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Lankan economic don in Australia explains tough road ahead with commercial creditors

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Premachandra Athukorala

By Rathindra Kuruwita

Bilateral creditors will never reduce the face value of the money they have lent and that the only concession Sri Lanka will receive will be lowering of interest rates, Professor of Economics at the Australian National University Premachandra Athukorala has said.

“They can also assist Sri Lanka by extending the period where debt has to be repaid,” he said.

“Let’s look at Zambia and Ghana, two countries that recently concluded debt restructuring. Bilateral creditors only provided concessionary interest rates and loan repayment periods. They will never reduce the face value of the loans,” he said.

Ghana has received about a 37% haircut from bondholders with 5% interest on new bonds from 2024 through July 2028 and 6% interest thereafter until 2035.

“Sri Lanka still can’t borrow from the international financial markets although an agreement with bilateral creditors has been made,” he said. An agreement must be reached with commercial creditors before Sri Lanka can resume borrowing.

“Pakistan has a much larger debt burden but it didn’t default like Sri Lanka. This is because they went to the IMF, before things really went bad, and signed a stand-by agreement. IMF’s Stand-By Arrangement (SBA) was created in June 1952 to provide financing to countries requiring help with balance of payments problems. The SBA has often been used by member countries and is the dominant lending instrument of the IMF, especially for emerging market countries,” he said.

Athukorala said that Zambia had benefited from a haircut of 21 percent after four-year negotiations. On the other hand, Ghana received a 37 percent haircut.

“It’s fascinating to study why different countries end with different haircuts. The simplest reason I can give is that you can get bigger haircuts if the debt restructuring process drags on. Zambia took about four years to restructure debt. On the other hand, Ghana had better leadership and a better plan and they finished the process in 18 months,” he said.



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Govt. extends ban on LTTE

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The NPP government has issued a new extraordinary gazette renewing and extending Sri Lanka’s long-standing ban on the LTTE and several Tamil diaspora organisations and individuals, continuing to designate them as “terrorists”.

The gazette, published recently, replaces a previous gazette issued in May 2025 and reaffirmed the proscription of a wide range of Tamil political and advocacy bodies operating around the world, alongside dozens of named individuals. The government alleged both the organisations and individuals listed are involved in “terrorism-related activities”.

The organisations blacklisted by the Sri Lankan government include:

• Liberation Tigers of Tamil Eelam (LTTE)

• Tamil Rehabilitation Organisation (TRO)

• Tamil Coordinating Committee (TCC)

• World Tamil Movement (WTM)

• Transnational Government of Tamil Eelam (TGTE)

• World Tamil Relief Fund (WTRF)

• National Council of Canadian Tamils (NCCT)

• Tamil Youth Organisation (TYO)

While the majority of the designations mirror those contained in the May 2025 gazette, the latest document updates identification details and addresses for a number of individuals and introduces at least one additional organisation to the list. All entries have been reissued under new reference numbers for 2026, though the underlying allegations and framing remain unchanged.

Successive governemnts have maintained a sweeping proscription regime against Tamil diaspora groups and individuals. A ban can make it a criminal offence for Sri Lankan citizens to maintain contact with these organisations or their members, severely restricting political engagement and stifling links between the diaspora and the Tamil homeland.

The original mass listings were introduced in 2014 under the administration of Mahinda Rajapaksa. Despite repeated outcry, subsequent governments have continued to uphold and renew the proscription regime, even after the Rajapaksas were voted out of power.

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Police obtain court order banning Wimal’s protest

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National Freedom Front (NFF) leader Wimal Weerawansa addresses a gathering outside the Education Ministry on Monday before launching a protest demanding the immediate resignation of Prime Minister Dr. Harini Amarasuriya as Education Minister over the inclusion of a link to an adult content website in the Grade 06 English module. (Pic by Thushara Atapattu)

Police yesterday (12) obtained an injunction order from the Kaduwela Magistrate’s court against the protest launched by National Freedom Front (NFF) leader and former Minister Wimal Weerawansa opposite the Education Ministry, Isurupaya, at Battaramulla.

Police informed Weerawansa of the court order. In line with the court order, the police informed Weerawansa that the road near the Ministry should not be obstructed and that no sound amplification equipment be used while the GCE Advanced Level (A/L) examination is in progress. The examination, put off due to Cyclone Ditwah, recommenced yesterday.

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Chinese Foreign Minister Wang Yi expresses optimism that Sri Lanka is on the right path to progres

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FM Herath with his Chinese counterpart Wang Yi

Minister of Foreign Affairs, Foreign Employment and Tourism Vijitha Herath held productive discussions with his Chinese counterpart Wang Yi today (12/01), during the latter’s brief visit to Sri Lanka.

The meeting aimed at further strengthening bilateral engagement and advancing the Strategic Cooperative Partnership between the two countries. Both Ministers reaffirmed the longstanding friendship and time-tested cooperation between Sri Lanka and China rooted in centuries of exchanges and consolidated since the establishment of diplomatic relations seven decades ago. The discussion also focused on enhancing partnership in the areas of trade, investment, development cooperation and tourism.

Minister Herath extended deep appreciation to the Government and the people of China for the steadfast support extended to Sri Lanka following cyclone Ditwah and requested further support for the second phase of resettlement, relocation and rebuilding, particularly for the restoration of affected infrastructure including identified roads, railways and bridges that are vital to connectivity, economic recovery and daily lives of people. Minister Wang assured China’s fullest support for this initiative and expressed confidence that Sri Lanka will continue its rapid recovery under the leadership of President Anura Kumara Disanayaka. He also welcomed the people-centric policies of the Government and expressed optimism that Sri Lanka is on the right path toward fulfilling aspirations of its people.

Minister Herath expressed appreciation for China’s constructive role in international fora and reiterated Sri Lanka’s firm commitment to the One China Policy and China’s sovereignty and territorial integrity.

Both Ministers also recalled the successful high level exchanges in the recent past, including visits of the President and the Prime Minister of Sri Lanka to China in 2025.

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