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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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Sun directly overhead Neriyakulam, Punewa, Kebithigollewa, Pankulam and Sinhapura at about 12.10 noon today (31)

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The sun is going to be directly over the latitudes of Sri Lanka from  28th of August to 07th of September due to its apparent southward relative motion.

The nearest places of Sri Lanka over which the sun is overhead today (31) are Neriyakulam, Punewa, Kebithigollewa, Pankulam and Sinhapura about 12.10 noon.

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BASL takes exception to Justice Ganepola being denied a place in SC

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… highlights injustice caused to Justice R. Gurusinghe

The Bar Association of Sri Lanka (BASL) has alleged that due to the failure on the part of President Anura Kumara Dissanayake to fill the existing vacancies in the Supreme Court, a Senior Justice of the Court of Appeal, Justice Dhammika Ganepola, retired at the age of 63 without being considered for, or granted, a promotion to the Supreme Court, to which he was well entitled. The BASL pointed out at the time of Ganepola’s retirement there were four vacancies in the Supreme Court.

In a letter dated 17 August, 2026, addressed to President Dissanayake, the BASL declared that the failure to promote and recognise Ganepola’s distinguished judicial service, resulting in his retirement at the age of 63, is indeed a loss to the Judiciary.

A top BASL spokesman told The Island yesterday (30) that the Bar Council, over the weekend, had decided to release the hitherto confidential letter.

The official said that they also wanted to remind the President of his assurance given to BASL, on 12 August, 2026, that vacancies in the Supreme Court and Court of Appeal would be filled as soon as possible, within a month.

The following is the text of the BASL letter, signed by  Rajeev Amarasuriya, President, BASL, and its Secretary Nalin De Silva: “We write further to our letters dated 29th December 2025 and 30th June 2026 in relation to the above, to which we have not received any response.

We also refer to our meeting with Your Excellency on 12th August. As discussed during the meeting, there have been vacancies in the Supreme Court since May 2025, and the number of vacancies has now increased to four (04). There are also four (04) vacancies in the Court of Appeal. These are all matters we have already written to Your Excellency about.

Your Excellency informed the BASL Delegation when we met that you would be taking steps to make recommendations to fill these vacancies as soon as possible, within a month.

We write to reiterate the importance of giving due consideration to the criteria set out in our aforesaid letter dated 29th December 2025. We also wish to emphasise that, in making judicial appointments and promotions, seniority should be given due priority, in keeping with longstanding practice, until such time there are objective and defensible guidelines governing the assessment of merit.

The only justifiable departure to this criterion would be where there exists a specific and recognized demerit in respect of the particular Judge concerned or such other known compelling circumstances that are objectively identifiable such as where a Judge has previously been overlooked for promotion unfairly or conversely, where a Judge has been unfairly previously granted promotions above others.

This approach will safeguard both the integrity of the Judiciary and the trust reposed in it by the public.

Further, while there has been considerable discussion and representation by the Government regarding the importance of retaining experienced judges, as reminded to Your Excellency at our said meeting that, only a few months ago on 8th May 2026, a Senior Justice of the Court of Appeal, Justice Dhammika Ganepola, retired at the age of 63 without being considered for, or granted, a promotion to the Supreme Court, to which he was well entitled, and in which there were four vacancies at the time.

The failure to promote and recognise his distinguished judicial service, resulting in his retirement at the age of 63, is indeed a loss to the Judiciary.

We also drew Your Excellency’s attention at the said meeting to the fact that the Senior-most Justice of the Court of Appeal, Justice R. Gurusinghe, who joined the Judicial Service in 1996, who also Acted in the Office of President of the Court of Appeal (appointed by Your Excellency) on 11th May 2026, is due to retire at the end of this month. In fact, we learnt through the Media that Her Ladyship then Chief Justice Justice Murdu Fernando, PC, had previously in July 2025 recommended to Your Excellency the promotion of Justice R. Gurusinghe to the Supreme Court, but the same is pending from that time.

 He too is well deserving of promotion to the Supreme Court and has already been recommended by the former Chief Justice, and his case must also receive due and urgent consideration before his impending retirement.

We hope that Your Excellency will take due note of and give due regard to the concerns of the Bar, as well as to the established principles, practices and conventions governing judicial appointments, when taking steps to fill these vacancies.

On this, Your Excellency is already open to the accusation that these vacancies have been kept open, to fill with favourites of the Government which is yet another serious indictment on the independence of the judiciary which accusation would be confirmed if recommendations are made outside established practice.

Moreover, the BASL expresses grave concern that withholding promotions of Judicial Officers for extended periods of time places undue pressure on Judicial Officers in the discharge of their duties and constitutes both directly and indirectly, interference with the independence of the Judiciary, in addition to the strain obviously caused to the dispensation of justice in other Courts and the stifling and delay of career progression of Judges legitimately entitled to promotions.

We do hope that Your Excellency would take due note and cognizance of the foregoing when effecting these judicial promotions which have been long overdue and which have already adversely impacted the efficiency and effectiveness of the administration of justice.”

The BASL has copied the letter to Prime Minister Dr. Harini Amarasuriya, Speaker Dr. Jagath Wickremaratne, Opposition Leader Sajith Premadasa and all members of the Constitutional Council.

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Sajith challenges govt. to hold PC polls

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Sajith

Opposition Leader Sajith Premadasa on Saturday (29) challenged the government to hold the long-delayed Provincial Council elections, saying the polls would provide an opportunity to gauge the level of public support enjoyed by the administration.

Addressing a farmers’ meeting in Tissamaharama, Hambantota, Premadasa also criticised the latest Rs. 17 per kilogram increase in wheat flour prices, warning that it would push up the prices of bread, bakery products and other flour-based food items and place further pressure on households already struggling with the rising cost of living.

He said Sri Lanka ranked 120th among 130 countries in an international comparison of minimum wages, arguing that wages remained inadequate to meet the escalating cost of living.

Premadasa also questioned official assessments of living standards, asking whether a person could survive for an entire month on Rs. 17,315, a figure he attributed to the Department of Census and Statistics.

He claimed that between 30 and 40 percent of the population was living in poverty and called for a clear programme to help affected families improve their economic conditions.

Turning to the proposed 22nd Amendment to the Constitution, which seeks to increase the retirement age of superior court judges, the Opposition Leader accused the government of attempting to undermine judicial independence and interfere with democratic institutions.

He also criticised the government’s handling of poverty, employment, agriculture, healthcare and investment, saying more effective measures were needed to provide relief to people facing economic hardships.Premadasa called for stronger policies to attract foreign direct investment and urged the government to formulate a national strategy for developing the tourism industry.

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