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Tuesday April 23rd, 2024

World Bank concerned over potential reform fatigue in Sri Lanka’s election year

ECONOMYNEXT — With elections coming up in Sri Lanka, the World Bank is concerned that reform fatigue could set in, leading to potential policy reversal, particularly with regard to state-owned enterprises (SOEs), a World Bank official said.

Senior Country Economist for the Maldives and Sri Lanka Richard Walker told EconomyNext that the World Bank is specifically concerned about SOE reforms as progress in that area has not been as rapid as hoped despite considerable macroeconomic gains made since the country’s worst financial crisis in decades.

“Maybe we haven’t seen it progress as far as we’d hoped. In terms of trying to put in place a much better framework to ensure better governance and options for private participation, that hasn’t moved as fast we’d hoped,” Walker said on the sidelines of an event held in Colombo on Tuesday April 02 to launch the World Bank’s Development Updates for Sri Lanka and South Asia.

“We do hear different views on this out there. I think there’s a sense of ‘let’s keep these enterprises owned and managed by the public sector’, so we’re not clear where that’s going,” he said.

Asked if the World Bank has closely studied competing views expressed by Sri Lanka’s mainstream political parties on the matter of SOE reforms, Walker said the Bank is just starting to have conversations with various parties to understand what different stakeholders deem possible and see where common ground may lie.

“I think the sense is that you don’t want to maybe take too big a step initially, but there needs to be some sort of plan which would help orientate the country and economy in a better direction,” he said.

Walker also cautioned against the use of the word ‘privatisation’.

“I think we should stay away from the word ‘privatisation’. Firstly, governance of these enterprises need to be improved as well as transparency and performance, which is starting to happen. You can then start looking at options for private participation,” he said.

There is a sequence of measures that can lead up to private participation, which can take different forms and approaches, according to Walker.

Sri Lanka is set to hold its presidential election between September 17 and October 17 this year, after which a dissolution of parliament is anticipated, leading to a general election. A formal announcement has yet to be made, however.

While President Ranil Wickremesinghe’s reform agenda has been largely commended by the International Monetary Fund (IMF) so far, albeit with some qualifications, opposition parties have been critical of some of the reforms, with the leftist National People’s Power (NPP), which is currently leading opinion polls, being particularly scathing on the proposed restructure of some SOEs.

Earlier on Tuesday, addressing the media at the World Bank’s Sri Lanka Development Update launch, Walker said that, while Sri Lanka’s economy is stabilising and there have been notable gains made, poverty, inequality and vulnerability persist and a commitment to the ongoing reforms are an essential bridge to recovery and prosperity.

“However, downside risks remain and [there are two risks I want to emphasise]. The first one is around the elections this year and the potential we see or the concern we see around policy reversal or policy fatigue, particularly around the reforms that have been implemented.

“And the other one is obviously a prolonged and insufficiently deep debt restructuring which would be a significant drag on the economy,” said Walker.

Asked to elaborate, Walker told journalists that a lot of progress has been made with respect to reforms but the burdens this has placed on the Sri Lankan people could lead to reform fatigue.

“There’s the election coming up. I think there are different views from different political parties on the reforms. So, from our side, yeah, we we are concerned about reform fatigue or reform reversal. As I said, it’s this bridge to recovery. The reforms are critical in those areas to sustain and maintain them,” he said.

“We’ve said it many times, use this crisis as an opportunity to put Sri Lanka in a much better place as an economy than it had been over a period of many years,” he added.

Walker said Sri Lanka’s economy had witnessed a deterioration over the years with issues in trade and the country’s investment environment and predominance of state-owned enterprises (SOEs) needing to be addressed.

“But it will take some time and commitment. So of course we’re not sure what’s to come, but we’ll be monitoring that quite carefully,” he said.

World Bank Country Manager for the Maldives and Sri Lanka Chiyo Kanda said while it’s not possible to predict how policy will pan out in the future, the Bank has been encouraging the government to reinforce its communications.

“This is to help the broader stakeholders understand why the ongoing reforms are important and needed, although some are quite painful in certain areas, so that the the importance of a continuing the reforms [is communicated] if we are not to turn back to a worse case scenario,” she said.

Kanda said communication is also critical in explaining how the various reforms are interconnected.

“We have been trying to help the reforms as much as possible to make it harder to reverse or turn back,” she said.

While nothing is irreversible, Kanda said, building certain institutions and systems and creating laws and regulations give the reforms some staying power regardless of what happens in the election cycle. (Colombo/Apr02/2024)

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Iran President to open Sri Lanka $514mn irrigation, hydro power project

MULTIPURPOSE: Uma Oya multipurpose development project is the largest since the end of the Mahaweli projects.

ECONOMYNEXT – Iran President Seyyed Ebrahim Raisi will inaugurate an irrigation and hydropower project that was designed and built by Iranian engineering firm and was also initially financed before international sanctions hit the project.

The Uma Oya (River) project will irrigate 4,500 acres of new agricultural land, generate 290 Gigawatt hours of electricity and also provide drinking water, a government statement said.

Sri Lanka had awarded an engineering, procurement, construction (EPC) to Iran’s FARAB engineering group to design and construct the 514 million dollar multipurpose project in 2010.

The project was funded until 2013 with a million US dollar credit from the Export Development Bank of Iran but international sanctions prevented the country from continuing financing, a government statement said.

The project continued with funding from Sri Lanka. Sri Lanka had since repaid 19.3 million dollars of the credit and 35.2 million remains outstanding.

The Uma Oya project has a 120MW of hydro power generators, which can generate 290 Giga Watt hours of energy.

Each year 145 million cubic metres of water will be taken from Uma Oya to the Kirindi Oya river valley after generating electricity in an underground power station.

It will irrigate 1,500 hectares of existing agricultural and 4,500 hectares of new land in the Moneragala district, where crops can be cultivated in both the Maha and Yala seasons.

About 39 million cubic meters of water will be used for drinking and industrial purposes.

Two reservoirs built at Dyraaba and Puhulpola in Uma Oya basin is connected by a 3.98 kilometre conveyance tunnel and water is taken through a 15.2 kilomtre headrace tunnel to an underground power station. A tailrace tunnel takes water from the power station to the Kirindi Oya basin.

The project was originally expected to be completed in 2015, but due to financing delays and later water leaking into the headrace tunnel and the Covid pandemic had delayed it. The project completion date was extended to March 31, 2024 and defect liability date to March 31, 2025.

(Colombo/April23/2024 – CORRECTED Iran President Seyyed Ebrahim Raisi will inaugurate an irrigation and hydropower project that was designed and built by Iranian engineering firm.)

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Sri Lanka state oligopoly allowed to import some black gram

ECONOMYNEXT – Sri Lanka has allowed the import of some black gram, by three state agencies, according to a gazette notice issued under the hand of President Ranil Wickremesinghe.

Import licenses will be given for 2,000 metric tonnes of the seed classified under HS Code 7312.31.22 and 29.

Sri Lanka State Trading Corporation, National Food Promotion Board and Sri Lanka Hadabima Authority is to be given import licenses.

Traders have resorted to smuggling some types of black gram (ulundu) mis classified as chick peas, to get over high taxes and import restrictions.

Tamil legislators have also protested the import controls, which they go into several key ethnic foods they consume. (Colombo/Apr23/2024)

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Sri Lanka Foreign Ministry consular division shifted to Battaramulla

ECONOMYNEXT – Sri Lanka’s Foreign Ministry said it consular division would be shifted to the Suhurupaya building in Subuthipura, Battaramulla from May 02, 2024.

Document authentication services provided by the Consular Affairs Division in Colombo will be suspended on 29 and 30 April 2024 held transfer the Electronic Document Authentication System (e-DAS) to the new premises at Suhurupaya.

Urgent applications for authentication to the Consular Division in Colombo, or any Regional Consular Offices by 4.15 pm on 26 April 2024, the Foreign Ministry said.

Regional Consular Offices in Jaffna, Trincomalee, Kurunegala, Kandy and Matara will remain open to accept applications.

Authenticated documents will be delivered to the applicants only on Thursday, 02 May 2024.

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