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Govt. to receive USD 780 mn via IMF SDR facility to get over COVID difficulties

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State Minister Ajith Nivard Cabraal says Sri Lanka will receive USD 780 mn in terms of Special Drawing Rights (SDR) in support of efforts to meet difficulties caused by the Covid-19 crisis. Asked whether the government had agreed to a programme, the former Governor of the Central Bank Cabraal said that the funds were made available to all countries regardless of a programme.

Pointing out that the total IMPF allocation was about USD 650 bn, Sri Lanka was entitled to USD 780 mn.

Top SJB spokesman Dr. Harsha de Silva, MP said that  every IMF member nation would get their share of the USD 650b new allocation to be used in any manner they wished but mostly for Covid-related expenses.

The MP said: “These allocations have taken place several times in the past as well. This time the proposal was stuck during the Trump administration but cleared by Biden.

Going to the IMF or not to resolve our debt issue is a separate matter. That is the decision of the government.

But the reality is that we are now on very thin ice because even with this windfall our official reserves will be around USD 3b at the end of August. And once the gold is removed, reserves will be around USD 2.5b. Then even if the reserves of all private banks and entities are added, at a national level usable reserves would be around USD 4.5b by the end of the month. But we have, both government and private sector, close to USD 7b in debt payments alone in the coming 12 months.

As we just saw last week the import ban is not working and the trade deficit is ballooning while remittances are falling and tourism is stuck. This means we will run a deficit in the current account of the balance of payments.

The result is additional requirements for reserves to meet imports.

Now I heard the Minister saying to CNBC that he expects USD 400m from India and USD 250m from Bangladesh. But these swaps are all very short term loans. A few months max. Maybe some additional money may come from China Development Bank etc. He said he expects anywhere from USD 400m to USD 1b from ‘utilizing underutilized assets’ in other words privatisation. This is I presume via Selendiva, but I am at a loss to figure out what would need to be sold to get that amount. That is still a one off inflow. Beyond that the much talked about FDI to Port City and elsewhere has not materialised and even if it does only a fraction would go to reserves as most would be spent on imports.

So even they have been harping on an ‘alternative’ no one has explained what it is.

So yes, I don’t see any other option but to approach the IMF to work out a facility to bail Sri Lanka out of the hole this government has put us into, starting from the unwise tax cuts in December 2019 and multiple blunders since, besides the pandemic. If they went to the IMF in late 2020 we could have settled at around LKR 190 to the dollar. If they go now perhaps around Rs 215 to Rs 220 and if we delay further then at a further depreciated rate. The choice is theirs but given the situation they have put us all into there is no way we can come out of this without the help of the IMF either now or 6 months down the road.

The MP said that instead of keeping the country open and letting thousands die because of their logic of the need to keep the economy moving, what they need to do is enter into a program with the IMF to restructure the debt and get a breather and close the country based on medical expert advice.”



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GL follows up Udaya’s initiative, negotiates concessionary crude oil supplies with UAE

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Balance-of-payment crisis continues to stagger govt.

By Shamindra Ferdinando

The United Arab Emirates (UAD) has agreed to discuss a possible arrangement to provide Sri Lanka crude oil on concessionary terms in the face of the country experiencing a severe balance-of-payments crisis, according to the Foreign Ministry.

Foreign Minister Prof. G.L. Peiris took up the matter with UAE Minister of Industry and Advanced Technology Dr. Sultan Al Jaber, on the sidelines of the 76th session of the United Nations General Assembly (UNGA) in New York. Prof. Peiris is on President Gotabaya Rajapaksa’s delegation to the UNGA.

In late August, Energy Minister Udaya Gammanpila sought the intervention of the Acting Head of the UAE Embassy in Sri Lanka, Saif Alanofy. Minister Gammanpila also met the Iranian Ambassador in Colombo in a bid to explore the possibility of obtaining oil from Iran on concessionary arrangements.

The Foreign Ministry statement on Prof. Peiris meeting with the UAE Minister dealt with the financial crisis experienced by the country. “Foreign Minister Peiris explained the challenges Sri Lanka is experiencing in respect of its external budget, as a result of the COVID-19 pandemic. Prof. Peiris focused in particular on the country’s requirement for oil and requested concessionary arrangements from the UAE.”

The Foreign Ministry quoted Minister Al Jaber as having said that the UAE would be happy to assist and proposed the establishment of a strategic framework to take the process forward.”

The ministry stressed that both sides agreed to follow-up rapidly.

Energy Minister Udaya Gammanpila earlier told The Island that concessionary arrangements were required to procure oil as part of an overall strategy to overcome the developing crisis.

Pivithuru Hela Urumaya (PHU) leader and Attorney-at-law Gammanpila said that increase in fuel prices in the second week of June this year was only a part of the government’s response to heavy pressure on foreign reserves. Minister Gammanpila said that the decision was taken close on the heels of dire warning from the Central Bank.

Minister Gammanpila said that in spite of foreign currency crisis, the government ensured an uninterrupted supply of fuel. According to him, Sri Lanka spent as much as USD 3.5 to 5 bn annually on oil imports depending on the world market prices.

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President attends 9/11 commemoration in NY

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President Gotabaya Rajapaksa yesterday attended the special commemorative event near the Manhattan Memorial in the United States to mark the 20th anniversary of terrorist attacks in Washington and New York.

The terrorist attacks took place on September 11, 2001, targeting the World Trade Center in New York and the Pentagon, the headquarters of the United States Department of Defence.

Coinciding with the 76th Session of the United Nations General Assembly, the United Nations Office of Counter-Terrorism and the 9/11 Memorial Museum jointly organised the event. Other Heads of State and government representatives, who were in New York to attend the UN General Assembly, were also present at the event to pay tribute to those who lost their lives in those attacks.

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FSP calls on govt. allies not to pretend to oppose adverse deal with US firm

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By Anuradha Hiripitiyage

Due to the secret agreement signed with US firm New Fortress Energy, Sri Lanka would soon face a situation akin to the one already faced by Ukraine, the Frontline Socialist Party (FSP) predicted yesterday.

“Sri Lanka is trying to reduce its dependency on coal and switch over to LNG. With this in mind, several coal and diesel power plants are to be converted into LNG in the coming decade. Now, we will entirely depend on the US to provide us with LNG to power these plants. Given that the US intends to control the seas in which Sri Lanka is placed strategically, they will not let us off the hook once they establish their foothold here. We are in deep trouble,” FSP Propaganda Secretary, Duminda Nagamuwa said.

Nagamuwa said that some constituents of the government were pretending that they opposed the transfer of government’s shares in the Yugadanavi Power Plant to New Fortress Energy. “But this is not the time for theatrics but for concrete action”, he said.

Nagamuwa said that the agreement between the government and US Company New Fortress Energy to construct a new offshore liquefied natural gas (LNG) receiving, storage and regasification terminal at Kerawalapitiya as well as the transfer of government’s shares in the Yugadanavi Power Plant had to be scrapped.

“Even government ministers agree that the agreement was not discussed with them. Several affiliates of the government are trying to convince the people that they are fighting this decision from inside. However, past experience has shown that when push comes to shove they will stay with the government. They must show the leaders of the government that they are not puppets,” he said.

Nagamuwa said that if those affiliated to the government were serious in their opposition to undermining Sri Lanka’s energy security they should show their commitment by doing something concrete.

The Yugadanavi Power Station at Kerawalapitiya already produced 300 MWs of energy and there was a plan to build another 350 MW plant there. The US Company had now been allowed to build an offshore LNG receiving, storage, and regasification terminal and to provide LNG to the existing Power Station and the new 350 MW power plant to be built, he said.

“Now we are under the power of the US. We will soon be facing the plight of Ukraine,” he said.

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