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Lanka eyes December bailout, IMF says timing hard to predict

(Nikkei Asia) Sri Lanka’s government appears increasingly upbeat about its chances of receiving International Monetary Fund (IMF) board approval for a USD 2.9 billion bailout by December, but the multilateral lender has cautioned that the time frame remains uncertain, and much depends on discussions with the heavily indebted country’s creditors.
Peter Breuer, senior mission chief for Sri Lanka, and Masahiro Nozaki, mission chief for Sri Lanka, in written comments to Nikkei Asia, said, “It is difficult to predict the timeline, as the process of debt relief discussions takes time. All parties who are involved in the process should move expeditiously, so that Sri Lanka can emerge from the crisis as quickly as possible.”
On Sept. 1, Sri Lanka reached a staff-level agreement with the IMF to obtain the $2.9 billion, a crucial lifeline for a country wrestling with the worst economic crisis in its history. The country’s year-on-year inflation topped 70% in August, and the public continues to face severe shortages of essentials.
Earlier this year, Sri Lanka defaulted on a foreign bond for the first time, after its foreign reserves dwindled to next to nothing. “We announced that we are not in a position to pay,” central bank Gov. Nandalal Weerasinghe said in May, confirming the “pre-emptive default.”
“Our position is very clear. Until [the lenders] come and restructure, we can’t pay,” Weerasinghe said.
Last Friday, Sri Lanka’s Finance Ministry held an online presentation for external creditors to explain the situation and discuss the next steps toward restructuring. A handout cited “some past policy mistakes” along with the COVID-19 pandemic and the resulting crisis as key factors that crippled the economy, depleted reserves and forced the country to stop debt repayments.
The day before, President Ranil Wickremesinghe chaired a meeting with ambassadors from 23 Paris Club and non-Paris Club countries, including Japan, France and India, to discuss related matters.Wickremesinghe appealed to all creditor countries to offer the “financing assurances” on debt sustainability the IMF has said are essential for the board to give the final green light.
The Indian High Commission in Sri Lanka, for its part, expressed support even before the creditor briefings. On Sept. 20 it said that it had started discussions on restructuring Sri Lanka’s official debt to India. A spokesman told Nikkei Asia that the “cordial atmosphere” of the talks reflected New Delhi’s support for an “early conclusion and approval of a suitable IMF program.”
Noting the need for other creditors to work on ensuring Sri Lanka’s debt is manageable, he added that India would remain “closely engaged” with relevant stakeholders.
During last Friday’s presentation, Weerasinghe and Mahinda Siriwardana, secretary to the Treasury and Ministry of Finance, noted that as of the end of June, Sri Lanka’s public debt stood at 122% of gross domestic product. A figure equivalent to 70% of GDP was denominated in foreign currency.According to the presentation by the Ministry of Finance and the central bank, China, Japan and India were the country’s top three bilateral creditors, with China accounting for 52% in total, followed by Japan at 19.5% and India at 12%.
The Sri Lankan officials also pushed for the formation of an ad-hoc coordination group to expedite the process of obtaining financing assurances from multiple creditors. They explained that such a group would allow official bilateral creditors to give such assurances to the IMF collectively, after discussing the matter among themselves.
The Japanese Embassy in Colombo agreed that it is essential for all creditors to come to the table for debt restructuring discussions to ensure that the process is transparent and fair. “If all the creditor countries will participate in a coordination platform proposed by President Wickremesinghe, the government of Japan is ready to contribute to the discussion in a constructive way,” the embassy told Nikkei Asia.
But all eyes are on top creditor China, known for its preference for refinancing loans or deferring repayments rather than restructuring and settling for loss-making “haircuts.”
On the sidelines of the United Nations General Assembly last week, Sri Lankan Foreign Minister Ali Sabry met his Chinese counterpart, Wang Yi, who pledged China’s support for a Sri Lankan economic recovery.A Chinese Foreign Ministry readout of the meeting said that Wang promised China “is ready to work with Sri Lanka to carry forward the traditional friendship, consolidate strategic mutual trust and deepen and expand pragmatic cooperation.” He also said that China would “continue to offer assistance within our capacity to help Sri Lanka overcome temporary difficulties.”
Still, a highly placed Sri Lankan diplomatic source said that although debt discussions have started with some countries, it is “impossible” to say how long they will take and when a final decision will be made.
News
IGP in hiding seeks to thwart arrest as manhunt intensifies

A two-member Appeals Court bench, comprising Acting President of the Court of Appeal Mohamed Lafar Tahir and Justice Sarath Dissanayake yesterday (10) directed that a petition filed on behalf of IGP Deshabandu Tennakoon, to prevent his arrest, would be considered tomorrow (12).
Weligama Magistrate, on 28 February, ordered the arrest of Deshabandu Tennakoon, and seven personnel attached to the Colombo Crime Division (CCD), accused of carrying out a firearm attack on W 15 hotel at Weligama.
Lawyers for Tennakoon moved court amidst ongoing manhunt for Tennakoon, who has evaded arrest for over 10 days.
On behalf of Tennakoon, his lawyers filed a writ petition with the Court of Appeal seeking an order preventing his arrest.
The petition has sought an interim injunction to stay the arrest warrant issued against him by the Matara Magistrate’s Court.
One officer, attached to the CCD, died when a joint police and Army patrol fired at the team from Colombo in Weligama in December 2023.
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NPP govt. urged to explain its defence policy

‘Prez shouldn’t have questioned loyalty of armed forces’
By Shamindra Ferdinando
Former Public Security Minister Rear Admiral (retired) Sarath Weerasekera said that the National People’s Power (NPP) government should explain the rationale in reducing the overall strength of the armed forces to 158,000 officers and men by 2030.
Weerasekera, who served as the Navy Chief of Staff at the time he retired at the onset of Eelam War IV, said that the NPP appeared to have adopted the proposal made by the Wickremesinghe-Rajapaksa government in late 2023.
Weerasekera was commenting on President Anura Kumara Dissanayake’s recent declaration in Parliament that the strength of the Army, Navy and Air Force would be reduced to 100,000, 40,000 and 18,000, respectively, by 2030. The President said so addressing Parliament during the Committee Stage Debate on the 2025 Budget.
President Dissanayake, who is also the Commander-in-Chief of the armed forces, in addition to being the Defence Minister, owed the country an explanation as to whether he adopted the previous government’s plan and who actually formulated the strategy, the naval veteran queried.
At the height of the war in 2008/2009, the combined strength of the armed forces was around 300,000, the war veteran said. Acknowledging that since the conclusion of the war in 2009, the strength of the armed forces had been gradually decreased, the ex-parliamentarian emphasized the responsibility on the part of the incumbent government to be prepared to face any eventuality.
The former Minister said that having served the Navy for over three decades he was so disappointed to hear the President questioning the professionalism of the country’s armed forces. The President’s assertion that our armed forces had been loyal to individuals but not the State was nothing but an insult to those who defeated northern and southern terror, the ex-MP said.
There had never been a single instance of the armed forces disregarding political directives during the war in the north-east and at the time of southern insurrections in 1971 and 1987-1990, the SLPPer said.
The war veteran asked whether the reduction of the armed forces had been in line with the agreement the previous government finalized with the IMF. In 2024 the Parliament unanimously passed the controversial Economic Transformation Bill that guaranteed whoever won the presidential and parliamentary polls the IMF agreement would be followed.
The former Minister said that the NPP government couldn’t absolve itself of the responsibility for defending our armed forces at the Geneva-based UNHRC. Unfortunately, the NPP not only questioned the professionalism of our armed forces but their loyalty, as well, amidst ongoing Geneva sessions, the ex-parliamentarian who served as the Chairman of the Oversight Committee on National Security, during the previous administration, said.
Commenting on the recent directive to arrest military deserters in the wake of a legally discharged soldier killing Ganemulle Sanjeewa in a courtroom at Hulftsdorp, Weerasekera emphasized the government couldn’t rein in the underworld by such measures alone.
There could be instances of serving personnel carrying out hits for the underworld, Weerasekera said, urging the government to be cautious in addressing perennial issues, such as nexus between the armed forces men and the underworld.
Weerasekera said that the economy was still in dire straits and the country couldn’t afford to undermine the security apparatus. Reference was also made to recent happenings at the Directorate of Military Intelligence (DMI) where over a dozen Brigadiers and Colonels had been moved out to pave the way for a relatively junior officer to move up the ladder.
The former Minister pointed out that fresh uncertainty was developing in the wake of the NPP’s contentious approach to defence.
News
Authorities working on alternative to moonshine

By Saman Indrajith
The government is working on plans to introduce a new brand of liquor in quarter bottles to reduce the consumption of illicit alcohol better known as kasippu in the country.
This was revealed during the last meeting of the Committee on Public Finance (COPF), where officials from the Ministry of Finance and related statutory bodies discussed the initiative. The new product is expected to generate tax revenue, ranging between Rs 50 to 100 billion.
The meeting was chaired by SJB Colombo District MP Dr. Harsha de Silva.
Officials said that in view of introducing the new quarter bottle, discussions had been held with representatives from the Ministry of Finance, the Excise Department, the Department of Government Analyst, the Industrial Technology Institute, and industry leaders.
They have been working together on the development of the new liquor brand, which will be produced from spirits with a strength of 85 percent, lower than the 96-96.2 percent spirits used in the current market. This brand will be sold in quarter bottles, aimed at luring consumers away from cheaper, illicit alcohol.
Officials present at the meeting said that nearly 40% of alcohol consumers in the country currently consumed moonshine as it was a cheap alternative. Despite the country producing approximately 90 million litres of spirit annually, only two-thirds of the alcohol consumed is legally produced.
Officials pointed out that the surplus of molasses from Pelwatte and Sevanagala sugar factories could be used to produce the new brand of liquor. That presented an opportunity for domestic resources to be utilized in the production process, further supporting the initiative, officials said.
The meeting also included discussions on recent gazette notifications related to excise duties and liquor regulations. Present at the COPF meeting were Deputy Ministers Dr. Harshana Suriyapperuma and Chathuranga Abeysinghe along with MPs Ravi Karunanayake, Harshana Rajakaruna, Dr. Kaushalya Ariyaratne, Nimal Palihena, Wijesiri Basnayake, Attorney-at-Law Lakmali Hemachandra, and officials.
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