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IMF hopes to complete Sri Lanka aid talks ‘as quickly as possible’
The International Monetary Fund (IMF) intends to complete talks with Sri Lanka “as quickly as possible,” Managing Director Kristalina Georgieva said on Wednesday, hours before the Parliament voted Acting President Ranil Wickremesinghe as the President.
Speaking with Nikkei Asia in Tokyo, Georgieva said the fund was “very deeply concerned about the well-being of the people in Sri Lanka,” which has been gripped by severe shortages of fuel, food and other essentials after its foreign reserves dried up.
Frustrated citizens have turned their anger on the government, clouding the outlook for debt restructuring and driving once-powerful President Gotabaya Rajapaksa to go into exile and resign last week. On Wednesday, the Sri Lankan parliament elected Ranil Wickremesinghe as his replacement.
Georgieva vowed that “the moment there is a government that we can continue our discussions with, our team will be there.” She added that she was “very hopeful that based on the good technical work we have already done, and the fact that this technical team of Sri Lanka is there, we can complete program negotiations as quickly as possible.”
Wickremesinghe is no stranger to the IMF, as a finance minister and six-time prime minister who has had a hand in negotiations. But he is deeply unpopular with the public.
Georgieva said that the IMF would work with any Sri Lankan administration “as long as the next leader enjoys support and has the longevity to lead the country.”
Sri Lanka is not the only South Asian country facing serious economic pressure. Others include Pakistan, with which the IMF recently reached a staff-level agreement to extend about $1.2 billion in aid, and the Maldives, whose debt-to-gross domestic product ratio stood 123.4% last year according to the IMF’s estimate.
“It is very important for all countries that have had that burden to stare it in the face and not pretend that somehow the problem can go away,” Georgieva warned. “Because it won’t.”
The managing director, who was stopping in the Japanese capital after attending the Group of 20 finance ministers meeting in Indonesia last week, went on to say: “Countries that are faced with severe problems of bad management need to understand that, in this context, markets are jittery. Sentiment is such that there is more anxiety. So if you need to be prudent in good times, you have to be even more prudent in bad times where we are today.”
In the case of Sri Lanka, which “pre-emptively” defaulted on its foreign debt for the first time earlier this year after COVID-19 devastated its core tourism sector, the government was due to submit a debt restructuring plan to the IMF by next month.
“What we would need for the program is financial assurances that will be sustainable, not immediately, but that we have a credible plan to get to that point,” Georgieva said. She added that the incoming government has “a very important role to play, reaching out to both bilateral creditors and private-sector creditors.”
Sri Lanka’s large creditors include Japan, China and India. Georgieva said that she has discussed the situation with the countries during her Asia trip, and was encouraged because “there is an understanding that protracted negotiations are simply not viable, that there has to be decisive action as early as the weeks after a [new] government is in place.”
More broadly, on the global economy, Georgieva said that the IMF will further lower its projection for global GDP growth when it releases its latest World Economic Outlook on July 26. This will mark the third downgrade this year alone. In April, the IMF lowered the outlook for 2022 to 3.6% from 4.4% in January.
She said that the new growth projections would remain in positive territory both for 2022 and 2023. But the downside risks, such as the Ukraine war and inflation, “remain very present.”
“The risk of recession has gone up,” she said.
Georgieva said there will be a “quite significant downgrade” for China, from its 4.4% growth forecast in the IMF’s April projections due to the impact of COVID-19 lockdowns and real estate problems.
She noted that Beijing has started to use monetary as well as fiscal policy levers, but said the question is “how quickly they can produce results.”
When asked about the weakening Japanese yen and the Bank of Japan’s monetary policy, she pointed out that Japan is an export-oriented economy. Hence, the exchange rate is helping Japanese exporters.
“The economy is not yet achieving its inflation target [of 2%] in a sustained manner,” she said. “And therefore, monetary policy accommodation remains the right choice.”
News
Review of progress in reforms and modernisation of key state revenue-collecting institutions
A progress review meeting on reforms and modernisation initiatives at Sri Lanka’s key state revenue-collecting institutions was held on Thursday (15) at the Presidential Secretariat, chaired by Secretary to the President Dr Nandika Sanath Kumanayake, with the participation of representatives of the International Monetary Fund (IMF) and officials of the Revenue Administration, Reform and Modernisation Bureau (RARMB) of the Presidential Secretariat.
At the meeting, the IMF representatives commended the revenue collection efficiency of the Department of Inland Revenue, Sri Lanka Customs and the Department of Excise, the country’s three leading state revenue-collecting institutions. Extensive discussions were also held on the progress of the reform and modernisation programmes being implemented at these institutions.
Secretary to the President Dr Nandika Sanath Kumanayake outlined the progress achieved by the three institutions to date and the reforms planned for implementation in the future.
The IMF representatives also highlighted the importance of strengthening risk management, developing human resources and ensuring the efficient operation of computer systems at the respective institutions.
Senior Additional Secretary to the President Seevali Arukgoda also attended the meeting. The IMF was represented by Cindy Negus, Senior Economist in Revenue Administration for the Asia and Pacific, Europe, Middle East and Central Asia regions; Alison Lister, Revenue Administration Adviser; and Gregory Toppin, Resident Revenue Adviser in Sri Lanka. A group of senior officials from the Revenue Administration, Reform and Modernisation Bureau of the Presidential Secretariat also participated.
(President’s Media Division)
News
Cut power bills by 3-5%, don’t hike them, consumers demand
By Anuradha Hiripitiyage
Electricity tariffs should be reduced by between 3 and 5 percent instead of being increased by 2.88 percent in the fourth quarter, as proposed by the National System Operator (NSO), Electricity Consumers’ Association Secretary Sanjeewa Dhammika said.
Addressing a media briefing in Maradagahamula, Divulapitiya, Gampaha, yesterday (16), Dhammika said a proper assessment of electricity generation costs, including the contribution of hydropower, could justify a reduction in tariffs.
He said the NSO had sought approval from the Public Utilities Commission of Sri Lanka (PUCSL) for a 2.88 percent tariff increase, which was expected to generate an additional Rs. 4,438 million.
However, the Commission had indicated that an increase of only 1.46 percent was warranted, amounting to Rs. 2,245 million, he said, adding that even this increase was unnecessary.
Dhammika alleged that the proposed revision sought to pass on to electricity consumers the financial burden arising from the non-arrival of five coal shipments and failed tenders.
“The Government had said that the burden of coal-related losses would not be passed on to the public. It is therefore unjust to make consumers bear these costs,” he said.
He pointed out that the PUCSL had forecast that hydropower would account for 32.34 percent of total electricity generation in the coming quarter, while the cost of such generation would represent only 3.45 percent of the overall cost of electricity production.
Consumers should benefit from the lower cost of hydropower generation rather than bear the burden of more expensive thermal power generation, he said.
Dhammika also questioned the inclusion of Rs. 669 million in capacity charges that had not been approved by the PUCSL, as well as a further Rs. 1,069 million to repay loans relating to incomplete projects.
Including such charges in the proposed tariff revision was unjustifiable, he said.
The PUCSL has given the public until October 30 to submit their views on the proposed tariff revision.
Dhammika said the possibility of increased hydropower generation in the coming weeks, as reservoir levels rise, should also be taken into account when determining electricity tariffs.
He maintained that tariffs could be reduced by 3 to 5 percent if hydropower generation was properly assessed and coal-related losses and unapproved charges were excluded from the calculations.
He further claimed that electricity tariffs could be reduced by as much as 10 percent through the promotion of renewable energy and the effective use of solar power and battery storage systems.
The Electricity Consumers’ Association urged the Government to withdraw the proposed tariff increase, insisting that consumers should not be made to bear costs arising from coal supply problems and other disputed charges.
News
Asgiri Mahanayake calls for immediate release of Gnanasara Thera
By S.K. Samaranayake
Most Ven. Warakagoda Sri Gnanaratana Mahanayake Thera of the Asgiri Chapter has called for the immediate release of Ven. Galagodaaththe Gnanasara Thera, who is currently serving a prison sentence, following a court ruling.
The Asgiri Mahanayake made the appeal when a delegation of senior prison officials, including Assistant Commissioner of Prisons and Director of Operations Senaka Pallegedara, called on him on the 16th.
During the meeting, the prelate warned that the continued incarceration of Ven. Gnanasara Thera could lead to a volatile situation and cause public agitation.
Responding to the appeal, the prison officials informed the Mahanayake Thera that the authority to order the release of Ven. Gnanasara Thera did not rest with the Prisons Department but with the President.
Other senior prison officials, including Rajeev Srimal Silva, Sampath Warnakulasooriya and Mangala Welivita, were also present at the meeting.
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