ECONOMYNEXT – Central Bank governor Nivard Cabraal said seeking International Monetary Fund (IMF) help to resolve a debt and forex crisis would lead to currency depreciation and sharply higher interest rates, trimming the public sector and privatization of state enterprises.
However several policy corrections, which are usually in IMF deals are already done, he said.
Sri Lanka has been downgraded to CCC by rating agencies indicating higher risk of default as the country printed money to keep rates in a “monetary stimulus” on top of “fiscal stimulus” and lost foreign reserves as the printed money was exchanged for dollar reserves to maintain the exchange rate.
Ministers of President Gotabaya Rajapaksa’s ruling SLPP coalition has discussed the possibility of the government seeking IMF assistance to resolve the external crisis as it became more difficult to import oil and other goods.
The party had come to power slamming the last administration for going to the IMF, which led to tax hikes.
“If we want, there is no problem going for the IMF. We had gone in 2009. So nobody should think that we hesitate or fear to go,” Cabraal said at a news briefing on Thursday.
“The IMF could tell us to depreciate the rupee, raise the interest rates by 30 percent, 40 percent, 50 percent further, reduce the number of government sector employees, reduce or curtail pension benefits, and sell various state assets.
“These are some conditions they include in their reform agenda.
“Our view is that we do not need that reform agenda at this juncture. Our view is that without going for that, we can pay back our creditors. Though we see some pressure during this time, we know that will ease in the time ahead.”
The last IMF program failed to impose sufficient controls on the central bank giving it enough room to print money under discretionary flexible inflation targeting and triggered a second currency crisis in 2018 within the program leading to an output shock.
It also failed to impose spending controls on the Treasury ‘under so-called revenue based fiscal consolidation’ sans ‘spending based consolidation’ leading to steep rise in government spending and an increase in state sector pension entitlements.
The currency fall which usually comes a under an IMF program leads to a fall in real wages, a consumption fall, higher unemployment and an economic slowdown – the inevitable consequence of monetary and fiscal excesses – which leads to unhappy voters if elections come before growth recovers.
Cabraal, however, said Sri Lanka itself has been already doing what the IMF might prescribe in a policy package.
“The issue is we need to face the debt problem,” Cabraal said. “The main reason for the debt problem is 6.9 billion US dollars had been borrowed as loans via sovereign bonds to this country from 2018 April to 2019 June. Those loans have put a lot of pressure on the country’s debt.”
“So we have decided to do away with that kind of borrowing and reduce them while using some other borrowing methods. That is what we are doing right now. This will be the same advice the IMF will give us. No other advice they will give.”
“Debt restructuring is basically you change from one instrument to another. This has been done with a deep thought and scientific manner. Since we are already doing it, we do not need external help to do that.”
He also said the government has already taken decisions to change maximum retail prices of commodities.
“In some instances, we have removed them which could be told by the IMF.”
The budget for 2022 had already frozen recruitment raised taxes on companies including turnover based taxes and there were no salary hike for state workers except for striking teachers.
However any IMF programme now is likely to require the float of the currency as a prior action to restore foreign exchange markets.
‘Revenue collecting PCs had only Rs. 40 billion for public service in 2021’
By Sanath Nanayakkare
There wouldn’t be a better time for major political parties to discuss and arrive at a consensus for abolishing the revenue-collecting provincial council system which hasn’t done anything more than just distributing government-sponsored welfare goods to the people, Pasanda Yapa Abeywardena, chief organiser of Lankalokaya and former provincial councilor said at a press conference in Colombo on January 19.
Pasanda who enjoys familial relationships with political higher-ups in the country while being the current chairman of Sathosa said that the President of Sri Lanka can travel across the island by helicopter in just one and a half hours which is only the size of Virginia in the United States, but has so many layers of governance including executive presidency, parliament, provincial councils, district secretariats, local government institutions etc.
“It is a known fact that provincial councils are mere training centres for the offspring of senior politicians and there is a demand in the country for cost-effective small government. In such a context, all political parties should have a dialogue in the next six months to abolish provincial councils, and strengthen the local government bodies through district development councils administered by the central government. Such a mechanism would reduce administrative layers while expanding the effective understanding of policies made by the government. Then the decisions made by the cabinet of ministers will easily flow to the ground level and the implementation process will be more dynamic. The President also has expressed similar views in this regard, he said.
“In the year 2021, revenue of provincial councils amounted to Rs. 331 billion while total expenditure was Rs. 316 billion, out of which Rs. 279 billion was spent on the payroll without having to bear the costs of provincial councilors. All in all, the provincial councils had only about Rs. 40 billion to spend on public services,” he said.
“In fact, I know from experience that nothing meaningful could be achieved through provincial councils other than merely being an institution of the central government that distributes chairs, mammoties etc., given by the government where provincial councilors claim to be the benefactors.”
“Provincial councils came to its end of term in April 2019 and five years have lapsed since the defunct of the system. Nevertheless, there is no public outcry to restore the system. PC system has never contributed to making any laws of the country or has never initiated a good programme on its own. So, we urge the political parties to engage in a meaningful discussion in the next six months before the country goes to presidential and parliamentary elections.”
He pointed out that the abolition of the PC system would help reduce the tax burden on the people, and that decision has to be taken well before PC elections are held.
Pasanda added that neither the people in the North of Sri Lanka or the government of India are interested in provincial councils anymore though the system was introduced by then government as a means of power decentralisation in Sri Lanka.”
“India is keen to have an equitable solution to the ethnic issue in Sri Lanka. However, I have reliable information that India doesn’t see provincial councils in the North and East would be an enabler in that quest. So, the abolition of provincial councils won’t trigger any geopolitical tensions with India,” he said.
HNB Assurance Group surpasses 20% growth mark for the third consecutive year
HNB Assurance Group recorded yet another year of exceptional performance, marking the third consecutive year of achieving a growth rate exceeding 20% in terms of GWP (Gross Written Premium). The year 2023 witnessed the Group achieving remarkable financial milestones and an array of local and international awards, solidifying its position as a frontrunner in the insurance industry.
HNB Assurance Group recorded a substantial GWP of LKR 18.7 Bn, showcasing a remarkable growth of 20% compared to the previous year. Reflecting on this achievement, Ms. Rose Cooray, Chairperson of HNBA and HNBGI, expressed her delight, stating, “To me personally, the remarkable growth trajectory of the HNB Assurance Group stands as a testament to our commitment to delivering value to our stakeholders. Both teams at HNBA and HNBGI performed an outstanding job, leaving no stone unturned, meticulously analyzing every challenge, and capitalizing on every opportunity. This approach to business was imperative, particularly in the aftermath of COVID-19 and the subsequent economic and social upheaval, where we as a nation encountered numerous challenges in diverse forms. In addition to our consistent growth of GWP, over the past three years, we as a group have so much to celebrate. Our Group assets grew by LKR 10 Bn during the year, well exceeding a remarkable total of LKR 51.2 Bn. Further, investment income for the Group surged to LKR 7.2 Bn, representing an outstanding growth of 49% from LKR 4.8 Bn in the preceding year. In terms of the Group’s profits, we recorded a commendable LKR 1.76 Bn in PAT.”
Honoring claims plays a vital role in maintaining the trust for any insurance company, “I am proud to note that the HNB Assurance Group honored claims of LKR 6.6 Bn, showcasing a growth of 19% compared to the previous year, aptly demonstrating our position as a reliable partner during our policyholder’s time of need.” explained Ms. Cooray.
Sri Lanka College of Endocrinologists partners with Morison to address the rising challenge of diabetes
The Sri Lanka College of Endocrinologists (SLCE), the leading authority at the forefront of diabetes management and education in Sri Lanka, has announced a collaborative partnership with Morison Ltd, a pioneer in the Sri Lankan pharmaceutical manufacturing industry, to launch a certificate training program for primary healthcare professionals on diabetes management.
Sri Lanka faces a growing epidemic in diabetes, with an estimated prevalence of one in five Sri Lankans living with diabetes. Primary healthcare doctors are often the first point of contact for patients with diabetes, hence equipping them with specialized knowledge and skills is crucial for early diagnosis, effective management, and preventing complications. The Memorandum of Understanding (MoU) signed between SLCE and Morison on 13th February 2024, reflects a shared commitment to bridge this gap in diabetes expertise and establish primary care as the first line of defence.
The course content developed and delivered by the SLCE, features an evidence-based curriculum, combining theoretical knowledge with practical applications, ensuring participants receive up-to-date knowledge that adheres to the latest Clinical Practice Guidelines and international standards. The program aims to empower primary healthcare professionals to deliver comprehensive diabetes care in their daily practice, including therapeutics, lifestyle counselling, and complication prevention, ultimately leading to improved patient outcomes and reduced burden on the healthcare system. The course, spanning four months, is now open for registrations for the first intake, and the collaboration aims to conduct two such programs per annum.
Dedicated to advancing endocrinology and diabetes care in Sri Lanka, the SLCE spearheads numerous initiatives to educate healthcare professionals on best practices in diabetes management. Dr. Niranjala Meegoda Widanege, President of the Sri Lanka College of Endocrinologists stated, “Equipping our primary healthcare doctors with specialized diabetes knowledge and skills is essential to tackle the growing epidemic effectively. This training program marks a significant step forward in ensuring accessible and quality diabetes care for all Sri Lankans.”
Dinesh Athapaththu, Managing Director, Morison Ltd commenting on the partnership added, “We are pleased to collaborate with the SLCE to bring this meaningful initiative to life. With a patient-centric approach across our value chain, we believe our latest efforts with the SLCE reflects our commitment to deliver a refreshing difference at a time it is most needed by the nation.”
Staying true to their purpose of “Making Premium Healthcare Affordable”, Morison strives to play a major role in the fight against diabetes by bringing the latest therapies closer to the nation with an offering that stands distinctively different with the best of quality and price.
Morison is a truly Sri Lankan pharmaceutical manufacturing company, with a rich legacy of over 60 years of industrial expertise. Their new state-of-the-art manufacturing facility in Homagama, is the largest investment to date in the local pharma manufacturing industry. Being the country’s largest pharma manufacturing facility for general tablets and liquids, it is also the first such facility in Sri Lanka to comply to European Union Good Manufacturing Practices (EU GMP) specifications.
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