silva cautioned that if not managed carefully, domestic debt optimisation could become a burden rather than a relief for the economy.

Citing the net debt relief Laffer curve, de Silva stated that the more we increase the haircut on banks, the more likely we are to hit the curve’s negative impact zone, where debt restructuring becomes counterproductive, thus leading to a negative impact on the economy. Harsha provided another example of this phenomenon: taxes on wine and spirits. High taxation has resulted in a drop in consumption, which, in turn, has substantially reduced the expected revenue for the Excise Department. Therefore, de Silva emphasised that the risk of capital adequacy in banks could result from debt optimisation, which is when a bank’s capital falls below the recommended levels, raising questions about its stability.

Harsha emphasised the need for discussions on this complex issue to occur in the Committee on Public Finance. By summoning relevant officials and utilising data to work the numbers, the Committee could help avoid potential blame down the road.

Furthermore, Harsha proposed the establishment of a Financial Sector Support Fund to ensure macro-stability. He suggested that multilateral organisations, like the World Bank and ADB, would lend money to establish this fund, as over 1 billion dollars would be needed.

Another issue raised by Harsha concerns the Employees’ Provident Fund (EPF), where hard-earned people’s pension money lies. Harsha questioned whether the EPF, established to provide positive real interest rates, as envisioned by then Minister T.B. Illangaratne, when bringing in the Act, had fulfilled its mandate. Harsha believes that people ought to get a positive interest rate that has been adjusted for inflation, as opposed to a positive nominal interest rate. However, as per current statistics, this has not been the case. The real interest rate has been declining since 2015, with the rate being -47.2% in 2022. The EPF has already been subjected to a 32% haircut in US dollar terms, as the value of the fund in 2021 was $15.8 billion, and by the end of 2022, it was $9.5 billion due to the rupee crashing and the impact of inflation. Harsha proposed that if the interest rate given to the recipient is less than 2.5%, the Central Bank should be given a loan from the Treasury to give the recipients a minimum of 2.5% interest. Harsha hopes that this proposal would be discussed in Parliament and that necessary legislation would provide relief to the already suffering middle class.

Harsha reiterates support for the IMF programme but suggests tweaking it to make it more bearable for the people. Additionally, if Sri Lanka needs to undergo domestic debt restructuring, Harsha proposes extending a warrant, a domestic debt restructure warrant, in other words, a derivative or put option, to creditors subjected to domestic debt restructuring. Harsha suggests that since the government has promised the people stability and an increase in GDP growth to 3% by 2027, the people have agreed to tough measures, like high taxes and a reduction in subsidies. Therefore, if the economy grows beyond expectations, the extra growth should be extended to the people to honour their sacrifices. Harsha expressed support for establishing discussions on this topic. Finally, the SJB believes that the government ought to treat both foreign and domestic creditors equally and non-discriminately, with the primary goal being to stabilize the country’s debt, while minimizing its impact on the EPF and banks.



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Govt. assures UN of readiness to introduce ‘vetting process’ for troops on overseas missions

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Thuyakontha

Defence Secretary (retd.) Air Marshal Sampath Thuyakontha has discussed with UN officials in New York the deployment of Sri Lankan troops in Haiti, under a new UN authorised force, tasked with tackling heavily armed gangs operating in the violence ravaged country.

The UN is in the process of building up a force comprising approximately 5,500 officers and men for deployment in Haiti.

The Sri Lankan delegation included Sri Lanka’s Permanent Representative to the UN, former Chief Justice Jayantha Jayasuriya. The UN has tagged the deployment Gang Suppression Force (GSF).

According to the Defence Ministry, Sri Lanka negotiated a Memorandum of Understanding (MoU) regarding the GSF. Although Sri Lanka has contributed to UN-led missions, the proposed deployment differed due to the nature of the operation, sources told The Island.

The delegation has assured that all personnel, assigned for UN missions, including the proposed GSF deployment in Haiti, would be subjected to a comprehensive screening process, in line with UN standards. War-winning Sri Lanka has declared, in New York, that the country was in the process of developing, what the Defence Ministry here called, National Human Rights Vetting Mechanism in consultation with the UN Resident Coordinator in Colombo.

The US has backed the deployment of Sri Lankan troops under UN command. Various interested parties, over the years, protested against the deployment of Sri Lankan troops on the basis of unsubstantiated war crimes allegations.

Thuyakontha has assured that troops would maintain highest standards of discipline during overseas missions. Sri Lanka brought the war here to a successful conclusion in May 2009 against predictions of contrary outcome by so-called experts.

The US and Panama proposed the GSF to replace a Kenya-led multinational force undermined by a lack of funding. Its strength hovered around 1,000, rather than the desired 2,500. The U.N. Security Council authorised the 5,500 strong force on September 30, 2025, with the new power to arrest gang members.

By Shamindra Ferdinando

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Lawyers cannot be denied right to represent a suspect – Udaya

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Sallay

Sallay’s case:

Attorney-at-law Udaya Gammanpila yesterday (27) said a lawyer could not be deprived of his or her right to represent a client.

The former Minister and leader of Pivuthuru Hela Urumaya (PHU) Gammanpila said so addressing the media at the party headoffice at Pita Kotte. Gammanpila was responding to recent media reports that he had been prohibited from representing retired State Intelligence Service (SIS) Chief Maj. Gen. Suresh Sallay. Therefore, there was absolutely no basis for claims that he had been barred from meeting the retired officer, now named the third suspect in the Easter Sunday case, the ex-parliamentarian said.

Gammanpila emphasised that in terms of the Constitution a suspect’s right to be represented by a lawyer was recognised as a fundamental right. The Criminal procedure Code, too, guaranteed the suspect’s right to consult a lawyer, the ex-lawmaker said, pointing out that the Judicial Organisation Act underscored the same.

Declaring that the retired officer’s wife had named him as Sallay’s lawyer in a letter addressed to Director, CID, Gammanpila said that the courts, police and the Attorney General’s Department couldn’t under any circumstances interfere with his right to represent Sallay.

The CID arrested Sallay on 25 February and detained him under Prevention of Terrorism Act (PTA) for a period of 90 days. Sallay has filed a writ petition before the Court of Appeal through his lawyers, challenging his arrest and detention by the CID under the PTA.

Former Minister Gammanpila said that even if a Magistrate had the power to prohibit a lawyer from representing a particular suspect, such a course of action couldn’t be resorted to without giving the lawyer concern an opportunity to explain his/her actions.

Declaring that in case of misconduct on the part of a lawyer only the Supreme Court could take disciplinary action, the PHU leader said, adding that he sought a certified copy of the proceedings of the day when a section of the media reported the Magistrate’s declaration of the purported ban. Gammapila said that he was really keen to know what happened during the proceedings on that day.

Sallay served as Director, Directorate of Military Intelligence (DMI) from 2012 to 2016 and received the appointment as head of SIS following the 2019 presidential election. Sallay held that appointment till early October, 2024.

Gammanpila said that he couldn’t be barred for speaking to the media after meeting Sallay, currently held under PTA, or for authoring a book on the 2019 Easter Sunday carnage. According to Gammanpila as long as the suspect had no objections to his lawyer sharing some information with the media it shouldn’t be an issue for Additional Solicitor General Dileepa Peiris.

By Shamindra Ferdinando

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Police seek Interpol help to probe monks nabbed with narcotics at BIA

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Police investigating the thwarted a bid made by 22 Buddhist monks to smuggle in narcotics, with a street value of Rs 660 mn via BIA, from Thailand, over the weekend, believe the monks who organised the clandestine operation had sent groups of monks to Thailand before.

Sources said that they had brought in narcotics on earlier occasions.

Police have seized the mobile phones used by the suspects and sought INTERPOL assistance.

Earlier, the Negombo Magistrate’s Court remanded those 22 monks, arrested in connection with the largest drug bust in the airport’s history.

The monks were produced before the Negombo Magistrate’s Court and ordered to be held in custody until 02 May, as investigations continue into the alleged smuggling operation and any wider networks involved.

However, other sources said that more than 110 kilogrammes of suspected Kush and Hashish, with an estimated street value exceeding Rs 1.1 billion, had been found, concealed in false-bottoms of their suitcases. The bags reportedly packed with school supplies and sweets are said to have contained over five kilogrammes of narcotics per individual.

The arrests followed a raid by the Police Narcotics Bureau on Saturday night. Investigators have also recovered mobile phone evidence indicating that the group had travelled to Bangkok on 22 April using airline tickets allegedly given by a sponsor. Authorities allege that the suspects were photographed in civilian clothing, while overseas, engaging in activities deemed suspicious.

Police say this marks the first reported instance of a large-scale narcotics operation via the airport involving Buddhist monks. The suspects are young monks from different parts of the country.

By Norman Palihawadana

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