A protest has been launched in Colombo today to voice objection to the actions of the government.

Accordingly, the protest is being held to object to the government’s decision to recast the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF) as part of its Domestic Debt Restructuring process for economic recovery.

Earlier today, the Fort Magistrate’s Court issued an order preventing the protesters, including trade unionists and politicians, from entering several parts of Colombo during the protest. (NewsWire)

#SriLanka: Happening now – trade unions protest the Ranil Wickremesinghe govt's decision to recast EPF/ETF funds as part of its Domestic Debt Restructuring exercise for economic recovery. pic.twitter.com/tneoT6EM2B

— Meera Srinivasan (@Meerasrini) August 28, 2023

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President Ranil Wickremesinghe has expressed confidence that Sri Lanka would overcome its bankruptcy status by September this year.

According to the President’s Media Division (PMD), the President also called for collective efforts to support the government’s initiatives, particularly, domestic debt optimization.

The President made the request while addressing the Annual General Meeting (AGM) of the Sri Lanka Institute of Directors (SLID).

Meanwhile, President Ranil Wickremesinghe also urged business leaders to educate their employees on this crucial step aimed to ensure that individuals and industries comprehend the significance of domestic debt optimization. 

During meetings held yesterday (29) at the Presidential Secretariat, President Ranil Wickremesinghe addressed members of the Chambers, business leaders and unions regarding Domestic Debt Optimization (DDO).

He said by engaging in widespread explanations, stakeholders can grasp the nuances of the restructuring and gauge its influence on their livelihoods.

President Wickremesinghe noted that the foremost effect of this restructuring endeavour is the anticipated reduction in interest rates, providing a glimmer of hope for individuals burdened by financial obligations. While the exact timeline remains uncertain, experts predict a noticeable decline in interest rates within a matter of months.

The President said, “I think best is for you all to go out and explain what this debt restructuring means to you all and to the workforce. I think that’s what you all should do and if you can keep that momentum in the next few days, it will be very helpful. This is about the best that we can achieve. With this comes the fact that our interest rates will come down. It’s a matter of months before it comes down. Secondly, the development assistance will start, which will be a boost to a part of the construction sector.”

Moreover, the President said as part of this restructuring, an injection of development assistance is on the horizon, poised to breathe new life into the construction sector. This infusion of support has the potential to stimulate growth, create employment opportunities, and invigorate the overall economy.

During the meeting with trade union representatives, President Ranil Wickremesinghe emphasized the importance of implementing the Domestic Debt Optimization program. He warned that failure to do so could lead to a potential increase in interest rates for loans obtained by small businesses. The President also expressed concerns about the possibility of the dollar’s resurgence, given the strengthening of the rupee. He emphasized that domestic debt optimization must be conducted simultaneously with foreign debt optimization to mitigate this risk.

President Wickremesinghe assured the trade union representatives that the law guarantees the continuation of the 9% annual interest provided to beneficiaries under the Employees’ Provident Fund. He urged them not to harbour any doubts regarding future benefits. (NewsWire)

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The banking system would not be burdened any further as it already contributes to the Treasury and economy through taxes of over 50%,  Governor of the Central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe stated.

Dr. Nandalal Weerasinghe assured that the 57 million depositors would be protected despite a domestic debt restructuring.

He further stated that the exchange of bonds pertaining to superannuation funds in line with the domestic debt restructuring plan will be completed within the month of July. 

The CBSL Governor also assured that the Employees Provident Fund (EPF) funds already accumulated would not be touched and also guaranteed a minimum of 09% interest for EPF.

At the moment there are two options for the EPF which has invested 3.5 trillion rupees in Treasury bonds, he said.

The CBSL Governor outlined that firstly, accept the government’s domestic debt restructuring process, go for step-down bonds, and agree to change the bonds from a higher rate to new series with a 9% yield from 2025 or Secondly, EPF will have to pay 30% corporate tax from the current 14%. 

Dr. Weerasinghe also assured that people can withdraw their EPF funds as per current laws and further assured liquidity to pay the funds for the contributors.

The CBSL Chief added that it was vital to protect the banking sector as a collapse of the country’s banking sector would have catastrophic consequences. 

Dr. Nandalal Weerasinghe made the clarifications during a meeting with the heads of media institutions held today (29). 

His remarks come after the Cabinet of Ministers granted approval for Sri Lanka’s domestic debt restructuring programme during a special Cabinet meeting held yesterday.

Responding to a question posed by a journalist, the CBSL Governor said Friday (June 30) was declared a bank holiday to prevent any speculation until Parliament approval was obtained for the domestic debt restructuring. (NewsWire)

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The Cabinet of Ministers has granted approval for Sri Lanka’s domestic debt restructuring programme.

The approval was granted during the Cabinet meeting held this evening.

Sri Lanka is in the midst of debt restructuring discussions with its international creditors. The authorities have also taken measures to restructure domestic debt to mitigate the country’s economic crisis. 

Earlier this week, Central Bank Governor Dr. Nandalal Weerasinghe assured local depositors of the safety of their deposits, adding that interests will not be affected due to the domestic debt restructuring. 

Meanwhile, President Ranil Wickremesinghe, yesterday assured that the restructuring of the local debt will have no impact on the stability of Sri Lanka’s banking system, including any state or private bank under the supervision of the Central Bank.

President Wickremesinghe also noted that the local debt restructuring will not affect the deposits in the banking system.

He also said that restructuring of domestic debt will not affect the member balance of any superannuation funds, including the EPF, ETF & the rate of return of superannuation funds that have been paid in the past.

President Wickremesinghe further assured that it will also not affect any interest on bank deposits that are currently being paid. (NewsWire)

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Opposition MP Dr. Harsha de Silva has called for legislative amendment to protect holders of domestic debt in a possible restructuring.

The government is reportedly expected to announce a Domestic Debt Restructuring (DDR) this week.

Commenting on the anticipated announcement, MP Harsha de Silva, expressed his thoughts and suggestions regarding the upcoming domestic debt-restructuring plan in Sri Lanka.

Addressing the media yesterday, he stated that opposition parties, while cautious about the potential consequences, would discuss the need for careful domestic debt optimization if deemed absolutely necessary. 

Press statement: 

Opposition Parties Stand United for Careful Domestic Debt Restructuring

In a press conference held at the Leader of the Opposition’s office, MP Harsha de Silva, expressed his thoughts and suggestions regarding the upcoming domestic debt-restructuring plan in Sri Lanka. He divulged that opposition parties, while cautious about the potential consequences, would discuss the need for careful domestic debt optimization if deemed absolutely necessary. Tomorrow, the opposition parties are scheduled to meet and discuss their stance on this crucial issue, which has garnered significant attention nationwide. The government plan is set to be presented to the Cabinet on the 28th and will subsequently undergo deliberation in the Committee on Public Finance over the following two days. Pending agreement at the Party Leaders’ meetings, a special parliamentary session is planned for the weekend of July 1st and 2nd to debate the plan.

Cautionary Approach Highlighted from the Start

MP Harsha highlighted the importance of a cautious approach toward domestic debt optimization. Their blueprint, published last year and revised earlier this year, stressed the need to guarantee the stability of Sri Lanka’s financial sector and prevent any unfair treatment of depositors, particularly the EPF and ETF. The Opposition firmly opposes any haircut on domestic debt and warned against it. He referred to a haircut as a ‘Do Not Cross’ line.

Strong Opposition to Damaging Measures, Willingness to Act for the Nation

He said while his party was totally opposed to any plans that include a haircut on domestic debt, they remain committed to protecting the interests of the nation. They emphasize the importance of fair treatment for pension funds and depositors without causing further harm to the economy. Their primary focus is on safeguarding the country’s interests and ensuring that any necessary measures are implemented in a responsible and cautious manner.

Urgent Need for Economic Growth

Sri Lanka’s economy is contracting daily, regressing to the GDP per capita levels in 2013. To achieve the status of a developed country, as outlined by the President, Sri Lanka needs to sustain a minimum growth rate of 6.5% annually from 2027 to 2048. Merely maintaining the current pace or IMF projected 3% by 2027 will not be sufficient to propel the nation forward. Additionally, the country faces challenges such as reduced demand in global markets and the displacement of low-skilled labour due to technological advancements and automation.

The Promise of Domestic Debt Optimization

The primary advantage of pursuing a domestic debt optimization program lies in the reduction of substantially increased interest rates, allowing the economy to regain stability and promote growth. MP Harsha emphasized that the focus should be on optimizing domestic debt rather than restructuring it entirely. The government has indicated that only treasury bonds will be subject to optimization, not treasury bills. Thus, as treasury bonds carry higher risk, they demand a risk premium. Lowering the risk through the debt optimization program will subsequently lead to a decrease in interest rates, benefiting small and medium-sized enterprises (SMEs) and other businesses, and revitalizing the economy. This urgency underscores the importance of implementing the domestic debt optimization plan as soon as possible.

Commitment to Protecting People and Creditors

MP Harsha de Silva and the opposition parties are prepared to draft laws and regulations in Parliament to safeguard the interests of the people and creditors. This commitment aims to ensure that any domestic debt restructuring measures are conducted in a manner that prioritizes the well-being of all stakeholders involved. They emphasize the need for transparency and accountability throughout the process.

Reviving the MSME Sector

One of the potential positive outcomes of an effective domestic debt optimization program would be the revival of the Micro, Small, and Medium Enterprises (MSME) sector. MP Harsha highlighted the importance of providing support and opportunities for these businesses, which are currently facing significant challenges. A well-executed debt optimization program could help uplift the MSME sector from its current state and foster growth and economic recovery.

As Sri Lanka grapples with the pressing issue of domestic debt, MP Harsha and the opposition parties stress the importance of careful consideration and a cautious approach. They stand united in their determination to protect the interests of the nation while exploring viable strategies for domestic debt optimization. By striking the right balance between economic stability, fair treatment of depositors, and sustainable growth, Sri Lanka can overcome its challenges and pave the way for a brighter future. (NewsWire)

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The government has not made a final decision yet regarding domestic credit optimization, State Minister of Finance Shehan Semasinghe clarified on Monday (19). 

During a press conference held at the Presidential Media Centre yesterday, State Minister Shehan Semasinghe addressed the issue of false information being disseminated by various parties in the country regarding the domestic debt optimization program.

He emphasized that the government has not made a final decision on this matter and further stressed the sensitivity surrounding the optimization of domestic debt and assured that the government is approaching this issue with utmost responsibility.

State Minister Shehan Semasinghe reaffirmed the government’s dedication to achieving improved optimization in order to uphold the stability of Sri Lanka’s banking and financial system. 

His remarks were made in line with the conference’s theme, ‘Collective path to a stable country’.

The full statement of the State Minister of Finance Shehan Semasinghe:

“No final decision has been made yet on the domestic debt optimization program. However, as a government, we always approach sensitive issues responsibly. President Ranil Wickremesinghe also addressed the matter of domestic debt optimization in Parliament. The Central Bank and the Ministry of Finance have provided clarifications on their stance. Our focus is on finding solutions for optimizing the banking and financial system of our country without negatively impacting stability, which is crucial. Consequently, various information and announcements are being released within the country.

Once the government reaches a final decision, we are prepared to inform both the parliament and the public. This is an extremely sensitive matter that significantly influences the market situation. Therefore, it is vital that we refrain from making statements that create doubts regarding this optimization, as it helps maintain stability in our financial market. We must all act responsibly in this regard. Following the President’s visit to France, we anticipate gaining a better understanding of these issues, particularly concerning the restructuring of foreign debt.

There have been criticisms on the political platforms concerning the current economic program implemented by the government. However, if the groups criticizing had a need or a plan, and possessed the capability, they would have an opportunity to confront that challenge. Only President Ranil Wickremesinghe has accepted that challenge. He has communicated to the people the progress made by the country since assuming office as President. While the leaders responsible for meeting the needs of the people fulfil their duties, those who have not taken on this responsibility continue to make various statements. Specifically, the JVP platform has expressed various opinions regarding the management of the economy. However, none of these statements present any practical ideas or programs for building the country.

The aim is to find a solution to the economic crisis without relying on the intervention of the International Monetary Fund (IMF). The government seeks to address the challenges and overcome the crisis through its own program, without external financial assistance. The specific solution that does not involve the IMF’s intervention is not mentioned.

While there are claims of providing a solution without IMF support, it is implied that such claims may lack substance. The challenging times we have faced are gradually coming to an end, and there is a belief that better progress will be achieved through the government’s program.

The IMF predicts a decrease in the negative growth rate from -7.8 to -3 by the end of the year. However, the government’s commitment and efforts are expected to lead to positive developments in 2024.

The government has achieved more results than anticipated thus far, and it is important to maintain the commitment made by the government.

The country’s progress in terms of transparency, combating corruption, and addressing fraud has gained international attention. The parliamentary week, which begins today, is expected to enhance confidence in Sri Lanka’s economy, administrative structure, and financial system. The Budget Office Bill and an Anti-Corruption Bill will be debated and passed in parliament, contributing to the country’s progress.

Passing these bills is crucial to boost the strength of the country’s financial market and attract investments. It may also lead to a change in rating agencies’ opinions about Sri Lanka. The first review with the IMF in September will showcase the progress made and the current program being implemented. Alternative measures have already been taken to address the slight decrease in income levels. Overall, the economic process is being successfully implemented in the country, though it may take some more time for the people to feel its effects.

As a government, we are committed to advancing this program. Any opposition or attempts to destabilize the political and social stability established can have consequences worse than those experienced during the weak economy of the previous year. Despite short-term challenges, we need everyone’s support to steer the country onto a new path, ensuring a clear future and preventing similar crises from occurring again.

Two groups exist in the country: one that capitalizes on the people’s suffering during the economic crisis to advance their political goals, and another that genuinely supports the government’s efforts to overcome the crisis. Some individuals attempt to spread misinformation and false news. As a government, we strive to provide accurate information based on correct data and statistics to enable people to make informed decisions. (NewsWire)

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