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Saturday January 28th, 2023

Sri Lanka govt mulls ways to control websites amid rising online activism

ECONOMYNEXT – Sri Lanka’s government is contemplating legislation that will target websites whose posts it deems “defamatory” and have no visible ownership, amid concerns of a clamp down on freedom of expression.

The government will first focus on websites without owners names and addresses, according to one minister.

The ministries of justice and media are developing a mechanism to control websites carrying allegedly defamatory content, Media Minister Keheliya Rambukwella said, as online criticism of the establishment mounts in the island. The idea is to “protect the rights of the people” without hindering freedom of expression or freedom of the press, he said.

Rambukwella told reporters at the weekly cabinet briefing Tuesday (10) morning that there ought to be a balance between freedom of expression and the personal freedoms of people.

“There is an opinion that there should be some measures with regard to websites that do not have owners and defame certain people deliberately, manipulating facts,” he said.

“This is not only a problem in this country. It has been discussed in five-star democracies too, and some of them have introduced regulations,” he added, without naming the countries.

Last week, Labour Minister Nimal Siripala De Silva lamented that Sri Lanka did not have China style ‘mardana’ laws to combat social media.

Related: Ban or regulate social media in Sri Lanka, top minister tells parliament

In April this year, Justice Minister Ali Sabry defended a move to criminalise social media posts deemed ‘fake’ through a law to be styled after Singapore’s POFMA, a controversial piece of legislation that has drawn widespread criticism as a tool to control the media and free speech.

The minister said at the time that discussions were under way at the cabinet level to introduce laws similar to the Protection from Online Falsehoods and Manipulation Act (POFMA), a move the government of Sri Lanka has reportedly been contemplating since November last year.

Related: New S’pore-style regulatory framework for Sri Lanka websites; activists concerned

Minister Rambukwella said at Tuesday’s cabinet briefing that the lack of ownership for the stories that appear in some websites is a problem.

“There is no problem if somebody is responsible for the content or opinion expressed on their websites. But if there is nobody to take responsibility (for the content), then there should be some legal framework to deal with it. This is my personal view and my professional opinion as well,” he said.

“The justice minister and I are working carefully on how to protect the rights of the people without hindering personal freedom of expression and media freedom. We are now in the process of that. We need such a law in this country,” said Rambukwella.

The minister said the government is obligated to protect the rights of the people as much as it must ensure media freedom.

“There is a need for a legal framework to protect them. It is the duty of all,” he said.

On June 08, Sri Lanka police said that citizens publishing or sharing news deemed false on social media can be arrested without a warrant. Police said anyone creating, publishing, sharing, forwarding, or otherwise aiding and abetting the spread of “fake news” on social media will be considered to have committed an offence under provisions in the police ordinance, the penal code, the prevention of terrorism act (PTA), the computer crimes act and other laws.

According to human rights lawyer Dr Gehan Gunatilleke, broadly and poorly worded provisions in the PTA and the Computer Crimes Act can be construed in bad faith to cover alleged falsehoods disseminated online. The Bar Association of Sri Lanka (BASL) has also expressed deep concern that these provisions could be misused by police to stifle free speech.

Related: Poorly worded legal provisions can be construed to cover “fake news”: Sri Lanka lawyer

In November last year, media reports said Minister Rambukwella had told a Ministerial Consultative Committee on Mass Media that a regulatory framework for Sri Lankan websites was on the cards.

The committee had reportedly studied Singapore’s controversial Infocomm Media Development Authority Act (IMDA), in addition to POFMA, which critics said will be emulated by Sri Lanka’s proposed regulatory framework in its mandate to curb reporting and content that spread falsehoods and incite racism.

Singapore’s IMDA passed in 2016 is one of the applicable acts to the statutory body responsible for broadcasting and content regulation (irrespective of the transmission medium). It received criticism from various quarters including the International Press Institute over allegations of controlling the media.

Under POFMA, passed in 2018, the Singaporean government can issue a “correction notice” to an individual or organisation for online content about a public institution that the authorities deem false or misleading. The government can even amend such content in the name of public interest. According to various international media reports, the law has been accused of targeting civil society activists, NGOs and opposition lawmakers. Allegedly false statements published by media websites in Singapore can, under POFMA, carry hefty fines up to 1 million Singapore dollars (USD 731,000) and jail sentences of up to 10 years. (Colombo/Aug11/2021)

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Sri Lanka utility to continue power cuts, regulator says no

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board has decided to continue power cuts, as the dry season hits the country despite orders to give 24 hours of power.

The utility said its Board “has decided to continue the demand management programme” and it has informed the regulator of this decision on January 27.

The Public Utilities Commission of Sri Lanka said it had not approved the power cuts “as it violate and affect the rights of 331,000 students sitting for the Advanced Level exams.”

Sri Lanka’s CEB has high running costs due to long term scuttling of planned coal plants by activists and lastly President Maithripala Sirisena.

‘CEB’s costs went up as demand went up since the last coal plant opening and steady collapse of the currency from 131 to 182 to the US dollar due to open market operations unleashed to suppress rates and operate a flexible inflation targeting by the central bank.

Even more aggressive liquidity injections after 2020 to target an output gap then busted the currency from 182 to 360 to the US dollar.

CEB has to use extra fuel from around February to April 2022 as the dry season hits reducing hydro power.

Sri Lanka’s Human Rights Commission has ordered the Ceylon Petroleum Corporation to supply fuel and banks to give credit for extra power.

Power Minister Kanchana Wijesekera has alleged that CPC officials agreed under duress and threat of jail sentence to supply fuel.

The CEB has to cut power in case demand outstrips supply to maintain frequency at 50 Hz to avoid cascading failures, according to sector analysts. (Colombo/Jan28/2023)

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Sri Lanka president suspends parliament till Feb 08

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe has suspended parliament till February 08, according to a gazette notice.

Parliament will re-convene at 1000 am on January 08.

President Wickremesinghe told party leaders that he would make a speech, officially declaring his intention to give effect to the 13th amendment to the constitution on provincial councils.

Provincial councils, a power sharing arrangement backed by India as a solution to the ethnic Tamil have not yet been given police and land powers. (Colombo/Jan28/2023)

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Sri Lanka, other defaulting nations have widely differing debt indicators: Expert

ECONOMYNEXT – Sri Lanka other recently defaulting nations have widely differing debt indicators, and some other countries survive with even higher levels of debt, a US based analyst has said.

“If you look at the ratio of debt to GDP, the size of the economy the number is very high, mostly because there has been a lot of depreciation, so the debt in dollars keeps growing relative to GDP,” Sergai Lanau, Deputy Chief Economist at Washington based Institute of International Finance said.

“This is sometimes over-emphasized… but this ratio at 120 is a lot.”

He was speaking at a forum organized by the Bar Association of Sri Lanka.

“Just for a reference point about 6 or 7 years ago Italy’s debt was 120 percent GDP, there was a lot of concern in the Euro area and that is a country that has the ECB. So Sri Lanka at 120 is a lot.”

Italy however is in a monetary union with Euro which is a floating exchange rate without anchor conflicts and forex shortages and basic external payment problems.

Sri Lanka is trying to bring the ratio down to 95 percent by 2032 under an International Monetary Fund backed program, according to a leaked letter from India.

“Typically for many years there was as lot of emphasis on debt ratios, when people looked at debt restructuring – or at least economists,” Lanau said.

“And that is something that always puzzled bond traders who came from the corporate sector. For them it is all about the flows and gross financing needs.

“The IMF has shifted its focus a lot financing needs over the years and it is a less of a problem now.”

Ghana has defaulted and it is trying to reduce its debt from around 90 percent to below 60 percent by 2028. It is starting at a much lower level and correcting within a shorter period to an even lower level.

Sri Lanka’s debt ratio is high but it “may or may not be a constraint”, he said.

What the … was that?

The IMF’s default workout framework is a work in progress, which has changed over the years since mass defaults hit market market countries which were denied monetary stability through intermediate regimes especially in Latin America from the early 1980s.

Until 1980, when the so-called BBC policy (now called exchange rate as the first line of defence) where countries were encouraged to bust their currencies instead of withdrawing inflationary policy, sovereign defaults were not a problem.

“During the 1970s, the risk of sovereign default was not perceived as a major concern,” the IMF itself admits.

“Most “external arrears” generated by a country were created by exchange restrictions. For example, an importer might miss a payment because the authorities were slow to release foreign exchange.

“Sovereign default had not been a problem since the Second World War.

“Therefore, the IMF’s policy framework was not equipped to confront the complications that arose in the context of the sovereign debt difficulties that emerged in the 1980s.

“In fact, it took until 1980 for the IMF’s Executive Board even to agree that a default on sovereign debt should also be covered under the external arrears policy.”

Washington based policy circles began to prescribe, inconsistent, anchor conflicting intermediate regimes with aggressive open market operations to anyone who was willing to listen after the Fed floated, in the false belief that currencies fell due to ‘overvaluation’ and not liquidity injections.

Countries like Sri Lanka where there is no doctrinal foundation in sound money and no knowledge of classical monetary theory, were easy prey, critics say.

East Asia and Japan rejected such regimes. Malaysia is a prime example which despite not having a legal hard peg, fixed itself, repaid debt ahead of time, when tin and other commodity prices collapsed in the wake of Volcker tightening, while Latin America defaulted.

Elephant in the Room

A country with a soft pegged central bank (flexible exchange rate or intermediate regime) will see debt rocket each time it suppresses interest rates to target a policy rate and triggers a currency crisis.

Once a currency crisis hits, on one had the domestic currency value of external debt which is denominated in dollars protecting sovereign bond holders, goes up.

Interest rates of domestic debt also have to go up to stop the money printing and halt forex shortages which can widen the overall deficit in the short term.

The currency collapse also kills purchasing power and the real economy slows or contracts.

Once the credibility of the exchange rate has been lost, due to excess money injected the country loses the ability to settle both imports and debt repayment by exchanging domestic money for dollars.

The reserves (savings of past years) are used for current imports and debt repayments more money is injected to sterilize the interventions to maintain the policy rate, reserves collected over several years are run down in a few months.

Falling reserves, a depreciating currency then trigger rating downgrades (usually due to so-called exchange rate of as the first line of defence which saw downgrades in 2018 and 2020 in Sri Lanka) and sovereign bond as yields soar, and market access is lost, triggering a default.

As reserves dwindle further due to holding the policy rate with new money, more downgrades follow.

Countries with flexible exchange rates/flexible inflation targeting with market access can default at virtually any level of debt, critics say.

Market Access

Sri Lanka’s debt to GDP ratio shot up over 100 percent and lost almost all its reserves following a currency crisis in 2000/2001.

But at the time (or in earlier soft-peg crises in 1988/89 and earlier) the country did not have market access and bullet repayment debt.

In Sri Lanka bonds are big part of the country’s debt.

“Once you have lost market access there is virtually no level of gross financing needs that is sustainable,” Lanau said.

Analysts say the once market access has been lost, and the IMF declares that debt is unsustainable, which blocks the World Bank and ADB from giving loans, default is almost certain.

Argentina which has the archetypal soft-pegged Latin America central bank, which sterilizes interventions, strikes zeros off the peso at intervals and get into forex trouble.

“The country got into an IMF program in mid-2018, it was a very optimistic set of IMF targets, policy adjustments,” Lanau said.

“And this IMF program did not work and the situation got critical in August 2019 at which point Argentina defaulted.”

In March 2020 the IMF had presented a debt sustainability analysis where it was expected to to get its debt to 40 percent of GDP by 2030 and foreign exchange debt service to 3 percent of GDP, Lanau said, compared to 4.5 percent for Sri Lanka to make debt sustainable.

Ecuador which had a successful pre-emptive debt re-structuring, had debt levels of around 60 percent when it went talked to bond holders.

It was an ‘easy re-structuring, Lanau said.

It was a “lot about a bunch of maturities coming due in very few years as opposed to a very high debt ratio or a situation that was very unsustainable economically.”

Ecuador however is a dollarized country where its central bank effectively died in the 1990s after the sucre collapsed to 25,000 to the US dollar.

The Central Bank of Ecuador is no longer capable of creating forex shortages or driving the people to starvation and external debt is effectively in domestic currency.

Ecuador’s gross financing needs are now down to around mid single digits, while Sri Lanka’s has shot up to around 30 percent of GDP following the currency collapse.

Ecuador central bank was set up by Edwin Kemmerer, a US money doctor, with a gold peg (no obstinate policy rate) but was corrupted in 1947 by Robert Triffin, a US Keynesian who set up Argentina style central banks in several Latin America countries that frequently defaulted from the 1980s.

Sri Lanka’s central bank was also set up in 1950 by a US money doctor with broadly similar sterilizing powers.

Sri Lanka also started to depreciate the currency from around 1980 without withdrawing inflationary policy (an earlier re-incarnation of first line of defence strategy) triggering strikes, social unrest but no sovereign default due to lack of market access.

Sovereign defaults were mostly absent during the Bretton Woods era even in Latin America when countries maintained their pegs more or less with complementary monetary policy and the IMF also supported external anchors.

However after 1980 when the US tightened policy under Chairman Paul Volcker there were widespread defaults in pegged Latin American countries which did not hike rates in tandem or sterilized interventions (resisted the BOP) trying to operate independent monetary policy.

Now there are a number of market access countries in Africa and Asia with reserve collecting central bank which are trying to operate flexible inflation targeting, another monetary policy which are in conflict with the balance of payments which are ripe for serial currency crises and default.

Clean floating central bank do not use foreign reserves for imports nor collects them. (Colombo/Dec27/2022)

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