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Is debt cancellation the way forward for Lanka?
(Al Jazeera) More than 180 prominent economists and development experts from around the world have made a global appeal to Sri Lanka’s financial lenders to forgive its debt, even as other experts are not convinced it is the best way forward for the island nation.
According to World Bank estimates, Sri Lanka has an external debt burden of more than $52bn as of December. Of that, nearly 40 percent is owed to private creditors, including financial institutions, while the rest is owed to bilateral creditors where China (52 percent), Japan (19 percent) and India (12 percent) are the largest ones.
Colombo defaulted on its debt repayments in April and negotiated a $2.9bn bailout with the International Monetary Fund (IMF).But the IMF will not release the cash until it feels that the island nation’s debt is sustainable.
Now several prominent academics and economists, including Thomas Piketty who wrote the bestseller Capital, Harvard University economist Dani Rodrik and Indian economist Jayati Ghosh have issued a statement calling for the cancellation of Sri Lanka’s debt by all external creditors and measures to stem the illicit outflow of capital from the country. The statement was put together by the “Debt Justice” campaign group, a global movement to “end unjust debt and the poverty and inequality it perpetuates”.
The private investors who lent at high interest rates to corrupt politicians must face the consequences of their risky lending by cancelling the debt, the academics said in the statement.
The academics have accused private creditors of contributing to Sri Lanka’s first-ever sovereign debt default as they accrued “a massive profit” by charging a premium to lend. Therefore, they said, the private lenders who benefitted from higher returns must be “willing to take the consequences” of their actions, meaning cancelling the debt and forfeiting the loans.
But not everyone agrees with this suggestion.
WA Wijewardene, a former deputy governor of the Central Bank of Sri Lanka, says that should the debt cancellation plan actually go through, it might lead to the collapse of the current global financial system.
Many of the academics who have signed the said statement are not economists, he told Al Jazeera.
“It is a galaxy of academics belonging to the social sciences field. As such, it needs to be critically appraised because, if accepted for Sri Lanka, it in fact provides a blueprint for a new world economic order.”
He added: “The present economic order is an interdependent, interconnected system. If you break this, the world will collapse. You don’t know what would happen thereafter.”
Wijewardene told Al Jazeera that he was surprised that Dani Rodrik, “who was a strong advocate for Washington Consensus, ie neo-liberal economic reform throughout the world” and Thomas Piketty, “who is from the opposite camp,” are on the same platform calling for debt cancellation.
Instead, he said, these academics and economists “should argue for the accountability to be established”.
“Money borrowed has been wasted or appropriated by rulers, leaving [out] people who haven’t benefitted from them. Those rulers should be made accountable for the losses and we should fight to establish a governance system in which they should be prosecuted for their crimes,” he said.
Wijewardene added that the cancellation of debt would not benefit the people but “the corrupt, despot” leaders.
“Corrupt despots have already benefitted from the money borrowed. When debt is cancelled, they don’t have to repay and can continue to borrow more and use that money for private gains. This is known as the moral hazard problem in economics; that when someone has taken responsibility for your liabilities, you have no incentive to take even the minimum precautions to minimise it,” he said.
For now, Nandalal Weerasinghe, the head of the Sri Lanka Central Bank, has urged China and India to come to an agreement over reducing the country’s debt.
“We don’t want to be in this kind of situation, not meeting the obligations, for too long. That is not good for the country and for us. That’s not good for investor confidence in Sri Lanka,” Weerasinghe told the BBC recently.
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CJ urged to inquire into AKD’s remarks on May 25 court verdict
‘Bar Association must reveal its stand’
Civil society group ‘Free Lawyers’ has requested Chief Justice Preethi Padman Surasena to probe whether political pressure was brought on a Magistrate, or a High Court Judge, in respect of an ongoing high profile case.
Speaking to The Island on behalf of ‘Free Lawyers,’ Rajith Keerthi Tennakoon said that they felt the urgent need to seek the CJ’s intervention, following the May Day declaration by President Anura Kumara Dissanayake that the verdict of a case that was heard on 30 April would be given on 25 May. Tennakoon said that addressing the NPP’s main May Day rally at Maharagama, the President asked the people to be ready to celebrate that verdict. The President couldn’t have said so if he hadn’t been aware of the impending verdict, Tennakoon said, while emphasising the responsibility on the part of the Bar Association to state its position on the issue.
‘Free Lawyers’ recently captured pubic attention following its exposure of the theft of USD 2.5 mn from the Treasury.
Responding to a query, Tennakoon said that on behalf of ‘Free Lawyers,’ Maithri Gunaratne, PC, on Monday, 4 April, wrote to both CJ Surasena and President of the Bar Association Rajeev Amarasuriya.
Alleging that President Dissanayake’s declaration caused immense harm to the independence of the judiciary and raised controversy over the judgement that would be given on 25 May, ‘Free Lawyers’ organisation also asked the CJ to inquire into whether the entire judicial process was under political pressure.
Tennakoon said that they expect the Bar Association to reveal its position on President Dissanayake’s statement. Tennakoon pointed out that during the May Day address, President Dissanayake made reference to 15 cases that were to be taken up during this month, whereas Transport, Highways and Urban Development Minister, as well as Leader of the House Bimal Rathnayake, mentioned nearly 10 names of politicians, both sitting and former lawmakers, to be summoned beginning, May.
Tennakoon said that the NPP appeared to have used May Day to counter growing accusations over the Colombo port container controversy, coal scam, Rs 13.2 bn NDB fraud and theft of USD 2.5 mn from the Treasury and USD 625,000 from the Sri Lanka Postal Service.
By Shamindra Ferdinando
News
ITAK MPs representing East take their woes to Canadian HC
The Canadian High Commissioner to Sri Lanka and the Maldives, Isabelle Martin over the last weekend met representatives of the Ilankai Tamil Arasu Kachchi (ITAK) in the East. Tamil Guardian reported that talks focused on the challenges facing the Tamil people.
The meeting was held at the office of ITAK Member of Parliament Kaveendiran Kodeeswaran and brought together parliamentarians representing the Batticaloa and Ampara districts, alongside local government officials including divisional council chairpersons.
Discussions centred on a range of pressing issues, including livelihoods, access to education, employment opportunities and ongoing human rights concerns, as well as the broader state of democratic governance in the region.
High Commissioner Martin sought updates on prevailing socio-economic conditions, particularly the challenges confronting local communities in the East. She noted the concerns raised and indicated that she would follow up on the matters discussed.
Among those present were ITAK MPs Kaveendiran Kodeeswaran, Gnanamuthu Sirinesan and Dr Elayathamby Srinath, along with several local council representatives.
News
People demand release of Keppapilavu land
A section of residents of Keppapilavu, in Mullaitivu, on May Day protested. demanding the release of lands still occupied by the military, 17 years after the end of the armed conflict.
They reiterated their longstanding demand for the return of lands seized by the military, in 2009, to establish a camp, sources in the North said. For over 17 years, Keppapilavu residents have sustained a continuous campaign of protests, petitions and advocacy efforts, calling for the right to resettle on their original lands, they said.
Despite limited releases under successive governments, protesters stressed that substantial areas remain under military control. They highlighted that 171 acres were yet to be returned, including 59.5 acres of residential land and 111 acres of agricultural land. The residential areas once supported over 55 families and included homes, schools, places of worship and shared community spaces.
Holding placards and chanting slogans, demonstrators said that their struggle extends beyond land ownership, framing it as a fight for dignity, livelihood and the restoration of a community life disrupted since 2009.
Residents declared that since the current government assumed office, multiple appeals have been made through formal channels, including submissions to the Presidential Secretariat and the Mullaitivu District Secretariat. However, they stated that these efforts have yielded no meaningful progress toward the release of the remaining lands.
Protesters called on Sri Lankan and the local authorities to take immediate and concrete steps to return the entirety of the occupied land, enabling displaced families to resettle and rebuild their lives without further delay.
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