News

Who is pouring oil on the flames in Sri Lanka?

Published

4 years ago

2022/06/16

By Feng Guoquan

Sri Lanka is in a dire situation. Known as the “Pearl of the Indian Ocean,” the country is facing the worst economic crisis since independence in 1948. Western media has taken this opportunity to hype up the so-called Chinese debt trap, alleging that Sri Lanka is on the verge of economic collapse because it was unable to repay its large loans from China. They add that the Belt and Road Initiative (BRI) has brought a heavy burden to the Sri Lankan economy, and constantly pitting the Sri Lankan government and its people against China, while turning a blind eye to those who are really behind all this.

Caught fire by accumulated debt

There are many causes for Sri Lanka’s economic crisis, among which the foreign exchange crisis is the main factor. Since its independence, Sri Lanka has suffered from internal and external troubles. It has been carrying trade deficits and relying on loans for years. Due to the combined impact of a string of terrorist attacks in April 2019, the COVID-19 pandemic and the Russia-Ukraine conflict, the country’s pillar industries including tourism, overseas remittances, tea and garments have been hit hard and it has rapidly drained its reserves.

What’s worse, Sri Lanka introduced a low tax regime in late 2019, which caused the government a loss of more than $1.4 billion in revenue, further limiting its capability to purchase foreign exchange.

While foreign exchange earnings have plummeted, Sri Lanka’s import payments have continuously increased. Sri Lanka’s production materials and daily necessities are highly dependent on imports, and the armed conflict between Russia and Ukraine has triggered a surge in global commodity prices. Taking energy as an example, 60 percent of Sri Lanka’s electricity is generated from coal and oil, both of which need to be imported. The global oil price increased by six-fold from $18 a barrel in April 2020 to above $100 a barrel now.

At the beginning of 2021, the Sri Lankan government banned the import of chemical to prevent the outflow of foreign exchange, resulting in large-scale crop failures, and the government had to replenish food reserves from abroad, further exacerbating the shortage of foreign exchange.

Sri Lanka’s foreign exchange reserves have plummeted by about 70 percent in the past two years. Its reserves stand at around $1.9 billion at the end of March, while its foreign debt obligations for this year exceed $7 billion. On April 12, the Sri Lankan government officially announced the temporary suspension of foreign debt payments, defaulting on its $50.7 billion foreign debt. On May 19, the government announced that it had failed to repay a total of $78 million in debt, which marked the nation’s first sovereign debt default since it gained independence.

The U.S.-led West have been pouring oil on the flames after setting fire

Although Sri Lanka has been in debt for many years, it has previously maintained a good record of foreign debt repayment. The Russia-Ukraine conflict, which was caused by the U.S.-led Western intervention, had a very serious impact on Sri Lanka’s economy, which was already in bad shape, and leading to its default. It is the hegemony and the greed of capital of the U.S.-led West that are the root causes of the economic crisis faced by Sri Lanka and other developing countries.

The mounting sanctions imposed on Russia by the U.S.-led West have been pushing global food and energy prices to new heights, and there are also restrictions on Russian financial and aviation sectors. The food prices surged in Sri Lanka due to soaring prices of wheat and corn triggered by the Russia-Ukraine conflict.

Sri Lanka exports about $150 million of tea and other commodities to Russia annually. However, as more and more Russian banks are banned from the SWIFT network, Sri Lanka was unable to obtain foreign exchange by exporting to Russia. In January this year, Russia was Sri Lanka’s largest source of tourists, but in March, the state-run national carrier of Sri Lanka suspended its flights to Russia due to the Western sanctions.

In terms of debt structure, most of Sri Lanka’s debts are in the form of international sovereign bonds, and the Asian Development Bank and Japan are its main lenders. According to the Central Bank of Sri Lanka data, as of October 2021, Sri Lanka’s international sovereign bonds reached $11.82 billion, accounting for 34.1 percent of total external debt. In terms of bilateral loans, Japan and India ranked first and second, with $3.54 billion (10.2 percent) and $790 million (2.3 percent) respectively, higher than China.

China’s bilateral loans to Sri Lanka are not the largest. Even with financial market loans (Exim Bank of China) included, it only accounts for 10 percent, and most of the loan interest rates are much lower than the capital markets, among which over 60 percent are concessional loans, and the remaining 40 percent are interest-free loans. So Sri Lanka’s debt repayment problems have very little to do with Chinese loans.

In fact, Sri Lanka is not the only country that suffers from the economic crisis. The Federal Reserve and other major central banks have raised interest rates to quell inflation, which drives up borrowing costs and may bring debt crisis to many developing countries. Turmoil triggered by rising food and energy prices is already gripping countries like Egypt, Tunisia and Peru. Scarcities of food, energy and finance put more than 70 countries at risk of following Sri Lanka into default, says United Nations, according to a recent report by the Wall Street Journal.

The trap of so-called Chinese debt trap

In recent years, governments and media of the U.S.-led West have tied the concept of the “debt trap” to China as a weapon to tarnish China’s reputation and the Belt and Road Initiative in order to counter China’s promotion of BRI, maintain their political and economic hegemony, and prevent the developing countries from participating in the BRI.

The Hambantota Port is a most cited case by the U.S.-led West in hyping up the “Chinese debt trap.” It is falsely claimed that China used the port to drag Sri Lanka deep in debt and would transform it into a military base in the future. But the fact is that the Hambantota Port added $1.12 billion of foreign exchange reserves for Sri Lanka to repay some short-term foreign debts. What’s more, the Hambantota Port is difficult to use as a military base due to water depth limitations, and the Sri Lankan government has explicitly prohibited the use of the Hambantota Port as a foreign military base.

On the contrary, India has recently partially acquired the Trincomalee Port situated on the eastern coast of Sri Lanka, which is a large natural port from a military point of view and used to be a strategic oil terminal for the British army during World War II. Because the United States intended to build an “economic corridor” and highway from Trincomalee to Colombo through the Millennium Challenge Corporation (MCC), which is obviously for military purposes, the United States, India and other countries have played deaf and dumb.

As a close neighbor of Sri Lanka, China has been sincerely helping Sri Lanka develop its economy. Instead of causing any crisis, China has over the years provided selfless help and firm support to Sri Lanka in socio-economic development. Especially since the onset of the COVID-19 pandemic, China and Sri Lanka have supported each other and pulled through together, writing a new chapter of China-Sri Lanka friendship. Chinese Premier Li Keqiang noted that China empathizes with Sri Lanka for its difficulties and challenges, and China is ready to provide much-needed livelihood assistance for Sri Lanka within its capacity.

The Sri Lankan government has explicitly refuted the myth of “Chinese debt trap” time and time again. Recently, Ranil Wickremesinghe, Sri Lanka prime minister and leader of the United National Party, expressed his gratitude to China for assisting Sri Lanka in overcoming difficulties in all aspects and stressed that the government will continue to attach great importance to developing ties with China and push forward BRI projects in the country, accelerate the development of the Colombo Port City, Hambantota Port and other major cooperation projects, make every effort to protect the safety of Chinese institutions and personnel in Sri Lanka.

The international community, especially the developing countries, need to be wary of the trap of “Chinese debt trap” set by the U.S.-led West

，which is a systematic move orchestrated by the U.S. to obstruct the BRI. Countries should endeavor to safeguard their national security and development interests, strengthen international cooperation, including those under the BRI, increase their representation and voice in global economic governance, and promote the establishment of a more just and reasonable international economic order. For developing countries including China, underdevelopment is the biggest trap, and the political, economic, military, and cultural hegemony of the U.S.-led West is the real trap.

(Writer Feng Guoquan is a commentator on international affairs. The article was first published by The People’s Daily, in Chinese, on June 11, 2022. The article reflects the author’s views, and not necessarily those of CGTN (China Global Television Network.)

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President chairs 2027 Pre-Budget talks on Agriculture Ministry

Published

6 hours ago

2026/07/8

Priyan

A discussion to review the progress of projects being implemented under the 2026 budget allocations for the Ministry of Agriculture, Livestock, Land and Irrigation, and to consider the Ministry’s budgetary requirements for 2027, was held on Tuesday (07) morning at the Presidential Secretariat under the chairmanship of President Anura Kumara Dissanayake.

During the meeting, the progress of projects implemented in 2026 by institutions under the Ministry, including the Department of Agriculture, the Department of Agrarian Development, the Department of Export Agriculture and the Institute of Post-Harvest Technology (IPHT), was reviewed individually. Attention was also focused on institutions requiring restructuring to enhance efficiency and effectiveness.

The President instructed that all irrigation projects maintained by various institutions, departments and local authorities should be regulated through a single district-level unit. He also directed that irrigation rehabilitation projects being implemented across the island be comprehensively mapped.

Emphasising the need to maximise the utilisation of funds allocated under the 2026 Budget, the President instructed officials to further promote concessionary bank loan facilities available to young entrepreneurs in the agriculture and industrial sectors.

The President also instructed officials to submit a report containing proposals for the integrated and systematic management of extension services currently operating under various ministries. He further highlighted the importance of holding separate discussions on individual subject areas to ensure seamless coordination between the Provincial Councils and the Central Government.

The President also directed officials to submit new proposals and projects aimed at promoting export agricultural crops and increasing the value of related products.

The meeting also reviewed projects launched in recent years with foreign loan assistance. As many had exceeded their scheduled completion dates, the President instructed officials to expedite their completion. He further emphasised that, in future, no project financed through foreign loans should be approved without a clear understanding of its intended outcomes.

It was also noted that the Government had incurred a significant financial burden due to the failure to complete certain projects initiated in previous years within the stipulated timeframe. Accordingly, it was decided to review projects that had not been completed on schedule.

The discussion also highlighted the importance of replacing outdated projects and programmes that have continued for many years without delivering tangible results with more productive agricultural programmes.

Minister of Agriculture, Livestock, Land and Irrigation K.D. Lalkantha; Minister of Labor and Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando; Deputy Minister of Agriculture and Livestock Namal Karunaratne; Deputy Minister of Land and Irrigation Aravinda Senarath; Secretary to the President Dr Nandika Sanath Kumanayake; Secretary to the Treasury and Ministry of Finance, Planning and Economic Development, Dr.Harshana Suriyapperuma; Senior Additional Secretary to the President Kapila Janaka Bandara; Secretary to the Ministry of Energy and Senior Additional Secretary to the President Russell Aponsu; Secretary to the Ministry of Agriculture, Livestock, Land and Irrigation D.P. Wickramasinghe; and officials of the Ministry of Finance, Planning and Economic Development and the Ministry of Agriculture, Livestock, Land and Irrigation were also present at the discussion.

News

Committee Appointed to investigate unrest at Negombo Prison

Published

7 hours ago

2026/07/8

Priyan

A Committee of Inquiry was appointed on Tuesday (07) by Secretary to the President Dr Nandika Sanath Kumanayake, with Cabinet approval, to conduct a comprehensive investigation into the unrest that occurred at Negombo Prison on 5 and 6 July and to report on the circumstances that led to the incident.

The Committee is chaired by retired Supreme Court Judge Priyantha Fernando. Its other members are Additional Solicitor General and President’s Counsel Milinda Gunatilake and President’s Counsel Mohan Weerakoon. Senior Assistant Secretary to the President K.L.D. Asela has been appointed Secretary/Convener of the Committee of Inquiry.

News

“Badhu Shakthi 2026” National Tax Week begins

Published

13 hours ago

2026/07/8

Priyan

The inaugural ceremony of “Badhu Shakthi 2026” (“බදු ශක්ති 2026”) National Tax Week, organised by the Revenue Administration Reform and Modernisation Unit of the Presidential Secretariat with the objective of strengthening State revenue generation and accelerating the country’s future development process, was held on Monday (06) morning at the Presidential Secretariat under the patronage of Speaker Dr Jagath Wickramaratne.

“Badhu Shakthi 2026” is a year-round national programme aimed at transforming the negative public perception of taxation into a positive one while fostering a culture of voluntary tax compliance. To mark its commencement, a National Tax Week will be observed across the island from 6 to 10 July.

A nationwide media and public awareness campaign will be conducted in parallel, including the distribution of leaflets and a range of promotional activities designed to educate the public directly and encourage greater tax compliance.

Addressing the inaugural event, Speaker Dr Jagath Wickramaratne stated that “Badhu Shakthi 2026” is not simply a tax collection campaign but a national initiative aimed at cultivating responsible citizens who love their country.

Further elaborating, the Speaker said:

“Today marks a significant milestone in our country’s future development and economic stability. The strength and sustainability of any sovereign nation depend on its economic independence. Taxation is one of the key instruments for strengthening State revenue and driving national development.

However, taxation has long been viewed negatively by many people. That perception was largely shaped by those responsible for collecting taxes and by successive administrations. When people develop a sense of national responsibility, their attitudes begin to change. For many years, taxes were regarded as a burden. History has shown us that tax evasion occurred on a significant scale, and it must be acknowledged, however reluctantly, that such practices often enjoyed political patronage.

In the past, the public had little understanding of how their tax contributions were utilised. Taxpayers lacked a clear vision of the benefits derived from the taxes they paid. The present Government has succeeded in changing this situation by fostering a more positive public attitude towards taxation. I wish to pay tribute to all taxpayers who contribute towards the Government’s national development agenda.

Today, people have confidence that the taxes they pay are being put to good use. Expressways, highways and power infrastructure projects are now being implemented using domestic funds. There is a sense of pride among the public that construction of the Kandy Expressway has commenced without obtaining loans from any external source. Cabinet approval has also been granted to commence work on the Kurunegala–Galewela Road.

Today, Sri Lanka has grown stronger as a nation capable of financing development activities through domestic resources rather than relying on foreign borrowing.

In ancient times, the country’s great stupas, reservoirs and irrigation networks were built through the collective contribution of the people. Likewise, Sri Lanka can become a prosperous and developed nation only through collective effort. The taxes collected today are being utilised for the welfare of the people. This was clearly demonstrated when the Government allocated Rs. 500 billion in response to Cyclone Ditwah. In addition, substantial benefits are now being provided to the public through the President’s Fund. Educational assistance is being extended to schoolchildren across every corner of the country. All of these initiatives are being financed through domestic resources.

It is essential that the public are made aware of the real benefits derived from tax revenue and of the development projects being implemented. This will strengthen public confidence in the transparent use of tax revenue. The primary objective of this national programme is to broaden the country’s tax base, improve tax compliance, reduce tax evasion and foster a positive attitude towards taxation. If everyone pays their fair share of taxes, the tax burden borne by others can be reduced.

We do not build a beehive with a single bee. It is created through the collective effort of thousands of bees, making it a remarkable achievement. Likewise, ‘Badhu Shakthi 2026’ is not merely a tax collection campaign. It is a national movement to cultivate responsible citizens who love their country. I extend my sincere appreciation to everyone who has dedicated themselves to making this important initiative a success.”

Labour Minister and Deputy Minister of Finance and Planning Anil Jayantha Fernando:

Labour Minister and Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando said that a proper understanding of taxation among citizens would enable Sri Lanka to make greater progress towards economic and social transformation.

He noted that while individuals naturally pursue their own personal goals and aspirations, many of these objectives cannot be achieved in isolation. The success of any society depends on cooperation and collective effort.

He further stated:

“Today, paying taxes has become a much simpler process. As a result, tax collection is now carried out more efficiently and systematically. At the same time, the Government recognises its responsibility to ensure that tax revenue collected fairly is managed prudently and utilised for the benefit of society. If the Government fails to demonstrate sound financial discipline, people will lose confidence and become reluctant to pay taxes. This was evident in the past.

Accordingly, the Government has introduced a tax administration system founded on strong fiscal discipline. We will not tolerate fraud, corruption or waste. If we are to rebuild this country, every citizen must contribute willingly and with a sense of national responsibility. This should not be driven solely by legal obligation. We are confident that the people of Sri Lanka will fulfil this responsibility.”

Deputy Minister of Economic Development Nishantha Jayaweera, Director General of Customs Wimal Liyanagama, Director General of Excise M.B.N.A. Premaratne, and Commissioner General of Inland Revenue Rukdevi Fernando also addressed the gathering.

Among those present were Director General of Public Relations to the President Dharmasiri Gamage, senior officials of the Presidential Secretariat, the Ministry of Finance, Sri Lanka Customs, the Department of Excise, the Inland Revenue Department, as well as taxpayers and other invited participants.