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Sunday June 23rd, 2024

Sri Lanka unions threaten to cripple economy against IMF-backed reforms

Sri Lanka will continue to experience more power cuts

ECONOMYNEXT – Trade unions in Sri Lanka have threatened to cripple the economy if the government does not reverse IMF-backed reforms, with one main opposition SJB-affiliated union leader promising a total shutdown of power & energy, medical, banking and other vital sectors starting midnight March 14.

Samagi Trade Union Collective Convenor Ananda Palitha told reporters on Monday March 13 that if the government does not revoke a newly increased progressive tax regime, lower interest rates and reverse a steep electricity tariff hike, trade unions will decide the fate of the government.

Claiming that the government is attempting to sell the Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC), historically loss-making state owned enterprises (SOEs) that according to Palitha are now turning a profit, he said the islandwide trade union actions that commenced on Monday will further intensify on Tuesday, leading up to a massive strike on Wednesday March 15 with the participation of various sectors.

“If the government still doesn’t get it, at midnight on March 14 all trains will stop, as will power supply. Doctors will cease to work, while the entire university, health, energy and banking sectors will be rendered inactive,” said Palitha.

“Let’s see if the government is going to stay or go; let’s see if it’s going to go or if it is going to be given the run. That decision will be taken on the 15th,” he said.

“If the government is pro-people, listen to these demands and reverse the tax policy, the interest rates, and revoke the power tariff hike and make the country peaceful,” he added.

Meanwhile, severe trade union action by medical doctors have already brought the state health sector to a near-standstill. Doctors are on strike in several provinces against an International Monetary Fund (IMF)-backed income tax hike, greatly inconveniencing patients.

The strike is taking place in hospitals in the Western, Southern, Central and Eastern provinces, with patients who visited outpatient department (OPD) clinics forced to turn back.

Only emergency services were available on Monday at the Colombo National Hospital and the Gampaha District General Hospital, with ward rounds taking place as usual.

The privately owned NewsFirst network showed that patients who arrived at the Kalubowila, Kalutara and Karapitiya Teaching Hospital OPDs for treatment were forced to turn back. A similar situation was reported in the Matara hospital.

Government Medical Officers Association (GMOA) Secretary Haritha Aluthge said his professional association is still open to a solution to its demands from the government.

“If we get a solution, with a timeframe, at least within the day today, we won’t have to extend this to tomorrow,” said Aluthge.

“At present, as has already been decided, trade union action is set to commence from 8am tomorrow in the North Western, Sabaragamuwa, Northern and North Central provinces. If there is no solution by tomorrow, it has been decided to go for a continuous islandwide strike from 8am Wednesday,” he said.

Nurses unions are also expected to join the strike on March 15.

“Even now, the ball is in the court of the administration. We have presented alternative proposals to resolve this without hurting government revenue and while increasing the country’s income. We have no intention to inconvenience patients and intensify strikes. But if that’s what the authorities want from us, we have to give that to them,” said Aluthge.

Banking employees, who are also part of the multi-sector trade union action, reported to work on Monday dressed in black, demanding a reversal of the tax hike. University lecturers are part of the campaign as well, with school teachers also ready to join them on Wednesday.

Related:

Sri Lanka state university lecturers still on strike against IMF-backed tax hike

General Secretary of the Ceylon Teachers’ Union Joseph Stalin told reporters on Monday that their trade union action will take place across all 10,172 schools in the country. Provincial and central government education authorities have been informed in writing about the strikes, he said.

“We’re taking this action against the myth that the government without a mandate is perpetuating that they can somehow do all of this. They have not made any response to these trade unions’ demands. Nor are they capable of responding,” said Stalin.

“This is a historic moment where this country’s working class has united.  We tell the government to understand the message the working class is conveying through this strike. Or else we will continue to go to bigger actions,” he said.

High-income earning public servants in higher education, medical, banking, ports and other sectors have for weeks been threatening to up the ante in ongoing trade union action against Sri Lanka’s IMF-backed reforms, including a progressive income tax hike that sees the cash-strapped government collect from anyone earning over 100,000 rupees a month.

Minister of Ports, Shipping and Aviation Nimal Siripala de Silva told parliament on Thursday that 17 ships en route to the Colombo Port had turned back as a result of a recent anti-tax protest organised by port unions. He also claimed that one protesting port worker earns over 170,000 rupees a month.

Related:

Seventeen ships turned back after Colombo Port anti-tax protests, claims minister

Sri Lanka’s new tax regime has both its defenders and detractors. Critics who are opposed to progressive taxation said it serves as a disincentive to industry and capital which can be invested in business. They argue that a flat rate of taxation is implemented where everyone is taxed at the same rate.

Others, however, contend that the new taxes only affect some 10-12 percent of the population and, given the country’s economic situation, is necessary, if not vital.

Critics of the protesting workers argue that most of the workers earn high salaries that most ordinary people can only dream of, and though there may be some cases where breadwinners could be taxed more equitably, overall, Sri Lanka’s tax rates remain low and are not unfair. (Colombo/Mar13/2023)

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India supports Sri Lanka Coast Guard to boost maritime security

ECONOMYNEXT – India has given 1.2 million US dollars’ worth spare parts to Sri Lanka’s Coast Guard to be used in a vessel also gifted to the Indian Ocean Island on an earlier occasion, the Indian High Commission in Colombo said.

“Handing over of the large consignment of spares symbolizes India’s commitment to support capability building towards addressing the shared challenges of Maritime Security in the region,” the Indian High Commission said

The spare parts were brought to Sri Lanka on the Indian Coast Guard Ship Sachet, an offshore patrol vessel that was on a two-day visit to the island.

The spares were formally handed over to the Sri Lanka Coast Guard Ship Suraksha which was gifted to Sri Lanka in October 2017 by India.

India has gifted spare parts for the ship in June 2021 and April 2022 and also provided assistance in refilling of Halon cylinders in January 2024. (Colombo/June23/2024)

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Sri Lanka Water Board makes profits, tax-payers inject Rs28bn

ECONOMYNEXT – Sri Lanka’s state-run National Water Supply and Drainage Board has made a profit of 5.2 billion rupees in the year to December 2023, after a tariff increase despite not getting money for 25 percent of its water it pumps out.

Total revenues went up to 61.8 billion rupees in 2023 from 35.4 billion rupees, a Finance Ministry report said.

Water revenue surged to 58.5 billion rupees from 33.1 billion rupees, cost of sales also went up to 32.8 billion rupees from 23.14 billion rupees, helping boost gross profits from 12.3 billion rupees to 29.0 billion rupees.

Finance costs surged to 14.9 billion rupees from 3.9 billion rupees,

NSWD reported net profits of 5.2 billion rupees for the year, against a loss of 2.7 billion rupees a year earlier.

The Treasury had given 28 billion rupees from tax payer money to settle loans.

During the Rajapaksa administration, macroeconomists who ran the Finance Ministry made state enterprises borrow money from banks through Treasury guarantees listing them as ‘contingent liabilities’, claiming they were ‘off balance sheet’.

The Road Development Authority, which had no revenues to speak of borrowed large amounts of money from banks which were listed as ‘contingent liabilities’ though they were a responsibility of the state from day one, allowing macroeconomists to understate both the budget deficit and national debt, critics say.

The water tariffs were raised by 81 percent after macroeconomists printed money to supress interest rates for flexible inflation targeting/potential output targeting. The currency collapsed after macroeconomists tried to float the rupee with a surrender rule in place.

Non-revenue water for which no money is collected was 25.2 percent. The agency was supposed to reduce non-revenue water. In some districts religious establishments are responsible for non-revenue water, according to an official who said it on condition of anonymity.

The water board is also unable to collect money from some services like common toilets for underserved communities. (Colombo/June23/2024 – Update II)

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Sri Lanka will expedite Indian projects: President

ECONOMYNEXT – Sri Lanka will expedite Indian-backed projects in the island, President Ranil Wickremesinghe told Indian business people after a visit by Indian External Affairs Minister S Jaishankar this week.

“I discussed with Prime Minister Modi the need to accelerate the joint program that we have decided, agreed on. So the major ones are identified, and Foreign Minister Jaishankar came down today [20] to have a discussion. Now this will show the new path we are taking,” president Ranil Wickremesinghe said.

“It won’t be individual projects. We’ve discussed a fair number of them. First is the grid interconnection between Sri Lanka and India, so that sustainable energy can be transmitted to India.

“We have the Sampur solar power project, which is a Government to Government (G2G) project, and a three island project, which is where we hope the ground breaking can take place in July,” he told Indian business people at the 31st All India Partner’s Meet 2024 (AIPM 2024), held at ICT Ratnadipa in Colombo.

The AIPM 2024 which was organised by KPGM Sri Lanka and India provided a platform for both countries to reaffirm their commitment to collaborative projects that promise to redefine bilateral relations and propel socio-economic growth.

“It’s a great pleasure and a privilege to have you in Sri Lanka, in Colombo, holding this meeting. It shows on one hand the close friendship that our two countries have, and on the other hand, the confidence that you have in Sri Lanka.

“Having now survived two difficult years, I must acknowledge that this was possible because India gave us a loan of $3.5 billion. All that will be repaid.”

Cooperation between the two nations needed to be enhanced, particularly in the energy sector, aiming to foster new development for the Northern region, Wickremesinghe said.

“We are looking at developing Palk Straight for wind energy and solar energy, both countries to get together and have a large farm for solar energy, for renewable energy. It also means that we will have a new economy for the northern province, which was worst affected by the war.”

Several Indian-backed projects in Sri Lanka have stalled due to protests from some parties, with some going to courts.

India is helping expand the Kankesanturai port, and is discussing development of the Palali and Colombo airports.

The National Livestock Development Board of Sri Lanka, in collaboration with India’s Amul Dairy Company, is involved in a project to enhance liquid milk production in the country.

The two nations are also considering establishing land connectivity.

Discussions have also taken place regarding expediting the Trincomalee Development Project, which encompasses industrial investment zones and tourist areas.

“Plans are underway to construct a multi-product oil pipeline from Nagapatnam to Trincomalee, pending the final observation report. Trincomalee is poised to become a hub for oil refining, with the development of ports and investment zones, transforming Trincomalee Port into a significant hub on the Bay of Bengal.

“Today, the entire East Coast is being opened up for tourism, with additional land earmarked for hotels in Galle and southern areas. Moreover, there are plans to establish more investment zones across the country, alongside expanding our professional training programs. In these endeavours, we are collaborating closely with India.” (Colombo/Jun22/2024)

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