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President calls for improved interaction between creditors & debtors

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President Ranil Wickremesinghe, participating in a high-level panel discussion at the Global Leaders’ Summit for a New Global Financing Pact, in Paris yesterday (22), discussed the country’s experience with debt restructuring and the need for a comprehensive approach to address the challenges faced by middle-income nations. 

He said Sri Lanka faced limited access to financing and took ownership of its debt and economic restructuring program. The president emphasized the need for timely and automatic access to concessional financing and highlighted the high costs incurred during the process. He also called for improved interaction between creditors and debtors and suggested a new approach to address geopolitical issues. 

President Wickremesinghe emphasized the urgency of restructuring to avoid instability and advocated for a separate process for middle-income countries to address their unique challenges.

He expresses gratitude for the IMF’s intervention and Sri Lanka’s coordination, which allowed dealing with both creditor groups. Ongoing negotiations with Japan, India, and China regarding trade integration and development programs also aided the process. However, President Wickremesinghe highlights the need for improved interaction between the committee and debtors during the restructuring process, suggesting that a new approach is necessary.

Following is an excerpt of the question posed by the Moderator First Deputy Prime Minister of Spain Nadia Calvino at the panel discussion and the response by President Wickremesinghe;

Q. So President Wickremesinghe, you are in a somewhat special situation. We move now into a middle-income country. The coordination challenges are maybe greater in the sense that you are not subject to the common framework, which is heard that it was an important instrument in the case of Chad. The official creditor committee has been formed with Paris Club and non-Paris Club members and we understand that India’s decision to participate and co-chair these creditors gathering is a major milestone. So what is your view about the restructuring process and what do you consider to be the main bottlenecks? We have already heard from the President of Chad that we need to reduce bureaucracy and we all agree on that. Simplification is sometimes the most complex thing to achieve. But, we are very interested to hear your experience in this regard. 
A. When Sri Lanka was declared bankrupt as a middle-income country, we were not eligible under the common framework for debt restructuring. We had limited access to concessionary financing and there was a complete loss of external financing. Therefore, Sri Lanka’s response was to take ownership of this program, both for debt restructuring as well as the economic restructuring needed for growth. Then we negotiated our conditionality with the IMF and the creditors. 

So, it’s like we were working on a menu, the argument of what are the items that should get on and what are the items that could be taken off. I think we had an agreement actually to about 90% of the items. So, we own it as much as the IMF is. Of course, we had two exceptional situations.

One is that India came to our help and that was nearly four billion US dollars available when no other source of funding was available. Secondly, through the World Bank and the ADB, we went through the process of reverse graduation.

So the gain became entitled to concessionary funding. But from the time we declared ourselves bankrupt, there was a delay in bureaucracy on both sides. We delayed and if we had funding by May, the upheavals of July could have been avoided.

But anyway, we had the upheavals of July. We went in immediately as it settled down. By September, we had a staff-level agreement, but it took us another six months for the agreement to come before we got any monetary assistance.

So, we undertook significant economic reform that imposed pain on the population but without any predictability. Now, this is the problem we have. I would say given the increasing vulnerabilities facing middle-income nations, MIC’s access to concessional financing must be viewed from a broader perspective. That is access to an automatic and timely, under an agreed criterion. If you fulfill the criteria.

Secondly, I mean, I agree President Acharya defined it. We could have done it much faster. 

We did the debt. The staff level agreement came last September. By November, we had the climate prosperity plan, which we announced at COP 27. Now, it’s been followed up by Sri Lanka’s growth agenda for a highly competitive green economy. So our financial needs, both official and private, have virtually quadrupled. So that’s problem others also have to face. Then I would say following the conclusion of the negotiations with the IMF and the successful approval of the Extended Fund Facility (EFF), we have had no roadmap to follow regarding the next phase of debt restructuring. So before we can get the next tranche from the IMF. So it’s a question of us now mapping the road out.

But I would like to certainly point out a few of the experiences. The data-led approach was the key to our success. It was our program, not an IMF program.

Secondly, we found a sponsor for us among the official creditor community. That helps. Thirdly, you have to be very pragmatic when you are implementing this. I’m not sure that a binding framework like the common framework would have rendered the process quicker or more efficient. The approach for a middle-income country would be to move. If you have a common framework, what happens is we move as fast as the slowest creditor.

So we get tied down. So that’s why we are not in favor of a common framework. We were able to create traction with the most committed creditors, raising the general quality and efficiency of the process. Because we are still frustrated by the lack of process.

The cost for us, economic and social, has been very high. Now, as far as the creditors, our creditors include the Paris Club and the non-Paris Club members of which India and China are two of our main creditors, and Japan from the Paris Club.

So we’ve attempted to establish an ad hoc platform for the official creditors, including the Paris Club members and others. India, Hungary, and others came on to participate in the ad hoc platform.

China participated as an observer. We shared the information with all parties on an open transaction, a transparent process. Then I must thank IMF for the intervention of the IMF and Sri Lanka’s coordination, we are dealing with both groups. So what else helped us was that Sri Lanka had ongoing negotiations with Japan, India, and China separately regarding further trade integration and also some of the development programs for the future. 

This assisted our process. But as far as my experience is, we need, we have to have some improvement in the interaction between the committee and the debtors because the debt restructuring process is a negotiation and it should in essence be interactive. Looking at the dealing with the Paris Club and non-Paris Club, we need a new approach because this is basically a geopolitical issue.

The mistrust between the US and China and the growing tension, it has to be addressed by all, not merely by Sri Lanka or the country concerned. If you do not resolve it, I think we will still, in Asia and Africa, we will get caught into another situation, not our making. So these will be the major issues that we have addressed. 

And restructuring is needed. I agree with it. It has to move fast, otherwise, most countries, whether low-income countries or middle-income countries, will not have much hope and there will be more instability, political and economic instability. And without creating a separate process under this roundtable, we should deal with the issues of middle-income countries because most are under stress. It’s better to deal with them under stress than when they are bankrupt. So that process has to evolve.

(President’s Media Division)

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SLPP MP temporarily ordained as monk

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SLPP Kandy District MP – Gunatileke Rajapaksa has been temporarily ordained as a Buddhist monk at the historical Isipathanarama Temple in India.

He is now known as Ven. Harispathuwe Dhammarathana Thera.
His son – Sandakelum Rajapaksa, who is an engineer by profession, has also been ordained as Ven. Ampare Dhammaloka Thera.

The MP had reportedly decided to enter into the religious order after the recent death of his wife. He too, was recently hospitalised after falling ill.

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Court delays ruling on Online Safety Act challenge

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The Sri Lankan Supreme Court today indefinitely postponed its decision on whether to hear a fundamental rights petition challenging the Online SafetyAct No. 9 of 2024.

President’s Counsel and Jaffna District Member of Parliament M A Sumanthiran filed a fundamental rights application in the Supreme Court on 14th Feb., challenging the Speaker’s certification of the Online Safety Bill as having been enacted into law.

During the hearing, Attorney General Sanjay Rajaratnam presented five preliminary objections, arguing that the court lacks jurisdiction to hear the case since the Speaker has already signed the bill into law. 

He further emphasized that the legislature holds the sole authority to pass bills, and the court cannot intervene in that process.

Countering these arguments, Attorney-at-Law Suren Fernando, representing Sumanthiran, asserted that the petition aimed solely at the Speaker’s signing of the Act, which he claimed contravened previous Supreme Court pronouncements on related petitions. 

He emphasized the petitioner’s intention to uphold the Constitution and the rule of law.

The three-judge bench, comprising Justices Priyantha Jayawardene, Shiran Gunaratne, and Achala Vengappuli, decided to postpone their decision on hearing the petition indefinitely. 

In his Petition, MP Sumanthiran claims that the government was seeking to enact the Bill without fully adhering the Supreme Court Determination, and that he had pointed out that the draft committee stage amendments would not sufficiently rectify the shortcomings, and provided his concerns in writing to the Speaker.

However, the Parliament had voted on the Bill prior to ensuring full compliance with the Determination, according to Sumanthiran.

The Petitioner claims that the Bill could have been passed by simple majority only if all the changes required by the Supreme Court were incorporated. If these were not incorporated, the Bill could only have been enacted if 2/3 of the whole number of MPs voted in favour of the Bill.

MP Sumanthiran states that the Bill was approved only by a simple majority of members present, and that therefore the Bill could not have become law.

Therefore he states that the Speaker, by certifying that the Bill was enacted into law, has violated the public trust and the fundamental rights guaranteed to Sumanthiran and the citizenry.

Sumanthiran also states that according to the Speaker, he had acted in accordance with advise given by the Attorney General, and if so, the Attorney General is also responsible for the violation of fundamental rights occasioned by the purported certification of the Bill.

The Speaker of Parliament and the Attorney General are named as Respondents to the Application.

(News 1st)

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English considered for legal proceedings in selected courts

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English language is to be considered for conducting legal proceedings and maintaining records in certain courts, according to a Cabinet decision.

The Cabinet has noted that particularly in the commerce sphere related to commercial activities are mainly used in the English language and require a considerable cost and time in translating those contents into Sinhala language.

Due to that, an extended period to settle commercial disputes takes place which leads to disadvantage when obtaining entrepreneurs, the cabinet has noted.

This situation also affected the position of Sri Lanka to be in a lower place the Ease of Doing Business ratings which envisage the ability of conducting enterprises in a country.

As a remedy to this, it has been recognized as appropriate to issue an order by the subject Minister of Justice with the approval of the Cabinet of Ministers and in par with the provisions of the statute 24 (4) of the Constitution permitting to use English language in relation to all the activities in recognized courts or legal records and proceedings precisely mentioned thereupon.

Accordingly, the Cabinet of Ministers approved the proposal submitted by the Minister of Justice, Prison Affairs and Constitutional Reforms to take necessary actions in this regard.

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