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Leftist Sri Lanka leader stuck with painful IMF deal: analysts

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A woman buys groceries at a market in Colombo. Idrees MOHAMMED / AFP

by Amal JAYASINGHE

Colombo (Sri Lanka)– 25 September 2024 12:30 – AFP: Sri Lanka’s new leftist leader has little room to renegotiate an IMF bailout that threw a lifeline to his bankrupt country but imposed punishing and unpopular austerity measures, analysts say.

Anura Kumara Dissanayake, 55, was a vocal critic of global lenders from the fringes of the island nation’s politics, including in the aftermath of Sri Lanka’s unprecedented economic meltdown two years ago.

He won Saturday’s presidential vote in a landslide promising to reverse steep tax hikes, raise public servant salaries and renegotiate the International Monetary Fund rescue package secured by his predecessor.

But after his inauguration two days later he appealed for international support to revive Sri Lanka’s economy, admitting he had no magic solution to its woes.

“There are certain red lines that the IMF will not agree to negotiate,” Murtaza Jafferjee of the Colombo-based economic think tank Advocata told AFP.

He said the Washington-based lender of last resort would be very unlikely to budge on core components of its $2.9 billion bailout, including a ban on printing money and revenue and spending targets agreed by the last administration.

Dissanayake’s party, the People’s Liberation Front (JVP), sports the hammer and sickle motif of the international communist movement on its logo.

The JVP was confined to the political wilderness for decades after leading rebellions in the 1970s and 1980s that left more than 80,000 people dead, before the party renounced violence.

Months of food, fuel and medicine shortages that accompanied the 2022 financial crisis and foreign debt default rallied the public behind it.

Dissanayake’s call to upend the island’s “corrupt” politics resonated with a public infuriated by chronic economic mismanagement and graft scandals in government ranks.

As the size of his victory became clear, his party moved quickly to assure markets and creditors that it would adhere to the broad strokes of the bailout deal.

“We will not tear up the IMF programme,” JVP politburo member Bimal Ratnayake said. “It is a binding document, but there is a provision to renegotiate.”

The ironic outcome of the pledge was that the same day as an avowed Marxist assumed the presidency, Colombo’s stock exchange rallied by 1.5 percent.

But by committing to maintain the rescue plan, Jafferjee said that any tweaks pushed by Dissanayake would necessarily be minor.

“On the fiscal side, there is not much adjustment that can be done,” he said.

Dissanayake’s predecessor, Ranil Wickremesinghe, was voted out of office after doubling income taxes and imposing other reviled austerity measures.

His policies ended the shortages as well as runaway inflation and returned the country to growth but left millions struggling to make ends meet.

The IMF said Wickremesinghe’s administration had made a great deal of progress in repairing the nation’s ruined finances after a $46 billion foreign debt default two years ago.

Analysts say the IMF would be very unlikely to budge on core components of its $2.9 billion bailout. Idrees MOHAMMED / AFP

But spokesperson Julie Kozack also warned ahead of the presidential poll that Sri Lanka was “not out of the woods yet”.

One of Dissanayake’s first acts of business will be to secure a parliamentary endorsement for a debt restructuring deal with international bondholders, negotiated by his predecessor at the eleventh hour and announced last week.

That will have to wait for the election of a new parliament, as Dissanayake sought to capitalise on his landslide win by calling snap polls on Tuesday, the day after he was sworn in.

Umesh Moramudali, an economics lecturer at the University of Colombo, warned that failing to secure the deal’s passage could open Sri Lanka to legal action from its creditors.

“It would be in the best interest of the country to avoid litigation with bondholders,” he told AFP.

Sri Lanka also owes billions to China and India, its two largest bilateral creditors who are both competing for influence in the island nation, which is strategically situated on global east-west sea routes.

Both nations have congratulated Dissanayake on his win and pledged to work with his administration.

Dissanayake’s ideological leanings, his campaign against an India-backed energy project and the JVP’s historical anti-India stance had led some experts to suspect his administration would lead Sri Lanka to a closer relationship with Beijing.

But he used his inauguration speech to reject “power divisions in the world” and pledged to work with all other countries for the benefit of his own.

“The new leader’s foreign policy stance will be important,” said Farwa Aamer of the Asia Society Policy Institute.

“It will be in his interest to work with India, as a regional partner, as he focuses on economic development.”



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Iranian ships stranded, Lanka fears US sanctions

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‘Companies may face US sanctions’: Lanka to put ‘national interest’ first as 19 Iranian vessels seek help

(ToI) Sri Lanka said on Friday it would “prioritise our national interests” before providing assistance to the crews of 19 Iranian ships anchored in international waters near the island nation.The crews are facing shortages of food, water and fuel. A foreign ministry spokesperson cited the risk of US sanctions against Sri Lankan companies supplying the vessels as a key concern.

The United States and Iran have been at war since February 28, when the US and Israel launched joint strikes against the Islamic Republic.

“Sri Lanka will put its national interest first before considering any help, and the companies that supply ships are aware of possible secondary sanctions from the United States,” spokesperson Thushara Rodrigo told reporters, ruling out any immediate assistance to the vessels.

Rodrigo clarified, however, that Sri Lanka had received no communication from the United States warning of repercussions if it decided to assist the vessels.According to Rodrigo, the ships are stationed 24 nautical miles off Sri Lanka’s coast.The Iranian Embassy said it had no information on the matter.

In March, a US torpedo attack sank the Iranian naval vessel IRIS Dena in Sri Lankan waters, killing 87 sailors.

The ship was returning to Iran after participating in a naval exercise at India’s invitation. A second Iranian vessel was brought to a Sri Lankan port after its crew reported technical problems.

Wounded sailors were treated at Sri Lankan hospitals, while those rescued from the second vessel were safely repatriated to Iran.

Sri Lanka is still recovering from an economic crisis, with both the United States and Iran serving as important trading partners. Washington played a key role in securing an International Monetary Fund bailout and supporting Sri Lanka’s agricultural sector to help avert a food crisis.

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Sri Lanka CERT warns of overseas university admission scams

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Sri Lanka CERT has warned the public of fraudulent social media advertisements offering admission to foreign universities after receiving complaints from parents and students who have lost hundreds of thousands of rupees to scammers.

The fraudsters reportedly pose as representatives of reputed foreign universities, promising admission, student visas, work permits and even eventual citizenship in return for registration fees and initial tuition payments.

They use convincing videos, photographs and documents circulated via email and WhatsApp to gain the confidence of unsuspecting victims before asking them to transfer money to foreign bank accounts. The scammers then disappear after receiving the payments, Sri Lanka CERT said.

The agency has urged prospective students and their parents to verify the authenticity of university representatives, documents and bank account details before making payments, and to seek overseas education opportunities only through legitimate and recognised channels.

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Navi Pillay’s Lankan affairs in focus as she wins 2026 Nobel Peace Prize

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Navi Pillay

Former UN High Commissioner for Human Rights and International Court of Justice judge Navanethem “Navi” Pillay has won the 2026 Nobel Peace Prize for her contribution to international law and efforts to promote peace, the Norwegian Nobel Committee announced in Oslo on Friday.

Announcing the award, committee chairman Jørgen Watne Frydnes said Pillay had “significantly enlarged the scope and impact of international law” and helped advance “a more comprehensive global legal order” with exceptional courage. He also praised her long career, which began as a lawyer confronting deep-rooted discrimination in South Africa, and described her as a person with a “firm moral compass”.

Pillay, 85, served as the UN High Commissioner for Human Rights from 2008 to 2014. Her tenure brought her into sharp focus in Sri Lanka, particularly over her assessment of the country’s human rights situation in the aftermath of the decades-long civil war.

During an official fact-finding visit to Sri Lanka from August 25 to 31, 2013, Pillay travelled to areas including Jaffna, Kilinochchi and Trincomalee, where she met civil war survivors, families of the disappeared and local communities.

Following the visit, she warned that Sri Lanka was moving towards authoritarianism and highlighted what she described as a persistent climate of fear.

She also reported intimidation and harassment of people who had sought to meet her during the mission.

Pillay urged the UN Human Rights Council to establish an international inquiry mechanism to investigate alleged war crimes and crimes against humanity committed by both government forces and the LTTE during the final stages of the 26-year civil war.

Her observations and recommendations became a significant part of international scrutiny of Sri Lanka’s post-war human rights record.

The Norwegian Nobel Committee received 287 nominations for this year’s Peace Prize, slightly more than a quarter of them being organisations. The committee traditionally considers efforts to promote peace, international fraternity and institutions that contribute to lasting stability.

Last year, Venezuelan opposition leader Maria Corina Machado won the prize for her campaign for a democratic transition in Venezuela. She was praised as a woman who kept the flame of democracy burning amid growing darkness.

The 2026 award marks the 125th anniversary of the Nobel Peace Prize, first presented in 1901. Over its history, the prize has recognised prominent figures and organisations involved in advancing peace, human rights and international cooperation.

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