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IMF tells SL how to save economy

Published

5 years ago

2022/03/4

The Executive Board of the IMF has asked Sri Lanka to reform state-owned enterprises and adopt cost-recovery energy pricing, the Fund said yesterday in a press release.

They also called for prudent management of the Colombo Port City project, and continued efforts to strengthen governance and fight corruption.

The IMF stated that further efforts are needed to diversify the economy, phase out import restrictions, and improve the business and investment climate in general.

The Directors also called for renewed efforts on growth-enhancing structural reforms and stressed the importance of increasing female labor force participation and reducing youth unemployment.

Below are the rest of the IMF release: “(IMF) concluded the Article IV consultation with Sri Lanka on February 25, 2022. Sri Lanka has been hit hard by COVID-19. On the eve of the pandemic, the country was highly vulnerable to external shocks owing to inadequate external buffers and high risks to public debt sustainability, exacerbated by the Easter Sunday terrorist attacks in 2019 and major policy changes including large tax cuts at late 2019. Real GDP contracted by 3.6 percent in 2020, due to a loss of tourism receipts and necessary lockdown measures. Sri Lanka lost access to the international sovereign bond market at the onset of the pandemic.

The authorities deployed a prompt and broad-based set of relief measures to cope with the impact of the pandemic, including macroeconomic policy stimulus, an increase in social safety net spending, and loan repayment moratoria for affected businesses. These measures were complemented by a strong vaccination drive. GDP growth is projected to have recovered to 3.6 percent in 2021, with mobility indicators largely back to their pre-pandemic levels and tourist arrivals starting to recover in late 2021.

“Nonetheless, annual fiscal deficits exceeded 10 percent of GDP in 2020 and 2021, due to the pre-pandemic tax cuts, weak revenue performance in the wake of the pandemic, and expenditure measures to combat the pandemic. Limited availability of external financing for the government has resulted in a large amount of central bank direct financing of the budget. Public debt is projected to have risen from 94 percent of GDP in 2019 to 119 percent of GDP in 2021. Large foreign exchange (FX) debt service payments by the government and a wider current account deficit have led to a significant FX shortage in the economy. The official exchange rate has been effectively pegged to the U.S. dollar since April 2021.

“The economic outlook is constrained by Sri Lanka’s debt overhang as well as persistently large fiscal and balance-of-payments financing needs. GDP growth is projected to be negatively affected by the impact of the FX shortage and macroeconomic imbalances on economic activities and business confidence. Inflation recently accelerated to 14 percent (y/y) in January 20223 and is projected to remain double-digit in the coming quarters, exceeding the target band of 4–6 percent, as strong inflationary pressures have built up from both supply and demand sides since mid-2021. Under current policies and the authorities’ commitment to preserve the tax cuts, the fiscal deficit is projected to remain large over 2022–26, raising public debt further over the medium term. Due to persistent external debt service burden, international reserves would remain inadequate, despite the authorities’ ongoing efforts to secure FX financing from external sources.

“The outlook is subject to large uncertainties with risks tilted to the downside. Unless the fiscal and balance-of-payments financing needs are met, the country could experience significant contractions in imports and private credit growth, or monetary instability in case of further central bank financing of fiscal deficits. Additional downside risks include a COVID-19 resurgence, rising commodity prices, worse-than-expected agricultural production, a potential

deterioration in banks’ asset quality, and extreme weather events. Upside risks include a faster-than-expected tourism recovery and stronger-than-projected FDI inflows.

“Executive Directors commended the Sri Lankan authorities for the prompt policy response and successful vaccination drive, which have cushioned the impact of the pandemic. Despite the ongoing economic recovery, Directors noted that the country faces mounting challenges, including public debt that has risen to unsustainable levels, low international reserves, and persistently large financing needs in the coming years. Against this backdrop, they stressed the urgency of implementing a credible and coherent strategy to restore macroeconomic stability and debt sustainability, while protecting vulnerable groups and reducing poverty through strengthened, well-targeted social safety nets.

“Directors emphasized the need for an ambitious fiscal consolidation that is based on high-quality revenue measures. Noting Sri Lanka’s low tax-to-GDP ratio, they saw scope for raising income tax and VAT rates and minimizing exemptions, complemented with revenue administration reform. Directors encouraged continued improvements to expenditure rationalization, budget formulation and execution, and the fiscal rule. They also encouraged the authorities to reform state-owned enterprises and adopt cost-recovery energy pricing. Directors agreed that a tighter monetary policy stance is needed to contain rising inflationary pressures, while phasing out the central bank’s direct financing of budget deficits. They also recommended a gradual return to a market-determined and flexible exchange rate to facilitate external adjustment and rebuild international reserves. Directors called on the authorities to

gradually unwind capital flow management measures as conditions permit.

“Directors welcomed the policy actions that helped mitigate the impact of the pandemic on the financial sector. Noting financial stability risks from the public debt overhang and sovereign-bank nexus, they recommended close monitoring of underlying asset quality and identifying vulnerabilities through stress testing. Directors welcomed ongoing legislative reforms to strengthen the regulatory, supervisory, and resolution frameworks.

Directors called for renewed efforts on growth-enhancing structural reforms.”

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Published

11 mins ago

2026/09/10

Sahan Weerasooriya

GL / Harshana

Opp. lashes out at Justice Minister for disparaging remarks about CLA

By Shamindra Ferdinando

The Joint Opposition yesterday (09) tore into Justice and National Integration Minister Harsha Nanayakkara over some disparaging remarks about the Commonwealth Lawyers Association (CLA) in Parliament on Tuesday (08).

The Convenor of the Opposition grouping, former Law Professor Peiris questioned Minister Nanayakkara’s declaration that the CLA was a private club that granted membership on payments received. Emphasising that the CLA consisted of those in the legal profession in Commonwealth countries, Prof. Peiris told the weekly media briefing at the Flower Road Office of former President Ranil Wickremesinghe that the views expressed by the organisation couldn’t be discarded under any circumstances.

Prof. Peiris dealt with Nanayakkara’s response to the CLA’S concerns about several issues, including the composition of the five-member panel of judges. “How could Minister Nanayakkara dismiss concerns raised by CLA on the basis of the paid-membership of the organisation?” Prof. Peiris asked. If membership became an issue, the government would have to reconsider Sri Lanka’s UN membership, the ex-External Affairs Minister said, pointing out that the country had to make regular payments to retain membership of other UN agencies, as well.

Prof. Peiris said that indefensible attacks on international organisations could cause irreparable damage to the country. Appreciating the CLA’s report on the Supreme Court proceedings on the 01 and 02 September, Prof. Peiris stressed the importance of what he called total transparency in the judicial process. He said that whatever the outcome of a particular legal process, it couldn’t be done behind the backs of the public.

Referring to legal processes regarding the 6th Amendment and 13th Amendment, in 1983 and 1987, respectively, Prof. Peiris said, on both occasions the then Chief Justices Neville Samarakoon and S. Sharvananda constituted benches consisting of all Supreme Court judges.

But, the incumbent CJ Preethi Padman Surasena, in spite of the majority of petitioners demanding all available 13 justices to hear the case, decided to leave out those on the seniority list from second position to fourth position.

The government got offended because the CLA pointed that out for the whole world to take notice, Prof. Peiris said. The former parliamentarian noted that the CJ hadn’t even give a reason for declining the widespread call to involve all available 13 judges. According to him, there had been instances where CJ’s appointed seven justices to hear a particular case. Prof. Peiris cited the 2018 bench of seven judges that heard the petitions against President Maithripala Sirisena over the dissolution of Parliament and a panel constituted in 2023 to hear the 2019 Easter Sunday carnage that claimed the lives of 270 people.

The issue at hand is that the five-member panel of judges hadn’t been selected on the basis of seniority, Prof. Peiris said, once the SC determination was sent and released through the Speaker, they would meticulously examine that to make their position known to the people. Prof. Peiris said that what they really wanted to know was that if seniority hadn’t been the basis for selection what the criterion was.

News

Sri Lanka reiterates its territory won’t be used against India

Published

13 mins ago

2026/09/10

Sahan Weerasooriya

Indian Defence Minister Rajnath Singh listening attentively to President Dissanayake (pic courtesy PMD)

The Indian Defence Ministry in a statement issued yesterday (09) quoted President Anura Kumara Dissanayake as having assured visiting Defence Minister Rajnath Singh that Sri Lanka would never allow its territory to be used for activities inimical to India’s security interests.

The text of the Indian press release: “Visiting Indian Defence Minister Rajnath Singh called on President Anura Kumara Dissanayake in Colombo on September 09, 2026. The two leaders held substantive discussions on issues covering the entire spectrum of the multi-faceted partnership between the two nations, characterised by traditionally warm relations and mutual trust.

The two sides reaffirmed that as civilisational twins, close neighbours and maritime partners, India and Sri Lanka would continue to work together for their development and welfare of the people while working jointly to ensure the safety, security, peace and prosperity of the region. The senior Indian Minister conveyed greetings on behalf of Prime Minister Narendra Modi and underlined that the citizens of the two countries share deep friendship based on strong historical & civilisational links and people-to-people exchanges.

Extending a warm welcome to Mr. Singh, President Dissanayake recalled his interactions with PM Modi and reiterated that Sri Lanka would never allow its territory to be used for any activities inimical to India’s security interests.

President Dissanayake expressed his gratitude for the relief assistance provided by India as part of Operation Sagar Bandhu during Cyclone Ditwah and the comprehensive rehabilitation package extended by New Delhi to facilitate reconstruction and rehabilitation work across different parts of the island. The powerful Indian Defence Minister emphasised that as a closest friend and neighbour of Sri Lanka, India considered it not a favour, but a responsibility to provide assistance as the first responder and would continue to do so in the future as well.

Both leaders virtually inaugurated three Bailey Bridges constructed by the Indian Defence Forces. The two sides also exchanged MoUs on upgradation of L70 Guns for the Sri Lankan Air Force, and cooperation between National Cadet Corps (NCC) & National Defence Colleges (NDC) of both the countries. The MoU on Upgradation of six L70 guns for the Sri Lankan Air Force falls under a Government of India grant. The upgradation of these air defence guns will significantly strengthen the air defence architecture of critical assets in Sri Lanka. These air defence guns were earlier provided to the Sri Lanka Air Force by India.

The MoU on academic cooperation between NDC, India and NDC, Sri Lanka will facilitate knowledge sharing which will be a significant step in further strengthening the academic bonds between both the sister institutes. The MoU on NCC cooperation will formalise the NCC youth exchange programme between India and Sri Lanka. This exchange programme provides a valuable opportunity for NCC cadets from multiple countries across the world to come to New Delhi every year and participate in NCC events.”

News

UK-led Core Group calls Jaffna mass graves a ‘stark reminder’ but stops short of calling for international accountability

Published

14 mins ago

2026/09/10

Sahan Weerasooriya

Eleanor Sanders

Mass grave excavations in Sri Lanka are a stark reminder that thousands of cases of enforced disappearance remain unresolved, the Sri Lanka Core Group has told the UN Human Rights Council, urging Colombo to translate its stated commitment to reform into concrete progress, while again stopping short of calling for the international accountability that Tamils have long demanded.

The statement, delivered in Geneva, on Tuesday (08), during the Council’s 63rd session by the United Kingdom’s Human Rights Ambassador Eleanor Sanders on behalf of Canada, Malawi, Montenegro, North Macedonia and the UK, welcomed, what it called, the High Commissioner’s balanced assessment of the human rights situation on the island.

The group acknowledged that Sri Lanka had faced considerable challenges recently, including severe weather events and global energy shocks, and welcomed positive developments, including the ratification of the ILO Convention 190 and engagement on the Convention on the Rights of Persons with Disabilities.

“However, much further action is needed to build confidence in accountability and reconciliation efforts,” Sanders said. “Progress in several emblematic cases has not yet been accompanied by a comprehensive,

victim-centred accountability process to address past violations. Mass grave excavations are a stark reminder that thousands of cases of enforced disappearances remain unresolved. And reports of intimidation, harassment, and restrictions affecting civil society, journalists and victims’ groups, including in the North and East, still raise concerns.”

The group urged progress on democratic governance, including advancing legal and institutional reforms, resolving land-related issues, ensuring respect for human rights in detention institutions and strengthening independent institutions.

The statement follows a familiar pattern. In June, the group acknowledged “developments in certain mass grave investigations” and urged that excavations meet international standards, and in March it called for the repeal of the Prevention of Terrorism Act. At the 58th session it welcomed a series of measures Tamils regarded as superficial. Neither this statement, nor its predecessors, names Chemmani, calls for international oversight of the excavation, or addresses the demand for a referral to the International Criminal Court.