Midweek Review

The Sri Lankan debt crisis: A layman’s review

Published

4 years ago

2022/06/1

Figure 1. Sri Lanka’s foreign debt from 2000 -2020 ( from https://www.reuters.com/markets/rates-bonds/sri-lanka-edge-debt-burden-mounts-2022-01-17/)

By Nimal Gunatilleke

As a layman in the subject of political economy, nonetheless interested in discerning the real background to the historic debt crisis that Sri Lanka is undergoing at present, I have been reading many reports, including expert views, opinion statements, institutional press releases, think-tank analyses, COPE reports, etc., that are plentiful on the internet. Based on these readings, I was able to synthesize a layman’s review, which I thought of putting out to a wider readership to stimulate constructive discourses from the more knowledgeable authorities and others alike, especially on the solutions that are available for our country to come out of this huge debt crisis. One of the major criticisms of the general public is that although warnings of this impending disaster had been made repeatedly at official meetings among technocrats and bureaucrats, the general public was not sufficiently alerted early enough, especially via popular media, to shake up the bureaucracy to make a timely course correction.

We all are now aware that Sri Lanka has an accumulated foreign debt of US $ 51 billion at the time of pre-emptive sovereign default of foreign currency repayment which happened in March/April 2022. The following Figure 1, with a series of histograms that appeared on the web, provides a relatively easy understanding of the progression of our cumulated foreign debt over the years since 2000 and its proportional ownership of creditors/lenders. It had been prepared by Reuters in January 2022 sourcing Central Bank information and colour-coded to apportion the foreign debt accumulated since 2000. The proportional ownership has been grouped into several categories of lenders in this chart, such as International Financial Institutions (IDA, ADB, etc. in red), foreign governments (Japan, China, India, etc. in orange), International Sovereign Bond Issuers (Goldman Sachs, Black Rock, and Pacific Investment Management, Vanguard, etc., in green!!) and other capital market lenders (Exim banks, etc., in pale green).

This figure reveals that a higher proportion of foreign funding for Sri Lanka’s development projects as well as to bridge the annual budget deficits in the early 2000 period, came via bilateral and multilateral donor contributions (red and orange color codes), when Sri Lanka was still a Lower Middle-Income Country (LMIC). However, this trend has been changing since 2007 or so, when Sri Lanka started obtaining loans at relatively higher interest rates from International Sovereign Bonds (ISBs) and other Financial Capital Markets. The contribution of ISBs increased significantly from around 2015 and reached an all-time high in 2019 almost at the same time when Sri Lanka was elevated to an Upper Middle-Income category (UMIC) for a short period of time by the World Bank. However, a year later, Sri Lanka was down-graded again as a lower-middle income country after it recorded a US$ 4,020 per capita income for 2020. Apparently, when a country reaches an Upper Middle-Income level, it is not entitled to concessionary loans but must seek funding from International Capital Markets at the internationally prevailing competitive interest rates. Sri Lanka’s access to international capital markets (with International Sovereign Bonds issuances since 2007) brought a shift to commercial borrowing and an increase in external interest rates to be paid back in short periods of time.

Consequently, Sri Lanka’s foreign debt apportioning in 2022, as per Figure 1, which has been computed using information from Sri Lanka’s Central Bank, indicates that over 35% of the island’s debt is owned by US and UK-based ISBs. The balance of foreign debt in 2022 is owned by the aforesaid bi-lateral and multilateral agencies. Some of these latter agencies, usually charge lower interest rates on concessionary terms. They have even gone to the extent of being more compassionate to express their willingness to further delay the debt repayment while at the same time being charitable enough to donate humanitarian aid in the form of food, fuel, and medicine during this crisis period. It is clear that the root cause of Sri Lanka’s default, at this time, is due to the disproportionate accumulation of ISBs and other such financial instruments in recent times. Higher interest rates over short periods of time needed to be paid, for refinancing the loans already taken. (See the graph)

This annual progression of the ‘sovereign debt trap’ also led to the speculation of unsustainability of Sri Lanka’s foreign debt from 2019 onwards leading to a progressive downgrading of credit ratings by the three leading credit rating agencies – Moody’s Investor Services, Standard and Poor’s (S&P), and the Fitch Group. This downgrading by credit rating agencies further deepened Sri Lanka’s debt crisis, pushing us into one of the worst economic crises in modern history.

The Verite Research Strategic Analysis Working Paper published in October 2021provides an analysis on this. For the five years, from 2021 to 2025, the annual average repayments due on servicing external debt maturities is US$ 4,400 million. In contrast, from 2015 to 2018, the government only had to repay an annual average of US$ 2,700 million as external debt repayment. To meet those debt repayments, during 2015 to 2018, the government borrowed on average US$ 1,900 million through ISBs in a year, as indicated in Figure 1. Since the beginning of 2020, the yields of ISBs have more than doubled and the credit ratings of the sovereign bonds were also downgraded multiple times, in 2020, leading to high risks of default in 2021 preventing further borrowing from the international markets. This forced the government to use its already depleting reserves to meet the external debt obligations, while at the same time, meeting the urgent healthcare emergencies resulting from the rapid spread of the COVID 19 pandemic which demanded lockdowns over months, associated economic losses and also for meeting increasing healthcare needs.

While it has been widely reported in the western media that Sri Lanka is a victim of a ‘Chinese debt trap’, our increased dependency on International Sovereign Bonds, over recent times is also equally, if not more, responsible for the default, at this time, as Sri Lanka has been compelled to borrow money from international capital markets at higher rates to be paid back over short periods of time. These funds were needed for the repayment of the loans already taken for the settlement of earlier taken loans/their interests while providing at the same time, the shortfall of social welfare benefits from the lost tax revenue as a result of ill-advised tax rebates granted in 2019. The resultant drop in revenue amounted to 3% of GDP – from 12.6% in 2019 to 9.2% in 2020. The revenue as a share of GDP for 2020 has apparently been the lowest in the post-independence history of Sri Lanka that led to huge deficits which need to be financed through borrowing, resulting in increasing debt.

Notwithstanding some of these unanticipated debilitating economic cataclysms, some political analysts speculate whether Sri Lanka was duped into a situation of ‘pumped and dumped’ by the Western interests. The World Bank up-graded Sri Lanka to a Lower Middle-Income Country (LMIC) in 1997, and then to the short-lived Upper Middle-Income Country in 2019 thus making it ineligible for lower interest rates for national development thus compelling to borrow from International Capital Markets. This fortuitously coincided with the 2019 Easter Sunday bombing spree which started the rapid downward spiraling of Sri Lanka’s economy.

On top of these, internal mismanagement of our economy also has contributed in no small measure to this predicament. The infamous bond scams, unbridled corruption and nepotism at the highest levels, imprudent decisions of the then monitory board of the Central Bank, and more significantly, holding on to such irrational decisions for a long period thus bleeding our foreign exchange reserves by over US$ 5.5, as reported by one of its members at a recent COPE meeting.

So, it surmises that both external interventions as well as internal economic mismanagement has contributed to the present-day debt crisis leading to ‘Arab Spring’ style protests by segments of the general public fueled by opportunistic politicians and their invisible handlers. It has been transmitted in some academic fora that Sri Lanka’s default seemed to follow a systematic, deliberate, and planned route to haul Sri Lanka into IMF’s and Washington’s clutches. This likelihood had apparently been in the air for some time – at least since the rejection of the Millennium Challenge Corporation (MCC) compact by the Sri Lankan Government in December 2019.

The MCC compact for Sri Lanka was designed to reduce poverty through improved transportation network and providing secure land titles to small holder farmers and other Sri Lankan landholders. The Special Presidential Commission Report which examined the draft MCC Compact has recommended the rejection of the Compact in its current form as it not only imperils Sri Lanka’s economic sovereignty but also undermines the land and human rights of her citizens. We need to be vigilant at this stage at which we are in a desperate situation in meeting day-to-day needs of the people as well as fulfilling debt obligations through their restructuring. There are indications that a number of stealthy moves are already at play to undermine the rights of the people (see recent press releases by Dr. Gunadasa Amarasekera of the Federation of National Organisations).

Some political analysts argue that this ‘staged default’ would enable the IMF to effectively take control of strategic geopolitical positioning by influencing Sri Lanka’s economic policy initiatives compromising its sovereignty. It is also speculated that by doing so, they can stave off the Chinese influence (despite China being a leading member of the IMF) and more significantly, make it difficult for Sri Lanka to source its oil, gas and other energy requirements at discounted rates from sanctions-hit Russia. Ironically, India continues to avail themselves to the discounted oil and gas supplies from Russia despite some resistance from her western partners while helping to meet our energy needs through loans and grants. It is a pity that Sri Lanka is far too late in looking into this possibility of negotiating with Russia directly for supplementing our long-term fossil fuel and other energy needs in exchange for our tea exports.

Sri Lanka is apparently caught between the devil and the deep blue sea for being located in a geostrategic position abundantly endowed with strategically important natural resources. While being at the centre of the Indian Ocean Sea Lanes of Communication (SLOC) with an extensive ocean and land-based mineral resources, including premium grade graphite and rare earth elements, some political analysts are of the view that Sri Lanka suffers from a ‘Paradox of Plenty’ or perhaps, a geostrategic ‘Resource Curse’. This phenomenon often afflicts countries blessed with abundant natural resources, like Sri Lanka. According to the Global Wealth Databook 2020 of the Credit Suisse Research Institute, the total wealth of Sri Lanka is estimated to be USD 351 billion while admitting at the same time that the quality of wealth data used for this estimation to be poor. A more realistic estimate could indeed yield even a higher value and Sri Lanka appears to be far from bankrupt, on that count. Despite all these, we have been having a slower economic development prone to poor governance, corruption and cronyism over successive political regimes since independence. This economic wealth of Sri Lanka may be a key constituent put on offer in attracting creditors to our national-scale real estate assets at this crucial stage of negotiations for debt relief.

The US Ambassador to Sri Lanka and the Maldives, Julie Chung, in a recent press release remarked that Sri Lanka is at the heart of the Indo-Pacific oceanscape, sitting next to some of the world’s busiest shipping lanes through which about half the world’s container ships and two-thirds of the world’s oil shipments pass. According to her, Sri Lanka has the potential to play a pivotal role in the health of world trade. It is not surprising, therefore, the former US Under Secretary for South and Central Asia, Alice G. Well, a few years ago, called Sri Lanka a ‘valuable piece of real estate’ in the Indian Ocean. Still others have termed Sri Lanka ‘an unsinkable aircraft carrier’ in the Indian Ocean – much more strategic than the Chargos Island which was handed back to the people of Mauritius by the British (and hence US occupation ended) in February 2019 after the International Court of Justice in the Hague ruled that the latter’s occupation of Chargos Island was illegal under International Law.

Furthermore, it was none other than the US Secretary Blinken who had recently reported that in today’s world, cyberspace and cyber security are increasingly important and, as part of their vision for the Indo-Pacific, the United States looks to coordinate with partners to ensure an open and secure internet and to implement a framework for responsible behavior in cyberspace.

With a background of this politico-geostrategic wealth, the Sri Lanka Government is up against tough bargaining with the IMF and their designated creditors to raise USD 8 – 12 billion or perhaps even more from the lease or sale of at least some of these valuable ‘real estate’ assets belonging to the public of Sri Lanka which have been grossly mismanaged over decades by successive governments. Dr. Nishan De Mel of Verite Research says, “When the IMF determines that a country’s debt is not sustainable, the country needs to take steps to restore debt sustainability prior to IMF lending”. These steps would undoubtedly feel quite painful in particular to the poorest and most vulnerable sectors of the country.

Prime Minister Wickremasinghe recently stated in the Parliament that SriLankan Airlines, with all its assets would be the first to be privatized to relieve the debt burden. Among the other valuable public assets that are being considered to go under the hammer according to reports on the web are Mattala and Ratmalana airports, Sri Lanka Telecom shares, and the Sri Lanka Insurance Corporation to name a few. Then there are physical assets like Sri Lanka’s marine Exclusive Economic Zone which include the already identified oil and gas deposits, Under-sea Data Cable Routes, the strategic island’s telecom frequencies important for cyber-security. These are a part of this ‘real estate’ package – the cynosure of many powerful global political players backed by leading international financiers – up for negotiations in the name of debt restructuring. Some economists are of the opinion that divesting these strategic public assets resulting from mismanagement, corruption, and ignorance of the potential value of these resources, is tantamount to throwing the baby with the bath water!

The debt restructuring and bridge financing negotiations with the IMF, if successful, may be able to provide us short term debt relief tied with very stringent conditions such as tightening our monitory policy, raising taxes, reduction of government expenditure and wastage, introducing a fuel and utilities pricing formula reflecting the market prices, among others. Although Sri Lanka promised a number of similar adjustments in the during earlier rounds of negotiations with the IMF (in 2009 and 2016), none of them were implemented in full as planned since these would have resulted in high social and political costs.

With such a track record, the conventional IMF debt restructuring formula may not help to overcome our efforts in moving toward bridging the trade deficit. This is primarily because Sri Lanka continues to spend more foreign exchange than its receipt of revenue through the export of goods and services. This indeed has been the root cause of our long-term external debt problem. Economists argue that going to the IMF alone will not fix this problem. According to them, the IMF will simply put a sticking plaster on our arterial wound and send us home. If Sri Lanka continues haemorrhaging foreign exchange with its typical laissez-faire approach, we may have to go back again to the IMF in two years’ time asking for yet more debt relief!.

IMF has just concluded a joint technical session with Sri Lanka to determine a roadmap for restoring macro-economic stability and debt sustainability that will serve as a platform for the negotiations with other creditors/lenders, later. Furthermore, this joint initiative once implemented in compliance with IMF conditions, is expected to increase investors’ confidence and also in securing additional resources from the IMF, the World Bank, Asian Development Bank, and other such agencies.

Amidst all these, there appears to be a silver lining in the dark financial clouds that hovering over Sri Lanka at present where even an adversity of this magnitude could be turned into an excellent medium or long-term investment opportunity. The silver lining in the dark horizon is that the leading international donor agencies are steadily moving towards ‘sustainable financing’ in compliance with the Paris Agreement on Climate Change in the present green economic era.

(To be continued tomorrow)

The author can be contacted at
nimsavg@gmail.com

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Midweek Review

NPP drowning in sea of scams

Published

4 days ago

2026/04/29

Sahan Weerasooriya

Outgoing Treasury Chief Mahinda Siriwardena congratulates his successor Harshana Suriyapperuma in late June 2025 at the Finance Ministry

The Opposition is pressing for a one-day debate on USD 2.5 mn Treasury theft, which is more like a daylight robbery that had been kept under wraps by Treasury mandarins till ‘Free Lawyers’ made it public. However, the government is strongly opposed to the Opposition proposal. The Opposition is seeking consensus among

different parties to intensify the campaign against the government, struggling to cope up with a spate of controversies. Against the backdrop of the devastating debate on the coal scam, the NPP seems reluctant to face another over the theft of Treasury funds.

By Shamindra Ferdinando

USD 2.5 mn brazen heist at the Treasury several months ago and the bigwigs there obviously dragging their feet over the matter till it was brought to light recently, thanks to the Free Lawyers movement, which has dampened the NPP’s enthusiasm for May Day. The Treasury fiasco humiliated the cocky NPP leadership against the backdrop of damning report issued by the National Audit Office (NAO) that found fault with the government for awarding the coal tender for 2025/2026 period to Trident Champhar Limited of India in violation of tender procedures. The NAO emphasised that the Indian company shouldn’t have even been considered for the tender.

Even after the exposure of the scandalous handling of the coal tender, the NPP, in spite of some rumblings within the party, remained confident of overcoming the growing accusations regarding governance issues. But, the sudden revelation of the loss suffered by the Treasury, and pathetic efforts made by the NPP to suppress the truth, has caused irreparable harm to the ruling party. The arrogant NPP will have to use May Day to defend the government. Instead of preaching to the masses ad nauseum the corruption allegations against previous administrations, the NPP would have to explain such massive failures/corruption, particularly the loss of USD 2.5 mn.

There hadn’t been a previous instance of such an incident at the Treasury. The NPP will have to answer questions posed by ‘Free Lawyers,’ a civil society group that first raised the Treasury issue. On behalf of ‘Free Lawyers,’ its President Maithri Gunaratne, PC, former Governor of several provinces Rajith Keerthi Tennakoon, and Attorney-at-Law Shiral Lakthikala, targeted the government over the unprecedented Treasury heist. The Opposition, too, censured the NPP, with SJB leader Sajith Premadasa, MP, Chairman of Public Finance Committee (CoPF) Dr. Harsha de Silva, MP, and United Republican Front (URF) taking the lead.

The NPP’s excuses, based on claimed raids carried out by hacker/hackers targeting the Treasury, are untenable. The NPP’s position cannot be defended or supported against growing criticism. The coal scam and Treasury fiasco dominated social media, with the Opposition, as well as ordinary citizens, having a field day at the expense of the NPP, a political party that accused its opponents of waste, corruption, irregularities and mismanagement. Its successful propaganda campaigns, at the presidential and parliamentary polls, in September and November, 2024, respectively, were centered on fighting corruption.

Their anti-corruption platform appealed to the people for obvious reasons. Against the backdrop of bankruptcy, declared in May, 2022, after failing to meet debt commitments, the electorate rallied around the NPP that thrived on waste, corruption, irregularities and mismanagement, perpetrated by previous governments. Having bagged the executive presidency in September, 2024, the NPP assured the electorate that the Parliament would be cleansed of evils at the general election. President Anura Kumara Dissanayake declared that the people have been vested with the responsibility of cleansing the Parliament. Dissanayake went a step further when he addressed a public gathering at the 18th mile post on the Negombo-Colombo road. The NPP leader, who also leads the JVP, asserted that there was no need for an Opposition in Parliament and the House should be filled with NPPers.

Dissanayake based his assertion essentially on two failed No-Confidence Motions (NCMs) moved against Ravi Karunanayake and Keheliya Rambukwella in 2016 and 2023, respectively. The NPP/JVP leader found fault with Yahapalanaya and the Wickremesinghe-Rajapaksa government for protecting the two wrongdoers, hence the call to cleanse Parliament.

The results of the parliamentary election proved that the electorate responded very favourably to Dissanayake’s call. Of the 225-seat Parliament, the NPP secured 159 seats, including 18 National List slots. Having accused previous governments of shielding wrongdoers, Dissanayake easily directed the NPP’s steamroller parliamentary group to defeat the NCM moved against Energy Minister Punyakumara Dissanayake (National List) on 10 April, just a few days after the NAO report exposed the coal scam.

First ex-MP as Treasury Secy.

If its own hands are clean, there is no doubt that the NPP now deeply regrets the appointment of ex-NPP National List MP Harshana Suriyapperuma as the Secretary to the Treasury and the Finance Ministry. That appointment was made in June 2025 to fill the vacancy created by the retirement of Mahinda Siriwardana who, along with Governor of the Central Bank Dr. Nandalal Weerasinghe, played a significant role in the country’s post-Aragalaya recovery programme.

Suriyapperuma, who had served as Deputy Minister of Finance and Planning for just seven months, before being appointed the Treasury Secretary/Finance Ministry Secretary, is under heavy fire for suppressing the truth. No less a person than CoPF Chairman Dr. de Silva publicly accused Suriyapperuma of trying to undermine his committee. The SJB has demanded Suriyapperuma’s immediate resignation. Dr. Anil Jayantha succeeded as Deputy Minister of Finance and Planning.

Those who inquired into the crisis-hit Treasury are of the belief that 53-year-old Suriyapperuma lacked the much required experience to fill the shoes of Mahinda Siriwardana. Perhaps, the breach at the Treasury could have been averted if an outsider was not brought in place of Siriwardena. The recent reportage of the incident revealed that Suriyapperuma had been aware of the breach and sought to avoid appearing before the CoPF. The NPP could have responded to the developing situation differently if an ex-MP hadn’t been entrusted with the task of steering the Treasury/Finance Ministry. To make matters worse, President Dissanayake holds the Finance portfolio.

Although the government declared that the theft of USD 2.5 mn had been reported to the Criminal Investigation Department (CID) after initial detection made in January this year, controversy surrounds the failure on the part of law enforcement authorities to bring it to the notice of the courts. Maithri Gunaratne, appearing in Hiru last Saturday (25), questioned why the police failed to inform the relevant Magistrate if the government lodged a complaint in that regard.

Australia has confirmed irregularities in payments owed to their government. Regardless of NPP efforts to blame it on hacker/hackers, the truth is clear. Payments have been made to an account that hadn’t been in the original agreement between the governments of Sri Lanka and Australia. That is the undeniable truth that the NPP cannot suppress by propaganda.

The NPP should be ashamed that such a fraud had been perpetrated on a country still struggling to cope up with the economic destruction caused by the UNP- and the SLFP-led governments with the help of “mission impossible” type roles played by outside interests, especially during Gotabaya Rajapaksa’s tenure using the JVP/Aragalaya.

The world knows how the UNP perpetrated the Treasury bond scams with the direct involvement of the then Governor of the Central Bank Arjuna Mahendran, in February 2015 and March 2016. Regardless of that intolerable scam, the UNP made a desperate attempt to retain the services of the Singaporean as the Governor of the Central Bank. Party leader and the then Prime Minister Ranil Wickremesinghe demanded the re-appointment of Mahendran. That despicable move had to be dropped due to massive Opposition protests and growing public discontent over the Treasury bond scams.

The first Treasury bond scam carried out on 27 February, 2015 caused a direct loss of approximately Rs. 2 billion. On the instructions of Mahendran, the Treasury suddenly and arbitrarily changed the process of issuing Treasury Bonds. According to media reports at that time, higher interest payments, over the next 30 years, caused a further loss of around Rs. 145 billion.

Then Mahendran struck again. Caused further direct losses of more than Rs. 4 billion to the government through the fraudulent increase in interest rates as a result of the Treasury Bond issues on 27th March, 2016 ,and 29th March, 2016, in order to provide an undue advantage to connected primary dealers by indulging in further pre-meditated bond scams.

NPP on back foot

The ruling party put on a brave face with lawmakers and various others trying to play down the incident at the Treasury. Some pathetically tried to compare various accusations directed at the Rajapaksas with the incident at the Treasury which they conveniently blamed on hacker/hackers.

The NPP is facing an explosive mixture of issues. Both the coal and Treasury scams have brought immense pressure on the national economy and caused automatic deterioration. The resignation of Punyakumara aka Kumara Jayakody over the coal scam indicated that defeating the NCM moved against him was a strategic political blunder. Had the NPP asked the tainted first time Minister to step down and appoint a Presidential Commission to go into the coal scam, the NPP could have averted a major disaster. However, the Energy Minister and the Energy Secretary Udayanga Hemapala had to resign before the Parliament took up the NCM. Had the top NPP leadership bothered to peruse the executive summary of the NAO presented to Parliament on 7 April, the Party wouldn’t have tried to defend the minister.

Having championed a corruption-free political party system and then won both the presidential and parliamentary polls on that platform, the NPP executed the shocking move to move 323 containers out of the Colombo Port, in January 2025, without even any cursory checks. Those who perpetrated that operation used continuing port congestion as an excuse to clear red-flagged containers without mandatory physical checking. The NPP recently thwarted a bid by Opposition lawmakers, representing a parliamentary committee inquiring into the illegal release of containers, to summon President Dissanayake.

That committee, headed by Justice Minister Attorney-at-Law Harshana Nanayakkara, owed an explanation as to why President Dissanayake, in his capacity as the Finance Minister, shouldn’t appear before a House committee. President Dissanayake very often addresses Parliament on crucial issues. As the Minister in charge of Finance, the President should offer an explanation regarding the high profile container issue that tarnished the NPP’s image.

Three major issues in hand, namely the release of 323 containers, coal scam and theft at the Treasury, regardless of what various apologists say on mainstream and social media, have caused irrevocable damage to the party, let alone escapades involving the likes of Speaker Jagath Wickramaratne, Minister Lal Kantha, etc. The impact on the NPP can be ascertained only at an election. With the public increasingly aware of the growing accusations against it, the ruling party will do whatever possible to put off long delayed Provincial Council elections. Facing the electorate against deepening discontent among the public seems to be a frightening situation. It would be interesting to observe how a House committee, headed by Foreign Minister Vijitha Herath, appointed to explore ways and means to conduct Provincial Council polls, address the issue at hand.

When compared with the three major issues, the resignation of Asoka Ranwala, as the Speaker, in December, 2024, over his failure to produce the much-touted educational qualifications, seems unnecessary. Of course, Ranwala’s case attracted tremendous public attention at that time as the public really believed the NPP wouldn’t deceive them. Ranwala’s lie shocked the public. NPP theoretician Prof. Ranjith Nirmal Dewasiri had no qualms in publicly attacking Ranwala in the wake of the NPP defending the Speaker. But, subsequent NPP actions revealed massive manipulations that shamed the first post-Aragalaya government.

Having accused Ranil Wickremesinghe of squandering as much as Rs 16 mn to join his wife Prof. Maithree in the UK in September, 2023, the NPP has ended up facing far more serious accusations. The incident at the Treasury should be sufficient for the Opposition to move NCM against the government. Of course, the NPP got the numbers in Parliament to easily defeat the NCM but the consequences would be devastating. Those who still talk of recovering the missing USD 2.5 mn must be living in a dreamland. The UNP is labelled with Treasury bond scams (2015 and 2016) and the SLPP faulted with tax cuts (2019) and sugar tax scam (2020). The NPP will have to live with the coal scam and Treasury theft. The NPP will no longer be able to parade on political platforms as paragons of virtue. It would be pertinent to mention that the Presidential Commission appointed to probe the procurement of coal, since 2009, would be able to produce a report to meet the NPP’s expectations. All indications point to that and 2026 is going to be far more challenging, both in and outside Parliament, than the previous year.

NDB fraud

Examined together, the massive fraud at the National Development Bank (NDB), perpetrated during the 2024-2026 period, and the Treasury incident, they underscore the vulnerability of the entire banking system. The 13.2 bn NDB fraud and theft of USD 2.5 mn from the Treasury exposed the regulator, the Central Bank of Sri Lanka, in respect of the NDB. The situation at the NDB cannot be examined without taking into consideration that Ernst & Young is the external auditors of the NDB and its Managing Partner Duminda Hulangamuwa functions as Senior Economic Adviser to President Dissanayake. People haven’t forgotten that Hulangamuwa had been mentioned as the possible successor of Mahinda Siriwardena before the NPP brought in Suriyapperuma. The Central Bank and Securities Exchange Commission (SEC) come under the purview of the Finance Ministry now embroiled in the expanding Treasury fiasco.

The Board of Directors at the NDB consists of Sriyan Cooray (Chairman), Kelum Edirisinghe (Director / Chief Executive Officer (Executive), Bernard Sinniah (Director /Non-Independent), Sujeewa Mudalige (Director /Independent), Kushan D’Alwis (Director/Independent), Kasturi Chellaraja (Director/Independent), Shweta Pandey (Director /Independent), Hasitha Premaratne (Director/Independent), Sanjaya Mohottala (Director (Non-Independent) and Shanil Fernando Director (Independent).

The issue at hand is how such a fraud went unnoticed for a considerable period of time and whether the top management simply ignored warning signs and the failure on the part of the regulator to intervene. Those who have read Mahinda Siriwardana’s ‘Sri Lanka’s Economic Revival: Reflections on the Journey from Crisis to Recovery’ would know the circumstances leading to the 2022 economic collapse. Soft spoken Siriwardana meticulously discussed how the then Central Bank leadership as well as the so-called economic leadership of the Pohottuwa party deliberately deceived President Gotabaya Rajapaksa. Siriwardena’s narrative is explosive. The book, launched before his retirement, with the participation of President Dissanayake, underscored the responsibility on the part of the political leadership and those running the banking system. Obviously Siriwardena’s work had no impact on the current dispensation as well as the top banking management.

The Opposition sees an apparent opportunity to heap pressure on the NPP as it contemplates counter measures. Their challenge is how to take remedial measures without jeopardizing the government. The IMF declaration that it is closely watching the theft of USD 2.5 mn from the Treasury must have added pressure on the government, ripped apart by the situation at the Treasury. Let us hope the government and the Opposition reach consensus on ways and means to improve financial discipline. Overall, the Parliament cannot absolve itself of the responsibility for enactment of laws and ensuring financial discipline and the fact that Sri Lanka needs to start repayment of debt in 2028.

Midweek Review

Is language social or psychological phenomenon?

Published

4 days ago

2026/04/29

Sahan Weerasooriya

This essay was presented at The Philosophy Group of the University of London about 20 years ago. The thought provoking essay published in The Island on 22 April by Usvwatte-aratchi- Some languages confine you; some languages free you prompted me to try to get this essay published if possible. It may help the readers to further their ideas about the importance of usage of language.

Personally, I have firsthand experience in this subject. I was exposed to two different cultures and two languages. In my formative years I was brought up in a certain culture and spoke the language pertaining to that culture/language (Sinhalese -Sri Lanka). I spent all my studying and working life (55 years) using a different language in a different culture (English -England). I must mention that this was not recently. It was the early 1960’s. I can claim that I have enough knowledge and experience to justify this essay topic. In this essay I shall be investigating some of the social aspects of language with the aid of some opinions put forward by some philosophers. Then I shall be making an attempt to see what psychology has to offer before I draw my own conclusions. I am treating social aspects as part and parcel of the culture. In my view these are inseparable entities, unless one chooses to forget his or her cultural upbringing to suit a particular society.

Adoption of different culture

Socially, learning a different language and adopting a different culture is quite possible. In this case what dominates is one’s attitude or the circumstances. Attitude is psychological. I am convinced that circumstances may lead to a change of attitudes. Having said that, we must not forget that there are individuals who have not taken the trouble to learn the language of the culture in which they live. This has created a lot of socio-psychological problems in the community in which they live. It is obvious that the problem is one of communication. The main tool of communication is language. Philosophers and psychologists have spent many years investigating how language helps us to communicate and also how it may lead us to misunderstand our own fellow human beings. Understanding others (family members, members of the community in which we live, and the strangers we meet) is one of the most important aspects of living.

An awareness of the problem of language goes back to the early Greek philosophers. Parmenides gave us the first example of an argument from language to the world, saying that if we speak of a thing it must exist, since we speak of a thing at various times, it must continue to exist in a particular form. It is recently that language itself has come to be studied in a systematic way. The two landmarks in this respect were the development of Linguistics and the philosophy of language in the 20th century. The great philosopher Bertrand Russell (1872-1970) has admitted that until he became a middle-aged man, he did not think about language per se, but regarded it as ‘transparent’. I am sure this is true with most of us although we are not of Russell’s caliber when it comes to philosophy. And one may not have to wait until one reaches one’s middle age.

Linguistics and philosophy of language

It will help us if we understand the difference between Linguistics and philosophy of Language. What linguists discover may be applied to philosophy, sociology, psychology, anthropology or physiology. But as a discipline of study, it remains independent of them. The philosophy of language is different. One of the modern philosophers John Searle (1932-2025) thought, by contrast to linguistics, philosophy tries to solve philosophical problems by analyzing the ordinary use, meaning and relations of words in a particular language. Searle goes on to say that language is crucial to understand human experience. In my opinion this is a very valid comment. At a very practical level we spend a lot of time sharing our experiences. Verbal communication is vital in this area. According to Canadian philosopher Ian Hacking(1936-2023) the influence of language on philosophy has been profound and almost unrecognized. He indicates, if we are not to be misled by this influence, it is necessary to become conscious of it, and to ask ourselves deliberately how far it is legitimate.

It is appropriate to bring in Ludwig Wittgenstein(1889-1951) at this point. He brought in the subject predicate theory of language. For example, if we say “John is king”. Where John is the subject and king is the predicate. Here existence requires substance. For Aristotle, forms do not exist independently of things—every form is the form of something. A “substantial” form is a kind that is attributed to a thing, without which that thing would be of a different kind or would cease to exist altogether. Wittgenstein supports Saint Augustine’s view that words are names of objects and that combinations of words have the sole function of describing reality. For example, if we point at a certain object, say a table and try to say to a child “this is a table”, the child will be confused as to what we are pointing at. Is it the colour, the tabletop or one or more of its legs This is called the ostensive definition method of teaching. Ostensive definitions lead to a variety of interpretations. The child may understand a particular case of this definition but there is no guarantee that she will be able to make a transition from one case to others like it.

Plato’s theory

J G Herder (1744-1803) pointed out the object to which we make reference may be defined by numerous different terms. How then can we justify direct, one to one correspondence-either of so many to one, or of one to so many? How are we going to deal with situations where a term describes something non-existent or only possible? Plato’s “Forms” theory cannot be applied here as anything that we can speak of already exists as a Form. Critics of this theory ask the question: “how can the world be crowded with so many imaginary objects?” We use words to describe and define. Is there any room for slang language? This comes in handy in our day to day social communication. Ostensive definition raises the questions that require a constant selection of what counts as relevant. In Aldous Huxley’s novel Chrome Yellow, the character Old Rowley is confused as to: Does ‘pig’ refer to the quality of having a curly tail? Or standing in rows to eat? Or being pink skinned and fat? Or wearing no clothes? When we use the word “piggishness” is it something inherent to pigs, or simply, a matter of how we choose to describe them?

How can we relate the above ideas and theories of language to our daily living? Daily living is a psychosocial activity.

Perceptions

The nature of language reflects the nature of our perceptions, and these are far from straight forward. Franz Brentano (1838-1917) developed his theory of intentionality: that every mental phenomenon has a relation of direction to its object, i.e. perceptions, desires, imagination etc. are related to what is perceived, desired or imagined. I presume this can be applied to any language irrespective of the culture (our social conditioning). Say for instance the images of art and the writings are given the ability to represent objects by imposing the intentionality on the object. Thus, when we assert that we see or believe something, we impose, by convention and intention, (that is true if and only if it is the case) on the statement, and these conditions are not contained intrinsically in the sounds that make it up, but in our perception of belief about the fact. I begin to wonder how this can be applied to non-physical and unseen situations. Sometimes our feelings and attitudes are unknown to the observer. A person may shout because he is angry but you cannot see the anger, only its physical expression. We will not be able to see the prior event that has led to the anger and the utterance. This shows that there is a limit to how much is revealed simply by observing a word and its context; there is often more than that can be said.

How can we account for unexpected linguistic behaviour? This has both social and psychological implications.

For a long time behavioural theorists believed that every development of the human being was controlled by environmental and social factors. This is similar to an ostensive explanation of meaning. It implied that everything was learnt through training and association. But Noam Chomsky (b.1928) was not happy with this idea. He thought language is a complex phenomenon and which is not taught bit by bit or systematically to infants. It is successfully acquired by (almost) everybody. From my own experience it is true to say that the difficulty in learning a second language is a very different process from that experienced with the first language. Chomsky argued that the first language is not in fact learned, but rather acquired through exposure to a particular language. According to him all languages share the same basic structure, and he called this “deep structure”, which may be expressed as surface structures through a process called ‘transformation’. Chomsky’s theory helps us to assume a universal system of grammar, which may generate an infinite number of particular sentences within a language. This explains how we may create sentences within a language we have never encountered before from a limited set of grammatical rules and this appears to be a rational scientific approach.

Social or psychological phenomenon

The argument/discussion whether language is a social or a psychological phenomenon requires much more investigation than this essay warrants. I have briefly brought in various philosophers’ work, which are invaluable to this topic in terms of philosophy of language. In conclusion I am tempted to state my own experiences as a bi-lingual person. When it comes to my first language, which is Sinhalese I don’t think I learned it. I heard my parents speaking it and I picked up a few words and I constructed my own sentences and gradually became proficient by accumulating more words. Of course, the proper grammatical use of even my own language was taught in school and not by my parents. Learning my second language i.e. English took a different form. I was taught to speak, read, and write English at school and I had to work harder at this than my first language, because my English was confined to the classroom situation only, i. e. I learnt English in a non- English environment. First language came naturally and the second one I had to learn to fit into the social and the education structure that prevailed at that time. Compulsion can motivate us to learn!I had no choice but to adopt myself culturally and linguistically as a university student in England and then as a university teacher in England. Apart from the native English students, I have taught students from different countries. European, African and Asian. I had the opportunity to intermingle with them and learned various different cultural and linguistic aspects. After almost a half a century in England, I am back to my own culture (language, customs, food etc) where I was born and started my life. I am still proficient in my own language Sinhalese. No conscious effort needed.

After all the foregoing arguments and philosophy that I have put forward, my own conclusion is Chomsky’s theories are more plausible to me than other theories on this issue. It is difficult to be exact and say whether language is a social or psychological phenomenon. From the above arguments, we can see that culture and language of a given society are tightly bound. This leads us to psychological adjustments in order to fit into a society. Who can deny that even the philosophers mentioned above have not been subjected to their own cultural environment?

by Prof. Sampath
Anson Fernando
Formerly University of
The Arts London