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Victoria Nuland calls Chinese bluff on SL debt relief



Victoria Nuland

By Harim Peiris

The United States, under-secretary of state for political affairs Victoria Nuland was visiting Sri Lanka last week and dominating her agenda with the government has been the core issue of restructuring the Sri Lankan government’s foreign debt, on which it has defaulted, which stands at the heart of our recovery from bankruptcy. Unusually plain speaking for a diplomat, under-secretary Nuland was blunt about the main factor obstructing the receipt of an IMF structural adjustment facility and that was the reluctance of the Chinese Government, through their state owned financial entities, to seriously explore the issue of a debt write down. Under Secretary Nuland stated that “What China has offered so far is not enough ….. We need to see credible and specific assurances that Chine will meet the IMF standard of debt relief”.

That credible standard of debt relief did not seem to be forthcoming from the Chinese. After months of being scarce in the process of debt renegotiation, the Chinese had finally made an offer that was at best completely underwhelming, namely a two-year moratorium on the repayment of debt. Compare that with what the Western aid donor countries, in the Paris Club were discussing about offering, which was a ten-year moratorium on debt repayment, including some debt write down. In the words of visiting Under Secretary Nuland, this commitment was very clear. “We, the United States, are prepared to do our part. Our Paris Club partners are prepared to do their part. India has made strong commitments that it will provide the credible assurances the IMF is looking for” she said.

Predictably the Chinese were quick to defend their not very generous offer as the epitome of reasonableness and were sharp in their rebuttal. Gone are the days when Chinese diplomats were known for bowing a lot and speaking softly. Now they come out swinging, as it were, at the slightest hint of criticism and accordingly the Chinese Foreign Ministry Spokesperson, Ms. Nao Ning responded saying “rather than jabbing fingers at China’s close cooperation with Sri Lanka, the US might as well show some sincerity and actually do something to help Sri Lanka weather through the current difficulties”. Conveniently perhaps forgetting that the US had for several years offered half a billion (five hundred million) dollars in grant (yes, a non-repayable) funding from the Millennium Challenge Cooperation (MCC) which the Rajapaksa Administration for reasons best known to itself, chose to turn down, giving a whole new meaning to the phrase, “looking a gift horse in the mouth” and then making the nation falling flat on our face.

The Chinese debt from the belt

and road initiative

Dealing with the Chinese debt is a serious challenge for Sri Lanka and an even bigger challenge for China. For Sri Lanka, it is currently the main sticking point in securing an IMF facility which would be the start of reversing the steep contraction (negative growth) of the Sri Lankan economy. For the Chinese, the issue of distress loans from its much vaunted belt and road program could not have come at a worse time. The Chinese economy has significantly slowed down and with it the Chinese face their own issues of the asset quality in their banking system. There is also now much more vocal criticism of the debt piled on the vulnerable economies of developing countries for the construction of projects of dubious utility and economic value at inflated prices. Sri Lanka has become a poster boy (case study) of corrupt and despotic local rulers (one of them chased out by a popular uprising) who indebted their countries to the point of bankruptcy. The issue becomes, how responsible is the lender for this fate of the borrower. Undoubtedly the Rajapaksas and their political cohorts in the SLPP should bear the responsibility for the decision to rake up expensive and extensive foreign debts. But rather like the classic tort law case studies of the liability for a drunk driving accident of a bar tender, who keeps plying his obviously intoxicated customer with ever more alcohol, knowing that the customer was a danger to himself and others, the Chinese showed at best a reckless disregard for the economic vulnerabilities of its borrowers, especially Rajapaksa led Sri Lanka or as its detractors claim, a cynical method of creating pliant client states.

The Chinese aspiration to being a global power requires China to deal with international issues and especially international global financial issues in a mainstream manner. China like even other great powers do not want to end up being isolated in their foreign affairs. Mostly due to some adroit work by some of Sri Lanka’s other friends, namely India and the Paris Club of creditor nations, the Chinese now find themselves in the unenviable position, where all others are ready for a very pragmatic and generous approach to debt restructuring, the very mention of it is unthinkable, a likely unviable long term position.

Coincidently, Sri Lanka’s international sovereign bond holders, through their lawyers White and Chase LLP also issued a statement and wrote to the IMF Managing Director, expressing their willingness to engage in good faith in debt negotiations. However, for them, the Paris Club and all other creditors, is the cardinal principal of equal treatment, that early movers who make concessions would not receive less favorable terms than the hold outs. So the real price of Chinese reluctance for serious debt renegotiations, is that it prevents even other creditors from doing so. The Wickremasinghe / Rajapaksa Administration has no answers to this dilemma and the other crucial requirements of economic reforms.

(The writer served as Advisor, Ministry of Foreign Affairs from 2016 to 2017)

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Ampitiya That I Knew



Ampitiya is a village just two miles from Kandy. The road to Talatuoya, Marassana, Galaha and turning left from Talatuoya to Tennekumbura and Hanguranketha and beyond goes through Ampitiya.My family moved there in 1949 when our paternal grandfather bequeathed the ancestral home to our father to be effective after our grandfather’s demise. Until then the eldest sister of our father’s family with her family and the two bachelor brothers lived in the house. After living in various places our father was transferred to on duty, we had come to our final abode there.

The house was situated about 100 yards before the second mile post. There were paddy fields both in front of the house and behind it with a mountain further away. These were salubrious surroundings to live in. There was no hustle and bustle as in a town and the only noise would have been the occasional tooting of horns and the call of vendors selling various household needs.

The Ampitiya village extended from near the entrance to the Seminary and the school situated a short climb away along Rajapihilla Mawatha (now Deveni Rajasinghe Mawatha) on the road from Kandy ending at the gate to the Seminary, and running up to the Diurum Bodiya temple.

Ampitiya was well known thanks to the Seminary of our Lady of Lanka located there. Newly ordained Catholic priests took theology classes here. The Seminary with its majestic building commanded a fine view of the Dumbara valley. The student priests lived in the hostel called Montefano St. Sylvester’s Monastery situated just above the sloping rice fields coming down to the Kandy-Talatuoya Road. There was a volleyball court within the Montefano premises and we used to see the young priests enjoying themselves playing a game in the evenings as the court was quite visible from our house.

We, as schoolboys of the neighbourhood, used to get together during many weekends and play cricket on the roadway to the Montefano which was just past the second milepost as there was no vehicular traffic then on that road.

Ampitiya had a school started by the Catholic Church and known as Berrewaerts College which later became the Ampitiya Maha Vidyalaya. At the time our family became residents of Ampitiya this was the only school. Later the Catholic Church established a girls’ school named Carmel Hill Convent. This school enabled most girls who had to go all the way to Kandy or Talatuoya by bus to walk to school.

People who follow sports, especially athletics, would have heard the names of Linus Dias, Sellappuliyage Lucien Benedict Rosa (best known in Sri Lanka as SLB Rosa) and Ranatunga Karunananda, all Ampitiya products who participated in the Olympics as long distance runners competing in the 10,000 metres event. Linus Dias captained the Sri Lankan contingent in the Rome Olympics in 1960.Though they were not able to emulate Duncan White they took part.

Karunananda became a hero in Sri Lanka as well as in Japan when at the Tokyo Olympics of October 1964 he completed the 10,000 metre course running the last four laps all alone. The crowd cheered him all the way to the finish appreciating his courage in not abandoning the already completed race. Later he said he was living up to the Olympic motto which said the main thing is to take part and not to win.

Rosa captained the Sri Lankan team in the 1972 Munich Olympics. He switched to long distance running while still a student thanks to the Principal of Ampitiya Maha Vidyalaya, Mr. Tissa Weerasinghe (a hall mate of mine one year senior to me at Peradeniya) who had noted his stamina and asked him to switch to long distance events. I must mention that Tissa was responsible for bringing this school to a high standard from where it was when he took over.

Coincidentally, during our Ampitiya days, all the houses from Uduwela junction for about half a mile towards Talatuoya were occupied by our relatives! They included the Warakaulles, Koswattes, Pussegodas, Sangakkaras, Godamunnes, Thalgodapitiyas and Wijekoons. Now most of these houses are occupied by others.

Ampitiya area had two Buddhist temples. One was the Dalukgolla Rajamaha Viharaya on the Ratemulla Road and the other, Ampitiya Diurum Bodiya, near the third mile post. From the latter temple a famous Buddhist monk, Ven. Ampitye Rahula Thero later joined the Vajirarama temple in Colombo and was highly recognized by Buddhists just like Ven. Narada and Ven.Piyadassi Theros.

The Uduwela temple had a water spout emerging out of a granite rock where the temple priests and neighbours used to bathe and wash their clothes. This spout never ran dry.

At present the landscape of Ampitiya has changed hugely. Most of the sloping paddy fields have been filled and dwelling houses have come up. The majestic view, except for faraway mountains, is no longer present. A five-star hotel has been built just beyond the second mile post and the area has lost its previous tranquility. A person of my vintage who once lived there visiting Ampitiya now wouldn’t be able to recognize the place given the changes.



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Expert advice on tax regime



The Government’s new tax regime has led to protests not only by high income earning professionals but also by Trade Unions.In my view the problem is not with the rate of taxation which is 6% – 36%, but with the tax exemption threshold. Due to hyper-inflation and the high cost of electricity, water, essential food items etc, the Exemption Threshold of 1.2 million per year is far too low.

If the Exemption Threshold is increased to at least 1.8 million per year, the Trade Unions are likely to accept this. It will also lessen the burden of taxation on high income professionals. And it should not impact on the IMF agreement.

The time has now come for a compromise between the Government and the protesters.

(The writer is a retired Commissioner General of Inland Revenue)

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This refers to the superlatively interesting and provocative piece on the above subject by Dr Upul Wijewardene{UW) appearing in The Island of 21/3/23 wherein, as he states, he had been a victim himself at the hands of a well-known Professor of Medicine turned health administrator. He makes it a point to castigate the leaders of the Buddhist clergy for their deviation from the sublime doctrine of this religion.

My first thought on this subject is that it is a cultural problem of exploitation by the privileged of the less fortunate fellow beings. The cultural aspect has its origin in the religion of the majority in India, Hinduism. There is no such discrimination in Islam.

The first recorded case was that of a Sinhala member of the Dutch army fighting against the Portuguese (or the army of the Kandiyan kingdom) being prevented by the members of the higher ranks from wearing sandals due to his low status in the caste hierarchy. The Dutch commander permitted the Sinhala solder to wear sandals as recorded by Paul Pieris in “Ceylon the Portuguese era”

There is also the instance of a monk getting up to meet the King when it was not the customary way of greeting the King by monks.

In an article by Dr Michael Roberts, a Sri Lankan historian published in a local journal, it is said that members of the majority caste (approximately 40% of the Sinhala population) were not permitting lower ranking public officials serving the British government wear vestments studded with brass buttons. The second tier of the hierarchy who had become rich through means other than agriculture like sale of alcohol in the early British times took their revenge by lighting crackers in front of houses of their caste rivals when a British Duke was marching along in a procession in Colombo.

It is not uncommon for members of minority castes numerically low in numbers to help their own kind due to the discriminatory practices of the higher tiers of the hierarchy.

Dr Leo Fernando
Talahena, Negombo

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