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Sri Lanka ethnic issue: TNA accepts president’s overture, MP suggests party ready to talk federal

TNA MP M A Sumanthiran/Facebook

ECONOMYNEXT — Sri Lanka’s opposition Tamil National Alliance (TNA) will engage constructively in sincere attempts at resolving the ethnic issue, legislator M A Sumanthiran said responding to President Ranil Wickremesinghe’s overtures to the opposition, while also suggesting that the TNA was open to a federal solution.

“We will engage constructively in every sincere attempt as we have always done but will not allow any farcical process,” Sumanthiran tweeted Thursday November 24 afternoon.

In a speech made in parliament the previous day, the Jaffna district MP said there can be no reconciliation by sweeping the truth under the carpet.

“It is only by the ascertainment of the truth that there can be true reconciliation,” he said.

“Your actions must be louder than words. All we have are words, words and words. As I speak, more lands are being acquired,” he added, highlighting an example that prompted a response from President Wickremesinghe that he would look into the matter.

Wickremesinghe on Wednesday re-extended an open invitation to opposition parties to a discussion on a permanent solution to Sri Lanka’s decades-long ethnic problem. Talks would begin after December 11, he said, with a view to agreeing on a solution by February 04 2023 when the island nation celebrates 75 years of independence from the British.

Related:

Sri Lanka president calls meeting to discuss ethnic issue after Dec 11

“We welcome the president’s initiative. He said everyone must agree on the solution. We want all the people of this country to be content and be satisfied and feel secure that this is their country,” said Sumanthiran.

The MP said there is broad consensus already on the issue and that only a few things need to be ironed out.

“That can be done in a day’s sitting. You don’t require three months,” he said.

President Wickremesinghe agreed in his speech that there is nothing new left to talk about.

If the president is looking at the South African example, said Sumanthiran, it must be noted that that country underwent a political transformation “before they could look at accountability issues”.

“That fundamental change must happen and must precede other measures,” he said.

Among the issues that Sri Lanka is confronted with with regard to reconciliation between communities is the matter of alleged human rights abuses, particularly during the final phase of the 26-year armed conflict. Missing persons, militarisation and alleged land grabs have also figured prominently in various international fora where Sri Lanka’s human rights record has come up for discussion.

“Of course you need to do many confidence-building exercises because there is a serious lack of trust because of the long history and what happened,” said Sumanthiran.

The MP said it is crucial that the core, root issues are settled first before considering issues of justice and accountability, which he said would provide the people a different outlook on resolving those issues.

He also paid what has lately been a rare compliment to President Wickremesinghe from the TNA.

“We recognise that perhaps you are the only person in this House today — although you’re not a member of this house — who’s had the longest experience in this matter. You were part of the government negotiation team that negotiated with the TULF from the middle to the end of 1986, which ended with the Indo-Lanka accord, and the 13th amendment which we did not accept as a meaningful scheme of devolution,” he said.

The 13th amendment to Sri Lanka’s constitution emerged out of the controversial Indo-Lanka Accord of 1987 as a purported solution to the worsening ethnic conflict. Provincial councils came in the wake of this amendment, but land and police powers have yet to be devolved to the provinces as originally envisioned. Both Sinhalese and Tamil nationalists have opposed the 13th amendment, the former claiming it devolved too much, the latter complaining it didn’t devolve enough.

Wickremesinghe knows “everything that is to know about the resolution of this”, said Sumanthiran. He also acknowledged the All Party Representative Committee (APRC) appointed by former President Mahinda Rajapaksa.

“Though we did not participate in the APRC, that’s a good report. Many members in the front row today in the government were members of the cabinet in August 2000 when President Chandrika Bandaranaike Kumaratunga brought a constitution bill to parliament. The UNP at that time led by President Wickremesinghe opposed it only because of a transitional provision with regard to executive presidency, not because of the devolution arrangements in that,” he said.

The UNP opposition notoriously burnt the draft bill in parliament when the Kumaratunga government presented it. Analysts have revisited that event as a possible misstep in Sri Lanka’s path to a lasting peace, though others disagree.

Sumanthiran said consensus is already there and all that is required is for decisions to be made.

“That is what has been entrusted to the president now,” he said.

The president’s call for a permanent resolution by the 75th Independence Day celebrations is a good ideal to work towards, but there isn’t much time, the MP warned.

“So we are willing to work with you constructively to achieve the objective you have enunciated. We’re willing to achieve the reasonable and legitimate aspirations of our people and indeed all the people that live in this country,” he said.

In his speech, Sumanthiran was emphatic that his party does not wish to do anything behind the back of the majority.

“Everyone must feel secure. That is our desire as well. That the majority of this country must accept it.”

The MP then said that more than 40 percent of the world’s population live in federal countries. (There are 25 countries with a federal form of government).

“Those are the strongest countries in the world,” the MP claimed.

“You have others who are quasi federal, who sometimes call themselves unitary, like Great Britain, where the extent of devolution is far more than even in a federal form of government.

“We’re not asking for something that isn’t found anywhere in the world. We’re asking for something that is reasonable and is practiced all around the globe. That will ensure that all our people will live with dignity and self respect in this country. We want the majority people to accept and understand that. You are, after all, a preponderant majority. No one can shift that. It was Prime Minister S W R D Bandaranaike who in 1926  introduced the idea of federalism to this country, not the Tamil leaders,” he said.

Sumanthiran recalled that it was in fact the Kandyan chiefs who had asked for a federal form of government on two separate occasions in the early 20th century.

“So it can’t be bad for the Sinhala people, it was the Sinhala people who asked for it,” he said, noting that over time wrong messages have been communicated to the country.

“There are suspicions those must be allayed. We must resolve this in a just way, so that we can all can then stand up as the president envisages by Feb 04 2023 as the children of one mother,” Sumanthiran said.

Federalism has been a highly controversial and politically inflammable idea in Sri Lanka over the years, with many nationalist or even some moderate parties in the south vehemently opposing the very suggestion of it. It is unclear whether this stance has softened over the 13 years since the end of the war, but to date no Sinhalese-dominated party has come out in support for it.

Sri Lanka Podujana Peramuna (SLPP) MP Gevindu Kumaratunga who now sits in the opposition responding to Wickremesinghe’s invitation on Wednesday cautioned that they can only support a proposal that will honour Sri Lanka’s unitary character.

“If you’re asking for a consensus within a unitary Sri Lanka, we’ll agree. Outside of that, I don’t think a majority of people will agree. There is a ground reality here. Our soldiers laid down their lives to protect the unitary state,” said Kumaratunga. (Colombo/Nov24/2022)

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Jayampathy Wickramaratne PC, responds to President on constitutional article 83

ECONOMYNEXT – Jayampathy Wickramaratne, President’s Counsel had responded to a statement made by President Ranil Wickremesinghe that Article 83 (b) of the constitution which has reference to a six year term was left alone not due to any ‘lapse’ on his part.

A Cabinet sub-committee headed by Premier Wickremesinghe was appointed to oversee the Nineteenth Amendment process.

The changes to the Constitution, were made by a team of legal officers of which he was member, overseen by a Cabinet sub-committee headed by then Prime Minister Ranil Wickremesinghe.

“Presidential candidate Maithripala Sirisena signed a memorandum of understanding with a group of 49 political parties and organisations headed by the Venerable Maduluwawe Sobitha Nayaka Thero at Viharamaha Devi Park, in which he pledged to abolish the Executive Presidency altogether,” Wickramaratne explained.

“However, the very next day, he signed another MOU with the Jathika Hela Urumaya, in which he pledged not to make any constitutional change requiring a Referendum. Mr Sirisena’s election manifesto also stated that no constitutional reform necessitating a Referendum would be initiated.”

The Attorney General also made sure that there were no changes that required a referendum, he said. As a result Article 83 (b) was left as it was.

The full statement is reproduced below:

On President Wickremesinghe’s statement that not amending Article 83 was a lapse on my part

The President stated in Galle on 19 July 2024 that not reducing the upper limit of the term of the President and Parliament from six to five years while preparing the Nineteenth Amendment to the Constitution was a lapse on my part due to my inexperience.

I wish to set the record straight.

Presidential candidate Maithripala Sirisena signed a memorandum of understanding with a group of 49 political parties and organisations headed by the Venerable Maduluwawe Sobitha Nayaka Thero at Viharamaha Devi Park, in which he pledged to abolish the Executive Presidency altogether.

However, the very next day, he signed another MOU with the Jathika Hela Urumaya, in which he pledged not to make any constitutional change requiring a Referendum. Mr Sirisena’s election manifesto also stated that no constitutional reform necessitating a Referendum would be initiated.

Soon after being sworn in, President Sirisena appointed Mr Ranil Wickremesinghe as Prime Minister. Constitutional affairs was Gazetted as a subject under Prime Minister Wickremesinghe. A Cabinet sub-committee headed by Premier Wickremesinghe was appointed to oversee the Nineteenth Amendment process.

The five-member team that prepared the initial draft comprised three retired officials who had served in very senior positions in the Legal Draftsman’s Department, myself and another lawyer.

The entire drafting process was carried out on the basis that the Bill should not be placed for approval at a referendum, in keeping with President Sirisena’s electoral pledge. While the terms of the President and Parliament were proposed to be reduced from six to five years, the upper limit of six years was not touched as that would require a Referendum.

Article 83 of the Constitution mandates that a Bill that seeks to amend or is inconsistent with particular Articles listed or the said upper limits would be required to be passed by a two-thirds majority in Parliament and approved by the People at a Referendum.

It is essential to note that Article 83 itself is included in the list of provisions requiring a Referendum. The several drafts prepared were all shared and discussed with the Cabinet sub-committee.

The draft finally approved by the Cabinet sub-committee was then sent to the Legal Draftsman, who took over as required by law and made some changes. It was then sent to the Attorney-General, who took the view that certain clauses, especially some that reduced the powers of the President, would require a Referendum. Prime Minister Wickremesinghe had several meetings with the Attorney General to discuss the matter. I participated in one such meeting. Several changes had to be made to the Bill because of the Attorney-General’s position.

Prime Minister Wickremesinghe presented the Bill to Parliament. When it was challenged in the Supreme Court, the Attorney-General argued on behalf of the Government that no provision required a Referendum. The clauses that the Supreme Court held to require a Referendum were either amended or withdrawn in Parliament.

In light of the above, I regret that President Wickremesinghe has thought it fit to place the entire blame on me for not reducing the upper limits of the President’s and Parliament’s terms.

I reiterate that the entire amendment process was based on avoiding a Referendum following President Sirisena’s pledge at the Presidential election.

(Dr) Jayampathy Wickramaratne, Presidents Counsel
20 July 2024.

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Sri Lanka banking system foreign assets turn positive in May: analysis

ECONOMYNEXT – Net foreign assets of Sri Lanka’s banking system turned positive in May 2024, official data showed, amid a steady reduction in the negative reserve position of the central bank helped by the current interest rate structure and domestic credit.

In May the combined net foreign assets position of commercial banks and the central bank was about 311 million US dollars by May, up from a negative 178 million US dollars a month earlier, central bank data show.

It was made up of positive 1.9 billion US dollar foreign assets position in overseas banking units and a negative 811-million-dollar position which gave a positive NFA position of about 1.13 billion US dollars for banks.
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The central bank still had a negative position of about 821 million dollars by May, down from about 4.5 billion US dollars in last currency crises triggered by deploying liquidity tools (printing money) to cut rates.

The central bank has been collecting reserves for several months, except in June after a confidence shock from the flexible exchange rate and some injections made to keep rates down.

Analysts have warned that under flexible inflation targeting, where there are anchor conflicts, external imbalances will re-emerge when private credit recovers and money is printed to cut rates.

Printing after giving Reserves for Imports

Sri Lanka’s central bank ran up a negative foreign assets position, by spending dollars borrowed from the International Monetary Fund and from other central banks including in Bangladesh and India as well as domestic banks and spending them to suppress market interest rates and finance imports.

An ‘age-of-inflation’ (or age-of-BOP-deficit) central bank that spends reserve for imports, simultaneously prints money into banks, injecting excess rupee reserves to maintain an artificial policy rate, preventing the outflow of real resources to other countries being reflected in bank balance sheets.

The printing of money after spending reserves, or the sterilizing of an outflow, allow banks to give loans without deposits and trigger forex shortages.

To collect foreign assets, a central bank has to do the opposite, and sell its domestic asset portfolio down against dollars purchased from banks, at an appropriate interest rate, which will moderate domestic credit.

Modern IMF-prone reserve collecting central banks are able to mis-target rates beyond their reserves mostly with the aid of Central bank swaps.

Sri Lanka’s central bank also borrowed reserves from domestic banks through swaps, in a somewhat similar operation to the way Lebanon’s central bank borrowed dollars to show reserves instead of buying outright against domestic assets.

Borrowed Reserves

Central bank swaps were invented by the Federal Reserve to mis-target rates and avoid giving gold reserves as macro-economists printed money to target growth in the 1960s and the printed dollars boomeranged on itself from other Bretton Woods central banks that focused on stability.

RELATED Central bank swaps symptomatic of Sri Lanka’s IMF return tickets and default: Bellwether

By March 2022, before rates were hiked, negative reserve position of Sri Lanka’s central bank was around 4.0 billion US dollars.

The negative position worsened to around 4.5 billion US dollars by the third quarter of 2022, helped by credits from Reserve Bank of India, which allowed Sri Lanka to run arrears on Asian Clearing Union balances.

In addition to the swaps, Sri Lanka also had borrowings from the International Monetary Fund which contributed to the negative foreign assets position.

The IMF borrowings came from serial currency crises triggered in the course of money printing to enforce rate cuts and target growth (potential output) and generate twice to three times the level of inflation found in monetarily stable countries through ‘flexible’ inflation targeting.

The external sector started to balance only after ACU credits were stopped. It has since been turned into a swap and the central bank is paying it down steadily in the current interest rate structure.

Related Sri Lanka repays US$225mn to Reserve Bank of India in first quarter

Sri Lanka was unable to use a People’s Bank of China swap to mis-target rates and boost imports its use was barred after gross reserves fell below three months of imports.

Private and State Banks

Sri Lanka’s private and state banks also had negative foreign assets for many years, due to lending to the government through US dollar Sri Lanka Development Bonds and other credits. The dollar loans to the government were financed in part by foreign credit lines.

As downgrades hit the country, and forex shortages worsened from flexible inflation targeting/potential output targeting, banks could not renew their credit lines.

Some banks avoided rolling over Sri Lanka Development Bonds. After the default and debt restructure, they were repaid in rupees leading to banks covering their open positions. The dollars are banked abroad, leading a net foreign assets position.

An improvement of net foreign assets, reflects an outflow of dollars from the domestic economy to foreign accounts, similar to repaying debt for building foreign reserves.

The foreign assets position of banks excluding the central bank turned positive in February 2023 and reached around a billion US dollars by the year end and has remained broadly stable around those levels in 2024r.

RELATED Sri Lanka bank net foreign assets turn positive: analysis

The stabilization of the NFA position in banks may allow the central bank to collect more foreign reserves than earlier, analysts say, at the current interest rate structure as long as money is not injected overnight or term injections to mis-target interest rates claiming inflation was low.

Any confidence shocks from the ‘flexible’ exchange rate or liquidity spikes, would also reduce the ability of the central bank to collect dollars and lead to mini ‘capital flight’ style episodes from importers and exporters. (Colombo/July20/2024)

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New constitutional amendment a ‘necessary revision’: Sri Lanka President

ECONOMYNEXT – Sri Lanka’s President has said a proposed amendment to the country’s constitution was a ‘necessary revision’, which would not result in a postponement of elections.

“In 2015, we proposed a new constitutional amendment,” President Wickremesinghe was quoted as saying during a ceremony to open a court complex in Beligaha, Galle on Friday.

“Typically, I would have assigned this task to K N Choksy, a lawyer.

“However, since he had passed away, the responsibility fell to lawyer Jayampathi Wickramaratne. He was unable to make the necessary revisions. This oversight is regrettable, and I apologize to the nation for it.”

President’s Counsel Wickramaratne has explained that the leaving out Section 83 (b) of the constitution was a not an “oversight” but it was a result of instructions received from the then administration to avoid making changes that required a referendum.

President Maithripala Sirisena in his election manifesto has pledged not to make changes that required a referendum, and the drafting team was told not to make changes that would require a referendum.

Related Sri Lanka’s 6-year Presidential term: problem in drafting 19th amendment explained

Meanwhile President Wickremesinghe said the move to change the constitution should not lead to a delay in elections.

“Our country has upheld democracy since 1931,” he said. “Protecting democracy is crucial. The upcoming election is on schedule, with the Chief Justice and the Supreme Court confirming that it should be held within the specified timeframe, and we support this directive.

“Some critics argue that democracy is at risk during certain crises. However, our constitution, judiciary, and political system have worked to advance and protect it. The most significant threat to our democracy occurred in 2022, yet we have continued to progress through consensus.”

Sri Lanka became the first country in Asia and Africa to grant universal suffrage in 1931, Wickremesinghe said.

“Unlike in the United States, where some states did not extend voting rights to Black people, Sri Lanka is unique for maintaining democracy continuously since then.

“Despite facing wars and rebellions, Sri Lanka has preserved its democratic system, and democracy has remained intact despite numerous challenges.”

Sri Lanka got universal suffrage under British rule.

In Sri Lanka, power transitions smoothly and without conflict after elections, the president said, “a testament to the strength of our democratic process. Despite various debates and issues, democracy has never been compromised.”

Opposition parties and lawyers have charged that the legal process involving changing the constitution could potentially delay the upcoming Presidential elections.

“Article 83 of the Constitution of the Democratic Socialist Republic of Sri Lanka is hereby amended in paragraph (b) thereof, by the substitution for the words “to over six years,”, of the words “to over five years,” the gazette notice issued on the orders of Wickremesinghe says.

Download bill 523-2024-bill-constitution-EN

There is a discrepancy in the Article 83 with reference to a six year term, while the rest of the constitution, refers to a five year term. (Colombo/July19/2024)

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