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Friday December 9th, 2022

Sri Lanka at risk of losing US$480mn Millennium Challenge grant

ECONOMYNEXT- Sri Lanka is at risk of losing a 480 million US dollar grant from the Millennium Challenge Corporation (MCC) to improve transportation and land information availability if the island does not sign the agreement by September, an official said.

“The 480 million US dollar program needs to be approved by Sri Lanka before our board meets in September,” Jenner Edelman, the Resident Country Director for the US government owned MCC told EconomyNext.

“We have been waiting for cabinet approval to sign the agreement. If we can’t get the program approved and signed then board members may suggest that we use these resources elsewhere.”

“We are not sure what position the board will take.”

Making Sri Lanka Efficient

The MCC grant is the largest grant from a single source Sri Lanka has ever received.

MCC funding would be used to ease traffic congestion in the Western Province over a 20-year period and improve transportation in the Central, Sabaragamuwa and Uva Provinces, linking producers in the region to export markets through the commercial hub in Colombo.

The transport segment of the project is expected to yield 19 percent of economic rate of return, while a land project which improves land use and administration will deliver a 26 percent return.

The MCC grant has come under heavy attack from a section of local and expatriate Sri Lankans, who claimed that Americans were using the program to acquire land in Sri Lanka to set up military bases. 

The grant was set to be signed in December 2018, but a constitutional crisis which pitted President Maithripala Sirisena against Prime Minister Ranil Wickremesinghe delayed implementation, and has now coincided with the renewal of two US-Sri Lanka military agreements.

The renewal of the Acquisition and Cross Servicing Agreement (ACSA) and the Status of Forces Agreement (SOFA) which strengthen military cooperation and determine the status of visiting US armed forces respectively were opposed by President Sirisena.

Edelman said that the renewal of the two military agreements has now been paused, as they do not have a deadline, unlike the MCC grant.

Narrowing Window

“This is a priority now for our organization and our embassy here because everyone knows that the window is narrowing and we’ve collectively worked so hard to develop this program and get it ready for signature.”

“It is very unfortunate that our grant has been conflated with ACSA and SOFA. They are completely separate,” she said.

“The MCC grant has absolutely nothing to do with these two military agreements which are simply renewals of longstanding agreements Sri Lanka has had with the US for many years.”

She said that MCC is independent, bipartisan and apolitical.

Edelman said that it was the Sri Lankan government which had reached out to MCC and requested funding for economic development.

“Sri Lanka has been working to develop and finalize this program for several years now.”

“In early 2017, the government of Sri Lanka, after extensive consultation with the private sector, civil societies, a number of think tanks, universities and based on a study by Harvard University identified weak transport infrastructure and land as key constraints to economic growth.”

“First they (Sri Lankan government) submitted a concept note and later that year, a project proposal.”

“In 2018 our investment committee and chief executive approved those projects and in October 2018 a team of Sri Lankans led by the Treasury Secretary went to Washington for two weeks to finalize the activities and terms of agreement.”

“We had hoped to fund the agreement in last December. We even had a signing date set but because of the political crisis here in October we had to put the program on hold temporarily.”

Expiration Looms

Edelman said that even if the MCC board is positive of funding Sri Lanka in September, the project may expire in December if not signed.

MCC, which mainly funds low income and lower middle income countries, will in December decide which countries are eligible for the organization’s funding.

Sri Lanka had graduated from lower middle income to an upper middle income country in July.

“Come December, when it is our annual decision meeting, if the agreement is not finalized, the board may determine that Sri Lanka does not want or need the funding, as it has not been approved here and the country has graduated to upper middle income status,” Edelman said.

She said 480 million US dollars represents a larger grant for a maiden MCC benefactor, as other first timers such as Malawi and Georgia had received 350 million US dollars and 140 million US dollars respectively. (Colombo/Aug26/2019)


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Sri Lanka president slams power regulator chief after conflicting with minister

ECONOMYNET – The powers to change the electricity tariff in Sri Lanka is vested with the Minister of Power and not the Public Utilities Commission (PUCSL), President Ranil Wickremesinghe told the Parliament.

The minister of Power and Energy, Kanchana Wijesekara has requested an upward price revision to be implemented in two phases both in January and July next year, saying the recent tariff hike was not enough for the state-run utility provider Ceylon Electricity Board (CEB) to continue uninterrupted power supply.

However, Jaynaka Ratnayake, the Chairman of the PUCSL had said  the recent tariff hike is enough for the CEB to cover the cost of production and it will not allow another price hike. However, he has said a twice a year price revision is necessary though it should be in April and October instead of January and July.

President Wickremesinghe said the PUCSL chief was opposing the tariff hike due to his personal reasons.

“The power is vested with the Minister and me. I am the one who made the PUCSL act and I know what is in it,” Wickremesinghe told the parliament on Thursday. quoting a letter from the Attorney General which mentioned provisions in the island nation’s Electricity Act.

Accordingly the Act, the PUCSL would be statutorily obliged to give effect to such policy. It is observed that neither the Act nor the PUCSL Act contains any provisions that empowers the PUCSL to change or act invariant of such policy guidelines.

“The Chairman of the PUCSL is misguiding the general public. I have to meet him and see,” Wickremesinghe said.

WIckremesinghe said the Chairman does not want the tariff hike because he owns one of the highest electricity consuming companies.

“He is the Chairman of the Trillium corporation. It is the firm that takes up the most energy”, he said.

The Trillium group is managed by Janaka Ratnayake and he also holds positions as the chairman and CEO of Trillium Property Management & Services Ltd., City Housing and Real Estate PLC, Trillium Residencies Ltd., Computer Care (Pvt) Ltd., and Rent a Comp Services (Pvt) Ltd., and JR Management Consultants (Pvt) Ltd.

“It means when the electricity bill increases, his expenses increase as well”

He said the CEB still has a loss of 300 billion rupees since 2013 and it needs to be covered.

The CEB issue can be solved only in three ways, either printing more money, increasing value added tax or increasing the tariffm, he said. (Colombo/Dec08/2022)

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Sri Lanka President bemoans over inconsistent LNG deals

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe bemoaned over successive governments’ liquefied natural gas (LNG) deal that has brought in all the world powers into the discussion.

Wickremesinghe’s center-right United National Party (UNP) had discussions with India and Japan between 2002-2004 for an LNG project.

“Following dialogues with India and Japan, the UNP government could come to agreements to get two LNG power plants. After we were defeated the successor government, without cancelling those agreements granted it to New Fortress company in USA,” Wickremesinghe told the parliament.

“Thereafter, as they did not like New Fortress, they gave it back to Pakistan and China. So within the same premises, there were China, Pakistan, India, USA, Japan and only Russia was not there.”

“It was wonderful that a world war did not ignited there as there were five main powers in the world.”

“Now there is no LNG or anything here and now they ask me to solve this issue.”

Wickremesighe’s outburst comes as his government is forced to raise tariffs on power prices after successive governments failed to implement cheap and renewable power generation projects.

He said a total loss for the state-run Ceylon Electricity Board since 2013 was 300 billion rupees and a possible drought next year could increase the 2023 electricity cost to 420 billion rupees.

“If it rained, we need Rs. 352 billion while Rs. 295 is required if rained so much to have floods. How are we going to find this money? We would have to print money, but Rupee would depreciate. We would have to increase VAT but it would increase the price of all commodities or to charge it direct.” (Colombo/Dec08/2022)

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Air quality drop forces Sri Lanka to close schools; public warned

ECONOMYNEXT – A rapid drop in air quality in Sri Lanka has forced the Colombo government to close all schools across the country after a deep depression over Southeast Bay of Bengal, officials said.

The Education Ministry, issuing a special notice on Thursday said, it has decided to close all government schools for Friday, after discussing with the officials in Meteorology Department and Disaster Management Center.

An official said the drop was due to the deep depression over Southeast Bay of Bengal carrying the air from India.

Due to the depression over South east Bay of Bengal (370 km east of Trincomalee) has concentrated into a cyclonic storm “Mandous” by Wednesday night.

“Cyclone in the Bay of Bengal that is the prime reason for the increase in the pollution load as we receive more wind from India,” H.D.S.Premasiri, Senior Scientist, Coordinator-Air Quality, noise and vibrations at National Building Research Organization (NBRO) told EconomyNext on Thursday.

Officials said there is a likelihood of the cyclone moving west-northwestwards and further intensify into a severe cyclonic storm tonight and cross North Tamil-Nadu, Puducherry and South Andhra Pradesh coast around midnight of 09 th December and the maximum wind speeds will be 70-90 km per hour and can increase up to 90 in sea areas.

“Hopefully, today we can expect normalization in the environment and the effects of the fog will disappear”.

According to the NBRO’s real time Air Quality Index Indicator, the quality of air in northwestern coastal district of Puttalam has dropped drastically and indicated a particular matter (PM) 132, while Kegalle (85) and Mannar (84) were the districts which had next worst air quality.

According to NBRO, Battaramulla, Polonnaruwa, Dambulla, Kegalle, Mannar and Puttalam indicate a poor quality of air due to higher PM.

“The fog will lead to lung and breathing issues,” Premasiri said.

“So the public is warned to wear a mask when they travel outside. The pollution highly prevails in city areas and has a less impact on the other parts of the areas.” (Colombo/ Dec08/2022)

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