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Deplorable Debt: Is Sri Lanka caught between IMF and IIF?

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by Jayasri Priyalal
Jayasripriyalal59@gmail.com

The greatest challenges confronting the nation-states in the current era revolve around; deplorable debt, depleted natural resources, and degraded environment. Economic growth and future prosperity for all living beings are stalled due to the varying degrees of the 3D problems emerging out of ill-conceived policy divergences propelling the linear economic activities for centuries in many countries.

Sri Lanka hit its worst economic setback, since independence, in 2021, experiencing near bankruptcy short of a failed state. Still, the country is reeling from its socio-economic and political debacle without a clear visionary leadership putting the country on a recovery path. Showing resilience alone will not take us anywhere. Amongst many shortsighted policy debacles, including unmanaged debt without a semblance of fiscal discipline, remains unresolved. The unbridgeable mismatch between government revenue and expenditure is one such burning issue. Not a single political party, gearing for elections to secure political power, squarely addresses this challenge with viable options proposed.

Debt restructuring talks are dominating the media as the second IMF tranche of the Extended Fund Facility (EFF) with access to SDR 254 million (about US$337 million), subject to the IMF Executive Board’s review in due course.

Time, Information, and Power (TIP) are critical elements for persuasive Negotiations

The delegation from Sri Lanka for debt restructuring with the Official Creditor Committee (OCC) which consists of the majority of the private sector creditors, and sovereign bondholders, faces critical challenges. The author aims to highlight the various challenges and obstacles to unfold during the tough negotiations Sri Lanka faces in this essay. All Sri Lankans should endeavour to negotiate favourable terms in putting Sri Lanka’s debt on the path towards sustainable economic growth in a medium and long-term time frame.

As a nation, we should not burden those private creditors who hold our sovereign bonds, and it is our supreme responsibility to pay all our dues with reasonable compensation. Those who invested their money in Sri Lankan Sovereign Bonds are not at fault for the economic mismanagement of the corrupt politicians and their cronies. Sri Lanka, a sovereign nation, should take ownership to honour our commitments to settle all our creditors.

Unless Sri Lanka shows clear policy directions to revive and grow the stagnant economy, no one will be ready to put good money behind wasted bad money. Instilling trust and confidence in our ability to come up with viable and sustainable solutions to jump-start the growth of the economy is the way forward. This conditionality is paramount even to restructuring the existing debt instruments so that they can be traded in secondary markets to mobilize cash flows for stimulating the economic activities for growth.

In times of crisis, stakeholders are forced to sit and negotiate to find viable solutions, balancing the common and conflicting interests between the two sides. Hence, parties who sit down for negotiations are forced to deal with adversaries and not with friends or sympathizers ready to bargain to meet different expectations.

Time for Schock Doctrines

In an excessively financialized world cyclic financial crises are a common feature. Someone’s pain will always turn into another’s gain swiftly. The international financial system, consisting of private and public institutions, is well set to manage the crisis with the sole objective of privatization of gains and socializations of pains.

Many of their strategies anaesthetize weak policymakers looking for innovative and creative economic growth-led solutions to overcome the debt-burdened situations in the developing world. Capitalizing on this phenomenon, they force painful shock doctrines and austerities on the victims of financial crisis reversing all the socio-economic gains achieved thus far.

The classic example could be quoted from our own experience, currently, a quarter of Sri Lanka’s population is pushed below the poverty line. Moreover, the second IMF EFF assistance is a blessing in disguise for policymakers to hoodwink the public, especially on the eve of elections. Partners, with whom Sri Lankan Treasury and Ministry of Finance officials negotiate, are aware of the time-critical importance of this factor.

Media statements, following the various IMF official’s meetings, are loaded with praises but without any substance in handling the crisis for viable resolution. Instead, many are saddled in their comfort zone depending on further debt as the only recourse.

Pruning expenditure on social security and welfare, imposing unbearable income tax on the middle class – working poor – curtailing their purchasing power, reversing all progressive labour laws and regulations that mainstream inclusive growth and fairer distribution of wealth created in the economy, especially hampering the investment growth in the EPF, workers savings with arbitrary interest rate cuts, are some of the policy options concealed within the shock doctrine recommendations.

Aside from the above privatization of profitable State-Owned Enterprises was mismanaged by appointing cronies by the various governments, including appointing ‘yes’ men to serve the political interest, including in the banks, allowing the henchmen to rob the banks from inside. Commercially viable enterprises are loaded with debt, restraining them from coming out with any turnaround strategies.

And many national wealth is now offered on a platter for privatization as a remedial measure to the current crisis. These are part and parcel of the shock doctrine proposed to serve the interest of those foreign investors to grab the national wealth. A classic case, outsourcing the on-arrival visa issuance to tourists, at the BIA, to a private company hiking the visa fees at a disproportionate increase impacting the resilient tourism industry. On top of that, the private company charges US$ 18.50 as their fees on each tourist applying visa.

However, many economists, and advisors are keen to measure productivity gains, even at times of crisis, on factor inputs such as Labour, Land and Entrepreneurship, except Capital. At times of Financial Crises, private-public partnerships strongly advocate Quantitative Easing options as a remedy to maintain market stability by subsidizing the Capital Markets with zero and negative interest rates.

Those civic-conscious officials, consisting of the Sri Lankan delegation who sit for negotiations with the OCC, should bear in mind, for the sake of sustainability of the debt and stimulation of future growth in the economy, should not pass on the advantage of time factor to the opponents across the table. They need to put the country’s interest first, not to serve the interest of the bankrupt political propaganda, merely to deceive the electorate on the eve of elections.

Sadly, there isn’t any form of social dialogue between the policymakers, officials, private sector chambers, and academia to propose policy recommendations, at least, to identify and cut the avoidable expenditure in the parallel administration structures in the island state. A culture of meaningful stakeholder consultations before policy formulation is a must in the desired new system that Sri Lanka is aspiring for.

Information Asymmetry and the Role of the Institute of International Finance (IIF)

The second critical element that is vital in negotiations is information. In any negotiation process to achieve desirable goals all parties need to act in good faith and be fully informed of the facts and circumstances.

The Institute of International Finance (IIF) is a powerful organization that represents the interests of private creditors and financial institutions. IIF members include a wide range of financial firms operating globally in the sovereign debt markets, with common and divergent interests. The mission and basic lobbying position of the IIF are enshrined in its by-laws, namely, to be the most influential financial lobby organization at the international level that promotes voluntary market-based approaches to financial or debt crisis prevention and management.

According to Netherlands Amsterdam-based Stichting Onderzoek Multinationale Ondernemingen (SOMO), Centre for Research on Multinational Corporations) October 2021, report highlights serious imbalances in relationships between the IIF and private creditors, on the one hand, and the other hand public international and national financial decision-makers, parliamentarians, citizens, and other affected stakeholders. Furthermore, reports contend, that the IIF’s strategy leads to even higher indebtedness to private creditors and promotes a profitable sustainability-linked financial industry, which the IIF actively supports in the interest of its members. https://www.somo.nl/the-iif-debt-relief/

The Sri Lankan delegation needs to be aware of the advantages enjoyed by the counterparties with whom they negotiate. As per findings of the SOMO research, IIF membership covers the largest international financial conglomerates with common and diverse interests regarding sovereign debt of middle-to-lower income countries: from private and public Chinese banks and Wall Street investment banks to credit rating agencies, asset managers and hedge funds. Official authorities, like the IMF and World Bank, and even the central banks of some middle- and low-income countries, are IIF members.

On the one hand, this diversity of members involved in the international debt market can enable members more easily to exchange views and coordinate. On the other hand, members’ very diverse interests may block positions and solutions that are proposed in the IIF’s lobbying activities.

Lazard the French Asset Management company Sri Lanka consults for the debt restructuring and the law firm Clifford Chance both could be members of IIF, if so the conflict of interest between the parties will become a stumbling block in reaching a favourable solution to the benefit of Sri Lanka as highlighted in the SOMO report. This fact must receive the best attention of the Sri Lankan delegation to the negotiation, bearing in mind that no one subordinate could work for two masters’

honestly – the adage often quoted as a warning to be cautiously optimistic in similar circumstances.

Information is Power – Markets are good When you are on the Right Side

The third element that is crucial in handling negotiation effectively rallies around the power that the parties to the negotiation garner. Readers would understand better by the foregoing how the balance of power tilts between the parties to negotiations.

IIF is committed to protecting the interests of its members by lobbying for voluntary market-based approaches to financial or debt crisis prevention and management. Towards achieving these goals IIF functions with a few committees such as IIF Committee on Sovereign Risk Management (CSRM), G20 Debt Service Suspension Initiative (DSSI), IIF Debt Transparency Working Group (DTWG), IIF Emerging Markets Advisory Council (EMAC). They are very well equipped with data on capital market flows and debt situations in countries and markets across the region. IIF is committed to serving the interests of its members to spot investment opportunities and secure the assets with returns.

Following the recent rounds of negotiations with the Sri Lanka delegation with OCC, media reports revealed that in principle understanding was reached with a set of frameworks for further negotiations. Furthermore, there appear to be some discussions to extend the maturities with varying haircuts and interest rates reclassifying the Sovereign Bonds linked to either Macro or Governance parameters. We are forced to agree weighing the pros and cons to make the bonds marketable in the secondary markets to overcome the short-term constraints knowing how the Creditors team up to serve their interest.

Breaking the Vicious Debt Cycles – Focus on Growth instead of Distribution Sri Lanka is battling with the current crisis because of irresponsible borrowing and investment in wasteful projects. The Supreme Court has given a ruling pointing out the responsible policymakers and concerned government officials who contributed to the mismanagement of the economy. But it is good to remember stupidity is not a crime in the eyes of law, hence marginalized and vulnerable population sacrifice future prosperity for sins of the corrupt and greedy.

To offer a viable counter-proposal to the OCC at the next round of negotiations, the Sri Lankan delegation must be prepared with viable policy options that stimulate economic growth in the long-term enabling us to repay the debts and move away from the debt traps. To make that happen Sri Lankan policymakers will have to move away from popular distribution-led policy directives offered to deceive the electorate to growth-led directives for bottom up transformation.

A May Day promise by the President to increase the daily wage of Workers in Plantations to Rs. 1700 is one such gimmick. This writer fully supports the upliftment of the quality of life of the plantation workers. But that must come as a non-wage benefit as a form of social security measure, without destabilizing the plantation industry. There is enough money saved by the plantation workers in their EPF/ETF to be invested in such projects getting a reasonable return to sustain the viability of the fund. Such projects will serve the growth and distribution needs of the country.

Sri Lanka has been depending too much on the advice from the neo-liberal pundits aiming at realizing fake prosperities widening inequality in wealth, income, health, and education. We need to count on organic growth-focused economic policies and directives instead of synthetic short-term policies grappling with deplorable debt.

Facts, issues highlighted in the essay; assumptions made and actions proposed are to stimulate discussion and debate amongst the like-minded. Critics’ comments are welcome to encourage meaningful social dialogues among various stakeholders and policymakers to think of creative and innovative growth led options to overcome the eternal debt crisis.



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Illegal solar push ravages Hambantota elephant habitat: Environmentalist warns of deepening crisis

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Land earmarked for the project

A large-scale move to establish solar power plants in Hambantota has triggered a major environmental and social crisis, with more than 1,000 acres of forest—identified as critical elephant habitat—cleared in violation of the law, environmental activist Sajeewa Chamikara said.

Chamikara, speaking on behalf of the Movement for Land and Agricultural Reform, said that 17 companies have already begun clearing forest land along the boundaries of the Hambantota Elephant Management Reserve. The affected areas include Sanakku Gala, Orukemgala and Kapapu Wewa, which are known to be key elephant habitats and long-used movement corridors.

He said that what is taking place cannot be described as development, but rather as a large-scale destruction of natural ecosystems carried out under the cover of renewable energy expansion.

According to Chamikara, the clearing of forests has been carried out using heavy machinery, while large sections have also been deliberately set on fire to prepare the land for solar installations. He said that electric fences have been erected across wide stretches of land, effectively blocking elephant movement and fragmenting their natural habitat.

“These forests are not empty lands. They are part of a living system that supports wildlife and nearby communities. Once destroyed, they cannot be easily restored,” he said.

The projects in question include a 50 megawatt solar development undertaken by five companies and a larger 150 megawatt project implemented by 12 companies. The larger project is reported to be valued at around 150 million US dollars.

Chamikara stressed that these projects are being carried out in a coordinated manner and involve extensive land clearing on a scale that raises serious environmental concerns.

He further alleged that certain companies had paid about Rs. 14 million to secure support and move ahead with the projects. He said this points to a troubling failure of oversight by state institutions that are expected to protect forests and wildlife habitats.

“This is not only an environmental issue. It is also a serious governance issue. The institutions responsible for protecting these lands have failed in their duty,” he said.

Chamikara pointed out that under the National Environmental Act, any project of this scale must receive prior approval through a proper Environmental Impact Assessment process.

He said that clearing forest land before obtaining such approval is a direct violation of the law.

He added that legal requirements relating to archaeological assessments had also been ignored. Under existing regulations, large-scale land clearing requires prior evaluation to ensure that sites of historical or cultural value are not damaged.

“The law is very clear. You cannot go ahead with projects of this nature without proper approval. What we are seeing is a complete disregard for legal procedure,” Chamikara said.

The environmental impact of these activities is already becoming visible. With their natural habitats destroyed, elephants are increasingly moving into nearby villages in search of food and shelter. This has led to a sharp rise in human-elephant conflict in several areas.

Areas such as Mayurapura, Gonnooruwa, Meegahajandura and Thanamalvila have reported increasing encounters between humans and elephants. According to Chamikara, more than 5,000 farming families in these areas are now facing growing threats to their safety and livelihoods.

 

He warned that farmers are being forced to abandon their lands due to repeated elephant intrusions, while incidents involving damage to crops and property are rising. There have also been increasing reports of injuries and deaths among both humans and elephants.

“This is turning into a serious social and economic problem. When farmers cannot cultivate their lands, it affects food production, income and rural stability,” he said.

Chamikara also raised concerns about the broader environmental consequences of clearing forests for solar power projects. While renewable energy is promoted as a solution to reduce carbon emissions, he said that destroying forests undermines that goal.

“Forests play a key role in absorbing carbon dioxide. When you clear and burn them, you are increasing emissions, not reducing them. That defeats the purpose of promoting solar energy,” he explained.

He added that large-scale deforestation in dry zone areas such as Hambantota could also affect local weather patterns and reduce rainfall, which would have further negative impacts on agriculture and water resources.

Chamikara called for a shift in policy, urging authorities to focus on more sustainable approaches to solar power development. He said that rooftop solar systems on homes, public buildings and commercial establishments should be given priority, as they do not require clearing large areas of land.

He also recommended that solar projects be located on degraded or abandoned lands, such as areas affected by past mining or other low-value lands, rather than forests or productive agricultural areas.

“Renewable energy development must be done in a way that does not destroy the environment. There are better options available if there is proper planning,” he said.

Chamikara urged the Central Environmental Authority and the Department of Wildlife Conservation to take immediate action to stop ongoing land clearing and investigate the projects. He stressed that all activities carried out without proper approval should be halted until legal requirements are met.

He warned that failure to act now would lead to long-term environmental damage that could not be reversed.

“If this continues, we will lose not only forests and wildlife, but also the balance between people and nature that supports rural life. The consequences will be felt for generations,” he said.

The situation in Hambantota is fast emerging as a critical test of whether development goals can be balanced with environmental protection. As pressure grows, the response of authorities in the coming weeks is likely to determine whether the damage can still be contained or whether it will continue to spread unchecked.

By Ifham Nizam

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Why Mahatma Gandhi’s teachings need to be at the heart of conflict resolution

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Mahatma Gandhi

All credit to the Tamil Nadu government for taking concrete measures to perpetuate the memory of the renowned Mahatma Gandhi of India, who on account of his moral teachings stands on par with the likes of Socrates, Plato, Aristotle, Confucius and Jalaluddin Rumi, to name a few such all-time greats. The time is indeed ripe to draw the world’s attention to the Mahatma’s humanistic legacy which has resonated in the hearts of peace-oriented sections the world over down the decades.

Under its mega developmental blueprint titled ‘ Tamil Nadu 2030’, the Tamil Nadu government, among other things, intends transforming villages into centres of economic growth in conformity with the Mahatma’s vision of making the village the fundamental unit of material and spiritual advancement. Thus will come into being the ‘Uttamar Gandhi Model Villages Project’, which will be initially covering 10 village Panchayats. (Please see page 3 of The Island of March 11, 2026).

The timeliness of remembering and appreciating anew the teachings of Mahatma Gandhi resides in the utter lawlessness that has been allowed to overtake the world over the last few decades by none other than those global powers which took it upon themselves to usher in a world political and economic order based on the UN Charter and the Universal Declaration of Human Rights. Mainly in ‘the dock’ in this regard are the permanent members of the UN Security Council.

As is plain to see, the international law and order situation has veered out of control. Principal priorities for the international community or what’s left of it is to prevent the current mainly regional war in the Middle East from degenerating dangerously into another world war, coupled with the task of eliminating the possibility of another nuclear holocaust.

The most scorching of ironies is that the world’s ‘number one power’, the US, has virtually lost its way in the ‘Global Disorder’ it has been party to letting lose. For instance, instead of making good its boast of militarily neutralizing Iran and paving the way for the constant flow of fuel and gas from the Strait of Hormus by itself and Israel, it is now appealing to the rest of the West to come to its assistance. Not surprisingly, US allies are indicating their unwillingness to help pull the US’ ‘chestnuts out of the fire’.

Oil and gas are the veritable life blood of countries and going ahead it should not come as a surprise if impatience gets the better of the major powers and the nuclear option is resorted to by some of them under the dangerous illusion that it would be a quick-fix to their growing economic ills and frustrations.

All the above and more are within the realms of the possible and the need is pressing for humanistic voices to take centre stage in the present runaway crisis. As pointed out in this column last week, Realpolitik has overtaken the world and unless the latter is convinced of the self-destructive nature of the major powers’ policy of ‘meeting fire with fire’ to resolve their disputes, annihilation could be the lot of a good part of the world.

For far too long the voice of humanity has been muted and silenced in the affairs of the world by the incendiary threats and counter-threats of the big powers and their allies. No quarter has been bold enough in these blood pressure-hiking slanging matches to speak of the need for brotherly love and compassion among nations and countries. But it’s the language of love and understanding that is the most pressing need currently and the Mahatma in his time did just that against mighty odds.

At present the US and Iran are trading threats and accusations over military-related developments in the Gulf and it’s anybody’s guess as to what turn these events will take. However, calming voices of humanity and moderation would help in deescalating tensions and such voices need to go to the assistance of the UN chief and his team.

The Mahatma used the technique of ‘Satyagraha’ or the policy of non-violent resistance to oppose and dis-empower to a degree the British empire in his time and the current major powers would do well to take a leaf from Gandhi. The latter also integrated into the strategy of non-violent resistance the policy of ‘Ahimsa’ or love and understanding which helped greatly in uniting rather than alienating adversaries. The language of love, it has been proved, speaks to the hearts and minds of people and has a profoundly healing impact.

Mahatma Gandhi defined the ideal of ‘Ahimsa’ thus: ‘In its positive form, “Ahimsa” means the largest love, the greatest charity. If I am a follower of “Ahimsa”, I must love my enemy or a stranger to me as I would my wrong-doing father or son. This active “Ahimsa” necessarily includes truth and fearlessness.’ (See; ‘Modern Indian Political Thought; Text and Context’ by Bidyut Chakrabarty and Rajendra Kumar Pandey, Sage Publications India, Pvt. Ltd., www.sagepub.in).

In the latter publication, the authors also defined the essence of ‘satyagraha’ as ‘protest without rancour’ and this is seen as ‘holding the key to his entire campaign’ of non-violent resistance. From these perspectives, the teaching, ‘hatred begets hatred’ acquires more salience and meaning.

Accordingly, the voice of reason and love needs to come centre stage and take charge of current international political discourse. The UN and allied organizations which advocate conflict resolution by peaceful means need to get together and ensure that their voices are clearly heard and understood. The global South could help in this process by seeing to the vibrant rejuvenation of organizations such as the Non-aligned Movement.

An immediate task for the peace-oriented and well meaning is to make the above projects happen fast. In the process they should underscore afresh the profound importance of the teachings of Mahatma Gandhi, who is acclaimed the world over as a uniting and healing political personality and prophet of peace.

If the Mahatma is universally acclaimed, the reason is plain to see. Put simply, he spoke to the hearts and minds of people everywhere, regardless of man-made barriers. The language of peace and brotherhood, that is, is understood by everyone. The world needs more prophets of peace and reconciliation of the likes of the Mahatma to drown out the voices of discord and war-mongering and ensure that the language of humanity prevails.

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Exciting scene awaits them …

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The Future Model Hunt extravaganza, organised by Rukmal Senanayake, and advocacy trainer Tharaka Gurukanda, held in late January 2026, has brought into the limelight four outstanding contestants who will participate, at the international level, this year – Sandeepa Sewmini, Demitha Jayawardhana, Diwyanjana Senevirathna, and Nimesha Premachandra.

Nimesha took the honours as Mrs. Tourism Sri Lanka 2026 and was featured in The Island of 05th March,

Sandeepa Sewmini was crowned Miss Supranational 2026 and will represent Sri Lanka at the big event to be held in Poland later in the year.

A Business Management and Human Resources student, she will be competing under the guidance of Rukmal Senanayake from the Model With Ruki – Model Academy & Agency.

The Mister Supranational Sri Lanka crown went to Demitha Jayawardhana, a 20-year-old professional model and motocross rider.

Apart from modelling he is engaged in his family business.

Demitha Jayawardhana: Mister Supranational Sri Lanka 2026

Demitha is also a badminton player with a strong passion for sports, fitness and personal growth.

In fact, he is recognised for his strength, discipline, and passion for fitness.

A past student of Wycherley International School and St Peter’s College, Colombo, Demitha is currently in his second year of Economics Management at the Royal Institute of Colombo.

He will represent Sri Lanka at the 10th edition of the Mister Supranational pageant, in Poland, in August, 2026.

Mister and Miss Supranational are annual international beauty pageants, held in Poland, and are designed to discover new talent for the modelling and television industries and produce instant celebrities.

The competition focuses on elegance, intelligence, and social advocacy, with contestants, representing their countries.

The newly appointed Miss Teen International Sri Lanka 2026 is Diwyanjana Senevirathna.

She was crowned at the Future Model Hunt and will represent Sri Lanka at the Miss Teen International 2026 pageant in India.

Diwyanjana is noted for her grace and dedication to representing the country at this prestigious event that aims to celebrate talent, intelligence, charm, and individuality, and provide a platform for young girls to showcase their skills.

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