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Economic crisis: How trade misinvoicing contributed to Sri Lanka’s bankruptcy

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Public interest group points finger at corrupt public-private partnership

By Shamindra Ferdinando

A group representing trade union and civil society collective on Tuesday (07) called for urgent action to tackle the well-organised influential public–private sector partnership engaged in ‘overinvoicing’ and ‘under invoicing, with the blessing of successive governments.

Addressing the media at the Centre for Society and Religion, Maradana, economic analyst Dhanusha Pathirana, civil society activist TharinduUduwaragedara and Attorney-at-Law Lakmali Hemachandra explained how ‘over invoicing’ and ‘under invoicing’ contributed to the economic crisis.

Pathirana asserted that a sharp reduction of capital, as a result of mispricing by importers, in respect of duty/tax free goods and taxable imports, was far more serious than the parking of funds overseas by exporters.

The group underscored the need to examine capital flows through four forms of trade mis-invoicing, namely import over-invoicing and under-invoicing and export over-invoicing and under-invoicing.

Opposition lawmakers Vasudeva Nanayakkara, Wimal Weerawansa and Gevindu Cumaratunga, in Parliament, estimated the stashed amount at over USD 35 bn. The trio has alleged that the Exchange Control Act No 12 of 2017, enacted during the Yahapalana administration allowed exporters to ‘park’ funds overseas.

Dr. Wijeyadasa Rajapakse, PC, has estimated as much as USD 53.5 bn had been ‘parked’ overseas. This claim was made during the committee stage debate on the Appropriation Bill last year.

Pathirana discussed the disclosures made by Global Financial Integrity (GFI), a Washington, DC-based think tank that examined illicit financial flows, corruption, illicit trade and money laundering, pertaining to Sri Lanka.

Commenting on statements made, both in and outside Parliament as regards parking of export proceedings, both Pathirana and Uduwaragedara emphasized that the country suffered much more losses due to capital outflows than ‘parking’ of export proceeds overseas.

They found fault with both importers and exporters, at different levels, and deceitful bureaucracy, that manipulated the entire process, for the benefit of a few, at the expense of the entire country. They stressed that such huge outflows couldn’t be caused by illegal money transferring schemes, such as ‘undial’ and ‘hawala.

Referring to GFI findings that dealt with the 2009-2018 period, Pathirana, formerly of Asia Capital, stressed that the country lost as much as USD 40 bn due to over-invoicing and under-invoicing, in addition to parking of export proceeds, etc.

Secretary General of the Commercial and Industrial Workers Union, Arulingam Swasthika, didn’t join the discussion, as stated by the organizers.

At the onset of the briefing, Uduwaragedara pointed out that the Wickremesinghe-Rajapaksa government was on its knees before the International Monetary Fund (IMF) for USD 2.9 bn bailout package, whereas USD billions ,that could be utilized,remained overseas.

Sri Lanka has secured IMF bailout packages on 16 previous occasions.

The activist said that Justice Minister Wijeyadasa Rajapakse, PC, and Samagi Jana Balavegaya (SJB) heavyweight Patali Champika Ranawaka, in his capacity as the Chairman of the National Council sub-committee on identifying short- and medium-term programmes, related to economic stabilization, acknowledged the disclosures made by the GFI.

Cabinet spokesperson Bandula Gunawardena, too, admitted the issue at hand, though the government was yet to respond to this situation, Uduwaragedara said.

Actually, the government owed an explanation why, in spite of facing such extreme difficulties, those responsible for the revenue collection mechanisms, soft-pedal the issue.

“We are in a desperate situation. But, Parliament, responsible for public finance ,never really intervened in this matter. Parliament not only turned a blind eye to this daylight robbery but encouraged corruption at every level,” Uduwaragedara alleged.

Pathirana pointed out that even after President Gotabaya Rajapaksa’s government restricted imports, in 2021, the import bill remained high. “Our foreign reserves, amounting to USD 7.5 bn, simply evaporated as unscrupulous elements ,engaged in ‘over-invoicing,’ simply stepped up their operations,” Pathirana said.

According to him, even foreign loans, received by Sri Lanka, and foreign remittances, too, were vulnerable to these machinations. Both Pathirana and Uduwaragedara warned that unless remedial measures were taken to tackle corrupt cartels, the USD 2.9 bn received, over a period of four years, wouldn’t make a difference.

Pathirana emphasized that if the government was genuinely interested in breaking up the corrupt networks it could be done.

The public interest group urged the government to launch a comprehensive audit as part of the overall remedial measures. The Central Bank should intervene in this matter, without further delay, Pathirana said.

Uduwaragedara pointed out that those at the helm conveniently failed to act on the shocking disclosures made by Panama Papers (published beginning April, 2016) and Pandora Papers (2021). Referring to a spate of cases, involving Sri Lankans, that had been disclosed by Panama Papers and Pandora Papers, Uduwaragedara stressed that the failure on the part of the government to properly investigate, at least one case, exposed the bitter truth.

The media was told how those who had been exposed, invested in property overseas, ranging from luxury houses to art.

Stressing the urgent need and the responsibility on the part of the government to further strengthen laws to tackle these issues, Pathirana suggested that there should be a wider discussion, regarding writing off debt.

The Island

asked whether they really expected those responsible for the economic ruin here to genuinely address this issue, and anything tangible expected from those at the helm of power. Lawyer Lakmali Hemachandra said that they were still pursuing the issues and no final decision was taken on future course of action.

Pathirana said that Universities should engage in what he called an in-depth study of the growing problem. Referring to former Auditor General Gamini Wijesinghe’s declarations, pertaining to the ongoing crisis, Pathirana suggested that the government should commence an inquiry, beginning 2021.

The group said that this particular issue hadn’t received sufficient attention of the Sinhala media, both print and electronic, hence the need to make the public aware of the continuing threat. In spite of the Central Bank, in July 2006, responding to the threat posed by money laundering and terrorism financing, successive governments never really took concrete measures in that regard.

Towards the end of the discussion, the urgent need to introduce amendments to the Exchange Control Act No 12 of 2017, as part of Sri Lanka’s response to the continuing financial crisis was also taken up. Amendments were necessary to restore the authority exercised by the Central Bank in respect of regulation of foreign exchange, before the enactment of the above controversial piece of legislation by the Yahapalana government.

The group said that wider investigation was required to establish the truth, though the current crisis had been blamed on President Gotabaya Rajapaksa’s policy mismanagements, such as unprecedented tax cuts that caused the loss of revenue to the tune of Rs 600 bn.



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X-Press Pearl disaster fuels global call to classify plastic pellets as hazardous

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X-Press Pearl

Nearly five years after the catastrophic sinking of the X-Press Pearl, off Sri Lanka’s western coast, the environmental scars remain visible — from contaminated beaches to disrupted fisheries. Now, that tragedy has become a rallying point for an international coalition of scientists, demanding urgent reforms to global maritime law.

A group of leading researchers and environmental experts is calling on the International Maritime Organisation (IMO) to formally recognise plastic pellets — commonly known as nurdles — as hazardous to the marine environment. They argue that existing international shipping regulations fail to adequately address the environmental devastation caused by pellet spills.

Their appeal comes through a newly accepted scientific commentary, published in Cambridge Prisms: Plastics, consolidating decades of research on the impacts of plastic pellet pollution.

Plastic pellets are small, lentil-sized (2–5 mm) particles made from virgin or recycled plastic and used to manufacture a vast range of plastic

products. Scientists say that spills occur frequently during handling and transport, both on land and at sea. Once released into the ocean, pellets persist for decades, spreading across vast distances and entering marine food chains.

Dr. Jennifer Lavers, who studies pollutants in seabirds, warned that the scale of plastic ingestion has reached crisis levels.

“Today the volumes of plastic pellets entering the marine environment are enough to ‘feed’ millions of young seabirds,” she said. “In some areas we are seeing nearly a 100% rate of plastic ingestion, with pellets being particularly problematic.”

Beyond physical harm such as digestive blockages in wildlife, pellets also pose chemical threats. According to Dr. Sinja Rist of DTU Aqua, they are far from inert materials.

“Pellets are persistent, widely dispersed, readily ingested by wildlife, and capable of transporting hazardous chemicals,” she explained, noting that they can absorb and release toxic substances across oceans.

Sri Lanka’s experience with the X-Press Pearl disaster, in 2021, highlighted these dangers on an unprecedented scale. The burning container ship released vast quantities of chemicals and billions of plastic pellets into the sea, causing widespread marine contamination and severe economic losses to coastal communities.

Hemantha Withanage, Chairperson of the Centre for Environmental Justice in Sri Lanka, said the disaster exposed major gaps in international maritime regulation.

“After studying the aftermath of the X-Press Pearl disaster, it is impossible to argue that plastic pellets are harmless cargo,” Withanage stressed. “The impacts in Sri Lanka were immediate, widespread, and long-lasting. Stronger international regulation is essential to prevent this from happening again.”

Under the International Convention for the Prevention of Pollution from Ships (MARPOL), the intentional discharge of plastics is banned. However, scientists argue that current rules are inadequate when it comes to preventing or responding to accidental spills, especially those involving container ships.

The researchers are urging the IMO to assign plastic pellets a specific United Nations classification number. Such recognition would formally acknowledge their environmental hazard potential and trigger stricter requirements for packaging, labelling, and emergency notification during shipping.

Dr. Therese Karlsson, lead author of the commentary and Science Advisor for the IPEN, said the scientific case is clear.

“There are decades of studies highlighting threats from plastic pellets released into the oceans, including risks to marine animals and the food chain,” she said. “Plastics contain thousands of chemicals, many known to cause harm to the environment and human health. It is past time for global regulations to protect our oceans.”

The European Union has recently introduced measures aimed at preventing pellet losses throughout the supply chain, and in 2021 the IMO committed to addressing pellet pollution as part of broader efforts to reduce marine plastic litter. Yet experts warn that without binding global action, pellet spills will continue.

For Sri Lanka, still recovering from one of the worst maritime environmental disasters in its history, the international call carries particular urgency.

Scientists say the message from the island nation’s experience is unmistakable: plastic pellets must no longer be treated as ordinary cargo, but as hazardous materials demanding strict global oversight.

By Ifham Nizam

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Foreign Minister Herath decries deadlock in global disarmament

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Minister of Foreign Affairs, Vijitha Herath, has underscored the urgent global need for enduring peace, security, and strengthened multilateral cooperation, warning that rising geopolitical tensions have created deadlocks in global disarmament efforts and posed serious challenges to international humanitarian law.

The Minister said so while addressing the High-Level Segment of the Conference on Disarmament (CD) in Geneva on Monday (23 Feb), reaffirming Sri Lanka’s firm commitment to global disarmament and multilateral cooperation.

Minister Herath said that safeguarding the future of humanity must be treated as a paramount priority, stressing that trust and mutual respect are essential foundations for effective decision-making in multilateral forums. He reaffirmed that Sri Lanka remains committed to ensuring a secure and stable world for future generations.

Highlighting Sri Lanka’s longstanding role in nuclear disarmament, he recalled the country’s contribution to the 1964 Non-Aligned Movement Summit in Cairo, which called for the establishment of nuclear-free zones. He reiterated that Sri Lanka continues to strongly support such initiatives, particularly in the Middle East, and emphasiSed that total elimination and non-proliferation remain the only guarantees against the use of nuclear weapons.

Sri Lanka also urged that non-nuclear-weapon states must receive unconditional, non-discriminatory, legally binding security assurances, achievable through the work of the Conference on Disarmament.

On humanitarian demining, Minister Herath noted that Sri Lanka remains an active partner in that effort and currently serves as a senior member of the victim assistance committee of the Anti-Personnel Mine Ban Convention. He further reaffirmed Sri Lanka’s continued commitment to the Cluster Munitions Convention, which the country presided over in 2019.

Recognising the rapidly evolving threat landscape, the Minister warned of the impact of emerging technologies that have already reshaped the global disarmament architecture while putting international humanitarian law at significant risk. In this context, he said Sri Lanka has been advocating for the early start of negotiations on a legally binding instrument to prohibit lethal autonomous weapon systems.

He also addressed growing threats to outer space security, stressing that Sri Lanka, long a supporter of disarmament in outer space, continues to back negotiations on a legally binding instrument to prevent an arms race beyond Earth.

Minister Herath concluded by affirming Sri Lanka’s readiness to work with all nations to ensure global efforts toward a safer world are accelerated and achieved at the earliest opportunity.

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CoPF orders officials to establish legal framework for Rs. 200 for estate workers daily attendance allowance

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NDF MP Ravi Karunayake speaking at the COPF meeting

The Parliamentary Committee on Public Finance has directed officials to establish a proper legal framework for the Rs. 200 daily attendance allowance provided by the Government to estate workers.

During the Committee meeting on February 17, 2026, chaired by MP Dr. Harsha de Silva, members emphasised that while there is no objection to increasing estate worker wages, the current payment mechanism lacks a formal legal basis. The allowance is being distributed under a Memorandum of Understanding (MoU) with private plantation companies without gazette notification, leaving the arrangement vulnerable to termination and excluding contributions to the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF), according to parliament sources.

Officials noted that the MoU with plantation companies was valid for three years, and thereafter a policy decision would be required to continue the payments. The Committee stressed that public funds should not be used to pay salaries in private institutions without proper financial discipline, despite the allowance being approved under the 2026 Budget as a “development subsidy.” The Deputy Secretary to the Treasury suggested the payment would be more appropriately classified as a “production incentive,” though existing payments and MoUs did not specify such requirements.

The Committee also reviewed disaster relief efforts for those affected by Cyclone Ditwah. Officials reported that approximately Rs. 24.4 billion had been disbursed under various relief programs, including allowances for house cleaning, household purchases, and school assistance. Delays in housing reconstruction and rental support were attributed to damage assessments and land identification, with Committee members urging faster delivery of housing aid.

Officials from the National Insurance Trust Fund (NITF) highlighted reinsurance claims of around Rs. 11 billion following Cyclone Ditwah, noting that although NITF had not reinsured its exposure internationally since 2023, it was capable of settling existing claims.

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