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Sri Lanka’s economic reform programme yielding first signs of recovery – IMF

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The economic reform programme, implemented by the Sri Lankan authorities is yielding the first signs of recovery with positive real GDP growth in the third quarter of 2023, low inflation, increased revenue collection, and a build-up of external reserves, the IMF has said.

Staying the course on the reform agenda is necessary for this stabilization to evolve into broad-based and stable growth that will ensure a full and lasting economic recovery benefitting the people, the IMF has said.

Progress in meeting key commitments, under the IMF-supported programme, will be formally assessed in the context of the second review of the Extended Fund Facility (EFF) arrangement, alongside the forthcoming 2024 Article IV consultation assessing Sri Lanka’s economic health.

An International Monetary Fund (IMF) mission team, led by Mr. Peter Breuer, visited Sri Lanka from January 11 to 19, 2024, to discuss recent macroeconomic developments and progress in implementing economic and financial policies under the EFF arrangement. At the end of the mission, Mr. Breuer issued the following statement:

“The economic reform programme, implemented by the Sri Lankan authorities, is yielding the first signs of recovery. Real GDP recorded positive growth of 1.6 percent year-on-year in the third quarter of 2023, the first expansion in six consecutive quarters. Shortages of essentials have eased, and inflation remains contained. Gross international reserves increased by USD 2.5 billion during 2023, and preliminary data point to improved fiscal revenue collections during the fourth quarter of 2023. However, challenges remain as these improvements need to translate into improved living conditions for Sri Lanka’s people.

“In this context, sustaining the reform momentum and ensuring timely implementation of all programmes commitments are critical to rebuilding confidence and putting the recovery on a firm footing that will benefit all people. Swift progress towards the introduction of a progressive property tax is key to ensuring fair burden sharing while sustaining the revenue-based consolidation. Tax policy measures need to be accompanied by strengthening tax administration, removing tax exemptions, and actively eliminating tax evasion to make the reforms more sustainable and to further build confidence among creditors to support Sri Lanka’s efforts to regain debt sustainability.

“Building on the Central Bank of Sri Lanka’s success in taming inflation, future monetary policy decisions should remain prudent with a focus on keeping inflation expectations well anchored. Against continued uncertainty, it remains important to continue rebuilding external buffers through strong reserve accumulation. Protecting the poor and the vulnerable through improved targeting and better coverage of cash transfers remains critical.

“To safeguard the stability of the financial sector and bolster its capacity to support economic growth, the authorities need to urgently finalize amendments to the Banking Act in line with their commitment under the IMF-supported program, implement the bank recapitalization plan and strengthen the financial supervision and crisis management framework.

“Following the publication of the IMF Governance Diagnostic report, it is now imperative for the authorities to adopt their own action plan for implementing the recommendations in the report beyond the priority commitments under the EFF arrangement. At the same time, ensuring an enabling environment for governance and transparency reforms to take place is key to bolstering public confidence and facilitating implementation of these important efforts.

“The authorities have made commendable progress with putting debt on a path towards sustainability. The execution of the domestic debt restructuring was an important milestone. A swift completion of final agreements with official creditors and reaching a resolution with external private creditors remain critical. Progress in meeting key commitments under the IMF-supported program will be formally assessed in the context of the second review of the EFF arrangement alongside the forthcoming 2024 Article IV consultation assessing Sri Lanka’s economic health.

“The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka (CBSL) Governor Dr. P. Nandalal Weerasinghe, Speaker Mr. Mahinda Yapa Abeywardana, Minister Mr. Kanchana Wijesekera, Minister Mr. Wijeyadasa Rajapakse,State Minister Mr. Shehan Semasinghe, Secretary to the Treasury Mr. K M Mahinda Siriwardana, Governor of Northern Province Mrs. P.S.M.Charles, Governor of Eastern Province Senthil Thondaman, and other senior government and CBSL officials. The IMF team also met with Parliamentarians, representatives from the private sector, civil society organizations, and development partners.

“We would like to thank the authorities for the excellent collaboration during the mission, including during the mission’s visit to the Northern and Eastern provinces. This visit enriched the mission team’s understanding of the challenges as well as the potential of Sri Lanka. We reaffirm our commitment to support Sri Lanka for a full economic recovery from the crisis.”



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Energy Minister indicted on corruption charges ahead of no-faith motion against him

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Jayakody

… first NPPer to face charges under Section 70 of Bribery Act

Colombo High Court has issued summons on Energy Minister Kumara Jayakody to appear in court today (27) to serve indictment in a corruption case filed by the Commission to Investigate Allegations of Bribery or Corruption (CIABOC). Action has been taken under Section 70 of the Bribery Act. The losses suffered by the government have been estimated at Rs. 8,859,708.

National List (NL) MP Jayakody is the first NPP minister or politician at any level to be indicted for corruption. The NPP parliamentary group consists of 159 including 18 NL members.

The summons has been issued by High Court judge Rashantha Godawalage.

Although CIABOC previously in many instances arrested those who had been under investigation and produced them before Magistrate courts, Minister Jayakody has been directly summoned by the Colombo High Court.

The investigation into alleged corruption in procurement during the time Jayakody served the Ceylon Fertilizer Corporation (CFC) started after the change of government in 2015.

According to the CIABOC investigation, the alleged instance of corruption took place in early 2014 towards the tail end of Mahinda Rajapaksa’s second term. At that time Jayakody was CFC’s Procurement Manager, and the CIABOC dragged the investigation until its current leadership under overall speeding up of the cases recently completed the inquiry.

Parliament recently announced that the debate on no-faith motion moved against Minister Jayakody over alleged irregularities in the procurement of substandard coal for the country’s only coal-fired power station at Norochcholai.

SJB MP Mujibur Rahman said that the NPP, having campaigned on an anti-corruption platform during presidential and parliamentary polls in 2025 couldn’t under any circumstances shield minister Jayakody. The indictment of Jayakody over a corruption case that had happened in 2014 and the failure on his part to fulfill obligations as Energy Minister under the current dispensation couldn’t be considered separately, the Colombo District MP said.

The issue at hand is whether the NPP would try to protect Jayakody at the expense of the government, MP Rahman said. Once the NPPer is formally charged in a corruption case the government would find it extremely difficult to keep him in the cabinet, the former UNPer said.

SJB lawmaker S.M. Marrikar recently warned Minister Jayakody that he should be prepared to serve a jail term. The warning was issued at a media briefing that primarily dealt with the alleged irregularities in the procurement of coal and their decision to move a no-faith motion against the minister. Marrikar explained how the crisis coupled with the growing diesel shortage could compel the government to increase electricity tariffs by as much as 18 percent next week. MP Marikkar said that they were eagerly waiting to see who backs Jayakody at the expense of the government during the upcoming  vote on the no-faith motion.

There had been a previous case of a sitting minister being charged under the Bribery Act in respect of corruption perpetrated as a government servant. MP Rahman said that they intended to intensify the ongoing campaign against the government on the strength of the unprecedented corruption case and the outcome of the no-faith motion. “Of course, they have the numbers to defeat our no-faith motion. But, in doing so, they end up with egg on their face. That is the reality,” Rahman said, adding that those responsible for waste, corruption and irregularities whichever political parties they represented shouldn’t expect special status.

MP Rahman alleged that the CIABOC granted special status to Minister Jayakody. All those who had been indicted previously were first called to the CIABOC, recorded their statements and then arrested, handcuffed and produced in court. The media was afforded the opportunity to cover their humiliation, MP Rahman said, but in this case the powers that be paved the way for the accused to receive indictments directly from the Colombo High Court.

“Let us see whether the Bar Association of Sri Lanka responds to this development,” MP Rahman said.

By Shamindra Ferdinando

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Over 1000 complaints of misuse of  QR quotas

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The Ministry of Digital Economy says it has received more than 1,000 complaints of fraudulent activities involving the misuse of QR-based fuel quota system.

Ministry Secretary Waruna Sri Dhanapala said investigations had been launched in coordination with the Police, noting that over 150 complaints had already been referred for further action, leading to several arrests.

He added, however, that a number of complaints stemmed from instances where individuals had used others’ QR codes due to a lack of awareness.

Police are also examining security camera footage at fuel stations to identify suspects linked to such incidents, the Secretary said.

by Pradeep Prasanna Samarakoon

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Fuel bowser operators demand 25% hike in haulage charges

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The Lanka Petroleum Private Tanker Owners’ Association has called for a 25% increase in fuel transportation charges, citing rising operational costs following recent fuel price hikes.

Addressing a media briefing in Colombo on Wednesday (25), Co-Secretary Shantha Silva said the association has formally notified the government of its proposal, warning that failure to respond favourably could result in trade union action.

Association President A.M.H. Adhikari said that fuel distribution had continued without interruption despite mounting challenges, but recent price increases have placed a significant burden on tanker operators.

“Fuel prices have risen by Rs. 101 within this month alone, creating serious difficulties for those engaged in distribution, particularly in outstation deliveries,” he said.

Adhikari added that the association’s Executive Committee has unanimously decided to seek a 25% increase in transportation charges for long-distance distribution, with effect from the 21st, expressing hope that the government would respond positively to avoid further disruptions.

by Chaminda Silva

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