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Wednesday December 7th, 2022

Sri Lanka to hold ground at UNHRC vote on Oct 06: foreign minister

Mohamed Ali Sabry PC/Facebook

ECONOMYNEXT – Sri Lanka has decided to hold its ground at the latest United Nations Human Rights Council (UNHRC) session in Geneva, expressing strong opposition to a newer and tougher resolution to be taken up for a vote on Thursday October 06.

Noting that the odds are stacked heavily against the island nation what with powerful Western nations lobbying hard for votes, Sri Lanka Foreign Minister Ali Sabry said on Wednesday that his government is particularly opposed to operative paragraph number 8, which he claimed is directly in confrontation with Sri Lanka’s constitution.

The paragraph reads: “Recognises the importance of preserving and analysing evidence relating to violations and abuses of human rights and related crimes in Sri Lanka with a view to advancing accountability, and decides to extend and reinforce the capacity of the Office of the High Commissioner to collect, consolidate, analyse and preserve information and evidence and to develop possible strategies for future accountability processes for gross violations of human rights or serious violations of international humanitarian law in Sri Lanka, to advocate for victims and survivors, and to support relevant judicial and other proceedings, including in Member States, with competent jurisdiction.”

Speaking to journalists in the run-up to the Thursday’s vote, Minister Sabry said over a Zoom call from Geneva that countries such as the United States and the United Kingdom, who lead the UNHRC core group on Sri Lanka, are greatly influenced by domestic-level lobbying by pressure groups from the Sri Lankan Tamil diaspora.

“This is not a fair reflection of the people’s will. This is heavy lobbying. This is geopolitics,” he said.

The composition of the UNHRC has changed and many countries that previously voted in support of Sri Lanka are no longer members of the council, said Sabry, indicating that the country will fare poorly at Thursday’s vote.

The minister complained that neither the West nor the diaspora groups are ever satisfied with the steps taken by Sri Lanka under successive governments to promote reconciliation through its own homegrown mechanisms and are determined to perpetually keep the “small country” trapped.

“Whatever you deliver, they will continue with a new theme and this will remain,” he said, falling back on Sri Lanka’s usual defence that human rights are being used as a tool of control.

With the exception of the Yahapalana government period from 2015 to 2019, Sri Lanka has, since 2009, taken a defensive if not confrontational approach to handling the UNHRC’s attempts to hold the state accountable for human rights violations alleged to have taken place in the final phase of a brutal 26-year with the separatist Tamil Tigers.

Minister Sabry said in September that Sri Lanka’s government under new president Ranil Wickremesinghe – who, incidentally, was prime minister in the Yahapalana government – does not want any confrontation with any international partner at the 51st UNHRC sessions but will oppose any anti-constitutional move forced upon the country.


Sri Lanka does not want confrontation at UNHRC, but will oppose anti-constitutional moves

In his address to journalists on the eve of the vote, Sabry said that Western machinations notwithstanding, Sri Lanka is committed to establishing a truth-seeking mechanism of its own and will go ahead with efforts at reconciliation that are in line with the constitution and do not violate the country’s sovereignty or the independence of the judiciary. Proponents of an external mechanism, however, have questioned the reliability of any internal investigation.

A truth-seeking mechanism that’s acceptable to the international community will be established after a rapport has been submitted by a presidential commission of inquiry, he said.

The Prevention of Terrosism Act (PTA), Sri Lanka’s controversial anti-terror law, already amended in April will also be repalced with new legislation, he added.

The PTA and its use in detaining anti-government protestors have also been highlighted in the new UNHRC resolution.

Sabry complained that countries like the US, the UK, Canada and Germany do not acknowledge measures taken by Sri Lanka over the years such as the rehabilitation and release of 12,9000 Tiger cadres who had surrendered to the army and the release of some 94 percent of Tamil-owned land previously occupied by the military.

The Tamil people of the country’s north and east, claimed Sabry, are not asking for a hybrid court or foreign judges but for employment opportunities and economic assistance.

The minister reiterated his government’s opposition to operative paragraph 8, which he called dangerous and a “targeted act against war heroes”.

“We cannot agree to this. We can’t do it even if we do agree,” he said, noting that having foreign judges investigate Sri Lankan troops or having troops prosecuted abroad would be a violation of the constitution.

“Since 2009, the peace benefits have been enjoyed by everybody, be they Sinhalese, Tamil, or Muslim. There has been massive development in various parts of the country. Until the unfortunate recent economic crisis, Sri Lanka was on a good path. People have now forgotten,” he said, adding that the dividends of peace are “everywhere”.

The latest UNHRC resolution on “promoting reconciliation, accountability and human rights in Sri Lanka”, sponsored by 26 countries, also makes reference to the country’s prevailing currency crisis.

Operative paragraph 13 calls upon the government of Sri Lanka to “address the ongoing economic crisis, including by investigating and, where warranted, prosecuting corruption, including where committed by public and former public officials, and stands ready to assist and support independent, impartial and transparent efforts in this regard.”

Minister Sabry said Sri Lanka objects to this too, on the grounds that the UNHRC has no jurisdiction on economic matters.

“We are all agreed that economic reform is needed. But is that the specialisation of the UNHRC? That’s the area of the IMF and the World Bank. We have been perpetually put here. They’re interfering in everything, whether it’s within their purview or not,” he said.

Next they’ll say they need to investigate cricket, he added.

“What we’re saying at this crucial juncture is [that Sri Lanka needs] unity international support. We don’t want division and polarisation in the council,” said Sabry.

“We have engaged the core group and told them that we need time and space to deliver,” he added. (Colombo/Oct05/2022)

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Sri Lanka in deep talent drain in latest currency crisis

ECONOMYNEXT – Sri Lanka businesses are facing a drain of talent, top business executives said as the country suffers the worst flexible exchange rate crisis in the history of its intermediate regime central bank and people lose hope.

“We are seeing a trend towards migrating,” Krishan Balendra, Chairman of Sri Lanka’s John Keells Holdings told an economic policy forum organized by the Ceylon Chamber of Commerce.

“We have seen an impact mainly on the tourist hotels side, quite an exodus of staff (migrating) to countries we have not seen in the past. 

“We have seen people go to Scotland, Ireland. It has usually been the Middle East and Maldives. Australia seems like a red hot labor market at the moment.”

Sri Lanka’s rupee collapsed from 200 to 360 to the US dollar after macro-economists printed money to suppress rates.

Sri Lanka operates a ‘flexible exchange rate’ where errors in targeting interest rates are compensated by currency depreciation especially after the 1980s.

Classical economists and analysts have called for the power to mis-target rates and operate dual anchor conflicting monetary regimes should be taken away to prevent future crisis.

Currency crises are problems associated with flexible exchange rate central banks which are absent in hard pegs and clean floats.

“Something new we are seeing is that older people, even those in their 50s, which was a surprise, are looking at migrating,” Balendra said.

Businesses are trying to retain talent as real wages collapse.

Balendra said as businesses they see some stability returning and based on past experience growth is likely to resume, and they were communicating with the workers.

“We have a degree of conviction that the economy should get better, its the stability phase now and it will get better going forward so without the way our businesses are placed we should see good growth,” Balendra said.

“We can’t chase compensation that’s just not practical and we are not trying to do that especially if people are looking to immigrate but what we can do is show the career opportunities in the backdrop of the situation that people would rather stay here because its home.” 

Sri Lanka unit of Heineken says it is also trying to convince workers not to leave, with more success.

“We are all facing the effects of brain drain and it’s not just the lower levels… What we are doing is a balance of daring and caring,” Maud Meijboom-van Wel – Managing Director / CEO, Heineken Lanka Ltd told the forum.

“Why I say daring is, you have to be clear in what you can promise people, when you make promises you have to walk the talk. So with the key talents and everyone you need to have the career and talent conversations.

“I am a bit lucky because I am running a multinational company so my career path goes beyond Sri Lanka so I can say if you acquire certain skills here, then you can move out of here and then come back too, that is a bit easier for me but it starts with having a real open conversation with walking the talk – dare and care.” (Colombo/Dec7/2022)


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Despite losses, Sri Lanka to resume “park & ride” transport after complaints  

ECONOMYNEXT –  Sri Lanka’s state-run Transport Board will resume its loss-making City Bus service from January 15, 2022 Cabinet Spokesman Bandula Gunawardena said, after the service abruptly discontinued with the state-run firm’s director board citing losses.

The City Bus service was introduced in 2021, under the government of former President Gotabaya Rajapaksa, from Makubura to Pettah and Bambalapitiya.

The service was started to reduce the number of automobiles travelling to and from Colombo and suburbs by providing a comfortable, convenient and safe public bus transportation for passengers and riders who use cars and motorcycles as their means of transportation.

During the time period in which the service was initiated, there were 800 hundred vehicles that would be parked and would use the system, Gunawardena, who is also the Transport Minister, said.

The service was later collapsed due to inconsistencies in scheduling and it was completely stopped after

“Without informing the Secretary or the Minister of the relevant Ministry, the Board of Directors have come to a conclusion that this is loss making route and must be halted,” Gunawardena said.

“The users of the City Bus service brought to our notice and therefore I gave the Secretary to the Ministry of Transport the approval to start the City Bus service from January 15.”

“If we stop all loss making transport services then massive inconveniences will occur to the people in far parts of the island.”

The chairman of the state run Ceylon Transport Board has been asked to handover the resignation letter by the Minister Gunawardana citing that the head has failed to implement a policy decision approved by the government. (Colombo/ Dec 06/2022)

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Sri Lanka may see rates falling next year: President

ECONOMYNEXT – Sri Lanka’s interest rates are high and hurting small businesses in particular but interest rates are required to maintain stability, President Ranil Wickremesinghe said.

“One is, all of you want to know what’s going to happen to the interest rates?,” President Wickremesinghe told an economic policy forum organized by the Ceylon Chamber of Commerce.

“I wish I know. The governor has told me that the inflation has peaked. It’s coming down. You all understandably want some relief with the interest rates to carry business on.”

“I understand that and appreciate the viewpoint. It’s not easy to carry business on with such high interest rates. On the other hand, the Central Bank also has to handle the economy. So maybe sometimes early next year we will have a meeting of minds of both these propositions.”

Sri Lanka’s interest rates are currently at around 30 percent but not because the central bank is keeping it up. The central bank’s overnight policy rate is only 15.5 percent but the requirement to finance the budget deficit and roll over debt is keeping rates up.

Rates are also high due to a flaw in the International Monetary Fund’s debt workout framework where there is no early clarity on a whether or not domestic debt will be re-structured.

After previous currency crises, rates come down after an IMF deal is approved and foreign loans resume and confidence in the currency is re-stabilished following a float.

This time however there has been no clear float, though the external sector is largely stable and foreign funding is delayed until a debt re-structure deal is made.

Sri Lanka’s external troubles usually come because the bureaucrats do not believe market rates are correct when credit demand picks up and mis-uses monetary tools given in 1950 by the parliament to suppress rates, blowing the balance of payments apart.

The result of suppressed rates by the central bank are steep spikes in rates to stop the resulting currency crisis.

A reserve collecting central bank has little or no leeway to control interest rates (monetary policy independence) without creating external troubles, which is generally expressed as the ‘impossible trinity of monetary policy objectives’.

However, it has not prevented officials from trying repeatedly to suppress rates, perhaps expecting different results.

After suppressed rates – supposedly to help businesses – trigger currency crises, the normalization combined with a currency collapse leads to impoverishment of the population.

The impoverishment through depreciation leads to a consumption shock, which also leads to revenue losses in businesses.

The suppressed rates then lead to bad loans.

In the 2020/2022 currency crisis the sovereign default has also led to more problems at banks. Several state enterprises also cannot pay back loans.

“…[T]he bad debt that is being carried by the banks is mainly from the private sector or the government sector,” President Wickremesinghe said.

“Keep the government sector aside. We’re dealing with it. How do you handle it? Look, one of our major areas of are the small and medium industries. You can’t allow them to collapse, but they’re in a bad way.”

Classical economists and analysts have called for new laws to block the ability to central bank to suppress rates in the first place so that currency crises and depreciation does not take place in the first place.

Then politicians like Wickremesinghe do not have to take drastic and unpopular measures to fix crises and there will be stability like in East Asia.

Sri Lanka had stability until 1950 when the central bank was created by abolishing an East Asia style currency board. The currency board kept the country relatively stable through two World Wars and a Great Depression.

In 1948 after the war (WWII) was over “we stood second to Japan” Wickremesinghe said.

“But we started destroying it from the sixties and the seventies,” he said. :We started rebuilding an economy, which was affected by a (civil) war, and thereafter the way we went, is best not described here.”

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