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Wednesday September 27th, 2023

Sri Lanka President says seeking IMF bailout for forex crisis, debt

ECONOMYNEXT – Sri Lanka will seek International Monetary Fund support, President Gotabaya Rajapaksa said as the country reels from foreign exchange shortages due to unusually high levels of money printed to keep interest rates low.

Sri Lanka is facing forex shortages for basic imports as printed money has pushed up domestic demand and made it difficult to repay debt.

It will be the 17th time Sri Lanka is getting IMF help, since a Latin America style central bank was set up in 1950.

“To this end, we have initiated discussions with international financial institutions as well as with our friendly countries regarding repayment of our loan installments,” President Rajapaksa said in an national address for which power cuts were halted.

“The government is in discussions with various parties to implement a new method regarding this which will be beneficial to our country.

“Yesterday’s discussion with the International Monetary Fund was also held for this purpose.

“Through those discussions, we hope to find a way to pay off our annual loan installments, sovereign bonds, and so on.

“Subsequent to my discussions with the International Monetary Fund, I have decided to work with them after examining the advantages and disadvantages.”

Sri Lanka’s started going to the IMF after a central bank capable of creating balance of payments deficit by printing money was set up in August 1950, abolishing a Singapore, Malaysia and Hong Kong style currency board that had kept the country stable since 1885.

The Singapore and Malaysia currency board (Straits dollar) was set up in 1898, but the monetary arrangements were retained after independence, blocking money printing. Malaysia has since become an intermediate regime and has seen instability.

President Rajapaksa meanwhile promised to solve the economic crisis which has left people in queues.

“I accept responsibility for the actions I take,” President Rajapaksa said. “Today, I am determined to make tough decisions to find solutions to the inconveniences that the people are experiencing.

“I have appointed a National Economic Council and an Advisory Committee to assist it. I will constantly monitor whether the decisions I make through this are implemented. Therefore, first of all I request you to have faith in the actions I will take on behalf of the people.”

Analysts say the the government will have to reduce spending and people will also have to pay higher taxes to pay the salaries of tens of thousands of unemployed graduates hired into the already bloated public sector.

Sri Lanka’s state spending went up from 17 percent of gross domestic product in 2014 to close to 20 percent under so-called ‘revenue-based-fiscal-consolation’ where spending based consolidation (cutting spending) was pooh-poohed.

Higher monetary instability was also seen amid call money rate targeting and real effective exchange ate targeting. However from 2019 taxes were cut and unusually high levels of level of money was printed under an extreme post-Keynesian ideology which was likened to Modern Monetary Theory.

Last week Sri Lanka broke a non-credible peg in a bid to establish a floating regime, but so far, the float has not taken place though the rupee has fallen to around 270 to the US dollar. (Colombo/Mar16/2022)

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Sri Lanka to have country pavilion at COP28 in bid for Climate Justice Forum

ECONOMYNEXT – Sri Lanka’s Cabinet has approved the proposal by its Minister of Environment to maintain a country pavilion during the 28th Conference of Parties (COP28), to display “national level initiatives related to climate change”.

Sri Lankan delegates representing the country’s interests at COP28 in November are to present a proposal to establish a forum, with the aim of raising a “common voice” for the aspirations of developing countries in the global dialogue over climate change.

While attending COP28 to the UN Framework Convention on Climate Change from 30 November to 12 December in Dubai, the Sri Lankan delegation is to present the proposal to the official body requesting permission for Sri Lanka to initiate a “Climate Justice Forum”.

The Cabinet decision said that the purpose of the forum is “raise a common voice regarding the aspirations of developing countries, together with countries that are more likely to be at risk due to climate change”. (Colombo/Sep27/2023)

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Sri Lanka’s sex workers face false charges: Women’s collective

ECONOMYNEXT – Sri Lanka’s sex workers have faced fundamental rights violations including unlawful detention and cruel, inhumane and degrading treatment, a representative of the Abhimani Women’s Collective said at a conference yesterday (26).

“Following their arrest, sex workers frequently experience the infringement of their fundamental rights, including the right to fair treatment, due process and protection from cruel and inhumane treatment,” said a report by the Abhimani Women’s Collective.

Soliciting on the street is currently illegal under section 7 1 (a) of the Vagrants Ordinance which criminalizes ‘any person in and about any public place soliciting any person for the commission of any act or of illicit sexual intercourse or indecency.

This provision along with section 2 of the Brothel’s Ordinance, which criminalizes the aiding and abetting of the management of a brothel, has been used to arrest sex workers in the country.

However, many sex workers claim that they have been presented before court on false charges of drug possession and have been subjected to harassment by both Police and customers.

“When inquiries are made over our arrest, the police say that we have been charged with drug possession,” Sakuni Mayadunna, a sex worker, said.

“Prostitution is not legal in Sri Lanka, so therefore, sex workers will face problems,” Chief of Police in charge of the Child and Women Abuse Prevention, Renuka Jayasundara, said.

“However, every citizen has fundamental rights in this country. We have not authorized the Police to carry out actions such as hitting detainees or not providing a female officer. If those actions happen, a complaint must be filed.”

Attorney-at-Law for the legal aid commission, Ganga Somarathna, said that the legal aid commission provides legal support for such victims whose income is below 45,000 rupees and also for women and children. (Colombo/Sep27/2023)

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Sri Lanka to introduce social security system: minister

ECONOMYNEXT – Sri Lanka’s Labour minister has said that they are set to introduce a comprehensive national social security system, covering all workers.

“The system will address the weaknesses of the current system and provide much-needed support to workers and their families,” Manusha Nanayakkara, Minister of Labour and Foreign Employment said on X (formerly known as Twitter).
He did not specify the details.

Nanayakkara also spoke of the need for robust social security when he met with exporters last week to discuss labor law reforms, boosting female workforce participation and attracting FDI.

Sri Lanka plans to reform labour laws for an export-oriented economy.

The pandemic and the economic crisis highlighted the need to improve the coverage of social security.

Studies have shown that Sri Lanka’s women are kept out of formal employment by childcare, elderly care and housework, as day care and elderly homes are either too expensive or too few.

The government imposed a Social Security Contribution Levy to increase its revenue last year. (Colombo/Sep27/2023)

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