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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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PSC action could cripple health services, warns GMOA Secretary

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There were vacancies for 89 specialist doctors in government teaching hospitals due to certain actions taken by the Public Service Commission (PSC), the Government Medical Officers Association (GMOA) said yesterday.

GMOA secretary Dr. Senal Fernando yesterday told The Island those vacancies had the potential to cripple the state health service, as the service was stressed due to COVID-19.

Dr. Fernando said: “Specialist doctors are appointed and transfered according to procedures established by the Health Service Minute. The Ministry of Health is responsible for the transfers and the PSC should oversee the transfering process to ensure that they are made in a proper manner.”

“The PSC has ordered the appointment of a committee to look into the matter but there is no mention of such a committee in the Health Service Minute. Instead of following the process, the PSC has tried to intervene in the process and 89 posts remain vacant during the time of COVID-19,” he said.

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Hizbullah denies links with Zahran

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But signed agreement for Zahran’s help in 2015 GE

By Rathindra Kuruwita

Former Governor of the Eastern Province, M. L. A. M. Hizbullah on Monday night told the Presidential Commission of Inquiry (PCoI) probing Easter Sunday attacks, that he had not had any links to National Thowheed Jamaat (NTJ) leader Zahran Hashim. The NTJ members had assaulted his supporters at Kattankudy in March 2017, he said.

Hizbullah said so when the Commissioners asked him about his links with Zahran.

Hizbullah was also asked about billions of rupees he had received from foreign organisations since 2016. Earlier in the day, it was revealed that close to Rs. 4 billion had been deposited by foreign individuals and institutions in two accounts Hizbullah operated at the Bank of Ceylon Colpetty Branch from 2016 to 2019.

The witness said the Sri Lanka Hira Foundation, a social service institution run by him, had received money from foreign countries after March 2016.

“Ali Abdullah al-Juffali of Saudi Arabia gave Rs. 308 million and Siddique and Diana Osmond of London gave Rs. 5.5 million,” he said.

Hizbullah added that he knew al-Juffali and some other Saudi philanthropists. Al Juffali family was one of the richest Saudis with an estimated worth USD 19.8 billion, he said.

Then, a video of a discussion Zahran had with Sibli Farooq of the Sri Lanka Muslim Congress was played at the PCoI.

The video showed Zahran and Farooq talking about a sum of one million riyals that Hizbullah had allegedly received from Saudi Arabia. In the video, Zahran says that he had no problem with Hizbullah receiving money from Saudi Arabia.

In response, Hizbullah said that by the 2015 Presidential election, Farooq and Zahran had been against him. A member of the Commission then asked why Hizbullah had entered into an agreement with Zahran during an election if he had acted against him.

Hizbullah said Zahran had told, on social media, that he would support politicians who agreed to some of his proposals.” All the parties joined him. I also went along,” he said. Earlier, it was revealed that representatives for the Sri Lanka Muslim Congress (SLMC,) Democratic Party, UNP, UPFA and National Front for Good Governance (NFGG) had signed agreements with Zahran in exchange for the support of NTJ in 2015.

Hizbullah was also questioned on the Aliyar clash between NTJ and Sunnath Wal Jamaat, a group that supported Hizbullah, on 10 March, 2017.

“Did you ask Zahran to surrender to the court through his mother?” a member of the Commission questioned.

“I made no such comment. I do not know if anyone in my party did so,” he said.

The Commissioners also asked Hizbullah about growing date palms in the Kattankudy area and placing Arabic billboards.

The witness replied that he had grown date palms because of the high temperatures in the area. Nameplates with Arabic letters had been put up to attract Arabic students as they were largely visiting the area, he said.

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CA annuls summons issued on President

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The Court of Appeal yesterday annulled the summons issued on President Gotabaya Rajapaksa over the disappearance of two persons in Jaffna in 2011.

Lalith Kumar Weeraraj and Kugan Muruganathan went missing in 2011. Last year, Jaffna Magistrate’s Court issued summons on Rajapaksa over a habeas corpus petition filed by the relatives of the two missing activists. They had named Rajapaksa one of the respondents since he was the Defence Secretary at the time of the disappearances.

Earlier, Rajapaksa had submitted a writ application stating that he found it difficult to appear before the Jaffna Magistrate’s Court due to security reasons. The Court of Appeal issued an injunction preventing Rajapaksa being summoned by the Magistrate.

President of the Court of Appeal A. H. M. D. Nawaz, declaring their decision, said that a Magistrate’s Court could only issue summons over a specific reason. However the Jaffna Magistrate’s Court had issued the summons based on a motion of a lawyer and that there was no legal basis for the summons. Thus, the Court of Appeal issued a writ notification declaring the summons issued by the Jaffna Magistrate’s Court void.

 

 

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