Corruption with impunity
Stop the Anti-Terrorism Bill


Sri Lanka is contemplating moving strategically to improve the economy to acceptable levels following the IMF agreement. This seems imperative given the country’s predicament throughout the last year. During the past year, people were saddled with many issues, from long hours of power outages to petroleum and gas shortages on top of severe food scarcity. Although the economy has not recovered fully or reached its full potential to grow during the rest of the year, people seem to be breathing a sigh of relief. This is after being crushed by economic burdens since the COVID pandemic, which caused immense hardship to the population in general. It is mainly due to the fact that the government has taken aggressive measures to support the people. These measures include increasing access to food and increasedfuel quotas, providing financial aid, and increasing foreign employment opportunities. Additionally, the central bank has also taken several positive measures to stimulate the economy.


However, debt restructuring appears to be a weighty problem since international lenders have asked the government to introduce domestic debt restructuring prior to foreign debt restructuring. This has virtually hurt the Employees’ Provident Fund and the Employees’ Trust Fund. The two funds are expected to lose billions of rupees if domestic restructuring occurs before foreign debt restructuring. These funds are unable to take a haircut since the rupee has undergone a lot of stress due to the upward trend of the US dollar against the rupee.


Due to this, the ability of these institutions to disburse money to their members would be further compromised. The government must therefore find a way to address this issue without burdening these two funds which are the biggest rupee funds.

The Sri Lanka Bankers Association (SLBA) appears to have expressed their opposition to domestic debt restructuring, and they seem inimical to restructuring.

In a critical statement issued by them they said domestic debt restructuring is likely to threaten banking sector stability and undermine public confidence.

They further said: ‘the banks believe that all stakeholders involved in structuring the restoration of Sri Lanka’s balance of payments to a sustainable equilibrium must necessarily take a careful look at the resulting outcomes—the impact on the banking sector’s capital and liquidity in a potential domestic debt restructuring (DDR)—and minimize the risk to the sector. A further escalation of the situation we are in must be avoided.

The SLBA represents all licensed banks in Sri Lanka and underpins all sectors of the economy.The banking sector is the main mechanism through which the Central Bank of Sri Lanka (CBSL) implements monetary policy and influences the financial markets. Therefore, the stability of the banking system is critical for the national interest.

“Having run an unsustainable macroeconomic model in tandem with the longstanding deficits in the budget balance and the external current account, the economy had fully exhausted its buffers by early 2022 as it was saddled by a myriad of vulnerabilities that emanated from both global and domestic sources” (CBSL Annual Report 2022).

Against this backdrop, the country’s debt repayment burden was declared unsustainable in April 2022, and proceedings were initiated to seek International Monetary Fund (IMF) help via financing the acute balance of payments deficit. In this process, it is necessary to arrive at a consensus with creditors that repayment relief will be afforded to the Government of Sri Lanka (GoSL) by their debt holders to enable repayment to commence within sensible repayment capacity limits that do not result in social strife and political disruption.

The management of this process, including the priorities of the GoSL through their agents, the IMF’s expectations, and all public debt holders, are admittedly difficult given the diversity of interests. However, the lack of transparency in the negotiations with the SLBA member bank consortium is unhelpful.

It must always be borne in mind that the banking sector will have to play an active role in Sri Lanka’s economic revival. The sector capital adequacy ratios (CAR) and liquidity coverage ratios (LCR) are presently within the regulatory requirements. This position must not be depleted through any action, including a debt restructuring that threatens the stability of banks and erodes public confidence.

Banks have asked for clarity on what is meant by “voluntary” debt optimization, whether there is a non-voluntary element, and to whom this applies (limited to the larger Treasury Bills and Treasury Bond holders such as the superannuation and pension funds and state-owned banks), more disclosure on proposed Domestic Debt Optimization (DDO) and International Sovereign Bond (ISB) restructuring terms, the IMF’s view of Sri Lanka’s economic growth prospects over the duration of the IMF Extended Fund Facility (EFF), and whether the proposed DDO would resemble the experience of some other countries who have taken this route before Sri Lanka.

Banks have consistently supported the GoSL and CBSL’s efforts over the years through severe economic hardship that led to both public anxiety and political upheaval reflected in crises, especially in recent times with debt repayment moratoriums, rescheduling of viable businesses, and necessary recovery arrangements on generally disadvantageous terms predicated by the many incidents of inclement weather, post-Easter Sunday 2019 attacks, the COVID-19 pandemic, political unrest, and social unrest. Credit impairments have hit an all-time high not previously seen. Adding further impairment costs on top of these strains on capital and liquidity is not sustainable, especially with the tax deductibility of these necessary costs of being in business being uncertain.

The banks reiterate that maintaining the stability of the banking system is paramount at this time when extremely difficult decisions are being made.

Besides, the most significant phenomenon is establishing political stability in the country. President Ranil Wickremesinghe also recognises this need for long-lasting stability in Sri Lanka by resolving the ethnic question once and for all. The President aims to create a unified Sri Lankan identity by having all ethnic groups work together to build a peaceful, stable nation. This includes resolving long-standing conflicts between different ethnic groups and creating policies that encourage cooperation between them.

In his May Day message, the President reiterated the need to resolve the ethnic problem at the earliest and promised to accomplish it before the end of this year. The underlying message is that economic stability is impossible unless there is political stability in the country. Hence, it is imperative that the ethnic issue is settled reasonably by fully implementing the 13th Amendment to the Constitution which was adopted in 1987, but no government has been able to implement its provisions in full. The more nationalistic Sri Lanka Podujana Peramuna (SLPP) and Sri Lanka Freedom Party (SLFP) have so far become a hindrance to its full implementation since they depend on the Sinhala Buddhist power base in the country. The Buddhist clergy also oppose the full implementation of 13A, which envisages police and land alienation powers for the provinces.

The Indian government has repeatedly called for the full implementation of 13 A. In addition, Tamil political parties in the North and East yearn for a federal constitution that gives more autonomy to Tami-speaking areas. It must be remembered that the 13th Amendment was a by-product of the Indo-Lanka accord signed between Prime Minister Rajiv Gandhi and President J.R. Jayewardene. The accord was signed to end the ethnic strife that had engulfed Sri Lanka for decades. No sensible person denies justice to the Tamil community living in Sri Lanka and recognizes their cultural identity as a distinct community.

The other crucial factor that Sri Lanka should be concerned about is legislating the anti-corruption bill at the earliest possible time. Corruption is rampant in every sphere with impunity and calls for a concerted effort to minimise it. The recent tender awarded to purchase petroleum products from a Middle Eastern company clearly shows how the bureaucracy and politicians are trying to bend the laws to circumvent certain situations.

The Middle-Eastern company which failed to comply with the order after winning the tender, has contracted a third party to supply the consignment of petroleum products after inordinate delays, and certain interested parties in Ceylon Petroleum Corporation (CPC) facilitated the unloading of the consignment without proper authority. Currently, CPC and the Ministry of Energy are hurriedly preparing a Cabinet paper seeking approval for a consignment sent by a third party. This consignment is outside of all accepted guidelines. The contracted party has no authority to delegate the supply to a third party. The CPC has no authority to unload the supply from a third party other than the contracted party. It has moved hastily to unload the consignment to avoid a petroleum crisis in the country. The procurement committee and the Attorney General have expressed their vehement objections to the matter. Therefore, it demands a full-scale investigation into this kind of highhanded act and the necessary steps that have been taken to stem it then and there. It is the government’s responsibility to take prudent steps to minimise corruption and get rid of corrupt elements within it.  This is only one incident that leaked out to the media, and there are many others that continue unchecked.

On the other hand, it is essential that the country has a broad discussion on the proposed anti-terrorism bill. This seems to be an obnoxious move to restrict the freedom of movement and expression of dissidents. Many organisations and civil activists have registered their vehement opposition and questioned the justification for introducing such a law when there is no imminent terrorist threat in the country. However, people believe the government wants to avoid a repetition of July 9and that stringent laws are needed to quell the slightest uprising. This is to keep in check any popular movement that gains momentum over a period of time and culminates in a popular uprising against the government. Such laws will help to preserve and keep intact the political power of despotic leaders whom the people reject with contempt. By having these strict laws in place, the government is able to control the population, ensuring that any potential uprising is quickly quashed. This allows the government to remain in power even if the people are not in support of them, as any opposition is prevented from gaining traction.


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