News
Harsha says govt. gave haircut to EPF unfairly sparing banks and insurance companies
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)
“No shipment for 10 days; seas off western coast will become rough by April end”
Education Secretary of the Frontline Socialist Party (FSP) Pubudu Jayagoda says the Indian company which secured a tender to supply coal for electricity generation this year has delivered only 13 of the 25 shipments required and no vessel has arrived in Sri Lanka for the last 10 days or so.
Jayagoda said so while addressing the media during a protest held in Colombo yesterday.
Jayagoda said the Indian company Trident Chemphar, which secured the tender to supply 25 coal shipments for 2026, had placed the country’s coal stocks at risk.
Although all 25 coal shipments are required to be unloaded before the end of April, only 13 vessels have arrived in Sri Lanka so far, according to Jayagoda. He also claimed that no shipment had arrived during the first week of March, adding that coal vessels had not arrived for about 10 days.
Jayagoda warned that the situation could endanger the country’s energy supply as the seas off the western coast usually turn rough by the end of April, disrupting unloading operations.
According to Jayagoda, a report submitted by the Public Utilities Commission of Sri Lanka to the Parliamentary Oversight Committee on infrastructure and strategic development, power cuts may become necessary from August even if the country falls short of five shipments unless electricity is generated using costly diesel-powered thermal plants.
Jayagoda also alleged irregularities in the tender process, claiming that the government had changed tender specifications and delayed the tender process by about four months, possibly to allow the Indian company time to register and secure performance guarantees.
He further alleged that the coal supplied by the Indian company was substandard.
Jayagoda questioned why the tender had not been cancelled despite several shipments allegedly failing to meet quality standards and why no investigation had been launched.He asked why legal action had not been taken against the company despite supply disruptions.
The US Department of State has said that Washington respects Sri Lanka’s sovereignty in handling matters relating to the Iranian warship IRIS Bushehr and its crew, according to agency reports, quoting a State Department Spokesperson. He has said the final decision regarding the vessel, its crew and the rescued Iranian sailors rests with Sri Lanka in accordance with its domestic laws and international legal obligations.
The statement follows comments by Foreign Minister Vijitha Herath that Sri Lanka was looking after 32 sailors rescued from the Iranian frigate IRIS Dena under Colombo’s international treaty obligations.
The frigate was sunk by a US submarine off Sri Lanka’s southern coast on Wednesday during escalating hostilities involving the United States and Iran.
Sri Lanka’s Navy conducted rescue operations, following the incident, recovering 84 bodies.
Asked whether Colombo was under US pressure not to repatriate the Iranian sailors, Herath said Sri Lanka had taken all actions in accordance with international law.
Sri Lanka also provided safe harbour to the second Iranian warship, IRIS Bushehr, and evacuated its 219 crew members a day after the Dena was torpedoed. The vessel was taken to the port of Trincomalee after reporting engine problems.
Citing an internal cable, Reuters reported that Washington had urged Sri Lanka not to repatriate the Iranian sailors. However, the State Department spokesperson reiterated that the disposition of the crew and survivors was a matter for Sri Lanka to decide, adding that the United States respects Sri Lanka’s sovereignty in managing the situation.
Meanwhile, India allowed a third Iranian warship, IRIS Lavan, to dock in a port on humanitarian grounds after it reported operational difficulties.
The ship docked at the port of Kochi, where many of the crew, including young cadets, were disembarked and transferred to a nearby facility.
President Anura Kumara Dissanayake said Colombo would follow the provisions of the Hague Convention, which requires neutral states to detain combatants of warring parties until the end of hostilities.
A senior administration official said Sri Lanka was in discussions with the International Committee of the Red Cross regarding the treatment of survivors from the torpedoed vessel. International humanitarian law would apply to the wounded, who could be repatriated if they requested it, the official added.
Iranian diplomats in Colombo have requested the return of the remains of sailors killed in the attack to Iran.
Opposition and SJB leader Sajith Premadasa, emphasised the critical need for the Indian Ocean region to remain peaceful and not become part of any conflict, said a news report published by NDTV yesterday.
It said: As the Iran-Israel war enters its second week, the theatre of the war has expanded dramatically, reaching the waters of Sri Lanka. With the sinking of Iranian warship IRIS Dena in international waters off Lanka’s coast and the docking of a second Iranian vessel, IRIS Busheher, Colombo has become embroiled in a conflict where it seeks to remain only a neutral bystander.
Speaking with NDTV, Sajith Premadasa, Leader of the Opposition in Sri Lanka emphasised the critical need for the Indian Ocean region to remain peaceful and not become part of any conflict.
“The Indian Ocean has on successive occasions been declared a peaceful area and should remain so,” said Premadasa.
The Sri Lankan government has said that it will attend to all survivors of the ill-fated IRIS Dena and IRIS Busheher as per international protocols and norms. Sri Lankan President Anura Kumara Dissanayake said his country had a “humanitarian responsibility” to take in the crew of the vessel, which was allowed to dock at Trincomalee in Northern Sri Lanka.
Premadasa, who is the leader of the opposition party SJB, called on all parties to cease the ‘asymmetric warfare’. He cautioned that the widening conflict would have devastating consequences for smaller countries like Sri Lanka, which is still reeling from its worst economic crisis in 2022.
“The Middle East conflict is already spreading to other countries, and this is having an impact on Sri Lanka and Sri Lankan people,” Mr Premadasa told NDTV.
A third Iranian vessel that was in the Indian Ocean, IRIS Lavan, has docked at Kochi in India. India has said it was a “humanitarian call” after the vessel sent out a distress call.
Iran names Khamenei’s son as new supreme leader after father’s killing
Oil prices jump above $100 for first time in four years
Dry weather will prevail over the island
FSP warns of possible coal shortage
Repatriation of Iranian naval personnel Sri Lanka’s call: Washington
Indian Ocean must remain peace zone: Sajith
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