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Tuesday June 25th, 2024

Aswesuma welfare scheme aimed to create poverty-free Sri Lanka by 2048: official

ECONOMYNEXT – Sri Lanka’s new consolidated welfare system Aswesuma aims to create a poverty-free Sri Lanka by 2048 with a view to creating an entrepreneurial state instead of a welfare state, an official said, amid criticism of deserving candidates allegedly being left behind.

Social Empowerment State Minister Anupa Pasqual told reporters on Tuesday July 11 that the government launched the Awesuma programme in response to allegations that the existing welfare scheme system was too politicised, with criticism specifically levelled at the Samurdhi scheme.

Aswesuma was launched by the Welfare Benefits Board following a proposal by President Ranil Wickremesinghe, said Pasquel, adding that the president “intends to create an entrepreneurial state instead of a welfare state.”

Welfare beneficiaries have been organising protests against alleged injustice in the evaluation process of Aswesuma, even as the government and opposition trade charges in what has now become a fresh political controversy following a significant rise in poverty.

State Minister of Finance Shehan Semasinghe tweeted on Tuesday that district secretaries will commence assessments of 968,000 appeals and 17,500 objections received for Aswesuma to make accurate determinations. The government will ensure that all deserving individuals who require assistance will be included in the new scheme, he said.

Instructions have been issued to assistant government agents to prioritise the entry of physically received appeals and objections into the system of the Welfare Benefit Board to ensure that everyone’s grievances are heard and addressed. The final count will be notified to the public upon completion of this process, said Semasinghe.

Opposition leader Sajith Premadasa, who called the Aswesuma programme a “blindfold” in a statement he issued on June 25, claimed that it would only benefit 1.2 million Sri Lankans in three years.

“While questioning the government about its intention in providing subsidies only to 1.2 million people when there are 7 million poor people, we would also like to know from the government about the criteria adopted in selecting those 1.2 million people,” said Premadasa.

However, State Minister Pasquel, who said Aswesuma is a non-political, open process, defended the programme. Both appeals and objections may be submitted throughout the same process, which will also cover the annual procedure of admitting the qualified and removing the ineligible, he said.

“The president entrusted our ministry with enlisting 1.2 million people into the productive economy in order to empower them. Before the end of this month, the president will get the relevant plan. The empowerment of this group will be accomplished during the course of the three-year strategy,” said Pasquel.

Protesting beneficiaries and would-be beneficiaries have made allegations of injustice in the evaluation process for selecting deserving candidates, which they said has been unfair and will deprive many poverty-stricken people of a vital stream of income.

The Aswesuma progarmme was originally set to come into effect on July 01, with some 400,000 families identified as severely poor receiving payments of 15,000 rupees a month for three years.

State Minister Pasquel noted that there are 1.8 million ‘Samurdhi’ beneficiaries, more than half of whom are adults. Although they were engaged in various jobs when they were young, they joined the Samurdhi movement after the age of 60, which has drawn the attention of the president with action proposed to be taken to implement the pension system with help from the Welfare Benefits Board. This will be submitted to the cabinet in the future and the necessary work will be done, said Pasquel.

The state minister also called for education reforms aimed at social empowerment through the creation of skilled professionals.

“We are receiving support for this programme from China, the Asian Development Bank, World Bank, and the Samurdhi Banking System. As a result, rather than eradicating poverty in Sri Lanka, we have planned to exploit the Samurdhi Bank system to generate wealthy individuals.

“Currently, some politicians are working very hard to misrepresent the Samurdhi Bank. However, the Samurdhi economy and financial system are being promoted more vigorously thanks to the Aswesuma programme,” he said.

The official said, starting August 01, those who could not apply for Aswesuma this year or failed to submit appeals will have another opportunity to do so. Every year, a certain number of people are eligible for these benefits, and some of them drop out due to a variety of reasons, he said, adding that the programme provides empowerment and protection to everyone, from young children to senior citizens.

“Instead of eradicating poverty, President Wickremesinghe wants to see Sri Lanka become a developed nation by 2048. This serves as the required context for that. A welfare state is not what we desire. A state of entrepreneurship must be established. The goals of building a developed country cannot be achieved through a welfare country. We are moving forward with these programmes in line, to achieve such a state,” said Pasquel.

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Sri Lanka to sign Paris Club debt deals as fresh ISB talks to also start

ECONOMYNEXT – Sri Lanka will sign agreements on restructured debt with Paris Club creditors Wednesday, Cabinet spokesman Minister Bandula Gunawardana said as sources said talks with private creditors are also due to start later in the week.

The relevant senior officials and State Minister Shehan Semasinghe has already left the country to sign the agreements, Minister Gunawardana said.

Sri Lanka has held detailed negotiations with bilateral creditors ever since a sovereign default in 2022 and President Ranil Wickremesinghe has personally met leaders of friendly countries to expedite the restructuring, he said.

The finalizing of the restructure was a ‘great victory’ for Sri Lanka he said.

Details will be revealed to parliament by President Wickremesinghe and an address to the nation on Wednesday he said.

Discussion with private bondholders are also taking place separately, he said.

Face to face talks with bond holders are likely to start Thursday, sources said.

Investors in a steering committee representing key bondholders have halted trading and are in a ‘restricted’ period Bloomberg Newswires reported.

Sri Lanka is attempting to restructure 12.5 billion dollars of sovereign bonds and about 1.7 billion dollars of past due interest following the declaration of an external default in 2022.

Private investors are seeking some so-called macro-linked bonds whose final haircut is linked to dollar GDP as well as some standard or ‘plain vanilla’ bonds with an upfront haircut.

The style of bonds have not been used in sovereign restructurings before. In the latest round of talks more plain vanilla bonds may be discussed, sources aware of the thinking of some bond investors said.

The ISB holders have proposed a 28 percent haircut and a 1.8 percent consent fee. The macro-linked bonds would have principle re-stated up to 92 percent of the original depending on the evolution of gross domestic product.

Sri Lanka is restructuring debt using an IMF debt sustainability model applied to middle income countries with market access as opposed to debt sustainability model used in countries like Ghana applicable to low income countries requiring deeper haircuts on both domestic and foreign debt.

Hair cuts may also depend on the maturity of bonds and the coupon interest.

Ghana has higher levels of commercial debt having started to access capital markets from around 2007.

Ghana also has a bad central bank like Sri Lanka and has gone to the International Monetary Fund 18 times.

The country is also operating flexible inflation targeting (inflation targeting without a clean float), which critics say is the latest spurious monetary regime peddled to hapless unstable countries without a doctrinal foundation in sound money.

Having done broad domestic debt restructuring as well as continued currency volatility both interest rates and inflation remains above 20 percent.

Ghana’s central bank has a worse monetary anchor (8 percent inflation plus 2 percent) compared to 5 percent plus two in Sri Lanka and runs into currency trouble despite being an oil producer like Iran, Venezuela and neighboring Nigeria.

Nigeria has an inflation target of 6-9 percent but ends up with around 20 plus inflation and currency trouble.

Sri Lanka has undershot its inflation target since reaching monetary stability in September 2022 and has appreciated the currency, amid deflationary policy giving a strong foundation for economic activity to resume. (Colombo/June26/2024)

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Sri Lanka to seek investors for 200MW BOOT power plant

EONOMYNEXT – Sri Lanka’s cabinet has given approval to seek investors for a 200 MegaWatt independent power plant on a build-own-operate-and-transfer (BOOT) basis, a government statement said.

The internal combustion power plant will be capable of running on natural gas and is part of the Long-Term Generation Expansion of state-run Ceylon Electricity Board.

The investor will get as 20-year power purchase agreement.

Land next to the ‘Sobhadanavi’ combined cycle plant will be made available for the developer.

According to the generation plan, the 200MW IC plant is expected to come on stream by 2026.

In 2026, a 115 MW gas turbine, a CEB owned diesel plants of 68 MW and 72 MW are due to be retired. (Colombo/June25/2026)

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Sri Lanka rupee closes steady at 305.25/35 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed fairly flat at 305.25/35 to the US dollar on Tuesday, down from 305.20/30 to the US dollar on Monday, dealers said, while bond yields up.

A bond maturing on 01.06.2026 closed at 10.75/11.05 percent.

A bond maturing on 15.12.2026 closed at 10.65/11.05 percent, up from 10.45/85 percent.

A bond maturing on 15.10.2027 closed at 10.65/11.10 percent.

A bond maturing on 15.03.2028 closed at 11.20/11.50 percent.

A bond maturing on 15.09.2029 closed at 12.10/15 percent, up from 12.05/17 percent.

A bond maturing on 01.12.2031 closed at 12.10/20 percent, up from 12.08/15 percent.

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