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State Minister Cabraal dispels fears about Sri Lanka’s debt service capacity

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State Minister of Money and Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal has said nobody should harbour fears of Sri Lanka’s ability to service its debt. Fears being expressed in some quartes are unfounded he has said, issuing a media statement.

Following is a statement issued by the State Minister of Money & Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal on 30th October 2020 “With the spread of the COVID-19 pandemic, all countries including Sri Lanka, observed a contraction in economic activity, reduction in foreign exchange earnings, decrease in revenue collection, and increase in health and welfare related expenditure. However, the prompt and measured policy support provided by the Government and the Central Bank enabled Sri Lanka to contain the unfavourable effects of Covid-19 to a great extent, and return the economy to near-normalcy by mid-May 2020. In fact, most economic activities have displayed a notable revival from May onwards, and this recovery is on-going. The recent detection of a new Covid cluster is now being decisively addressed by the Government, and this wave is also expected to be short-lived. Accordingly, the expansion of the fiscal deficit and the increase in debt levels in 2020, should not be generalised as a prolonged debt distress, but rather as a “one-off” deviation from the clear fiscal consolidation path that has been well articulated in the new Government’s policy framework.

“The election of a new President in mid November 2019 and the formation of a single-party Government with a sizable majority in August 2020, has enable the new Government to address the uncertainties in the political and policy spheres observed during the period 2015 to 2019. Consequently, Sri Lanka has been able to address public health concerns swiftly, as well as take difficult economic decisions with greater confidence. For example, when the Government was of the view that it was necessary to conserve forex, given the likelihood of low foreign exchange earnings due to the pandemic, and the need to prioritize foreign debt service obligations, the Sri Lankan authorities imposed restrictions on non-essential imports from March 2020. Such decisive and bold action, along with the reduction in global petroleum prices, resulted in a substantial saving of nearly US$ 3 billion in terms of expenditure on merchandise imports in the first nine months of the year, compared to the same period of the previous year. This saving, along with the better-than-expected outcomes in terms of merchandise exports, services exports other than tourism, and workers’ remittances, is now projected to compress the external current account deficit to below 1.5% of GDP in 2020.

“It would also be noted that capital flows and official reserves were also affected during the early months of the global outbreak of Covid-19. However, growing business confidence due to decisive action by the Government and the Central Bank has enabled the country to stabilize the exchange rate with only a marginal depreciation of around 1.5% so far this year, even while the Central Bank was able to purchase/absorb US$ 300 million from the domestic foreign exchange market during the year. As a result, official reserves remain close to US$ 6 billion, after settling foreign debt service repayments of around US$ 4 billion thus far during the year, including the repayment of the matured International Sovereign Bond of US$ 1 billion in October 2020. In the meantime, it would be further noted that the Sri Lankan authorities are presently negotiating a loan of USD 700 million from the China Development Bank which is expected to be at an interest rate and terms of repayment that are significantly more favourable than the USD 1 billion Sovereign Bond that was just re-paid. In addition, an attractive, exchange rate risk-free, Forex SWAP facility has been introduced for any foreign investor who invests in Sri Lankan government securities, which is expected to boost foreign exchange inflows particularly from the Middle-East, in the period ahead.

 

“In terms of growth performance, Sri Lanka is once again set to embark on a growth path, following the setback in the first half of 2020 caused by the pandemic. The formulation of the new Government Cabinet and State Ministerial structure, with clear performance indicators has been geared towards improving the efficiency and effectiveness of the economy. These new governance structures are bound to enhance agriculture and agro-based and mineral-based industries, increase export opportunities, as well as facilitate large projects within the Port City, Hambantota Port, and dedicated industrial zones. The expected revitalization of state owned enterprises, together with the private sector-led growth projects would also revert the Sri Lankan economy to the high growth path that was observed prior to 2015 whereby annual growth rates of over 6.5% were regularly recorded.

“In the meantime, Sri Lanka’s entire local debt stock of about Rs. 7.7 trillion (USD 42 billion) as at end July 2020 is being rolled-over and re-priced now at interest rates which are almost half of what was paid in 2019, while the Rupee remains stable. It may also be noted that a new trend has been established where greater reliance is being placed on domestic financing, and that strategy has already improved the “domestic: foreign” ratio of the debt from 51:49 at end 2019 to 56:44 now, which trend the authorities are keen to improve further in the period ahead. It is therefore clear that the Government’s commitment and support towards better debt management, both directly and indirectly, has already started to take effect.

“Sri Lanka is justifiably proud of its immaculate debt service record, without a single default. It would also be noted that Sri Lanka has experienced similar challenging circumstances previously, with high levels of debt. For instance, during 2001-2004, the country’s debt to GDP ratio was well over 100%, and by end 2005, it was at 91%. Nevertheless, Sri Lanka was able to gradually reduce the debt to GDP ratio to just 72% by end 2014 through decisive and innovative action.”



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Jugglery alleged in Constitution making process: SJB, Gevindu make strong case against jumbo Cabinet

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By Shamindra Ferdinando

Opposition and Samagi Jana Balavegaya Leader, Sajith Premadasa, says that the current economic crisis shouldn’t be exploited to form a jumbo Cabinet, under any circumstances.

 “The national economy is in such a pathetic state that those struggling to make ends meet shouldn’t be burdened further,” the Colombo district MP said. The growing opposition to further expansion of the Cabinet-of-Ministers is quite understandable, the former UNP Deputy Leader said, urging the government to drop the relevant provisions.

The Opposition Leader said so when The Island sought his opinion on the provisions, pertaining to the formation of a National Government, in terms of the proposed 22 Amendment to the Constitution. Declaring his party has absolutely no intention of joining the government, lawmaker Premadasa warned the public would revolt if the limits on the number of Cabinet Ministers and Deputies/State Ministers were violated.

 The SJB leader emphasized that whoever is in power should adhere to the limit of 30 Cabinet Ministers and 40 non-Cabinet rankers.

Lawmaker Premadasa said that political stability and economic revival couldn’t be achieved by expanding the Cabinet-of-Ministers.

 SLPP National List MP Gevindu Cumaratunga last week strongly condemned, in Parliament, what he called controversial provisions pertaining to the National Government. Cumaratunga told The Island that he took up the issue at a recent party leaders’ meeting. The provision for Parliament to decide the number of ministers and Deputies/State Ministers would be abused, the leader of civil society group Yuthukama said.

Referring to the inclusion of provisions pertaining to a National Government, in the 19th Amendment that had been endorsed in 2015, lawmaker Cumaratunga said that the proposed 22 Amendment interpreted National Government as an administration formed by the recognized political party or the independent group which obtains the highest number of seats in Parliament, together with the other recognized political parties or the independent groups.

The first time entrant to Parliament said that this should be examined, taking into consideration the strength of political parties represented in Parliament. Of the 225 MPs in Parliament, a total of 199 were elected: the SLPP (145/17 National List seats) and SJB (54/07 National List seats)) ticket. The third largest grouping in Parliament belonged to the Illankai Thamil Arasu Kadchi (ITAK/01 National List seat), the MP pointed out. The powers that be owed the public an explanation how the SLPP backed President Ranil Wickmesinghe intended to form the National Government without having a formal agreement with the second largest party in Parliament.

MP Cumaratunga recalled how the then UPFA MP Vasudeva Nanayakkara, at the Committee Stage of the 19th Amendment, asked the then Justice Minister Wijeyadasa Rajapaksa, PC, for an interpretation of national government and was told national government meant formation of an administration by the party securing the largest block of seats and the party with the second highest number of seats. Vasudeva Nanayakkara declared that they wouldn’t support the 19th Amendment unless the government provided an interpretation of the National Government.

However, what had been put to the Speaker for approval was very much different from the assurance given in Parliament, MP Cumaratunga said. The MP pointed out that the difference was instead of the union of party with the highest number of seats and the second highest being the national government, the gazette referred to the party with the highest number of seats and other parties in Parliament as the national government. The section in question is 46 of the 19th Amendment.

Lawmaker Cumaratunga said that the 2015 wrongdoing had been repeated.

Parliament website posted the 19th Amendment with the original clause given below: “If at the conclusion of the General Election held immediately after the coming into force of this Article, the recognized political party or the independent group obtaining the highest and the recognized political party or the independent group obtaining the second highest number of seats in Parliament agree to form a Government of national unity, then, notwithstanding the provisions of paragraph (1), the number of Ministers of the Cabinet of Ministers and the number of Ministers outside of the Cabinet of Ministers and the Deputy Ministers, may be increased up to forty-five and fifty-five, respectively, if Parliament agrees to such increase, within two weeks of the first sitting of such Parliament.”

MP Cumaratunga said that finally the limits had been done away with for obvious reasons. Responding to another query, the Yuthukama leader said that the change of provisions, pertaining to the National Government, surreptitiously could be compared with the jugglery in manipulating the relevant Parliamentary Select Committee’s recommendations as regards the National List appointees.

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CEB again faces crunch situation with another unit at Norochcholai breaking down

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Three-hour daily power cuts a possibility

By Ifham Nizam

The Ceylon Electricity Board (CEB) now had to impose at least three-hour power cuts due to a sudden breakdown of the First Unit of the Lak Vijaya Power Plant Complex at Norochcholai, a senior electrical engineer said.

The second unit there has already been shut down for annual maintenance. Both units account for 540 MW of power with each usually producing about 270 MW.

CEB Chief Nalinda Illangakoon told The Island that he had instructed officials to go for maximum intake of hydro power, instead of turning to fuel powered generation, to meet the shortfall. It is understood that in the event of turning to the latter, the cost would be Rs. 47 per unit.

CEB Chairman Illangakoon said that it would take between 13 and 14 days to rectify the latest breakdown.

Responding to queries, he said that scheduled maintenance of the Second Unit would be further delayed due to some overseas technical experts contracting COVID.

He expressed confidence that the second plant would be restored and connected to the grid in November.

Power and Energy Minister Kanchana Wijesekera earlier confirmed the breakdown of Unit 1.

He added: “Technical staff is working to identify the fault. Unit 2 is undergoing scheduled maintenance work. Unit 3 will continue to operate.”

However, he said West Coast and other Fuel Power Plants would be used to bridge the supply shortfall.

Meanwhile, the electricity sector regulator, the Public Utilities Commission of Sri Lanka (PUCSL) has given the approval for three-hour power interruptions for the next four days.

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Now Prasanna alleges Diaspora link in SJB, JVP, and FSP

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Urban Development and Housing Minister Prasanna Ranatunga has alleged that the Samagi Jana Balavegaya (SJB), the Janatha Vikukthi Peramuna (JVP), its breakaway faction, the Frontline Socialist Party (FSP) and some civil society groups, affiliated to the Tamil Diaspora, were engaged in a campaign to remove Sri Lanka Podujana Peramuna (SLPP) lawmakers from politics.

 The accusation was made at a meeting held in Colombo last Friday (12) attended by SLPP members of Parliament and Local Government representatives, representing the Gampaha District. The allegation coincided with the government delisting several Tamil Diaspora groups and individuals.

 Lawmaker Ranatunga, who is also the Chief Government Whip, claimed that this operation was being implemented, taking advantage of the ongoing protest movement. Minister Ranatunga said that the conspirators wanted to defeat the SLPP’s ideology at the next national level election.

 Acknowledging that the SLPP had suffered a setback, as a result of a protest campaign launched in the wake of the economic crisis, Minister Ranatunga stressed that they still dominated Parliament, therefore no one could ignore the 2020 parliamentary mandate received by the party.

 The Gampaha district SLPP leader said that the SLPP backed UNP leader Ranil Wickremesinghe’s candidature at the parliamentary contest to choose an MP to complete the remainder of President Gotabaya Rajapaksa’s term because he was the best available choice (SF).

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