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Avoiding IMF won’t help us avoid austerity

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by Naqiya Shiraz and Rehana Thowfeek

Sri Lanka’s debt problems are a topic of national conversation. Foreign reserves, low at USD 4bn in May 2021 fell to USD 2.8bn after the most recent bond repayment of USD 1bn in July 2021 . The government claims that the timely repayment of the bond is proof that doomsayers were wrong and that it indicates a robust economy. Is this correct?

While it is true that a default has been avoided thus far it does not necessarily mean that the economy is sound. The recent bond repayment comes at a cost: a foreign exchange squeeze. Bond holders are being repaid, but this means that foreign exchange that could otherwise have been used for imports are now being used to pay bond holders instead.

The government seems to be adamant in avoiding the bogeyman, the IMF, perhaps to avoid the tough medication an IMF programme will bring. Yet avoiding the IMF does not mean we can escape the inevitable austerity that will follow. Austerity is in fact already upon us, in the form of restricted imports. The restrictions are denying essential inputs to the local economy and medicines and food to citizens. These restrictions work in two ways:

1. The outright restrictions on imports

2. The shortages of foreign exchange in the market

The government has banned or restricted imports of what is termed “non-essential” items although the list includes goods like some clothing items, refrigerators and food items ( live fish, tomatoes for example).

In addition, Central Bank’s attempts to control the rate of exchange have resulted in shortages of foreign exchange. The Central Bank has decreed an official rate of around 200/- but only limited amounts are being converted at these rates resulting in a shortage of hard currency.

Banks are now rationing foreign exchange with the result that even items that are not banned are becoming unavailable.

“We cannot accommodate the requests for LCs so we have to ration them,” a banker said. “There is no regulation to say to ration them, but we are forced to do it.”

Sri Lanka rupee, forex markets in pickle as LC rationing froths

The import restrictions were supposed to be restricted to luxury items but the currency shortage means that even medicine and some food items seem to be running short

While foreign bondholders will undoubtedly be pleased to have been repaid, local consumers and businesses must now suffer, making do without everyday products. The shortages in supply mean that prices rise: of whatever available imported products as well as local products.

This affects not only consumers, but also businesses. With banks being unable to open a Letter of Credit (LC’s), imports of intermediate goods, even exports by SME’s which have no access to BOI facilities are at risk.

Unable to trade or operate due to lack of stocks or input material, import dependent businesses are losing out. The net result is an overall decline in economic activity and welfare of all Sri Lankans.

A person interviewed for this report explained the difficulty in obtaining asthma medication for his mother. He had to try four different pharmacies to get the required drugs. He said that he believes larger stores have fewer stocks available as the volume of people going to them is much higher.

Another respondent said chemotherapy drugs brought in from Europe were no longer available with only cheaper products from India, Bangladesh or Argentina being available. As he had no other choice he used the substitutes for part of his wife’s chemotherapy treatment but was worried about the quality and safety.

The knock on effects of these are palpable. Prices of basic goods are increasing. Inflation in January 2019 according to the NCPI was 127 index points which increased to 146 in June 2021. That means prices have increased by 15% in little over two years as a whole. But prices of essential food prices have increased by a lot more. Food inflation particularly has dramatically increased by 25% (NCPI). According to the Advocata Institute’s Buth Curry Indicator, prices of food that would be consumed in a buth curry meal have increased by 45% from July 2020 to July 2021.

The effects don’t end there. Importers of seeds were complaining that their sales have dropped by 50% because of uncertainty over fertiliser imports. These importers bring in seeds that are not produced in Sri Lanka, for vegetables like beetroot and carrots. Sales have fallen as they are not being purchased by domestic farmers. Farmers are holding back from cultivating due to the uncertainty caused by the shortages of fertilisers needed for production. A consequence of this would be shortages and rising prices of fruits, vegetables and other produce in the coming months. This will not only affect farmers’ incomes but also result in higher consumer prices. The government may have to resort to importing more food, thereby negating the impact of the fertilizer ban to begin with. Only recently, the cabinet approved the importation of 6000 metric tonnes of rice from Pakistan to manage the shortage in the market.

This fertiliser fiasco has affected the poor disproportionately. Larger businesses are able to stock up on fertiliser, but not everyone can afford to do that. It’s the small farmers that lose out on income. The incomes of these small farmers are in jeopardy. Coupled with the milk powder and gas shortage, prices of these essential commodities are forced to increase at an already difficult time.

Economic policy affects the ordinary person in a society. These may be individual stories but they are certainly not one off situations.

The fact of the matter is that the country is undergoing a self-imposed austerity program in the form of import restrictions and more recently a foreign currency shortage that has resulted in the rationing of even items that are not subject to control.

The basic principles of economics cannot be ignored in policymaking. By avoiding the IMF for fear of austerity measures, has resulted in more damaging self-imposed austerity. We need to ask ourselves how sustainable this really is in the long term. The longer we wait, more stringent austerity measures will be needed.

Rehana Thowfeek is an economics researcher by profession. She has a MSc in Economics from the University of Warwick and a BSc in Mathematics and Economics from the University of London. She has worked previously for Sri Lanka-based think tanks; Verité Research and the Institute for Health Policy. At present she works for a US-based food technology company as a researcher. Naqiya Shiraz is the Research Analyst at the Advocata Institute and can be contacted at naqiya@advocata.org.

Learn more about Advocata’s work at www.advocata.org. The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute, or anyone affiliated with the institute.



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Siri completes 50 years at the Bar

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Siri Andrahennadi

Former parliamentarian and PC member Siri Andrahennadi this September celebrates 50 years as a lawyer.

Kalinga Indatissa, PC President Bar Association of Sri Lanka (2019- 2021) has issued the following statement to coincide with felicitation at the Tangalle Magistrate court today (4): “I have great pleasure in penning down this message on the joyous occasion of the 50th Anniversary of Siri Andrahennadi’s call to the Bar.

I first had the opportunity of meeting Mr. Andrahennadi in 1986, when, as a young apprentice, I visited the Tangalle, Hambantota, and Walasmulla Courts with my Senior, Mr. Tivanka Wickramasinghe, PC. They were good friends, and from the very inception, I knew that Siri was a gentleman of high values and principles.

He received his early education at Ananda College, Colombo, and joined the Sri Lanka Law College in the mid-1970s to pursue his studies in law. He was called to the Bar on 6th September 1976.

Soon after, Siri developed a lucrative practice at the Criminal Bar. He was highly respected and admired by his colleagues in the legal profession and by the judiciary alike.

Siri was a people’s person, and it was therefore inevitable that he entered politics. He served as Chairman of the Tangalle Urban Council, Minister of the Southern Provincial Council, Member of Parliament representing the Opposition in 2000, and Deputy Chairman of Committees.

He has played a unique dual role as both a Lawyer and Legislator.

I had the privilege of meeting him again in later years, in the company of the late Lalith Athulathmudali, PC.

Siri has always been a decent human being with a sound knowledge of the law, and he has guided and supported many juniors in their formative years at the Bar.

I take this opportunity to wish Mr. Andrahennadi good health and many more fruitful years in life and at the Bar.”

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Civilizational dialogue proving a remote possibility as realpolitik rages

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Political leaders at the Shanghai Cooperation Organization Summit 2026. (Photo by PROKOFYEV / POOL / AFP)

Looking back over the years since the 9/11 catastrophe, it could be said that barring former Iranian President Mohammad Khatami no world political leader of note has made an earnest effort to change the nature of global political discourse for the better. Khatami won world acclaim for his pronouncement that the time is right to launch and sustain a ‘Dialogue among Civilizations’.

This was in marked contrast to US political scientist Samuel P. Huntingdon’s epochal theses, formulated in the wake of 9/11 and other global political tumults that the Post Cold War era is essentially one of conflicts among civilizations. That is, people’s identity markers, such as culture and religion, are the prime shaping forces of international conflicts.

From a Political Realism standpoint, Huntingdon’s theory may seem to have gained in credibility over the years but it is Khatami’s pronouncement that has evoked an empathetic response in the hearts and minds of publics world wide. So much so, 2001 was proclaimed by the UN General Assembly as the ‘Year of Dialogue among Civilizations’.

It could be said that the latter proclamation was an endeavour to give back to humans their essential identity of peace-makers. It was an eschewing of the position that war and conflict are central to the human condition and amounted to upholding constructive dialogue among peoples and civilizations as a path to peace.

That things have not worked out in the world in keeping with the expectations of peace makers does not in any way invalidate the thesis that peace is the essential propensity of humans.

If peace-making is seemingly ineffective it is primarily because the path to peace is narrow, tortuous and time-consuming. On the other hand, violence usually misleadingly recommends itself to the human as the more expedient, cost-effective way out of a conflictual situation. However, the ultimate cost of the latter approach is prohibitive because it brutalizes the human beyond recognition.

Some of the evidence is before our eyes. The Trump administration, for example, has, minus much forethought, unleashed what may be described as a ‘quick-fix’ war against Iran but is now finding that it is in a veritable military quagmire in West Asia. The priority for the administration now seems to be a face-saving escape strategy. Such are the costs of the war option.

However, there is no denying that much remains to be done by the world community to bring peoples and cultures together with a view to enabling them to work as one for the cause of a less dangerous world.

Meanwhile, the broad divisions in international politics continue and past political polarities are lingering to the detriment of enhanced international understanding. The East and the West and the South and the North, for instance, are continuing to work in separate collectives, more or less, and no notable efforts are being made by the international community to bring these sides together for the purpose of united constructive action that could usher greater international well being.

The recent Shanghai Cooperation Organization Summit, 2026, held in Kyrgyztan was a replication of the above broad trends but there were some statements at the forum by Indian Prime Minister Narendra Modi that deserve special scrutiny and comment.

Modi was quoted saying among other things: ‘The land of Gandhi and the land of Buddha share a single message: the path to peace!..We must move away from endless war towards an end to the war. This is essentially for the well being of humanity. A peaceful resolution to all issues at the earliest is the call of humanity, and this is India’s message.’

The above is the language of international peace and unity. It is such language that will help in building bridges among civilizations and advance the cause of world peace. Besides, it will help bring a measure of understanding between North and South.

In this regard, the Trump administration could take a leaf or more from the Modi government. Unless it makes a ‘U turn’, as it were, in the direction of peace and reconciliation it is very unlikely that the US and the world would experience any stability worth speaking of.

Right now the US is savaging the sovereignty of Venezuela. It is a question of the ‘Empire striking back’ but Venezuela is a far cry from Iran. Iran has outsmarted the US on the battle field and is in a position to influence broad trends in the world economy since it still has control over the Hormuz Straits. That is, Iran could exercise a determining influence over world oil, gas and energy prices. In short, the US consumer’s future peace of mind is very much in the hands of Iran.

Given the above backdrop it should have dawned on the US political leadership that working towards cordial relations with Iran is the most advisable option. The US, simply, has too much to lose otherwise.

Likewise, Russia too needs to take a leaf from India. It is plain to see that its invasion of Ukraine is proving totally ineffective. It has not brought any measure of peace for the Russian people. Russia is right now experiencing a rerun of its military misadventure in Afghanistan. On the other hand, sections of the peoples concerned have been victimized and even brutalized.

Accordingly, there needs to be a coming together of democratic opinion worldwide for a fresh consideration of the options facing humanity. There is a dire need for value-based politics to take the place of Realpolitik. Besides, the language of peace and humanity needs to replace current divisive discourse with its stress on polarities and antagonisms.

International organizations of the stature of the UN need to take the lead in spearheading the above initiatives. Right now the UN gives the impression of being a spent force. This columnist hopes that he would be proved wrong on this score because the UN remains the only hope of the poor and victimized. It will be in the interests of all peoples for the UN to rejuvenate itself and dedicate itself increasingly enthusiastically to the cause of international peace.

Whether it be the South or North, dynamic, visionary political leadership and direction emerges as essential. The need is for voices that would espouse peace and accord across boundaries and divisions. For South Asia, India and Pakistan have the potential to fill this lacuna.

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Sri Lanka’s constitutional test: Judicial independence beyond immediate political moment

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Superior Court Complex, Colombo

by Shelton Dharmaratne

Sri Lanka has reached an important constitutional moment.

The proposed 22nd Amendment has moved beyond political debate and into the constitutional process through which its validity will be examined. That development should change the character of the national discussion.

That is understandable in a politically contested environment. But Sri Lanka should now resist reducing a question of constitutional design to a contest over political positions.

The deeper issue concerns the relationship between constitutional reform, judicial independence and public confidence in the institutions of the State.

The Supreme Court will determine the constitutional questions before it. Public commentators should therefore exercise restraint in predicting, interpreting or seeking to influence that determination. But restraint does not require silence. It requires a more rigorous discussion of the institutional principles at stake.

A narrower constitutional question than the political debate suggests

The proposed amendment principally concerns the retirement ages of judges of the Supreme Court and Court of Appeal, together with an increase in the maximum number of judges permitted on the Court of Appeal.

Under the proposal, the retirement age of Supreme Court judges would rise from 65 to 67 and that of Court of Appeal judges from 63 to 65. The maximum number of Court of Appeal judges would also increase from 19 to 24.

Other proposed changes concerning the retirement ages of judges in the lower courts arise under separate legislation. This distinction matters because the public debate has sometimes treated the wider package of judicial reform as though it formed a single constitutional proposal.

Nor should the central issue be reduced to whether retaining experienced judges is inherently good or inherently dangerous. Both propositions are too simplistic.

Sri Lanka faces a substantial burden of pending litigation, and delays in the administration of justice impose significant costs on citizens, businesses and the State. Experienced judges represent an institutional resource. Continuity, accumulated knowledge and familiarity with complex areas of law cannot always be replaced immediately.

Those are legitimate policy considerations.

But the opposing concern is equally important: judicial tenure is not merely an employment condition. It is a structural component of judicial independence.

The real question is institutional

The critical question is not whether an individual judge is capable of acting impartially. It is whether the constitutional structure provides adequate protection against circumstances in which judicial tenure could become connected, directly or indirectly, with political authority.

That is an institutional question, not an accusation against individual judges.

A judge may be entirely conscientious and independent while the institutional arrangements surrounding the judiciary nevertheless create public doubts about independence. Constitutional democracies therefore cannot depend solely on the personal integrity of office-holders. They must construct institutions capable of preserving independence even when governments, individuals and political circumstances change.

This is particularly relevant when constitutional reform concerns the tenure of serving members of the superior judiciary.

The institutional sensitivity of such a proposal should neither be exaggerated into an allegation of improper motive nor dismissed as irrelevant. The appropriate response is transparency, procedural fairness and confidence in constitutional safeguards.

Legitimate objectives do not settle constitutional questions

The government has stated that its objectives include strengthening the administration of justice, addressing delays, retaining judicial experience and increasing institutional capacity.

Those objectives deserve serious consideration. Sri Lanka needs judicial reform. Citizens waiting years for their cases to be concluded experience the justice system very differently from those discussing it in Parliament, courtrooms or universities.

A government is therefore entitled to propose reforms designed to improve judicial efficiency.

But legitimate objectives do not automatically resolve constitutional objections. The relevant question is whether the means chosen are compatible with the constitutional structure and whether sufficient safeguards exist against unintended institutional consequences.

That is precisely why constitutional scrutiny matters.

The concerns of the Bar Association of Sri Lanka (BASL) should likewise be examined without political labelling. Opposition to the proposed changes should not automatically be characterised as opposition to judicial reform or an attempt to obstruct the government. At the same time, invoking judicial independence does not place any argument beyond scrutiny.

The appropriate questions are straightforward:

Does extending judicial tenure strengthen the administration of justice?

What risks, if any, could it create for judicial independence?

Are adequate institutional safeguards in place?

Does the proposal operate prospectively, or does it affect judges already serving?

Could the same objectives be achieved by filling vacancies, increasing judicial capacity, improving court administration and strengthening case management?

These questions can be examined rationally without attributing improper motives to either side.

Judicial vacancies and institutional confidence

Recent concerns raised by the BASL regarding judicial vacancies add another dimension to the debate. The BASL has argued that vacancies in the Supreme Court contributed to the retirement of a senior Court of Appeal judge without promotion to the Supreme Court, despite vacancies having existed. It has also raised concerns regarding forthcoming judicial retirements and the need for timely consideration of appointments.

Such matters should not be treated as evidence of the motives behind the proposed amendment. They do, however, illustrate a broader principle.

Judicial independence is shaped not only by the retirement age written into the Constitution. It is also influenced by how vacancies are filled, how promotions are determined, how seniority and merit are assessed, and whether judicial officers and the public believe that institutional decisions are made according to transparent and defensible criteria.

The government has an opportunity to address these concerns constructively.

Prompt appointments based on publicly defensible principles would strengthen confidence in the judiciary irrespective of the eventual outcome of the constitutional debate.

Seniority, merit and transparent criteria

The controversy also exposes a longstanding question concerning judicial appointments.

Seniority has traditionally carried considerable weight in judicial advancement. Yet seniority alone need not be the sole measure of merit. Conversely, replacing established practices with undefined assessments of “merit” could create another institutional problem.

If governments or appointing authorities can determine which judges are sufficiently meritorious without clear and objective criteria, uncertainty itself may become a source of institutional anxiety.

Sri Lanka would therefore benefit from clearer, objective and defensible standards governing judicial appointments and promotions.

Such standards would protect judges as well as appointing authorities. They would reduce opportunities for favouritism, strengthen institutional confidence and make it harder for political actors to portray every appointment as politically motivated.

Institutional rules are stronger safeguards than assurances of good intentions.

The State is larger than any government

One principle deserves particular emphasis: a government is not the State.

Governments are temporary. The constitutional State is continuing. Political parties change, parliamentary majorities change and political priorities change. The judiciary, however, must continue to function independently of whoever occupies the government benches.

The judiciary is neither a government institution in the political sense nor an Opposition institution. It is an institution of the State whose legitimacy depends upon its independence from both.

For that reason, governments should exercise particular caution when proposing constitutional changes affecting the judiciary, even where the policy objectives are legitimate.

The stronger a government is politically, the greater its responsibility to demonstrate institutional restraint.

That is not political weakness. It is constitutional maturity.

Public confidence is a constitutional asset

The most consequential issue may ultimately be neither retirement age nor judicial capacity, but public confidence.

Courts do not possess political power in the conventional sense. Their authority rests substantially on the acceptance of their decisions as legitimate.

Citizens will sometimes disagree with judicial decisions. But where the judiciary is perceived as independent, even unpopular decisions can command respect. If judicial institutions are perceived as being shaped by political convenience, even legally sound decisions may become vulnerable to suspicion.

Constitutional reform affecting judicial tenure must therefore be evaluated not only by its immediate administrative benefits but also by its effect on institutional credibility.

A reform that produces short-term efficiency while weakening confidence in judicial independence could impose a greater long-term cost. Conversely, reform that improves efficiency while preserving independence can strengthen both justice and public trust.

The challenge is not to choose between judicial efficiency and judicial independence. It is to achieve both.

If a referendum arises …

If the constitutional process ultimately requires approval by the people at a referendum, the debate should rise above the conventional government versus Opposition contest.

The electorate should be given a clear constitutional question and sufficient information to assess it.

Citizens should understand what problem the amendment seeks to address, why the proposed mechanism is considered necessary, what institutional risks have been identified, what safeguards exist and whether alternative measures could achieve the same objectives.

A constitutional referendum deserves a higher standard of public discussion than an ordinary election campaign.

The people would not merely be choosing a political side. They would be deciding the institutional framework within which political power and judicial authority operate.

Beyond who wins

The most important question arising from the proposed Twenty-Second Amendment is therefore not simply whether the government succeeds or whether the Opposition and BASL prevail.

Nor is it ultimately whether judicial retirement ages become 67 and 65 or remain unchanged.

Those are immediate constitutional questions. The deeper issue is what Sri Lanka learns from the controversy.

If the government seeks to modernise and strengthen the justice system, that objective deserves serious consideration. If the BASL and others warn that particular reforms may affect judicial independence, those concerns deserve equally serious examination.

Neither side strengthens the country by assuming that the other is acting in bad faith.

The constitutional system is strongest when legitimate disagreements are resolved through institutions rather than political pressure.

Whatever the eventual constitutional outcome, Sri Lanka will still face the underlying challenges of judicial vacancies, case delays, institutional capacity, judicial appointments and public confidence. Those problems will not disappear with a judicial determination, nor should the national conversation end there.

Sri Lanka should instead seek a broader consensus around a fundamental proposition:

Judicial reform and judicial independence are not competing objectives.

The real challenge is to pursue reform in a manner that strengthens the judiciary without placing its independence under suspicion.

That requires sound legislation, transparent appointments, adequate resources, efficient court administration, responsible political conduct and safeguards capable of surviving changes of government.

The present controversy will eventually pass. Political arguments surrounding it will fade.

But constitutional arrangements can endure for decades.

That is why Sri Lanka must look beyond the immediate political contest.

The ultimate test is not who wins today’s constitutional argument. It is whether, when the political moment has passed, Sri Lanka has a judiciary that is more efficient, more accessible and more trusted—while remaining sufficiently independent to hold every government, including future governments, within the boundaries of the Constitution.

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