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IMF tells SL how to save economy

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The Executive Board of the IMF has asked Sri Lanka to reform state-owned enterprises and adopt cost-recovery energy pricing, the Fund said yesterday in a press release.

They also called for prudent management of the Colombo Port City project, and continued efforts to strengthen governance and fight corruption.

The IMF stated that further efforts are needed to diversify the economy, phase out import restrictions, and improve the business and investment climate in general.

The Directors also called for renewed efforts on growth-enhancing structural reforms and stressed the importance of increasing female labor force participation and reducing youth unemployment.

Below are the rest of the IMF release: “(IMF) concluded the Article IV consultation with Sri Lanka on February 25, 2022. Sri Lanka has been hit hard by COVID-19. On the eve of the pandemic, the country was highly vulnerable to external shocks owing to inadequate external buffers and high risks to public debt sustainability, exacerbated by the Easter Sunday terrorist attacks in 2019 and major policy changes including large tax cuts at late 2019. Real GDP contracted by 3.6 percent in 2020, due to a loss of tourism receipts and necessary lockdown measures. Sri Lanka lost access to the international sovereign bond market at the onset of the pandemic.

The authorities deployed a prompt and broad-based set of relief measures to cope with the impact of the pandemic, including macroeconomic policy stimulus, an increase in social safety net spending, and loan repayment moratoria for affected businesses. These measures were complemented by a strong vaccination drive. GDP growth is projected to have recovered to 3.6 percent in 2021, with mobility indicators largely back to their pre-pandemic levels and tourist arrivals starting to recover in late 2021.

“Nonetheless, annual fiscal deficits exceeded 10 percent of GDP in 2020 and 2021, due to the pre-pandemic tax cuts, weak revenue performance in the wake of the pandemic, and expenditure measures to combat the pandemic. Limited availability of external financing for the government has resulted in a large amount of central bank direct financing of the budget. Public debt is projected to have risen from 94 percent of GDP in 2019 to 119 percent of GDP in 2021. Large foreign exchange (FX) debt service payments by the government and a wider current account deficit have led to a significant FX shortage in the economy. The official exchange rate has been effectively pegged to the U.S. dollar since April 2021.

“The economic outlook is constrained by Sri Lanka’s debt overhang as well as persistently large fiscal and balance-of-payments financing needs. GDP growth is projected to be negatively affected by the impact of the FX shortage and macroeconomic imbalances on economic activities and business confidence. Inflation recently accelerated to 14 percent (y/y) in January 20223 and is projected to remain double-digit in the coming quarters, exceeding the target band of 4–6 percent, as strong inflationary pressures have built up from both supply and demand sides since mid-2021. Under current policies and the authorities’ commitment to preserve the tax cuts, the fiscal deficit is projected to remain large over 2022–26, raising public debt further over the medium term. Due to persistent external debt service burden, international reserves would remain inadequate, despite the authorities’ ongoing efforts to secure FX financing from external sources.

“The outlook is subject to large uncertainties with risks tilted to the downside. Unless the fiscal and balance-of-payments financing needs are met, the country could experience significant contractions in imports and private credit growth, or monetary instability in case of further central bank financing of fiscal deficits. Additional downside risks include a COVID-19 resurgence, rising commodity prices, worse-than-expected agricultural production, a potential

deterioration in banks’ asset quality, and extreme weather events. Upside risks include a faster-than-expected tourism recovery and stronger-than-projected FDI inflows.

“Executive Directors commended the Sri Lankan authorities for the prompt policy response and successful vaccination drive, which have cushioned the impact of the pandemic. Despite the ongoing economic recovery, Directors noted that the country faces mounting challenges, including public debt that has risen to unsustainable levels, low international reserves, and persistently large financing needs in the coming years. Against this backdrop, they stressed the urgency of implementing a credible and coherent strategy to restore macroeconomic stability and debt sustainability, while protecting vulnerable groups and reducing poverty through strengthened, well-targeted social safety nets.

“Directors emphasized the need for an ambitious fiscal consolidation that is based on high-quality revenue measures. Noting Sri Lanka’s low tax-to-GDP ratio, they saw scope for raising income tax and VAT rates and minimizing exemptions, complemented with revenue administration reform. Directors encouraged continued improvements to expenditure rationalization, budget formulation and execution, and the fiscal rule. They also encouraged the authorities to reform state-owned enterprises and adopt cost-recovery energy pricing. Directors agreed that a tighter monetary policy stance is needed to contain rising inflationary pressures, while phasing out the central bank’s direct financing of budget deficits. They also recommended a gradual return to a market-determined and flexible exchange rate to facilitate external adjustment and rebuild international reserves. Directors called on the authorities to

gradually unwind capital flow management measures as conditions permit.

“Directors welcomed the policy actions that helped mitigate the impact of the pandemic on the financial sector. Noting financial stability risks from the public debt overhang and sovereign-bank nexus, they recommended close monitoring of underlying asset quality and identifying vulnerabilities through stress testing. Directors welcomed ongoing legislative reforms to strengthen the regulatory, supervisory, and resolution frameworks.

Directors called for renewed efforts on growth-enhancing structural reforms.”



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Economic crisis: MR, ministers, CBSL Governor, Dr.PBJ ignored IMF warnings

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Dr. Jayamaha says Monetary Board acted regardless of strong opposition

By Shamindra Ferdinando

It was disclosed before the Committee on Public Enterprises (COPE) yesterday (25), the then Prime Minister Mahinda Rajapaksa, who served as the Finance Minister, had been briefed, in March-April 2020, on the impending financial crisis of unprecedented magnitude, but he had chosen to ignore the dire warning.

The parliamentary watchdog was told how the International Monetary Fund (IMF) had warned the then Governor of the Central Bank, Prof. W. D. Lakshman, and Treasury Secretary S. R. Attygalle, of Sri Lanka’s inability to procure loans unless the country undertook debt restructuring immediately.

COPE members received a briefing on the circumstances leading to the crisis when senior officials of the Central Bank appeared before the all-party body yesterday. CBSL Governor Dr. Nandalal has stated that the IMF warning hadn’t been heeded at all.

The COPE received confirmation of what has been widely speculated hours after UNP Leader Prime Minister Ranil Wickremesinghe, was sworn in as the new Finance Minister.

Janakantha Silva, Director Legislative Services / Director Communication, Parliament quoted Dr. Weerasinghe as having told COPE that following technical talks held in terms of the Finance Act pertaining to the IMF’s stand, recommendations were made to the then Premier and other senior officials. Dr. Weerasinghe has stated that the relevant decisions should have been made by the Premier, in his capacity as the Finance Minister and the entire Cabinet of Ministers.

The IMF has made its position clear after having asserted Sri Lanka lacked debt sustainability.

Asserting the failure on the part of those who managed the economy for causing a massive crisis, COPE Chairman Prof. Charitha Herath called it a crime. The first time entrant to Parliament recommended the setting up of a Special Parliamentary Select Committee to probe those who neglected their responsibilities thereby caused the current debilitating crisis. Prof. Herath blamed those few who managed the economy during that period.

SLPP National List MP Basil Rajapaksa succeeded Mahinda Rajapaksa in July 2021 as the Finance Minister whereas President Gotabaya Rajapaksa brought in SLPP National List MP Ajith Nivard Cabraal as the Governor of the Central Bank in Sept 2021. Cabraal quit in March to pave the way for Dr. Weerasinghe, the former Bank Deputy Governor to return from retirement in Australia, as its new Governor.

Dr. Harsha de Silva pointed out that the then Finance Minister Mahinda Rajapaksa delegated his responsibilities to the then State Finance Minister Cabraal who refrained from briefing the Parliament as regards the actual situation. Dr. de Silva said that the IMF’s declaration of debt sustainability should be examined against the backdrop of the revenue cut imposed on the recommendation of the then Secretary to the President and one time Central Banker and Treasury Secretary Dr. P.B. Jayasundera that deprived the Treasury of Rs 600 mn in taxes.

Dr. de Silva asked who decided on the tax cut in spite of the IMF specifically advising the government not to do so. The top SJB spokesperson and COPE member asked who decided on such reckless course of action.

COPE member and SLPP lawmaker Rear Admiral (retd) Sarath Weeraselera has said that tax cut was declared to encourage business and trade.

When COPE raised contentious issue of the Central Bank wasting precious funds to prevent depreciation of Sri Lanka Rupee, Dr. Weerasinghe has said this was the responsibility of the Monetary Board comprising five persons. The then Monetary Board member Dr. Ranee Jayamaha has revealed that the then Governor Prof. W.D. Lakshman, Treasury Secretary S.R. Attygalle and nominated member Samantha Kumarasinghe decided on that course of action in spite of her and Sanjiva Jayawardena, PC, opposing them. They had registered their protest in writing.

Dr. Weerasinghe assured the COPE that in spite of the difficulties likely to be experienced within the next three to four months he would try to achieve objectives.

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People’s Bank remains firmly committed to the nation’s progress

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The People’s Bank is known for its commitment towards the betterment of the country. As one of the largest financial services providers in Sri Lanka, the Bank has been continuously featured in the 1000 Best Banks in the world by the world renowned ‘The Banker Magazine’ in the years of 2018, 2019, 2020 and 2021.

CEO/GM of the People’s Bank Ranjith Kodituwakku recently spoke to the media about the bank’s journey so far, and its present and future vision.

Could you share some insight about the present progress and stability of the People’s Bank?

People’s Bank was mainly initiated for the purpose of making banking facilities accessible to the general public. At present we have the country’s largest customer base of over 14 million and largest branch network of 742.

Our total assets have grown to Rs.2.6 trillion, and our deposits exceed Rs. 2.0 trillion. Our loans and receivables have exceeded Rs. 1.9 trillion. We are happy to announce that we also received the highest pre-tax profit of Rs. 30.4 billion and Rs. 23.7 billion pre-tax profit during the year 2021.

* People’s Bank has introduced a number of new innovations to the local financial sector, how are they faring?

People’s Bank became the first commercial bank to work in Sinhala and Tamil. It pioneered the act of printing cheque books in Sinhala and Tamil which were only printed in English earlier.

People’s Bank also introduced the Gold Mortgage Loan Service in 1962. Through this, we were able to free people who were caught in the clutches of money lenders.

On World Women’s Day in 1993, a branded ladies account “Vanitha Vasana” was launched, and to build future security for our student population, the “SisuUdana” account was launched coinciding World Children’s Day in 1996.As of today, most students deposit their savings at People’s Bank.

People’s Bank also was the first bank in the country to implement a complete digital transformation for the entire operating model, covering all aspects from the lowest to the highest levels of the Bank.

The bank’s Self Banking Units (SBUs) are a pioneering introduction to our digitalization programme of which there are over 265 islandwide. With ATMs, CDMs and bill payment machines (KIOSK) installed herein, you can experience convenient and efficient banking which operates 24 hours a day, seven days a week, 365 days a year, all year round.

All of our branches now have instant access to People’s Wiz which enables quick account opening. Over a million people are registered with the People’s Wave app, which allows you to bank from anywhere. People’s Bank also launched the People’s Pay Mobile App in support of the Central Bank’s efforts to promote digital transactions without the use of cash. In addition, the People’s Website offers online banking and People’s Wiz Credit provides personal loans within 24 hours. We have won numerous local and international awards for digital banking.

* People’s Bank was established to boost local agriculture, rural economy, upgrade small and medium-scale entrepreneurs by assisting every level of ordinary people with the bank. What are the contributions given by People’s Bank to those sectors?

Since the inception, People’s Bank’s main focus was on developing the rural banking system and uplifting the people. Even today, this focus remains unchanged within the bank. If you take the last year, People’s Bank granted loan facilities to SME businesses to the tune of Rs. 63.0 billion.

Also the bank introduced an agriculture-based Harvest Loan Scheme to create a self-sufficient country and granted loans of Rs.2.3 billion over a period of 15 months ending 31 December 2021 alone. The ‘Made in Sri Lanka’ loan scheme was introduced to promote local industries and ‘Saarabhoomi’ to encourage local production of fertilisers, pesticides, herbicides. ‘Vanitha Saviya’ loan scheme was launched to empower women entrepreneurs and ‘Business Power’ to uplift small and medium enterprises.

People’s Bank also launched the People’s Spark Entrepreneurship Development Programme with the aim of empowering Sri Lankan youth who are passionate about running their own business.

* What are the facilities given to customers when remitting money to Sri Lanka?

Sri Lankans working in foreign countries or any other person can send money to their loved ones and this money can be withdrawn conveniently from our 742 island wide network.

In order to recognise and encourage expatriate workers remitting money from abroad, the Bank launched a promotion called ‘Vaasi Kotiyai bonanza early this year. Under this promotion the Grand Draw winner who will be selected at the year-end will be presented with a Grand Prize of Rs.10 million. Additionally, Rs.1 Million Monthly winners will be selected every month, 22K gold sovereign weekly winners will be selected 48 times, while 10,000 daily cash prize winners will be selected 334 times until 31st December 2022.

In addition to that, we also provide loan facilities for those who seek foreign employment and to those who are already working abroad. We have also planned to introduce a special benefits package for Sri Lankan working abroad which includes insurance benefits and loans at concessionary interest rates.

* What’s your opinion about the stability of the banking system and what benefits are gained by transacting with a government bank and benefits receive by the society?

In addition to having a strong capital base, our banking system is closely monitored by the Central Bank and all local banks are run in compliance with the highest standards in the world.

State Banks specifically have the largest capital bases in the country and due to the government ownership, they enjoy extraordinary stability which in turn provides maximum security for customer deposits.

In addition, due to the large branch network and superior digital banking capabilities, customers can transact conveniently with People’s Bank.

Last but not least, the profits made by state banks are channeled back towards the development of the country which ultimately benefits customers.

* Finally, what is the contribution given by the People’s Bank through import and export trades?

People’s Bank works successfully with over 900 banks worldwide to facilitate import and export trades by issuing Letters of Credit to private and State owned enterprises. This function is invaluable to sustain normal lives of general public as it enables importation of essential items such as fuel, medicine, food and gas.

As I mentioned earlier, People’s Bank is driven by objectives that extend beyond mere profits. We work for the betterment of people and the country. As a Bank that is firmly committed to the wellbeing of the nation, we will continue to fulfill our responsibilities in this manner in the future.

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Governments harm children’s rights in online learning – HRW

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146 authorised products may have surveilled children and harvested personal data

Governments of 49 of the world’s most populous countries harmed children’s rights by endorsing online learning products during Covid-19 school closures without adequately protecting children’s privacy, Human Rights Watch said in a report released yesterday (25).

The report was released simultaneously with publications by media organisations around the world that had early access to the Human Rights Watch findings and engaged in an independent collaborative investigation.

“‘How Dare They Peep into My Private Life?’: Children’s Rights Violations by Governments that Endorsed Online Learning during the Covid-19 Pandemic,” is grounded in technical and policy analysis conducted by Human Rights Watch on 164 education technology (EdTech) products endorsed by 49 countries. It includes an examination of 290 companies found to have collected, processed, or received children’s data since March 2021, and calls on governments to adopt modern child data protection laws to protect children online.

“Children should be safe in school, whether that’s in person or online,” said Hye Jung Han, children’s rights and technology researcher and advocate at Human Rights Watch. “By failing to ensure that their recommended online learning products protected children and their data, governments flung open the door for companies to surveil children online, outside school hours, and deep into their private lives.”

Of the 164 EdTech products reviewed, 146 (89 percent) appeared to engage in data practices that risked or infringed on children’s rights. These products monitored or had the capacity to monitor children, in most cases secretly and without the consent of children or their parents, in many cases harvesting personal data such as who they are, where they are, what they do in the classroom, who their family and friends are, and what kind of device their families could afford for them to use.

Most online learning platforms examined installed tracking technologies that trailed children outside of their virtual classrooms and across the internet, over time. Some invisibly tagged and fingerprinted children in ways that were impossible to avoid or erase – even if children, their parents, and teachers had been aware and had the desire to do so – without destroying the device.

Most online learning platforms sent or granted access to children’s data to advertising technology (AdTech) companies. In doing so, some EdTech products targeted children with behavioral advertising. By using children’s data – extracted from educational settings – to target them with personalized content and advertisements that follow them across the internet, these companies not only distorted children’s online experiences, but also risked influencing their opinions and beliefs at a time in their lives when they are at high risk of manipulative interference. Many more EdTech products sent children’s data to AdTech companies that specialise in behavioural advertising or whose algorithms determine what children see online.

With the exception of Morocco, all governments reviewed in this report endorsed at least one EdTech product that risked or undermined children’s rights. Most EdTech products were offered to governments at no direct financial cost. By endorsing and enabling the wide adoption of EdTech products, governments offloaded the true costs of providing online education onto children, who were unknowingly forced to pay for their learning with their rights to privacy and access to information, and potentially their freedom of thought.

Few governments checked whether the EdTech they rapidly endorsed or procured for schools were safe for children to use. As a result, children whose families could afford to access the internet, or who made hard sacrifices to do so, were exposed to the privacy practices of the EdTech products they were told or required to use during Covid-19 school closures.

Many governments put at risk or violated children’s rights directly. Of the 42 governments that provided online education to children by building and offering their own EdTech products for use during the pandemic, 39 governments made products that handled children’s personal data in ways that risked or infringed on their rights. Some governments made it compulsory for students and teachers to use their EdTech product, subjecting them to the risks of misuse or exploitation of their data, and making it impossible for children to protect themselves by opting for alternatives to access their education.

Children, parents, and teachers were largely kept in the dark about these data surveillance practices. Human Rights Watch found that the data surveillance took place in virtual classrooms and educational settings where children could not reasonably object to such surveillance. Most EdTech companies did not allow students to decline to be tracked; most of this monitoring happened secretly, without the child’s knowledge or consent. In most instances, it was impossible for children to opt out of such surveillance and data collection without opting out of compulsory education and giving up on formal learning during the pandemic.

Human Rights Watch conducted its technical analysis of the products between March and August 2021, and subsequently verified its findings as detailed in the report. Each analysis essentially took a snapshot of the prevalence and frequency of tracking technologies embedded in each product on a given date in that window. That prevalence and frequency may fluctuate over time based on multiple factors, meaning that an analysis conducted on later dates might observe variations in the behavior of the products.

It is not possible for Human Rights Watch to reach definitive conclusions as to the companies’ motivations in engaging in these actions, beyond reporting on what it observed in the data and the companies’ and governments’ own statements. Human Rights Watch shared its findings with the 95 EdTech companies, 196 AdTech companies, and 49 governments covered in this report, giving them the opportunity to respond and provide comments and clarifications. In all, 48 EdTech companies, 78 AdTech companies, and 10 governments responded as of May 24, 12 p.m. EDT. Several EdTech companies denied collecting children’s data. Some companies denied that their products were intended for children’s use. AdTech companies denied knowledge that the data was being sent to them, indicating that in any case it was their clients’ responsibility not to send them children’s data. These and other comments are reflected and addressed in the report, as relevant.

As more children spend increasing amounts of their childhood online, their reliance on the connected world and digital services that enable their education will likely continue long after the end of the pandemic. Governments should pass and enforce modern child data protection laws that provide safeguards around the collection, processing, and use of children’s data.

Companies should immediately stop collecting, processing, and sharing children’s data in ways that risk or infringe on their rights.

Human Rights Watch has launched a global campaign, #StudentsNotProducts, which brings together parents, teachers, children, and allies to support this call and demand protections for children online.

“Children shouldn’t be compelled to give up their privacy and other rights in order to learn,” Han said. “Governments should urgently adopt and enforce modern child data protection laws to stop the surveillance of children by actors who don’t have children’s best interests at heart.”

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