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Sunday September 24th, 2023

Sri Lanka COPF chair urges IMF to prioritise accountability, transparency as review begins

ECONOMYNEXT – Chairman of Sri Lanka’s parliamentary Committee on Public Finance (COPF) Harsha de Silva has urged the International Monetary Fund (IMF) to prioritise accountability and transparency as the international lender goes into its first review of its programme.

“As the IMF evaluates our progress, we urge them to prioritize accountability and transparency. Confronting past mistakes is crucial for our nation’s recovery. Let’s work together to rebuild Sri Lanka on a foundation of truth and justice,” de Silva tweeted Thursday September 14 afternoon.

The main opposition Samagi Jana Balawegaya (SJB) MP made this call in a Twitter thread about questions he had raised at a recent press conference about a former Central Bank of Sri Lanka (CBSL) governor guarantee repayment to a Chinese-American financier named Benjamin Wey when Sri Lanka was on the brink of defaulting in January 2022.

“Benjamin Wei’s involvement in questionable activities, including ties to the Hamilton Reserve Bank and Fintech Holdings Ltd., is deeply concerning. How did a small bank in a nation with 50,000 inhabitants and GDP under $1 billion amass a $250 million stake in our bonds?” said de Silva.

The same question was raised by an article that appeared in the London-based Financial Times on September 08 in a piece titled ‘The mysterious ‘global financier’ suing Sri Lanka’.

The FT story was on a lawsuit filed by the US government in the first week of September.

“The case has been brought by Hamilton Reserve Bank in St Kitts & Nevis. Somehow, a small bank based in a country with 50,000 inhabitants and GDP of under $1bn has amassed a $250mn face-value stake in a Sri Lankan bond,” the FT wrote.

This specific bond was issued in happier times (2012) and lacks some now-common clauses that make bonds easier to restructure, the FT noted. What was unusual, according to the newspaper, was the size of HRB’s stake and the “unusual aggressiveness” of its lawsuit against Sri Lanka, which began almost as soon as it defaulted in April 2022. The lawsuit “smelt a bit fishy”, the FT wrote.

“We’d heard whispers about who might be behind HRB’s lawsuit, and last week Sri Lanka’s law firm Clifford Chance for the first time said explicitly who it thinks is driving this: a Chinese-American financier called Benjamin Wey,” the paper said, adding that Wey is no stranger to legal controversy.

According to the FT, Wey had contacted several creditors about joining forces against Sri Lanka, and had even emailed a presentation laying out their case.

MP de Silva said in his Twitter thread on Thursday that parallels with Greek bond crisis are evident, “as we see investments in ‘junk’ bonds raising anger”.

“Recent revelations of Wei rallying creditors against #lka only deepen suspicions of undisclosed deals,  who truly invested in these bonds & at what discounted rates?

“The U.S., Britain, and France’s support underscores international unease. However, our refusal to accept allegations of #EconomicCrimes remains a significant challenge. The @IMFNews must not overlook governance issues in Sri Lanka’s recovery plan. 🌍 #IMF #Accountability,” he tweeted.

The IMF begins its first review of its ongoing programme in Sri Lanka on September 14. (Colombo/Sep14/2023)

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Sri Lanka India industrial zone around Trinco, maritime links mooted

ECONOMYNEXT – Sri Lanka’s Ports Minister Nimal Siripala de Silva had highlighted the desire of both the Governments to work closely to develop the industrial zone at Trincomalee, after accepting an invitation to participate in a maritime summit.

The Global Maritime India Summit (GMIS) will be held in India from October 17-19, 2023 at Mumbai where Sri Lanka has been invited at a partner country.

At a curtain raiser event on September 22, India’s High Commissioner in Colombo, Gopal Baglay had said both countries were working on enhancing sea connectivity according to a vision document launched during a recent visit of the President of Sri Lanka to India.

Minister de Silva will lead a delegation from Sri Lanka to the summit.

Secretary to the Ministry of Ports, Shipping and Waterways, Government of India, T K Ramachandran said the Global Maritime India Summit aims strengthen the Indian maritime economy by promoting global and regional partnerships and facilitating investments.

The event will give an opportunity to the Government of Sri Lanka to attracting greater investment from India in development of its maritime infrastructure, Ramachandran said.

It will also facilitate greater business to business interactions. (Colombo/Sept24/2023)

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Sri Lanka brings back import para tariff on milk

ECONOMYNEXT – Sri Lanka has brought back an import para tariff called the Ports and Airports Levy, to several grades of milk powder.

Milk powder has been removed from a list of PAL exemptions, making them liable for a 10 percent tax.

The PAL para tariffs are also a contentious issue in terms of export competitiveness, and the government has previously given undertakings that they will be eliminated.

Trade freedoms of the poor figure in an IMF/World bank reform program with the governments.

Milk is a protein rich food, in a country where children of poor families are facing stunting and malnutrition.

Economic nationalism is seen at high levels in food, with several businessmen are pushing for trade protection, amid an overall autarkist (self-sufficiency) ideology, going directly against policies followed in East Asia, which the same as hold up as examples.

Sri Lanka keeps dairy product prices up ostensibly to bring profits to a domestic dairy company and farmers.

Sri Lanka also keeps maize prices up, ostensibly to give profits to farmers and collectors. (Colombo/Sept22/2023)

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Sri Lanka govt warns liquor manufacturers: pay defaulted tax or lose licence

ECONOMYNEXT – Sri Lanka government which is struggling to raise the state revenue despite   higher taxes, has warned liquor manufacturers to pay defaulted taxes or lose their licence.

The government is now getting tough with past tax defaulters amid concerns over falling short of this year’s revenue target agreed with the International Monetary Fun (IMF).

“Liquor manufacturing firms owe us 660 crore rupees (6.6 billion rupees),” Siyambalapitiya told  reporters on Thursday (21).

“Most of this or around a third is the only excise tax amount to be paid. The rest is penalty. If a liquor manufacturer does not pay on time, we impose a penalty of 3 percent per month This means 36 percent (penalty) per annum,” he said.

“We have given them deadline to repay the basic excise taxes. If they don’t pay, we will cancel their licence.”

President Ranil Wickremesinghe’s government committed an ambitious revenue target among many other reforms to the International Monetary Fund (IMF) in return to a $3 billion loan package.

However, the revenue could face a short fall of 100 billion rupees, State Finance Minister Ranjith Siyambalapitiya has said.

A new Central Bank Act also has legally prevented the government of printing money at its discretion as  in the past.  (Colombo/September 24/2023)

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