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TNA: Budget needs to be consistent with IMF economic reform program and macroeconomic framework

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TNA MP M.A. Sumanthiran told Parliament that the Government must rethink its priorities and address the needs of the lower income classes of the country. Sumanthiran pointed out that the Government, despite promises, has not allocated funds to provide the promised subsidy for kerosene but is making essentials necessary for the country’s middle class and upper-middle class readily available.

“The Government is making petrol and super diesel available but there is a shortage of diesel and kerosene. The priority must be the other way around. The needs of those who need the support most must be prioritised,” he said. The TNA MP said he believes the Government has taken this course of action in a bid to silence the protests of the country’s middle and upper-middle class. “The Government is doing this because it thinks by silencing the dissent of the middle and upper-middle class it can get away with blue murder,” he accused. According to the MP, the interim Budget has only further burdened the lower-income classes of the country. “Hoping to supply the Budget deficit through local revenue is not the answer,” he said. Sumanthiran pointed out that many shootings and killings are taking place across the country. “Police are not investigating these crimes and are instead being deployed in the thousands to stifle genuine protests by the people. Around 1000 policemen are deployed to stop a protest march of just 500 people. Earlier tear gas and water cannons were used on protestors and now the Government is using the Prevention of Terrorism Act to repress them as well,” he noted. He also questioned if the President is attempting to appeal to some sections of the country. “The President signed the recent detention orders in Sinhala, whereas he usually signs in English.

Is there a sudden change of personality? Is he trying to appeal to certain sections of society by signing in Sinhala?” he asked. The MP pointed out that the International Monetary Fund (IMF) has announced the Staff-Level Agreement with Sri Lanka but based on several conditions. “Even as it was announced the IMF released this statement and I quote – ‘the new Staff-Level Agreement is subject to the approval of IMF management and the Executive Board in the period ahead, contingent on the implementation by the authorities of prior actions including financial assurances from Sri Lanka’s official creditors.’ In other words, this is contingent on something that has not been done yet. We hope the Government sees to this,” he said. But the MP also pointed out that to fulfil these obligations the Budget needs to be consistent with the economic reform program and macro-economic framework underlying by the IMF. Pointing out Japan’s denial of hosting a debt restructuring conference on Sri Lanka contrary to President Ranil Wickremesinghe’s claims, Sumanthiran said the people must be told the whole truth. “People are being told what they like to hear,” he said.



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Pakistan’s ex-president, Pervez Musharraf dies aged 79

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(picture BBC)

BBC reported that Pakistan’s former president General Pervez Musharraf, who seized power in a coup in 1999, has died aged 79.

The former leader – who was president between 2001 and 2008 – died after a long illness, a statement from the country’s army said.

He had survived numerous assassination attempts, and found himself on the front line of the struggle between militant Islamists and the West.

He supported the US “war on terror” after 9/11 despite domestic opposition.

In 2008 he suffered defeat in the polls and left the country six months later.

When he returned in 2013 to try to contest the election, he was arrested and barred from standing. He was charged with high treason and was sentenced to death in absentia only for the decision to be overturned less than a month later.

He left Pakistan for Dubai in 2016 to seek medical treatment and had been living in exile in the country ever since.

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The 75th Anniversary of National Independence celebrated under the patronage of President, PM

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(picture Presidents Media)

The 75th National Independence Day celebration was held under the theme “Namo Namo Mata – A Step towards the Century”, under the patronage of President Ranil Wickremesinghe and Prime Minister Dinesh Gunawardena on Saturday morning (04) at Galle Face Green.

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Lanka sovereign bond holders write to the IMF

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ECONOMYNEXT –Sri Lanka’s bondholders have written to the International Monetary Fund expressing their willingness to engage in debt re-structuring talks but also raising matters related to the domestic debt re-structuring and economic assumptions and forecasts.

The group, styling itself as the “Ad Hoc Group of Sri Lanka Bondholders (the Bondholder Group) has written last week to the IMF Managing Director from New York said inter alia that the Bondholder Group through its Steering Committee stands ready to engage quickly and effectively with the Sri Lankan authorities to design and implement restructuring terms that would help Sri Lanka restore debt sustainability and allow the country to re-gain access to the international capital markets during the IMF Programme period.

The letter concluded with the paragraph: Recognizing the important commitments made by India in the India Letter, the Sri Lankan authorities will apply the principle of comparable treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors.

Following is the text of the letter:

NEW YORK, Feb. 3, 2023

Dear Managing Director Georgieva,The Ad Hoc Group of Sri Lanka Bondholders (the “Bondholder Group”) acknowledges the Sri Lankan authorities’ engagement with their official creditors towards a resolution of the current crisis and restoration of debt sustainability.

The Bondholder Group further acknowledges that such engagement has recently resulted in the Government of India (in its letter to the IMF, dated January 16, 2023 (the “India Letter”)) delivering letters of financing assurances, committing to support Sri Lanka and contribute to its efforts to restore debt sustainability by providing debt relief and financing consistent with the IMF Extended Fund Facility Arrangement (the “IMF Programme”) and the IMF Programme targets indicated in the India Letter.

Similarly, the Bondholder Group through its Steering Committee stands ready to engage quickly and effectively with the Sri Lankan authorities to design and implement restructuring terms that would help Sri Lanka restore debt sustainability and allow the country to re-gain access to the international capital markets during the IMF Programme period.

Based on the limited information available to us at this time, including information contained in the India Letter, we understand that the IMF Programme’s debt sustainability targets are identified as

(i) reducing the ratio of public debt to GDP to 95% by 2032,

(ii) limiting the central government’s annual gross financing needs to GDP ratio to 13% in the period between 2027 and 2032, and central government annual foreign currency debt service at 4.5% of GDP in every year between 2027 and 2032 and

(iii) closing of the external financing gap.

The Bondholder Group hereby confirms it is prepared to engage, through its Steering Committee, with the Sri Lankan authorities in restructuring negotiations consistent with the parameters of an IMF Programme and the targets specified therein (the “IMF Programme Targets”), which the Bondholder Group understands to be the targets identified in the India Letter; it being recognized that these negotiations will necessarily be further informed by the receipt of the forthcoming DSA.

We would note that the finalization of an agreement will also be subject to the satisfaction of the following conditions:

The central government’s domestic debt – defined as debt governed by local law – is reorganized in a manner that both ensures debt sustainability and safeguards financial stability.

Assuming that annual gross financing needs should not exceed 13% of GDP in the period between 2027 and 2032, whilst allowing for central government annual foreign currency debt service to reach 4.5% of GDP in every year between 2027 and 2032, domestic gross financing should therefore be limited at 8.5% of GDP for the period 2027-2032.

While we recognize that the determination of the economic assumptions underpinning the IMF Programme Targets is ultimately the responsibility of the IMF and that the overall design of the IMF Programme is one that is negotiated between the IMF and Sri Lanka, it is nevertheless important that the Bondholder Group has the opportunity to express its views on both the economic assumptions underpinning these IMF Programme Targets and the adequacy and feasibility of the adjustment efforts contemplated under the IMF Programme.

When considering any restructuring proposal that is made to the Bondholder Group, it is the Bondholder Group’s intention to take into consideration the extent to which the economic assumptions and the adjustment efforts are consistent with these views.

Recognizing the important commitments made by India in the India Letter, the Sri Lankan authorities will apply the principle of comparable treatment in respect of the debt relief requested and obtained from all their remaining official bilateral creditors.

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