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Harsha says govt. gave haircut to EPF unfairly sparing banks and insurance companies

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3 years ago

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The Committee on Public Finance (COPF) had not received the data that the Central Bank and the Ministry of Finance had when it discussed the resolution on domestic debt restructuring, CoPF Chairman and Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva said in a television interview on Wednesday.

“We held discussions with officials of the Central Bank, the Ministry of Finance, and other stakeholders for two days based on the data available to us. They told us that domestic debt restructuring must be done,” he said.

Dr. de Silva said that the Central Bank Governor had said that he wasn’t a great fan of domestic debt restructuring. However, the latter said that the country had to restructure its domestic debt because foreign debt holders were insisting on it, the SJB MP said.

“My stance was that we must avoid restructuring domestic debt. However, if the government insists that this must be done, I have suggested ways in which we could do this in the two blueprints I presented in 2022 and 2023,” Dr. de Silva said.

The SJB MP said that the IMF had not told Sri Lanka that it must restructure its domestic debt. The IMF wanted Sri Lanka’s authorities to restore debt sustainability by reducing the level of public debt below 95 percent of GDP by 2032; reducing the average central government gross financing needs (GFNs) in 2027–32, including from the materialiation of contingent liabilities, below 13 percent of GDP; keeping FX debt service of the central government below 4.5 percent of GDP in any year during 2027-32; and to ensure that the fiscal and external financing gaps are closed.

“Why did we have to restructure domestic debt, then? Reducing the level of public debt below 95 percent of GDP by 2032 is not a difficult thing. Reducing the GFNs is tougher. There are two parts to achieving this. First is the fiscal pillar, i.e., reducing the budget deficit. How do we do this? We have to increase tax revenue, and reduce expenses. The extent of debt restructuring depends on our ability to reduce the budget deficit,” he said.

Dr. de Silva said the government has believed that they can’t reduce the budget deficit beyond this point. Thus, they have asked foreign debt holders for a 30 percent haircut, he said.

“Then these debt owners insist that we also restructure domestic debt, since they have to take a haircut. So about 0.5 percent of the GDP worth of domestic debt had to be restructured,” he said.

The problem is that the burden of the entire debt restructuring has fallen on the EPF, while banks and other such institutions have been made exempt. Out of the total debt portfolio, EPF held 42 percent, while banks held 45 percent, he said. About eight percent was held by insurance companies, MP de Silva said.

“There wouldn’t be any problem if the burden was divided in an equitable manner,” he said.

Sri Lanka had to issue treasury bonds at high interest rates in the last few years because everyone knew that a haircut was inevitable.

“An investor would purchase a bond at 28 percent, expecting that he or she would have to take a cut of about eight percent. However, a large number of those who bought bonds at an interest rate of 28 to 30 percent didn’t have to take a haircut at all. But EPF has to take a big cut and get nine percent interest,” he said.

The SJB MP said those who defend the decision to exempt banks and insurance companies from debt restructuring claim that banks already pay a 50 percent tax on their profit and that the exemption would prevent a collapse in banks. However, both claims are false, he said.

“Funds like the EPF are the last to be affected in all other countries that have restructured domestic debt. Those who contribute to the EPF have no say in how their money is invested. If the burden of domestic debt restructuring was divided equally, both banks, EPF, and insurance companies would have had to pay relatively bearable amounts, and it would not have led to a collapse in the banking sector,” he said.

The SJB had proposed to divide restructuring equally and give banks regulatory forbearance, i.e., a regulatory policy that permits banks and financial institutions to continue operating even when their capital is fully depleted, he said. (RK)


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Heat index likely to increase up to ‘Caution level’ at some places in the Northern, North-central, North-western, Western, Sabaragamuwa, Southern and Eastern provinces and Monaragala district

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17 hours ago

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2026/04/12

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Warm Weather Advisory
Issued by the Natural Hazards Early Warning Centre at 3.30 p.m. on 11 April 2026, valid for 12 April 2026

The Heat index, the temperature felt on the human body is likely to increase up to ‘Caution level’ at some places in the Northern, North-central, North-western, Western, Sabaragamuwa, Southern and Eastern provinces and Monaragala district.

The Heat Index Forecast is calculated by using relative humidity and maximum temperature and this is the condition that is felt on your body. This is not the forecast of maximum temperature. It is generated by the Department of Meteorology for the next day period and prepared by using global numerical weather prediction model data.

Effect of the heat index on human body is mentioned in the above table and it is prepared on the advice of the Ministry of Health and Indigenous Medical Services.

ACTION REQUIRED

Job sites: Stay hydrated and takes breaks in the shade as often as possible.
Indoors: Check up on the elderly and the sick.
Vehicles: Never leave children unattended.
Outdoors: Limit strenuous outdoor activities, find shade and stay hydrated.
Dress: Wear lightweight and white or light-colored clothing.

Note:  In addition, please refer to advisories issued by the Disaster Preparedness & Response Division, Ministry of Health in this regard as well. For further clarifications please contact 011-7446491.

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Sun directly overhead Cheddikulam, Kebithigollewa, Gomarankadawala and Nilaveli about 12:11 noon. today [12]

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17 hours ago

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2026/04/12

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On the apparent northward relative motion of the sun, it is going to be directly over the latitudes of Sri Lanka from 05th to 15th of April in this year.

The nearest areas of Sri Lanka over which the sun is overhead today (12th) are Cheddikulam, Kebithigollewa, Gomarankadawala and Nilaveli about 12:11 noon.

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CEB orders temporary shutdown of large rooftop solar systems

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18 hours ago

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2026/04/12

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The Ceylon Electricity Board (CEB) has directed owners of large-scale rooftop solar systems to temporarily disconnect their installations for a 10-day period beginning from Friday (April 10), citing growing concerns over grid stability amid low electricity demand and high solar generation.

The directive applies to rooftop solar systems exceeding 300 kW capacity, which are required to remain switched off until April 20. The move coincides with the extended holiday season, during which national electricity demand typically declines, alongside prevailing sunny weather conditions that significantly increase solar output.

Senior electrical engineers told The Island that the decision, though exceptional, was necessitated by operational risks posed to the national grid.

“We are seeing a pronounced imbalance between supply and demand,” a senior CEB system control engineer said. “With industries and commercial establishments operating at reduced levels during the holidays, demand drops. At the same time, solar generation remains high, creating excess power that the grid struggles to absorb.”

He explained that such imbalances could lead to fluctuations in system frequency, potentially threatening the stability of the grid. “If generation exceeds demand, frequency rises beyond acceptable limits.

This can trigger automatic protection mechanisms or, in extreme cases, lead to partial outages.”Another senior engineer attached to the transmission division noted that managing distributed solar generation remains a technical challenge.

“Unlike conventional power plants, rooftop solar systems are not centrally dispatchable. We cannot directly control their output in real time. This limits our ability to balance the system during periods of excess generation,” he said.

He added that the country’s grid infrastructure is still adapting to the rapid growth of renewable energy. “We lack sufficient large-scale battery storage and advanced grid management systems to effectively handle these fluctuations. Until such capabilities are enhanced, temporary curtailment becomes necessary.”

Engineers also pointed out that conventional thermal plants cannot be abruptly shut down or adjusted to compensate for sudden surges in solar generation.

“These plants require minimum stable operating levels. When solar floods the grid during low demand, it creates operational constraints that are not easy to manage,” one official said.

The CEB, in its statement, expressed appreciation for the cooperation of solar system owners affected by the measure, stressing that it is a short-term intervention aimed at ensuring uninterrupted and stable electricity supply across the country.

Energy experts say the development underscores the urgent need for grid modernization, including investment in battery energy storage systems, smart grid technologies, and improved demand-side management.

“This is part of the transition challenge,” an independent analyst noted. “As solar penetration increases, the grid must evolve to become more flexible. Otherwise, curtailment will remain a recurring necessity.”

Despite the temporary shutdown, CEB engineers reaffirmed their commitment to expanding renewable energy.

“Solar power is a key pillar of Sri Lanka’s future energy mix,” a senior engineer said. “But integration must be carefully managed. Grid stability cannot be compromised.”

The temporary disconnection order, which took effect yesterday, marks a critical moment in Sri Lanka’s energy transition—highlighting both the progress made in renewable energy adoption and the technical hurdles that remain.

By Ifham Nizam

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