Registered as a newspaper in Sri Lanka

www.ft.lkThursday April 09, 2020Volume: 11/111

Sri Lanka’s weak public finances will exacerbate COVID-19 economic shocks

‘Viru Abhiman’: Tribute by SLIC to heroes of the nation battling COVID-19 pandemic

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Coronomics and the mutatingcoronavirus of the mind P9

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ReuteRs: More than 1.41 million people have been reported infected by the novel coronavirus across the world and 83,414 have died, according to a Reuters tally.

Infections have been reported in 212 countries and territories since the first cases were identified in China in December 2019.

Following are the countries that have reported the most deaths due to the corona-virus as of 1400 GMT on 8 April:

� Italy: 17,127 � Spain: 14,555 � US: 12,862 � France: 10,328 � UK: 6,159 � Iran: 3,993 � Mainland China: 3,332 � Belgium: 2,240 � Netherlands: 2,248 � Germany: 2,024

The National Film Corporation (NFC) plans to issue a grant of Rs. 100,000 per month to all registered cinema halls.

NFC General Manager Nilanga Vithana said the Corporation plans to offer the grant for a period of three months.

Under the proposed grant scheme, NFC registered film hall owners will receive a grant of Rs. 50,000 a month for payment of wages and maintenance, while another Rs. 50,000 will be issued as an interest-free loan to be repaid in 10 instalments.

The NFC has made arrangements to remit the Rs. 5,000 allowance paid to 160 registered motion picture artists before the third day of each month. The NFC has also planned to deliver packages of dry rations and essential medicines worth Rs. 5,000 to artists in the coming days.

London (Reuters): Nearly 140 campaign groups and charities urged the IMF and World Bank, G20 governments and private creditors on Tuesday to help the world’s poorest countries through the coronavirus crisis by cancelling debt payments.

The call, spearheaded by the British-based Jubilee Debt campaign, comes a day before a Group of 20 working group tasked with the coronavirus response for develop-ing countries is due to meet.

The campaign urged the immediate can-cellation of 69 poor countries’ debt pay-ments for the rest of the year, including to private creditors, estimating that it would free up over $ 25 billion for the countries, or $ 50 bil-lion if extended for 2021.

It also called for debt cancellations or addi-tional finance to be free of conditions on eco-nomic policy such as austerity, and for the G20 to back emergency rules that would prevent poorer countries from being sued by private creditors.

“Developing countries are being hit by an unprecedented economic shock, and at the same time face an urgent health emergency,” Sarah-Jayne Clifton, Director of Jubilee Debt Campaign, said.

FITCh Ratings believes that the extraordinary regulatory meas-ures announced by the Central Bank - focusing on the relaxa-tion of capital expectations and classification of loans for banks - should relieve immediate pres-sure on the banks’ financial pro-files but will not prevent medium-term deterioration.

Fitch recently revised the sec-tor outlook for Sri Lanka to nega-tive from stable to reflect these risks and will be assessing the impact on bank ratings.

T h e r e c e n t l y a n n o u n c e d measures are in addition to a spate of concessions already given, including a debt morato-rium (capital and interest) and a working-capital loan for busi-nesses and individuals affected by COVID-19.

The additional measures allow Domestic Systemically Important Banks (D-SIBs) and non D-SIBs to draw down their capital con-servation buffers by 100bp and 50bp, respectively, where banks currently hold a buffer of 250bp of their risk-weighted assets. This will allow the banks to operate below their current Tier 1 regula-tory minimums of 10% for bucket 2 D-SIBs (Bank of Ceylon and Commercial Bank of Ceylon PLC), 9.5% for bucket 1 D-SIBs (People’s

Bank and hatton National Bank PLC) and 8.5% for non-DSIBs.

“This would release around Rs. 53 billion of capital for lending purposes, based on banks’ report-ed capital ratios at end-2019; how-ever, it will also reduce buffers against potential deterioration in asset quality,” Fitch Ratings said in a statement.

The regulator has also provid-ed support to the smaller banks through regulatory forbearance. The Central Bank has extend-ed the deadline to increase the minimum capital requirement for banks (to Rs. 20 billion for licensed commercial banks and Rs. 7.5 billion for licensed special-ised banks) by two years to end-2022.

This will provide some breath-

ing space for banks such as Pan Asia Banking Corporation PLC, Amana Bank PLC and Cargills Bank Limited that were required to double their existing capital levels - which would have been challenging in the current envi-ronment.

DIVeRSIFIeD blue chip Softlogic holdings Plc has announced its own set of cost-cutting measures including pay cuts, suspending hikes and bonuses to manage the impact from the global and local spread of the novel coro-navirus (COVID-19).

T h e m e a s u r e s f o l l o w Softlogic Chairman Ashok Pathirage telling staff that the unprecedented lockdown in the country with curfew being imposed from 17 March and which continues una-bated to date has eroded the Group’s performance, with most companies being closed for business.

Nonetheless, he said staff wellbeing and good health were of primary importance and overrode any other sec-ondary measures the group was implementing to ensure continuance of strong opera-tions in the economy which is globally battered by the new coronavirus.

Aimed at three months, salary cuts range from 5% to 30% for anyone earning over Rs. 50,000. There will be no overtime payments as well but when called upon to do so an employee would need to volunteer and work the extra hours should the job require such commitment.

Softlogic will also freeze all new recruitments, includ-ing head count replacements. “All staff must come forward and volunteer to take on an extra function at this point in time,” Chairman Pathirage has requested the team at Softlogic.

The number of COVID-19 deaths in Sri Lanka reached seven and total cases climbed to 189 yesterday, prompting health authorities to expand treatment facilities, and call on the Government to refrain from loosening curfew, as the next few weeks remained crucial to effectively countering the virus.

The warning came as the seventh infected patient, a 44-year old gem merchant and resident of Mount L a v i n i a , s u c c u m b e d t o COVID-19 last evening. Four persons tested positive for the virus yesterday, tak-ing the total number of con-firmed cases to 189. Three of the four had closely associat-ed with a COVID-19 infected patient from Ratnapura.

A M B A S S A D O R S of the european Union (eU) yes-terday appreciated the Government of Sri Lanka for facilitating the departure of tourists from the european region, and backed the meas-ures taken by Sri Lanka to counter COVID-19, the Task Force for Continuous Supply, Operation and Coordination of essential Services said.

A meeting of the Special Presidential Task Force

for Continuous Supply, Operation and Coordination of essential Services was held under the patronage of Basil Rajapaksa at Temple Trees yesterday, with the participation of ambassa-dors of european Union (eU) countries.

The delegation expressed a p p r e c i a t i o n t o t h e G o v e r n m e n t a n d o t h e r organisations for facilitating the safe departure of a large number of tourists from the european region, who were stranded in the island due to the lockdown, a statement released by the Task Force Secretariat said.

The selling rate of the US Dollar yes-terday was quoted at Rs. 200.4652, an increase from Rs. 199.40 on Monday.

In the first quarter, the Rupee sharply depreciated by 4.7%, largely influenced by the behaviour in March owing to the impact of COVID-19 on the economy and reserves.

HONG KONG (Reuters): Indonesia has raised $ 4.3 billion in its first so-called “pandemic bond”, which included the longest-dated dollar debt tranche ever issued in Asia, according to a term-sheet seen by Reuters.

The deal was finalised in the US overnight and sold in

tranches of 10.5 years and 30.5 years, worth $ 1.65 billion each, and a $ 1 bil-lion 50-year tranche.

It was Indonesia’s larg-est bond deal and the first

time a 50-year dollar deal has been issued in Asia, not including rolling hybrid transactions, according to the term-sheet.

A group of activists and organisations yes-terday wrote to Acting I n s p e c t o r G e n e r a l of Police (IGP) C. D. W i c k r e m a r a t n e t o revoke the directive issued warning of strict legal action against those who spread or share false or malicious mes-

sages, news or informa-tion, stating it adversely impacts the freedom of expression.

“The notice that strict action will be taken against those who ‘criti-

cise’, point out ‘minor shortcomings/failures’ or ‘scold/chastise’ State of f icials performing their duties adversely impacts the freedom of expression and the expression of dissent. This constitutionally guaranteed freedom is key to holding the State to account for its actions and questioning the action or inaction of State officials is the civic duty of every citi-zen and is fundamental to ensuring a healthy and functioning democ-racy. hence, it should

not be interpreted as obstructing the perfor-mance of the duties of public officials,” the letter addressed to the Acting IGP said.

On 1 April, the Media Division of the Sri L a n k a P o l i c e , u p o n the instructions of the Acting IGP, issued a notice addressed to all media organisations that strict legal action will be taken against those who spread or share false or malicious messages, news or infor-mation.

WITh most businesses suffering from the partial shutdown of the country and economy as part of mitigation measures against the spread of COVID-19, companies are considering half-pay leave or no-pay leave if curfew continues for much longer.

With the country marking near three weeks of partial shutdown except for essential services and select export companies, most busi-nesses are suffering from zero rev-enue or insignificant income, caus-

ing a serious cashflow crisis. For these businesses, the Government-enforced Work from home ini-tiative is not helping either, with growing fears over how April sala-ries can be paid with zero or dismal revenue.

There is consensus that stem-ming the spread of COVID-19, which has killed seven people so far and infected nearly 150, is important, but there is also a grow-ing view that economy or busi-nesses cannot be shut down too

long whilst owners are expected to pay salaries as usual. “The issue is no revenue generation owing to the curfew and the partial shutdown. The longer this status quo persists, the bigger the problem will be end of the month,” it was opined. In cer-tain COVID-19 affected countries employees inactive due to the shut-down are treated "unemployed."

“If the curfew and partial shut-down approach continues for few more weeks, lot of companies will face serious problems in paying

salaries,” a business leader told the Daily FT. ”Yes, debt moratorium will help to reduce costs, but sala-ries have to be paid irrespective of the work from home arrangement, and how to pay sans regular rev-enue is the issue,” he added.

Whilst most companies have paid March salaries, despite two weeks of shutdown or work from home initiative, the financial capacity to pay salaries in April is seriously undermined, another business owner said. “Continuity

of curfew and partial shutdown will force owners to take a drastic decision of letting employees stay home (working or otherwise), sub-ject to paying only half of their sal-aries or no-pay,” he added.

There is consensus that stem-ming the spread of COVID-19, which has killed seven people so far and infected nearly 150, is important, but there is also a growing view that economy or businesses cannot be shut down too long whilst owners are expect-

ed to pay salaries as usual. “The issue is no revenue generation owing to the curfew and the par-tial shutdown. The longer this status quo persists, the bigger the problem will be end of the month,” it was opined.

Several large companies such as John Keells, Brandix, and Softlogic, as well as SriLankan Airlines, have announced pay cuts ranging from 5 to 35% for execu-tives for three months.

COVID-19-struck zero-revenue businesses considering half-pay or no-pay leave if curfew continues

Global coronavirus cases at 1.41 m, death toll tops 83,400

Rs. 100,000 monthly grant for owners of cinemas closed due to COVID-19

Social groups urge mass debt relief for poor countries hit by crisis

Softlogic cuts pay, stops hiring; urges staff to take up extra roles to cope with COVID-19

Chairman Ashok Pathirage

�� Govt. told not to relax COVID-19 countermeasures�� Testing continues to be expanded�� Seventh patient succumbs to virus�� Total cases reach 189, active cases 140�� Four specialist hospitals established in Western Province�� Nine people arrested for spreading fake news on social media

One more COVID-19 death, total cases at 189

�� Govt. praised for facilitating departure of European tourists, measures taken to counter COVID-19

Task Force for Essential Services meets EU ambassadors

�� Activists say directive hinders freedom of expression, concerned by equating criticism of State officials with obstruction of duties, spreading disinformation

Acting IGP asked to revoke directive warning of legal action against criticising public officials

Acting IGP C. D. Wickremaratne

�� Latest CB policies expected to release Rs. 53 b capital for lending ��Warns that if NPL classification is reversed, NPL ratio could increase�� Recalls banks have already restructured 3.6% of gross loans by end-Sept. 2019 from 1.8% at end-2018 �� Speculates next step by CB may be to relax liquidity coverage ratio

Banks’ risks will persist despite regulatory measures: Fitch

Indonesian Government raises $4.3 b in first 'pandemic bond'

Rupee fall persists; US$ exchange rate crosses Rs. 200 mark

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Let’s not take supply chains for granted

�CJE cautions against ‘infodemic’ in COVID-19 reporting -See page 02

�CBK joins intl. group calling for $ 8 b to fill urgent gaps in COVID-19 response - See page 04

CURfew will not be lifted within the Ratnapura and Pelmadulla police areas today, and travel through these areas too will not be permit-ted, Police Spokesman DIG Ajith Rohana said yesterday.

Ratnapura and Pelmadulla under lockdown

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News www.ft.lk

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THURSDAY APRIL 09, 2020

Continuations from Page 1

THE Centre for Journalism and Education (CJE) urged media institu-tions, journalists and media personali-ties/influencers to avoid discriminatory rhetoric, misinformation and disinfor-mation when reporting on any and all matters related to the new coronavirus.

“Ethical journalism lies at the core of good journalism. Particularly at a time of unprecedented crisis, it is the respon-sibility of all individuals and institutions providing information to the public to adhere to the core principles of truth and accuracy, fairness and impartiality, humanity, accountability and independ-ence,” the organisation stated in a news release.

CJE said that Sri Lanka, like most other countries in the world, was in the midst of the novel coronavirus pandem-ic, with the Government, security and health authorities continuing to battle against the spread of this disease.

“While crises generally have the effect of bringing people together, recently however, distorted and false information that supports racism has begun to circulate on social and mainstream media, undermining these efforts,” it said.

CJE added that at stake how-ever was more than journalism itself. “Attempting to blame a minority group of people for the spread of the disease in the nation is not only unfactual and unethical but also puts the whole country at risk. The World Health Organisation (WHO) has declared the threat of misinformation related to the novel coronavirus pandemic an ‘infodemic’ as it poses a serious threat to public health. To quote the WHO Director-General, ‘the stigma is more dangerous than the virus itself’,” the organisation said.

Reporting during a pandemic is no easy task and many good journalists

put themselves at risk to provide clear, concise and up-to-date information to the public. Others, however, by forc-ing a fear-based response, are creat-ing confusion, stigmatising an entire group of people, putting victims and their families at risk of violence, and distracting others from following the guidelines issued by the authorities. They are also working in direct con-travention of the guidelines issued to the media by the Ministry of Health.

To assist in combatting this deadly epidemic, the Centre for Journalism and Education has created and made available educational material for journalists, media institutions and even media personalities/influencers to utilise when reporting on the pan-demic. See https://www.facebook.com/pg/Centre-for-Journalism-and-Education-104928591056073/photos/?tab=album&album_id=105704200978512.

Unlike humans, viruses do not discriminate, based on race or reli-gion. Journalists, media institutions and media personalities/influencers, particularly at a time of crisis such as this, have a responsibility to report accurately in a manner that does not cause harm to an individual, commu-nity, or country.

“Utilising fear to target a vulnerable group and divide a nation of people does not lead to a path of safety. Let’s work to ensure the health and safety of all peoples,” the Centre stated.

The Centre for Journalism and Education is dedicated to the devel-opment of journalism in Sri Lanka. A non-partisan and non-profit organisa-tion, its aim is to create an ethical, innovative and sustainable journalistic practice across the island, because ‘good journalism leads to healthier societies’.

THE Task Force on Essential Services has issued new regu-lations for the distribution of vegetables around the country, which will be done through the respective Divisional Secretariats from yesterday.

Issuing a statement, the Task Force Secretariat noted that it had been pointed out to them numerous times by experts that allowing hundreds of farmers to converge at economic centres was risky as it could foster the spread of COVID-19. Therefore, until further notice, no farm-ers will be allowed to gather at the Economic Centres in Dambulla, Thambuththegama, Nuwara Eliya, Keppetipola, and Ambilipitiya.

Instead, the transactions at these centres will be conduct-ed online or via phone. The Essential Items Procurement Committees established at every Divisional Secretariat country-wide have the responsibility of evaluating how much vegeta-bles are needed for their area and conveying that to the near-est centre by 10 a.m. Each order

should not be less than 7,000 kg. According to the statement, those manning the centres will then notify the Divisional Secretariats before 2 p.m. on whether their orders can be met and what changes, if any, may be made. The goods will then be dispatched from the centres to the respective Divisional Secretariats. Once they arrive, the regional sellers are respon-sible for offloading, distributing and selling the stocks.

The Divisional Secretariat is responsible for monitoring the quality of the vegetables and other goods received and ensur-ing that they are distributed covering the entire region equi-tably.

“The Task Force will contin-ue to evaluate and monitor the distribution of the vegetables and other provisions to ensure that the public are adequately supplied. We are confident that with these measures in place the distribution of goods can con-tinue without placing anyone in unnecessary danger,” the state-ment from the Task Force said.

THE Sri Lanka Navy has begun to patrol the Bolgoda and Bentara Rivers after reports of Atulugama in Bandaragama and Dharga Town residents violating curfew regulations by traveling in boats.

Some residents were seen vio-lating orders to remain in isola-tion and curfew regulations

by crossing the rivers by boat to interact with persons on the opposite banks, the Navy said in a press release yesterday.

The Navy, with the assis-tance of the Police , has deployed a number of small boats to patrol the inland water-ways and enforce curfew regu-lations.

THE Government yesterday called on the public to maintain social distancing during the Sinhala and Tamil New Year period to protect against COVID-19.

The sole purpose of curfew measures is to ensure the well-being of the people of this country in this critical situation, the President’s Media Division said in a statement.

“Hence the Government requests the public to bear the inconveniences caused as a result of ongoing curfew in a responsible manner. Also, the Government emphasises to limit the traditions and associations during the Sinhala and Tamil New Year to only the members of the family,” it said.

The curfew imposed in the districts of Colombo, Gampaha, Kalutara, Puttalam, Kandy and Jaffna, which have been identified as high risk zones, will contin-ue until further notice.

In all other districts, curfew will be lifted at 6 a.m. today, and will be re-

imposed at 4 p.m. on the same day. This will be effective until 6 a.m. on Tuesday 14 April, when curfew will again be tem-porarily lifted in these districts and re-imposed at 4 p.m. the same day.

Travelling to and from all districts has been completely prohibited, except for the purpose of providing essential ser-vices.

Those who misuse regulations intro-duced with the prime objective of ensur-ing the smooth and efficient functioning of essential services will severely be dealt with according to the law.

D u r i n g c u r f e w h o u r s , t h e

Government has put in place a mecha-nism to continuously supply essen-tial food and other goods, enabling the public to purchase them while at home. Those who are engaged in paddy farming and cultivation of small tea holdings and export crops in any district are permitted to carry out their activities.

The villages which have been declared isolated areas in the districts of Colombo, Kalutara and Kandy will remain in the same category, and no one will be allowed to enter or leave from these areas until further notice.

THE Office of Missing Persons (OMP) yesterday recommended that families of the missing and disappeared be included in any proposed relief measures, including the provision of food and financial assistance in

response to the COVID-19 crisis.OMP Chairperson Saliya

Pieris P.C., in a letter addressed to President Gotabaya Rajapaksa, said that as a short-term measure, the OMP recom-mends that dry rations be pro-vided to families of the missing and disappeared through Grama Niladharis. Grama Niladharis have already collected informa-tion regarding the missing and disappeared in their local area, and such lists could be used to

avoid duplication in instances where such families are also beneficiaries under other State assistance schemes for vulner-able persons.

The OMP, acknowledging in its Interim Report of August 2018 the extreme poverty faced by some families, recommended a range of interim relief measures for the most vulnerable among families of the missing and dis-appeared pending the award of a reparations package. In

response to one of the interim relief measures recommended by the OMP, the Government proposed to allocate Rs. 500 million in the 2019 Budget to provide Rs. 6,000 monthly relief to families of missing and dis-appeared persons, including members of the armed forces and Police identified as miss-ing in action on the condition of them of possessing a Certificate of Absence.

“According to information

received by the OMP, interim relief payments valued at approximately Rs. 11 million have been paid to 153 ben-eficiaries, up to 11 November 2019. The OMP observes that in many cases, the most vulnerable among families of the missing and disappeared are elderly and are female-headed households and survive on the daily wages of one family member. The pre-vailing situation in the country has had dire consequences on these families, as they are no longer able to earn their wages and they have limited or no assets,” the letter said.

THE Department of Pensions yesterday remitted Rs. 25,000 each to people eligible but were unable to register for pensions by 1 February.

Pensions Director General Jagath D. Dias issuing a press release stated that many eligi-ble pensioners were unable to register with the Department to receive their pensions due to the outbreak of the COVID-19.

Under the move, former Government employees and others who are eligible for pensions but failed to register have been paid the allowance based on the latest pension circular issued by the depart-ment.

The said circular (4/2020[i]) has been displayed on the Department’s website, the press release added.

CJE cautions against ‘infodemic’ in COVID-19 reporting

Navy patrols Bolgoda and Bentara Rivers to enforce curfew

New system to distribute produce countrywide

�� Curfew for all non-high risk areas will be temporarily lifted today and re-imposed until 14 April

Govt. calls on public to limit family interaction during Sinhala and Tamil New Year

��Writes to President for assistance �� Says many families in extremely difficult situation, especially female-headed households �� 2019 Budget allocation to give Rs. 6000 monthly relief stopped in Nov.  

OMP recommends inclusion of families of disappeared in COVID-19 relief measures

Rs. 25,000 grant to pensioners who missed Feb. registration

COVID-19-struck zero…

Paying the usual salary for the remaining employees will con-tinue to be a big burden unless the situation improves for the better sooner than later.

Private sector analysts point to several initiatives in COVID-19 impacted countries, where the Government is undertaking to pay in full or 80% of salaries of non-executive grade employ-ees. However, they are also mindful that the Government too lacks the fiscal space to enact such policies in Sri Lanka. The tourism industry, which is among the worst-hit, has made a similar appeal.

Greater clarity on the way forward in terms of pay in a con-tinuous shutdown is likely next week, and private sector expect the Government to step in and extend support despite its own challenges, due to the sensitivi-ties over salaries and job secu-rity by employees.

The Government has been commended for addressing the plight of the self-employed and those surviving on daily wages as well as poor families by grant-ing Rs. 5,000 to over 4 million families, though questions have been raised for how long this can be continued, and whether the recipients will be content.

Softlogic cuts…

The company has also fro-zen all expenses pertaining to training and development and employee welfare unless otherwise deemed as a critical expense whilst all new plans and capital expenditure will be held in abeyance.

Pathirage said these unprece-dented times were not endemic to Softlogic alone but to all other corporate entities, small and large, operating in the economy.

Noting that whilst other companies had been faster to take measures to cut staff emoluments, Pathirage said Softlogic after careful considera-tion and giving much thought to all grades of staff, decided to implement cost-saving meas-ures to ensure that job losses were minimised.

This is whilst taking the opportunity to look inwardly and reduce wasteful expenses, centralise functions to avoid duplication of work, eliminate unviable business practices and adopt the right strategy – so that management may accordingly stay on top of the learning curve – and face challenges of today’s harsh economic realities.

“At this moment, we will do our best to control what is within our ambit with foresight although there is little we can do to mitigate factors beyond the

control of human intervention,” Pathirage said.

He said that the Government, the Central Bank and health authorities were exploring ways to solve such intractable eco-nomic and health issues, but as a Group that was responsible for lives and wellbeing of over 10,000 staff and their families, the company expected staff at this critical time to understand the business rationale for under-taking cutbacks affecting staff emoluments, incentives and allowances in order to save expenditure during a time sus-tainable revenue growth was undermined for reasons beyond ordinary control.

The Softlogic Chairman appealed to the staff to give their best, double up on their perfor-mance objectives and commit themselves with utmost dili-gence and good faith and thus cooperate with management to implement these positive deci-sions until Group performance goals are successfully reached.

“Should our internal pro-cesses be harnessed with your focused commitment during these times, the Group will cer-tainly endure these temporary setbacks and become stronger like it has always done in the past,” the Softlogic Chairman added.

One more COVID-19…

Health authorities were treat-ing 140 active cases while 42 patients have been released from care after recovering. There are 228 hospitalised people being closely monitored by healthcare authorities.

Issuing a press release, Director General of Health Services Dr Anil Jasinghe said that the outbreak from the returnees from Italy has now reached the final stage.

“At the moment we have those who were exposed due to persons who returned from Indonesia, India, and Dubai. We have expanded testing, but found fewer patients than we antici-pated, this is a good trend. However, we will increase testing of target groups.”

Nevertheless, if the cur-rent countermeasures put in place to prevent the spread of the virus are relaxed, the current situation could swiftly take a turn for the worse, he stated. Social distancing and other public health regulations need to be adhered to strictly, he urged.

Addressing the press at the National Operations Centre for the Prevention of COVID19 (NOCPC) Dr. Jasinghe said that consecutive decisions taken by the Government and Health Ministry and relentless action by armed forces, Police, and public health inspectors had controlled

the spread of the virus. Had it not been for the quick action taken and tight enforcement, the number of patients could have easily increased, he said.

“Yesterday we opened the Iranawila facility, with it the spe-cialist hospitals in Beruwala, Homagama and Minuwangoda can cover the high-risk Colombo, Gampaha, Puttalam and Kalutara districts,” he explained, pointing out that the coming days will be crucial.

According to DIG Ajith Rohana, a person who uploaded a video spreading fake news about COVID-19 patients was arrested and made to appear before a magistrate court. The suspect has been remanded by court. The Police and the Criminal Investigation Department (CID) have arrested nine persons for spreading fake news thus far.

Ratnapura…The move follows four per-

sons testing positive for the virus yesterday, taking the total num-ber of confirmed cases to 189. Three of the four had closely associated with a COVID-19 infected patient from Ratnapura.

Acting IGP asked…

The activists and organisa-tions said that they recognise the need to counter the cir-culation of false or malicious information and to take action against those that hinder public officials from performing their duties or threaten them, but pointed out that the notice treats criticism of State officials as amounting to obstruction of their duties and spreading disinfor-mation.

Social groups urge mass…

Major governments and institutions are already push-ing for some of the measures the groups are calling for. The International Monetary Fund (IMF) is making $ 50 billion available from its emergency financing facilities and some 80 countries have already asked for help. The World Bank has also approved a $14 billion COVID-19 response package.

The institutions are also making a joint push for official bilateral creditors to allow low income countries to suspend their debt service payments for 14 months from the start of May.

But Tuesday’s message from the charities and campaign groups echoed the recent con-cerns of African governments - that it won’t be enough. Ethiopia said in a proposal submitted ahead of the G20 meeting that Africa alone is likely to need $150 billion of support.

“Out of the 69 low income

countries we are talking about, at least 45 of those are going to need to request emergency funding just to get through 2020,” said Mark Perera, a policy manager for the European Network on Debt and Development, one of the groups involved.

When the IMF and World Bank launched their Heavily Indebted Poor Countries (HIPC) debt relief programme in 1996, nations mainly owed money to wealthy countries and multilat-eral institutions.

No longer. China’s govern-ment, banks and companies lent some $143 billion to Africa between 2000 and 2017, according to Johns Hopkins University, while African govern-ments have taken on over $55 billion on international debt in the past two years.

The debt campaign group’s statement, whose signatories included the likes of Oxfam and Save the Children, also called for the creation through the United Nations of a systematic and enforceable process for sovereign debt restructurings.

Banks’ risks…In addition, the regulator

has loosened some NPL clas-sification requirements, and the banks no longer need to classify all credit facilities extended to a borrower as non-performing when the aggregate amount of all outstanding non-performing loans granted to such borrow-ers exceeds 30% of total credit facilities.

“We believe that while this and other measures should help to suppress a sharp near-term increase in NPLs, a reversal in these guidelines as the economy recovers could see the banks’ NPL ratios rise significantly,” it added.

Banks have also been per-mitted to grant an extension of 60 days to borrowers who are not entitled to any other con-cessions, to settle loans and advances which are becoming past due during March 2020, and not to consider such facili-ties as past due until the end of this 60-day period.

In addition, banks now have the flexibility to recover loans in Sri Lankan rupees, as the last resort, in circumstances where recovery of loans in foreign currency is remote. Such relief measures highlight the authori-ties’ supportive stance to the banking system.

The regulator has allowed the banks to consider changes to payment terms and loan contracts until end-June 2020 as ‘modifications’ instead of ‘restructuring’ for the purpose of classification of loans and advances and impairment computation. “We believe that the banks would be permitted to follow a similar treatment for impairment of such loans

for accounting purposes, as a modification may not be viewed as an increase in credit risk.” Banks have already undertaken a large amount of restructuring, which saw the share of restruc-tured loans in gross loans increase sharply to 3.6% across Fitch-rated Sri Lankan banks by end-September 2019 from 1.8% at end-2018.

“Apart from the reduction in the statutory reserve ratio, the regulator has not yet introduced any measures to support the liquidity positions of banks, but we believe that there could be further relaxation - particularly on the liquidity coverage ratio, which could fall due to non-repayment of loans and pos-sible deposit outflow. Banks are currently required to maintain a 100% coverage on both local- and all -currency ratios.”

Notwithstanding such meas-ures, the risks to the banking sector have increased, with the weaker operating environment exerting pressure on banks’ loan quality and profitability. Fitch expects weaker profitability to also weigh on capitalisation over the next 12 months.

Indonesia…The term-sheet showed

Indonesia will use the cash raised to partially “fund its COVID-19 relief and recovery efforts”.

Indonesia’s Government announced on Monday the 2020 estimated net bond issu-ance was raised to 549.6 trillion rupiah ($ 33.55 billion) to cover the country’s widening deficit.

It also listed a plan for sales of 449.9 trillion rupiah ($ 27.47 bil-lion) worth of “pandemic bonds” to cover additional spending for the COVID-19 response.

Citigroup, Deutsche Bank, Goldman Sachs, HSBC and Standard Chartered were the joint book runners for the deal, according to the term-sheet.

Rupee…Analysts said recent restric-

tions on outward remittances as well as the Government’s appeal for inward remittances reflect the pressure on the Rupee apart from external shocks the country is facing due to the new corona-virus pandemic.

Task Force...“The delegation of the

European Union applauded the manner in which Sri Lanka’s health authorities and heads of Government agencies have managed the COVID-19 situa-tion,” it added.

They also discussed various mechanisms for dealing with the health and economic sector of the country in the near future.

Ambassadors represent-ing Germany, Italy, France, Switzerland, Romania, Netherlands and Norway were present at the discussion.

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Over 200 dignitaries including one-time world leaders and heads of international bodies including former President Chandrika Bandaranaike Kumaratunga have issued a joint statement calling for world leaders to immediately agree to commit $ 8 bil-lion – as set out by the Global Preparedness Monitoring Board – to fill the most urgent gaps in the COvID-19 response.

The signatories also included former UN Secretary General Ban Ki-Moon, former State President of South Africa Frederik Willem de Klerk, two former British Prime Ministers John Major and Gordon Brown as well as Malala Yousafzai – Nobel Peace Prize Laureate (2014).

The signatories called for immediate internationally coordinated action – within the next few days – to address our deepen-ing global health and economic crises from COvID-19.

They called for $ 1 billion this year urgent-ly needed by World Health Organization (WHO) to enable it to carry out its critically important mandate in full.

“While it has launched a public appeal – 200,000 individuals and organisations have generously donated more than $100 million – it cannot be expected to depend on charita-ble donations,” the statement said.

The other commitment that former leaders called for were:

n $3 billion for vaccines: The Coalition for epidemic Preparedness Innovations (CePI) is coordinating the global research effor t to develop and scale up effective COvID-19 vaccines. In addition, Gavi, the vaccine Alliance will have an important role procur-ing and equitably distributing vaccines to the poorest countries and requires $7.4 billion for its replenishment: this should be fully fundedn$2.25 billion for therapeutics: The COvID-19 Therapeutics Accelerator aims to deliver 100 million treatments by the end of 2020 and is seeking these funds to rapidly develop and scale-up access to therapeutics. Instead of each country, or state or province within it, competing for a share of the existing capacity, with the risk of rapidly increasing prices, we should also be vastly increasing capacity by supporting the WHO in coordi-nating the global production and procure-ment of medical supplies, such as testing kits, personal protection equipment, and ITU technology to meet fully the worldwide demand. We will also need to stockpile and

distribute essential equipment.n A fur ther $ 35 billion will be required, as

highlighted by WHO, to support countries with weaker health systems and especially vulnerable populations, including the provi-sion of vital medical supplies, surge sup-por t to the national health workforce (70% of whom in many countries are underpaid women), and strengthening national resil-ience and preparedness. According to WHO, almost 30% of countries have no COvID-19 national preparedness response plans and only half have a national infection preven-tion and control program. Health systems in lower income countries will struggle to cope; even the most optimistic estimates from Imperial College London suggest there will be 900,000 deaths in Asia and 300,000 in Africa.

n We propose the convening of a global pledg-ing conference – its task supported by a G20 executive Task Force – to commit resources to meeting these emergency global health needs. The signatories also noted that much has

been done by national governments to counter the downward slide of their economies, but a global economic problem requires a global economic response.

“Our aim should be to prevent a liquidity cri-sis turning into a solvency crisis, and a global recession becoming a global depression. To ensure this, better coordinated fiscal, mon-etary, central bank, and anti-protectionist initia-tives are needed. The ambitious fiscal stimuli of some countries will be all-the-more effective if more strongly complemented by all countries in a position to do so.”

The statement said a wider group of central banks should be given access to the arrange-ments for currency swaps and the International Monetary Fund (IMF) should enter into swap arrangements with the major central banks. The IMF should use those hard currency resources and establish its own swap line facility to pro-vide emergency financial support to emerging and developing nations. But it is vital that if we are to prevent mass redundancies, the guar-antees that are being given in each country are rapidly followed through by banks via on-the-ground support for companies and individuals.

“The emerging economies – and in par-ticular those of the poorest countries – need special help, not the least in ensuring that sup-por t reaches all those affected by the drastic decrease in economic activity. The IMF has said it will mobilize all of its available resources. There should be an additional allocation of around $500-$600 billion in Special Drawing rights (SDrs). At the same time, to ensure

sufficient funding for individual countries, we encourage IMF members to allow lending quota limits to be exceeded in countries most in need.”

“The World Bank and many of the regional development banks have recently been recapi-talised, but more will be needed. It is likely that, as in 2009 when the International Bank for reconstruction and Development’s (IBrD) spending alone went from $16 billion to $46 billion, it – and the regional development banks – will need a much larger expansion of available resources. To meet its responsibili-ties for humanitarian aid, and for refugees and displaced people, whose plight is likely to become desperate, and for the UN Sustainable Development Goals, UN agencies have issued this week an immediate call for $2 billion of additional resources that are urgently needed.”

The former leaders also called for the inter-national community should waive this year’s poorer countries’ debt repayments, including $44 billion due from Africa, and consider future debt relief to allow poor countries the fiscal space to tackle the health and economic impact of the COvID-19 pandemic. We ask the G20 to task the IMF and the World Bank to fur ther assess the debt sustainability of affected countries.

“We agree with African and developing country leaders that given the existential threat to their economies, the increasing disruption to livelihoods and education and their limited capacity to cushion people and companies, that at least $150 billion of overall support will be needed for health, social safety nets, and other urgent help. These allocations should be agreed to immediately, coordinated by a G20 executive Task Force as par t of the G20 Action Plan, and be confirmed in full at the upcoming IMF and World Bank meetings. The two core economic institutions should be given reassurances that additional bilateral funding will be for thcom-ing and the need for fur ther capital injections agreed.”

The letter added that the longer-term solution is a radical rethink of global public health and a refashioning – together with proper resourcing – of the global health and financial architecture. “The United Nations, the governments of the G20 nations, and interested par tners should work together to coordinate fur ther action.”

The group also got support from Dr Abiy Ahmed – Prime Minister of ethiopia, Julius Maada Bio – President of Sierra Leone, Sheikh Hasina – Prime Minister of Bangladesh and Ken Ofori-Atta – Finance Minister of Ghana and Chair of the World Bank Development Committee.

news

THe ruwala resort in Kalpitiya, owned by Ceyline Holdings Ltd., has been tem-porarily handed over to the Sri Lanka Navy to be used as a quarantine centre.

The Navy said yesterday with the tourism trade at a minimum, the vacant facility has been made available to aid in preventing the spread of the COvID-19 virus.

The 41-room resort will be converted to be used as a quarantine centre by the Navy and will be returned to the com-pany once tourism operations begin.

The Navy has undertaken to hand back the facility after sterilising the premises in accordance with proper guidelines for sanitation and disinfec-tion, the statement added.

THe National Chamber of exporters of Sri Lanka (NCe) in a statement yes-terday expressed appreciation for the Government’s proactive measures to overcome COvID -19.

The NCe said the Prime Minister explained in simple terms to the people the measures that had been adopted.

“These have enabled the country to effectively contain the threat,” stated the chamber. “Other countries includ-ing developed economies are in great difficulty having failed to do so. This is evident by the commendation of our country by the Head of the World Health Organization (WHO).”

The chamber endorsed the gratitude of the Government, particularly regard-ing the services and sacrifices of the health authorities, the forces, and the Police to tackle the common enemy. “This in spite of the risks to their own health and of their families. As stated by the Prime Minister, this is not the time for debate on rights and wrongs. each and every one of us, irrespective of ethnic, and other differences, need to do our duty to overcome the crisis during these few critical days.”

Noting that the impact of the crisis on the economy of the country and the lives of the people had been substantial, the chamber said the apparel export sector and tourism, which were main

foreign exchange earners, had suffered severe blows.

“This excludes the other major for-eign exchange earner, the remittances of our workers, who have been battered due to conditions in other countries. As such the chamber agrees with the view that we need to produce whatever possible locally in the immediate future because imports will be seriously ham-pered. This particularly applies to food products, medicines, and other needs of the healthcare services.”

The Prime Minster in his address requested the people to grow their fruits and vegetable requirements as far as possible in their home plots. The NCe said it wished to support this move and would like to encourage local growers to supply any excess of agricultural items they could produce to member expor ters of the NCe, who could be requested to purchase such produce for direct expor ts as well as for processing to ensure value addi-tion.

“For this to happen production activities need to be commenced to revive the economy without delay, following the lead given by China. The chamber trusts this will be ensured during the coming days, to resurrect and strengthen the battered lives of the majority of our people.”

Bunkering vessel Mt. Melody d o c k e d a t t h e H a m b a n t o t a international Port (HiP) last week to discharge approximately 25,000 MT of oil into the port’s newly furbished tanks. With the first shipment of Very Low Sulphur Fuel Oil (VLSFO) 380 CST in their tanks, HiP will soon begin bunkering for ships that call at the port, providing support to the heavily impacted international sup-ply chain.

Over 31,000 vessels ply the main sea route that lies just 10 nautical miles from the port every year. HiP with its proximity to the route that connects the east, and the West is in an ideal position to provide these vessels with bunkering services, helping them take maximum advan-tage of the port’s unique location.

Bunkering is an important part of the energy services portfolio offered by HiP. “The port invested in refur-bishing the tank farm to Lloyds clas-sification standards and the tank farm facility will be operated and managed by Sinopec, a leading glob-al operator, who will train our local staff up to international standards in safety and operation. The facility has a fully-fledged oil testing labora-tory at the site. HiP aims to become the bunkering hub of the region and will work with Sinopec and the local bunker suppliers in making this a reality,” says Hambantota international Port group (HiPg) COO Tissa Wickramasinghe.

The international Maritime Organisation set a limit for sulphur in fuel oil used on board ships of 0.50% m/m (mass by mass) from 1 January, and HiPg’s strategic part-ner Sinopec will supply Sri Lanka accordingly.

This is another step by HiP in achieving their goal of becoming an energy hub. in October 2018, the port partnered with LAugFS gas, a pio-neer in Sri Lanka’s power and ener-gy sector, to service their storage and transshipment requirements of LPg. Transshipment of LPg is a part of the energy hub mix at HiP, and many vessels called at the port for transshipment, during the past year.

First bunkering ship discharges low sulphur fuel at HIP

Ruwala Resort in Kalpitiya to be made a quarantine centre by Navy

NCe commends Prime Minister on measures to overcome COvID-19

CBK joins intl. group calling for $ 8 b to fill urgent gaps in COVID-19 response�n Over 200 former world leaders and heads of intl. organisations sign letter�n It calls on world leaders for internationally-coordinated action on deepening global health and economic crisis �n Proposes convening of global pledging conference to commit resources to meeting emergency global health needs�n Calls for international community to waive this year’s debt repayments by poorer countries

www.ft.lk

5

THURSDAY APRIL 09, 2020 Financial Services

Treasury Bills91 Day Bills – 6.60 / 6.80 182 Day Bills – 6.70 / 7.10364 Day Bills – 6.90 / 7.40

Treasury Bonds 01/05/21 - 7.70 / 7.8501/10/22 - 8.30 / 8.5015/07/23 - 8.50 / 8.9015/09/24 - 8.85 / 9.1001/08/25 - 9.10 / 9.3001/06/26 - 9.15 / 9.3515/10/27 - 9.20 / 9.4001/09/28 - 9.25 / 9.4501/05/29 - 9.00 / 9.5015/05/30 - 9.00 / 9.5515/01/33 - 9.00 / 9.6515/09/34 - 9.00 / 9.7015/03/35 - 9.00 / 9.7515/08/39 - 9.00 / 9.90

By Wealth trust securities

THE Treasury bond auctions conducted yesterday saw weighted averages record levels well below secondary market yields as all three maturities were seen pro-gressing to the second phase of the auction system but not to the mandatory third phase due to the minimum accepted requirement of 70% at during the first phase not being ful-filled.

The three-year and five-month maturity of 01.09.2023, the four-year and five-month

maturity of 15.09.24 and the seven-year and six-month maturity of 15.10.27 recorded impressive weighted aver-ages of 8.50%, 8.70% and 8.90% respectively against i ts pre-auction levels of 8.95/05, 9.15/23 and 9.35/50. Nevertheless, only a total amount of Rs. 34.72 billion

was accepted against a total offered amount of Rs. 40 bil-lion.

In the secondary bond mar-ket yesterday, two-way quotes were seen declining and wid-ening subsequent to the auc-tion results. However, maturi-ties of 2021s (i.e. 01.03.21 and 01.05.21), 01.10.22, 2023s (i.e.

01.09.23 and 15.12.23) and 2024s (i.e. 15.03.24 and 01.08.24) were seen changing hands at levels of 7.80%, 7.85%, 8.55%, 9.00%, 9.05% to 9.07%, 9.17% to 9.20% and 9.25% to 9.60% respective-ly in an active pre-auction ses-sion.

I n s e c o n d a r y b i l l s , November 2020 and January

2021 maturit ies changed hands at levels of 7.25% to 7.40% and 7.35% to 7.70% respectively.

In money markets , the weighted average rates on overnight call money and repo stood at 6 .50% and 6.59% respectively yester-day as the DOD (Domestic O p e r a t i o n s D e p a r t m e n t ) of Central Bank was seen injecting an amount of Rs. 4.6 billion by way of a seven-day Reverse repo auction at a weighted average rate of 6.55%, subsequent to offering Rs. 30 billion.

I t f u r t h e r i n j e c t e d a n amount of Rs. 4.5 billion for a period of 88 days at a weighted average rate of 6.39%, subse-quent to offering Rs. 25 billion. The overnight liquidity sur-plus stood at a high of Rs. 71.99 billion.

USD/LKR In the Forex market, the

USD/LKR rate on spot con-tracts was traded within the range of Rs. 198 to Rs. 199.75 yesterday.

The total USD/LKR traded volume for 6 April was $ 84.25 million.

Primary bond auction weighted averages fall well below secondary market01.09.23 Rs. 12.500 Billion Rs.32.040 Billion Rs. 7.220 Billion 8.50% 15.09.24 Rs. 10.000 Billion Rs.37.430 Billion Rs. 10.000 Billion 8.70% 15.10.27 Rs. 17.500 Billion Rs.64.423 Billion Rs. 17.500 Billion 8.90% Rs. 40.000 Billion Rs.133.893 Billion Rs. 34.720 Billion

Maturity Offered mount Bids received Amount accepted Weighted Average

R E U T E R S: Asian stocks stepped back on Wednesday after two sessions of sharp gains as investors tempered their optimism about the coro-navirus while death tolls were still mounting across the globe.

While the number of COVID-19 hospitalisations seemed to be levelling off in New York state, deaths across the United States jumped by a record 1,800. Mainland China’s new corona-virus cases also doubled in 24 hours due to infected overseas travellers.

Not helping sentiment were wild swings in the oil market, where prices rebounded in Asia after sliding on Tuesday to leave traders feeling dizzy. US crude futures jumped 5.5% to $ 24.93 a barrel, having shed 9.4% the session before, while Brent crude added 75 cents to $ 32.62.

The erratic action spilled over into equities with MSCI’s broadest index of Asia-Pacific shares outside Japan losing 0.7%.

Japan’s Nikkei went the other way and added 0.4%, while Shanghai blue chips lost 0.6%.

E-Mini futures for the S&P 500 wobbled either side of flat, while EUROSTOXX 50 futures dropped 1.1%.

“There is reason to be cau-tious as this looked to be a relief rally ahead of next week’s start of Q1 earning sea-son and before data reveals the depth of the virus impact,” said analysts at JPMorgan in a note.

“Data shows the recent move higher has been accom-panied by short covering and de-risking rather than active risk taking on the long side.”

The S&P 500 had ended Tuesday down 0.16%, having been up as much as 3.5% at one stage. The Nasdaq dropped 0.33% and the Dow 0.12%.

After US stock markets closed, President Donald T r u m p s a i d t h e U n i t e d States may be getting to the top of the coronavirus curve.

The Trump administra-tion asked Congress for an additional $ 250 billion in emergency economic aid for small US businesses reeling from the pandemic.

“While the virus’ ‘curve is flattening’, the economic effects of the corona crisis will linger for years in our view,” Commonwealth Bank of Australia economist Joseph Capurso said in a note.

“Economies will take time to re-open, some businesses will not re-open, and unem-ployment will take years to return to levels reported at the end of 2019.”

R a t i n g s a g e n c y S & P G l o b a l o n W e d n e s d a y warned the cost of combat-ing the virus would weigh h e a v i l y o n A u s t r a l i a ’ s finances and changed the outlook for the country’s rating to negative.

That knocked the Aussie dollar down 0.6% to $ 0.6130 and hit risk sentiment gen-erally. The US dollar eased 0.1% on the safe-haven yen to 108.80, while the euro dipped 0.2% to $ 1.0865.

Against a basket of cur-rencies, the dollar edged up 0.2% to 100.170.

Gold prices eased back to $ 1,645, after touching a 3-1/2-week high on Tuesday at $ 1,671.

Asian shares turn cautious, oil rebounds in choppy trade

SYDNEY (Reuters): New Zealand’s central bank on Tuesday said it would buy up to NZ$ 3 billion ($ 1.79 billion) of local government debt to ease liquidity strains in the funding market as it moves to cushion the economy from the fallout of the coronavirus pandemic.

The Reserve Bank of New Zealand (RBNZ) said the new measure would expand on its Large Scale Asset Purchase ( L S A P ) p r o g r a m , w h i c h has been buying govern-ment debt.

“The Bank had observed signs of increasing illiquidity and dislocation in the Local Government Funding Agency (LGFA) market in particular in recent weeks,” it said in a statement.

The strain in this important market was “posing a signifi-cant risk to the transmission of monetary policy” and need-ed to be tackled, the bank said.

As a result, the bank’s pol-icy-making committee held a conference call on 4 April to discuss the problem and authorise the purchase of LGFA debt.

The bank plans to buy up to NZ$ 3 billion of LGFA debt on the secondary market within the next 12 months, or about 30% of the total LGFA debt on issue. The move takes the total size of the LSAP to NZ$ 33 billion.

The committee will update its economic assessment and the size and scope of the LSAP at its next meeting set for 13 May, the bank added.

New Zealand’s central bank adds local govt. debt to stimulus plan

PRESIDENT Gotabaya Rajapaksa yesterday extended the term of the Commission of Inquiry (COI) appointed to inquire into alleged wrongdoing, irregularities, and malpractice in connection with ETI Finance Ltd. (ETI) by a period of six months.

The term of the COI, which was appointed in January, expires today (9 April). President Rajapaksa extended its term till 9 October 2020 via a Gazette notification issued yes-terday.

The COI is headed by retired S u p r e m e C o u r t J u d g e K . T . Chithrasiri, while its members are retired Solicitor General Suhada Gamalath, Esq., and senior banker D.M. Gunasekara.

It is tasked with probing alleged wrongdoing, irregularities, and malpractice in connection with ETI Finance Ltd. (ETI), a finance company which was regulated by the Central Bank of Sri Lanka and which faced serious financial prob-lems, leading to the CBSL’s inter-vention and a sale of the assets of ETI to settle its depositors.

E T I ’ s a s s e t s i n c l u d e d Swarnamahal Financial Services PLC, EAP Broadcasting Company Limited with its subsidiaries; EAP Films and Theatres Ltd. (and its subsidiaries); Hotel Sapphire Ltd.;

Swarnamahal Jewellers Ltd.; and other immoveable assets owned by ETI Finance PLC.

The COI is probing the sale of the above establishments to a consor-tium consisting of Blue Summit Capital Management Private Ltd. and Ben Holdings Private Ltd., in violation of restrictions under the laws of Sri Lanka on ownership of media institutions by foreigners, and the sale of the assets of ETI to said party in violation of the laws of Sri Lanka prohibiting the purchase of immoveable properties by for-eigners.

�� President extends term by six months�� COI appointed in January to probe alleged wrongdoing, irregularities and malpractice in connection with ETI Finance

Term of COI probing ETI extended

President Gotabaya Rajapaksa

NATIONAL insurer Sri Lanka Insurance has taken many initiatives to pledge support to Government ini-tiatives in the prevention of the spread of COVID-19. One such initiative was the donation of Rs. 5 mil-lion made to the COVID-19 Health and Social Security fund last week.

N o w S r i L a n k a Insurance has launched yet another initiative in support of motivating all State sector employees on the front line of COVID-19 service – ‘Viru Abhiman,’ a free financial cover for the families of the State sector employees who are active-ly involved in combatting COVID-19.

The cover is extended at the unfortunate event of employee’s loss of life due to

COVID-19 within in the year 2020.

The cover ‘Viru Abhiman’

is extended to all healthcare employees in the State sec-tor (e.g. Health Ministry officials, doctors, nurses, attendants, drivers, minor workers, Public Health Inspectors, regional health officials, etc.), members of the Armed Forces of Sri Lanka (Sri Lanka Army, Sri Lanka Navy, Sri Lanka Air Force), Sri Lanka Police and Civil Defence Force of Sri Lanka, members of the divi-sional secretariats includ-ing field officers, members of the District Secretariat, and members of the Postal Department.

This is the first and the only cover in Sri Lanka offered free for our heroes who are taking the frontline in ensuring the safety of our people.

“As the national insur-er to the nation our main objective is to fulfil our duty towards the nation by safeguarding the families of the State sector employees and members of the armed forces who have come forth to protect the country from the COVID-19 pandemic and to assist the national program of the Sri Lankan Government,” SLIC stated.

‘Viru Abhiman’: Tribute by SLIC to heroes of the nation battling COVID-19 pandemic

�� Rs. 1.5 m cover from Sri Lanka Insurance

SLIC Chairman Jagath Wellawatta speaking at the press confer-ence. Also present from left: Director Nishantha Dayananda and CEO Chandana L. Aluthgama

CEYLINCO Life has announced it is offering multiple online payment and communica-tions options as well as facilitation of set-tlement of claims, to ensure policyholder requirements are met as they stay safe in their homes to protect themselves, their families and the community against the spread of COVID-19.

Sri Lanka’s life insurance leader said it has activated web-based, mobile-phone based and app-based payment options to ensure policies will not lapse during the period of curfew and self-quarantine, and that the company’s call centre and social media messaging sites are all activated to respond to customer queries.

“These are extremely challenging times for customers and companies alike, and the best way to ensure we survive the crisis together is to maximise the possibilities offered by technology to look after all stake-

holder interests with minimal disruption,” Ceylinco Life Managing Director Thushara Ranasinghe said. “The steps we have taken will ensure our policyholders can stay home and safe, confident they will not suffer the consequences of a lapsed policy.”

Among the premium payment methods offered by Ceylinco Life are the ‘Easy Pay’ option hosted on the company’s website which can be accessed and operated with ease. The policy number is all that is required for payment of premiums with minimum hassle.

Ceylinco Life also offers a ‘Direct Pay’ option via sms, where a link is sent for cus-tomers to enter their policy details and cred-it/debit card credentials securely online.

Additionally, the company said it has partnered with most major banking institu-tions in Sri Lanka as well with mobile wallet services such as FriMi, eZ Cash, mCash

and Genie to facilitate anytime, anywhere premium payments.

For existing as well as prospective cus-tomers who need information or clarifica-tions, Ceylinco Life’s interactive chatbot ‘Ceylena’ is available 24 hours of the day to help visitors to www.ceylincolife.com/ by answering their queries relating to life insurance.

Ceylinco Life is also geared to address any queries relating to the company’s online payment options via its hotline 0112461461 or via its WhatsApp and Viber accounts on 077 5776556.

Policyholders that need to make a claim are advised to call the company’s call centre, which would then set the process in motion by arranging for necessary docu-ments to be sent via email or WhatsApp for claim settlement direct to the policyholders’ accounts.

Declared the ‘People’s Life Insurance Service Provider of the Year’ for the 14th consecutive year at the 2020 SLIM-Nielsen Peoples Awards, Ceylinco Life was also adjudged Sri Lanka’s most valuable life insurance brand by Brand Finance in 2019, and in the same year was ranked among the 10 ‘Most Admired Companies’ in the country by the ICCSL, named the Best Life Insurer in Sri Lanka for the sixth consecutive year by World Finance, and ranked sixth overall in the Business Today ranking of the country’s top 30 companies.

Ceylinco Life has close to a million lives covered by active policies and is acknowledged as a benchmark in the local insurance industry for innovation, product research and development, cus-tomer service, professional development and corporate social responsibility.

�� Offers host of premium payment options and claim settlement facility in response to restrictions in place to combat spread of COVID-19

Ceylinco Life opens multiple channels to interact with customers staying home

LONDON (Reuters) - Britain’s accounting watch-dog fined KPMG and a senior partner last week for fail-ing to challenge what a cli-ent was telling them about certain complex supplier arrangements.

The Financial Reporting Counci l , which did not name the company being a u d i t e d , s a i d K P M G ’ s fine was discounted from 700,000 pounds ($868,840.00) to 455,000 pounds for early settlement. Senior partner Nicola Quayle was fined

45,000 pounds, reduced to 29,250 pounds for early set-tlement.

KPMG and the other big accounting firms are facing major reforms to improve standards after company collapses at British builder Carillion and retailer BHS.

Policymakers also want to put an end to what they consider cosy relationships

between auditing firms and their clients and bring in more competition.

KPMG, one of the world’s top four accounting firms, i n 2 0 1 8 w a s p u t u n d e r “increased scrutiny” by the FRC for poor auditing.

In the latest case, the watchdog said KPMG failed to obtain and document suf-ficient audit evidence in

relation to supplier-funded rebates. Auditors should have been on alert to pay p a r t i c u l a r a t t e n t i o n t o “these types of complex sup-plier arrangements.”

“ P r o f e s s i o n a l s c e p t i -cism remains at the core of an auditor’s duty and the FRC will take appropriate action where it has been lacking, as in this case,”

said Claudia Mortimore, the FRC’s deputy executive coun-sel.

But the FRC said the breaches were limited in nature and did not call into question the truth or fairness of the company’s financial statements.

KPMG said it regretted that specific aspects of its audit of the company in question for

the 2015/16 financial year did not meet the required stand-ards and has updated proce-dures.

“As the FRC makes clear, there is no question as to the truth and fairness of the financial statements,” KPMG said in a statement.

The FRC said KPMG was also required to under-take a quality performance

review of three audits for which Quayle is the auditor and report the results to the watchdog.

Quayle, an auditor for 23 years and a former non-exec-utive board member of KPMG UK, will also be required to “undertake appropriate train-ing, in a format to be agreed with the FRC”, the watchdog said.

KPMG fined 700,000 pounds for failing to challenge client

Opinion/Issues www.ft.lk

6

THURSDAY APRIL 09, 2020

THE COVID-19 pandemic has resulted in many countries hav-ing lockdowns mainly to control the spread of the coronavirus. This pandemic, which started in Wuhan, China, has now spread worldwide, with Europe and America experiencing a major impact and huge loss of lives.

Sri Lanka has taken corrective measures early and this has result-ed in the leadership given under the directions of the President who set up the National Operation Centre for the Prevention of COVID-19 Pandemic headed by the Commander of the Army with the Health Services Head and the Armed Services and Police to assist and work with the health authori-ties to control this epidemic. This has resulted in controlling the movement of people, which will prevent the spread of the virus.

Those returning from affected countries such as Italy and South Korea were isolated and corrective action was taken by the authori-ties by sending them to quarantine centres and treating those affected which has reduced the spread of COVID-19 and saved the lives of those who were affected. While the priority is to wipe out COVID-19 from Sri Lanka and get back to normal life the process is not easy and time-consuming.

This would mean with a lockdown nor-mal life is disrupted a n d e c o n o m y a n d business comes to a standstill, with many losing jobs and affect-ing small and large businesses and the self-employed. This would need an early National Action Plan for eco-nomic revival headed by a similar committee which should include both the public and private sector together with the Armed Services and Police giving the necessary strength and courage to resurrect our economy similar to what has been done to fight the COVID-19 pandemic.

Global and local economyAll this time we were working on

global policies which has now been disrupted due to the COVID-19 pan-demic. Imports, exports and global supply chains will be severely affected, foreign exchange scarcity will be severe, and the exchange rate depreciation will speed up with many job losses and bankrupt-cies of business organisations.

Everyone is looking for the Government to assist or bail them out and the response has been good in the short-term with the conces-sions granted to business and soci-ety but not a solution for the future without studying the Sri Lankan economy and how we can work out a new National Strategy to take the country forward and to find solu-tions to problems encountered.

Already technology is playing a major role in sectors of com-munication and education and many others. The lack of foreign exchange will mean that we may have to look at the policies we adopted prior to 1977 where local production and agriculture were priorities. However this should be handled with care and caution with the new experiences we gained through the opening of the econo-my promoting exports, free availa-bility of foreign exchange, Foreign Direct Investment, excessive borrowings of the Government, negative terms of trade, Free Trade Agreements, free availabil-ity of raw materials, food stuffs and many others which will be greatly diminished or not available now.

The gap in the continued bal-ance of trade, the dependence on foreign employment income, major export of garments together with the major imports of fuel, food-stuffs and milk foods will have major impacts on the economy and society and needs to be vigorously pursued in framing the new strate-gies to transform the economy and look at local agriculture, and local industry as priorities to save the nation.

Already the Governor of the Central Bank has requested all exporters to bring in the export proceeds and halted all non-essen-tial imports. These are all indica-tions that we need to frame our new economic policies on a major-ity local economy. Local banks and finance companies too will have to play a major role to assist local businesses in these difficult times and the Central Bank has already outlined certain packages and the ultimate result should be to enable

them to tide over these difficulties and come back to normality.

Priority for agricultural sectorIf you consider the local economy

then the priority has to be given to the agricultural sector as we can-not be without food and to avoid

hunger. Hence a simi-lar dynamic National Project Committee should be formed with the Government machinery going to the agricultural areas and draw up the plans to maintain food secu-rity and to decide what crops should be grown to substitute for food items that were imported which can be grown in Sri Lanka.

W e a r e c e r t a i n that many of the food items coming from India will not be available as they will need to feed their own people first. But we all know that all

of them can be grown in Sri Lanka and we need to put the agricultural sector on a war footing. Technology and knowledge information should also be used in this new drive for excellence in the agricultural sector.

The Government officers now have to put their best foot forward and come with practical and work-able plans and policies with district project committees coordinated by a strong and result-oriented main National Project Committee which need to be action-oriented.

We should make use of experi-enced professionals, Government servants, technical officers, Armed Services and Police similar to the National Committee formed to fight the COVID 19 Pandemic which is an example as to how the Government can be effective and productive to reform the local agricultural sector the biggest asset we have. We need to achieve this goal of self-sufficien-cy in food items and go back to the era of King Parakramabahu when we earned the distinction to be the ‘Granary of the East’.

Foreign exchange scarcityOn foreign exchange usage the

biggest import items are fuel and foodstuffs. Since these items are imported we need to earn the for-eign exchange required for imports. In the case of fuel for transport and electricity generation, industry needs have to be properly planned to determine the minimum imports of fuel based on the low availability of foreign exchange. In the case of food stuffs we need to grow our own food-stuffs and save the valuable foreign exchange going out. Increasing reli-ance on renewable energy will also reduce the usage of fuel for generat-ing electricity.

We are not in a position to go for more foreign loans as this would mean that we will get further indebt-ed and even portions of the country will have to be sold to foreigners to repay loans. This should be avoided as we have the capacity, profession-als, technical and devoted citizens to develop like countries such as Singapore, Malaysia and Korea which were unseen and unheard at the time we obtained independence in 1948. We need honest ‘can do’ peo-ple with a love for the country who can contribute to the development of Sri Lanka with a strong leadership.

We will also lose the foreign exchange earnings from the tourism and the garment sector and other exports to the European markets and USA which will be a big hit. The growing IT/BPM industry exports should also be closely monitored, developed and supported as a major export earner opening new opportu-nities to take Sri Lanka to the high tech era supported by the universi-ties and the new IT colleges.

Therefore we need to immediately cut down the imports of all goods that can be produced locally in order to save valuable foreign exchange.

Hence imports under FTA should also not be permitted to harm local industries.

Priority for local economy and industries

All local industries should be pro-moted and given due protection, financial assistance and tax incen-tives. All large businesses and indus-tries should use the SME sector so that we will be able to make the SME sector successful and enable us to produce goods and services at com-petitive prices.

Already some of the bigger com-panies, especially those in the retail trade, are buying the produce of the farmers directly to give fresh veg-etables and fruits to customers. This concept of outsourced work is done on a big scale and used by foreign companies especially in the IT and BPO/BPM sector and India is one country that had greatly benefited. However the foreign markets will be affected in the present context.

The Government need to give high priority for technology by decid-ing to computerise all the govern-ment departments and ministries to improve the efficiencies and produc-tivity and this work should be given to local experts and companies who can contribute to build our economy in this economic downturn. This strategy will also assist companies to use outsourced components, goods and services to be provided to make themselves competitive in the mar-ket place. The Government could also implement the work from home concept which has been introduced recently with the problems encoun-tered by undertaking computerisa-tion.

The Government should also give incentives to all companies that go for the concept of using local out-sourced goods and services. This will also promote the rural indus-tries like how we set up the 200 Garment Factories Project which enabled the garments sector to be the number one exporter from Sri Lanka. This sector is today badly affected and the industry should be provided all assistance to stage a recovery as the largest foreign exchange earner.

With the prominence we plan to give the agricultural sector, the food-based industry – small, medium and large – should be encouraged and given all support and incentives. We need to go with the slogan ‘Made in Sri Lanka’ and change our mental-ity from imported or foreign goods and services to locally manufactured goods and services.

The plantation and agricultural exports too will be hit but may not be to the same extent of the garment and industrial exports. The planta-tion sector should be made more

productive and cost competitive and modern techniques brought in to make them viable. All assistance should be given to this sector to retain export markets.

Expert management for restructuring of loss-making State corporations

All State corporations running at losses such as Ceylon Petroleum Corporation, Ceylon Electricity Board and SriLankan Airlines will need expert management to take them forward on a war footing to make people work, increase pro-ductivity, make them profitable and make those in charge accountable and performance monitored on a regular basis.

The Government will in no way be able to subsidise these State insti-tutions and absorb the huge losses they are making especially at a time when we are in a dire economic state. Accountability needs to be in brought in at all levels so that those given responsibility at all levels will be held accountable and responsi-ble for their work performance and priority given to least cost produc-tion and services with productivity and value creation to face this grave threat facing the economy and soci-ety.

At present it is taken for granted that State corporations can run at losses but not after the COVID-19 pandemic which is pushing us to become beggars with such perfor-mances and Government and society cannot tolerate such incompetence and losses to destroy the economy and harm the people. This would be applicable to all State corpora-tions and Government institutions such as the Railway and Transport Boards which are heavily subsi-dised.

Education and use of technology

The education sector needs to be restructured to immediately convert the rural schools to teach Science, Technology, Engineering, Maths (STEM) subjects without producing large number of Arts students pass-ing at the A/L and going into univer-sities which have the largest num-ber of undergraduates in the Arts stream both at entry and when pass-ing out. The introduction of STEM will enable Sri Lanka to become a technology hub producing useful graduates for the development of the economy of the country.

Modern methods of learning using new technology such as e-learning, video lectures done in order that rural students will be given the same facilities as those in urban areas instead of coming with the stock excuse to say we do not have suffi-

cient science qualified teachers. One cannot understand this excuse given for the last three decades when we have so many advanced level quali-fied students in the Science stream who can be recruited for graduate training with assured jobs to serve in difficult areas.

Research and Development will be another important area which has to be covered in all sectors to enable new innovations and develop-ments to assist agriculture, industry, health and other sectors especially for boosting local industrial produc-tion and services and exports.

IT and English Colleges are very essential be set up through-out the country as Public-Private Partnership (PPP) initiatives so that opportunities are provided to all youth to study programmes which will provide job opportunities where the Government can provide the course fees to students and the pri-vate sector and foreign investors can find the jobs.

Skill development in other sec-tors should also be given the highest priority as there is a great demand for those with skills in carpentry, masonry, electricians, technicians, plumbers, construction workers and others where there are many vacan-cies and self-employment opportu-nities and to give them a recognised certificate which will enable them to obtain a good job and wage for their skills and expertise.

New work methodology and culture for the future

We need to transform our econo-my, the local industry, agriculture, education, plantation industry, banking and finance, exports, busi-ness and commerce to meet the new challenges and drive it forward. Considering the current strength given by the dedicated medical doc-tors, nurses and other health staff with the assistance and strength provided by the Armed Services and the Police has provided a new work methodology and culture with the direction of the President and Prime Minister which one can say is very successful and result-oriented and to work towards the elimination of the COVID-19 pan-demic.

This new work methodology could be used for the setting up of the National Committees for the Development of the Economy post COVID-19 pandemic. Therefore the National Operation Centre for the Prevention of Covid-19 Pandemic is a new innovative project committee which has been set up and a similar concept could be used to manage business through the COVID-19 pandemic to transform from a global to a local economy and is an opportu-

nity we should not miss to make Sri Lanka the ‘Granary of the East’ and ‘Dynamic Business Hub in the Indian Ocean’.

(The writer is a Chartered and Management Accountant, former

Chairman and Director General – BOI and former Chairman

– People’s Bank.)

Guest Column

By Prof. Lakshman R. Watawala

Managing business through COVID-19 pandemic to transform from a global to a local economy

Everyone is looking for the Government to assist or bail them out and the response has been good in the short-term with the concessions granted to business and society but not a solution for the future without studying the Sri Lankan economy and how we can work out a new National Strategy to take the country forward and to find solutions to problems encountered – Pic by Shehan Gunasekara

We need to transform our economy, the local industry, agriculture, education, plan-tation industry, banking and finance, exports, business and commerce to meet the new challenges and drive it forward. Considering the current strength given by the dedicated medical doc-tors, nurses and other health staff with the assistance and strength provided by the Armed Services and the Police has provided a new work methodology and culture with the direc-tion of the President and Prime Minister which one can say is very success-ful and result-oriented and to work towards the elimination of the COVID-19 pandemic. This new work methodology could be used for the setting up of the National Committees for the Development of the Economy post COVID-19 pandemic. Therefore the National Operation Centre for the Prevention of Covid-19 Pandemic is a new inno-vative project committee which has been set up and a similar concept could be used to manage business through the COVID-19 pan-demic to transform from a global to a local economy and is an opportunity we should not miss to make Sri Lanka the ‘Granary of the East’ and ‘Dynamic Business Hub in the Indian Ocean’

www.ft.lk

7

thursday april 09, 2020 issues/Opinion

By Fellows oF the AdvocAtA InstItute

Sri Lanka’s shaky public finances are about to receive another blow from the fallout of COViD-19. The most crucial aspect of a pandemic is always the human cost, but the spread of the virus has important repercussions for the economy. Studies indicate that pandemic impacts a country’s economy through several channels, includ-ing the health, transportation, agricultural and tourism sectors. As borders are closed and global markets slow, trade is impacted, so exports suffer.

Sri Lanka’s already-battered tourism industry will be further hit and the order books of some of the key exporters will suffer in the next quarter. As international sup-ply chains contract exports may remain constrained, even when markets reo-pen as components and raw materials may remain in short supply. The supply chain impact will affect even domestic producers as import-ed raw materials run short. Agriculture depends on imported fertiliser, pesticides, planting materials and chemicals. Local factories source raw materials, compo-nents and spare parts from overseas and may be unable to work at full capacity.

As cashflow dries up and debts mount, m a n y b u s i n e s s e s will find it difficult to cope. During the global financial cri-sis of 2008/10, an estimated 90,000 Sri Lankans lost their jobs1 due to downsiz-ing amongst manu-facturing firms, espe-cially in the apparel sector. The impact of the current cri-sis has potential to be worse, because unlike the financial crisis, this pandemic is not confined to advanced countries. Developing countries were affected due to the loss of export markets but their domestic markets were unaffected. This pandemic is affect-ing both developed and developing coun-tries. Daily wage-earners will see their already uncertain incomes further dampened. Small businesses will be among the hardest hit.

This would mean that growth will slow further. The budget deficit will take a double hit from falling revenues and increased expenditure. Lower levels of activ-ity mean lower levels of tax collec-tion. As sales and imports decline, the collection of VAT and import taxes will decline. As business profits fall, income tax collection will fall. Meanwhile Government spending on health (from testing kits to hospital costs) and relief measures will rise in response to the pandemic. The budget deficit will thus widen and the Government will need to borrow more. Sri Lanka’s interest bill this year alone will be rs. 1 trillion.

Even if public finances were robust, this would pose a signifi-cant challenge, but Sri Lanka’s finances – sickly to begin with – were weakened by recent tax cuts. The fallout is difficult to estimate but a recap of the principal issues is useful to assess the available pol-icy options.

Sri Lanka obtained an iMF facili-ty of $ 1.5 b in June 2016. This is the

16th instance when it turned to the iMF since joining the fund in 1950 - an indication of the systemic and long-running nature of the under-lying problems. The overall objec-tive of the recent iMF program was to “reverse a two-decade decline in tax revenues and put public financ-es on a sustainable medium-term footing”2. The program aimed to increase Government revenue to reduce the budget deficit and there-fore the public debt (as deficits fall, the need to borrow reduces).

in the popular imagination iMF programs are associated with aus-terity: cutting Government expend-iture which negatively impacts social and welfare spending. The reduction in expenditure closes the budget deficit at the expense of the

welfare programs. Under the previ-ous ‘Yahapalana’ regime, Sri Lanka did the opposite: increasing taxes to cover the deficit. Expenditure was left untouched and in fact continued to increase.

Unfortunately, t h e b u l k o f G o v e r n m e n t r e v e n u e c o m e s through the form of consumption taxes particularly V A T , s o m u c h of the burden of increased tax fell on the general pub-lic anyway, pro-voking intense dis-pleasure. income taxes were also increased, anger-ing the business community. The Government thus succeeded in antag-onising a remark-ably diverse set of constituents and became exceeding-ly unpopular.

Public financ-es did improve s o m e w h a t b u t were never very strong. With the attacks in April 2019 things start-ed to slip again. The iMF review in November 2019 noted that “the fiscal targets are no longer within reach, due to the significant revenue shortfalls”3.

Following the P r e s i d e n t i a l E l e c t i o n o f November 2019 the new Government

announced sweeping tax cuts in December. Given the unpopularity of the tax increases, responding to public frustration could hardly be faulted, but the breadth of the cuts was astonishing. Corporate income tax was reduced from 28% to 24%, VAT was halved from 15% to 8% with a high VAT-free threshold; Withholding Tax, Nation Building Tax and Economic Service Charge were scrapped4. The objective was to kick-start a floundering econo-my but the cost – around a quarter of Government revenues or 3-4% of GDP – destabilised public finances.

On 7 February 2020 the iMF noted that: “Preliminary data indi-cate that the primary surplus tar-get under the program supported by the Extended Fund Facility (EFF) was missed by a sizeable margin in 2019 with a recorded def-icit of 0.3% of GDP, due to weak revenue performance and expendi-ture overruns”5. According to the fund, Sri Lanka’s 2020 budget defi-cit could rise to 7.9% of GDP, the highest since 2015. Given the pan-demic, this will look optimistic. The reported deficit for 2019 was 6.5% but according to the Ministry of Finance “the actual budget defi-

cit for 2019 should have been over 8%” as around rs. 367 b of expendi-ture remained unpaid and unac-counted at the year end6.

Meanwhile the rating agencies Fitch7 and S&P8 downgraded the outlook on Sri Lanka’s debt to ‘negative’ from ‘stable’. Sri Lanka’s already wobbly public finances must now cope with the added eco-nomic shock of COViD-19.

Dealing with the public health emergency and the associated human cost should be top of mind for policymakers. Yet clear-eyed economic thinking will be equally important and will have a direct bearing on the human cost, par-ticularly for our society’s most vulnerable. This is why weighing the relative costs of a lockdown or a complete curfew is important.

The biggest headache for the Government will be managing the foreign debt. The Central Bank’s freshly minted medium term debt strategy is based on assumptions that no longer hold – 5% GDP growth over the medium term, inflation of 5% and a budget deficit of 3.5%. With the medium term strat-egy in ruins can the Government rollover the matur-ing debt?

Gross reserves stood at $ 7.9 b9 equivalent to 4.6 months of imports at February 2020. E x t e r n a l d e b t repayments are around $ 5.6 b in 2 0 2 0 . T h i s h a s been partially refi-nanced by a $ 500 m loan10 from China which has report-edly promised a further $ 700 m. The country will be looking to raise a further $ 2-2.5 b at least if it intends to repay this year’s debt while main-taining a minimum reserve of three months imports.

With its public finances in sham-bles, the iMF pro-gram derailed and inevitable debt downgrades expect-ed from rating agencies it is impos-sible to return to the market to borrow. The yields on Sri Lanka’s sovereign bonds maturing this year have spiked. At the time of writing investors were asking for a 101% increment on the current yield, bonds maturing next year are at 44%. A new iMF program will restore confidence to the mar-kets but that would mean a return to painful tightening. Appealing for further bailouts is thus the most attractive option.

Sri Lanka is among the coun-tries that have called for debt relief.

The call has been supported by the World Bank and the international Monetary Fund (iMF).11 Although the call is for the poorest of coun-tries, there are signs that these organisations will consider coun-tries recently transitioned into upper middle income category like Sri Lanka.

Some commentators have even suggested that the Government should simply default12. While this may appear simple, it is risky and even restructuring of commercial debt:deferring or reducing repay-ments is viewed by the markets as a default event, which means it will be difficult to return to the mar-kets for a while. it also delivers a shock to the economy with declines in GDP, investment, and private sector credit being common. The financial sector may be affected leading to bank failures.

An iMF study in 2002 covering restructurings by russia, Ukraine, Ecuador and Pakistan in 1998-2000 showed as a result of the restruc-turing:

“The decline of real income and financing was trans-mitted to domestic demand. Confidence plummeted and pri-vate investment was curtailed sharply. Private consumption followed, albeit with a lag, as for a while h o u s e h o l d s d r e w down their available savings. Public con-sumption was also scaled down reflect-ing efforts to consoli-date public finances. Despite exchange controls, exchange rates depreciated sharply reflecting the shortage of for-eign funds result-ing from capita l flight. The domestic demand contraction and import substitu-tion helped improve current accounts. The exchange rate depreciation passed quickly to prices and inflation surged. Wages lagged, infla-tion wiped out the

value of deposits, unemployment rose, and households suffered sig-nificant real income losses.”13

Sri Lanka thus finds itself in a tricky position with little room to manoeuvre. These problems are not due to COViD-19 alone, although it has made matters much worse. The pandemic has only pre-cipitated the policy weaknesses that were building up over decades into a single giant shock encom-passing growth, fiscal and external sectors at the same time.

This was also the case in the countries in the iMF study referred above where following a relatively

short history of access to interna-tional capital markets, the macro-economic situation was destabi-lised by domestic policy shortcom-ings and exogenous shocks: weak oil prices for russia and Ecuador, international sanctions follow-ing nuclear testing for Pakistan, the El-Niño effect f o r E c u a d o r , russia’s turmoil for Ukraine, in addition to an unfa-vourable external environment after the Asian crisis.

in the short-term bailouts will be necessary, but it is only a temporary m e a s u r e , p o s t -poning the issues for a later but not too distant date. Whilst further bi-lateral loans from China are a pos-sibility, given the global nature of the Covid-19 crisis, fur-ther bi-lateral aid may not be a realis-tic option. With its $ 1 trillion lending capacity, an iMF program provides perhaps the only realistic option to access further bor-rowing.

Politicians and citizens who have been living in a state of denial must wake up to the grim realities. Pre-election bravado and long touted conspiracy theories must give away to level-headed thinking and negotiations with global financial institutions. Economic manage-ment should be done in consulta-tion with all other statutory agen-cies that are empowered to play a role.

Mistakes could be costly and run the risk of turning the COViD-19 outbreak from a severe public health crisis into a devastating eco-nomic crisis.

(The authors are fellows of the Advocata Institute, a free-market

think tank based in Colombo, Sri Lanka. For more insights and commentary on COVID-19 from

Advocata, visit www.advocata.org/covid19)

Footnotes1 Daily News 9 Jul 2009. Over 180

countries adopt Global Jobs Pact. [ONLiNE] Available at: http://archives.dailynews.lk/2009/07/09/bus10.asp. [Accessed 29 March 2020].

2 i M F . 3 J u n e 2 0 1 6 . i M F Executive Board Approves Three-Year US$1.5 Billion Extended Arrangement under EFF for Sri Lanka. [ONLiNE] Available at: https://www.imf.org/en/News/

Articles/2015/09/14/01/49/pr16262. [Accessed 29 March 2020].

3 iMF. 4 Nov 2019 . Sixth review Under the Extended Arrangement Under the Extended Fund Facility and requests for Waiver of Nonobservance and Modification of Performance Criterion-Press release; Staff report; and Statement by the Executive Director for Sri Lanka. [ONLiNE] Available at: https://www.imf.org/en/Publications/Cr/issues/2019/11/04/Sri-Lanka-Sixth-review-Under-the-Extended-Arrangement-Under-the-Extended-Fund-Facility-and-48787. [Accessed 29 March 2020].

4 Ministry of Finance, Economic and Policy Development. 23 Mar 2020. Pre Election Budgetary P o s i t i o n r e p o r t . [ O N L i N E ] Available at: http://treasury.gov.lk/documents/10181/829992/Pre-Election+Budgetary+Position+report-2020-20200323-2/d489aa0a-edb8-47e4-bab0-af51b68d2132. [Accessed 29 March 2020].

5 iMF. 7 Feb 2020. iMF Staff Concludes Visit to Sri Lanka. [ONLiNE] Available at: https://w w w . i m f . o r g / e n / N e w s /Articles/2020/02/07/pr2042-sri-lan-ka-imf-staff-concludes-visit-to-sri-lanka. [Accessed 29 March 2020].

6 Ministry of Finance, Economic and Policy Development. 23 Mar 2020. Pre Election Budgetary P o s i t i o n r e p o r t . [ O N L i N E ] Available at: http://treasury.gov.lk/documents/10181/829992/Pre-Election+Budgetary+Position+report-2020-20200323-2/

d489aa0a-edb8-47e4-bab0-af51b68d2132. [Accessed 29 March 2020].

7 Economynext, 19 Dec 2019. Sri Lanka s o v e r e i g n r a t i n g outlook downgrad-ed to ‘negative’ by Fitch over tax cuts. [ONLiNE] Available at: https://econo-mynext.com/sri-lan-ka-sovereign-rating-outlook-downgraded-to-negative-by-fitch-over-tax-cuts-36605/. [Accessed 29 March 2020].

8 Economynext. 14 Jan 2020 . Sri Lanka credit out-look downgraded to negative on tax cuts by Standard and Poor’s. [ONLiNE] Available at: https://economynext.com/sri-lanka-credit-out-look-downgraded-to-negative-on-tax-c u t s - b y - s t a n d a r d -a n d - p o o r s - 4 0 1 1 8 / . [Accessed 29 March

2020].9 Adaderana Biz. 12 Mar 2020. Sri

Lanka official reserves increase to US$ 7.9bn in February 2020. [ONLiNE] Available at: http://bizenglish.adaderana.lk/sri-lanka-official-reserves-increase-to-us-7-9bn-in-february-2020/. [Accessed 29 March 2020]

1 0 C o l o m b o P a g e . 1 8 M a r 2020. China grants US$ 500 mil-lion concessionary loan to Sri Lanka to fight coronavirus pan-demic. [ONLiNE] Available at: http://www.colombopage.com/archive_20A/Mar18_1584548120CH.php. [Accessed 29 March 2020

11 Euromoney. 26 Mar 2020. Debt relief for Africa as corona-virus Covid-19 crisis intensifies [ONLiNE] Available at: https://www.euromoney.com/article/b1kxnyc2th4x6d/debt-relief-for-africa-as-coronavirus-covid-19-cri-sis-intensifies. [Accessed 29 March 2020].

12 Ceylon Today. 10 Jan 2020. Sovereign debt: Why not default?. [ONLiNE] Available at: https://ceylontoday.lk/print-more/49288. [Accessed 29 March 2020]

13 iMF. 21 Feb 2002. Sovereign Debt restructurings and the Domestic Economy Experience in Four recent Cases. [ONLiNE] A v a i l a b l e a t : h t t p s : / / w w w .i m f . o r g / e x t e r n a l / N P / p d r /sdrm/2002/022102.pdf. [Accessed 29 March 2020].

Sri Lanka’s weak public finances will exacerbate COVID-19 economic shocks�� The country will have to borrow heavily and go in for a new IMF program

Dealing with the public health emergency and the associated human cost should be top of mind for policymakers. Yet clear-eyed economic thinking will be equally important and will have a direct bearing on the human cost, particularly for our society’s most vulnerable. This is why weighing the relative costs of a lockdown or a complete curfew is important – Pic by Shehan Gunasekara

The budget deficit will take a double hit from falling revenues and increased expenditure. Lower levels of activity mean lower levels of tax collection. As sales and imports decline, the collection of VAT and import taxes will decline. As business profits fall, income tax collection will fall. Meanwhile Government spending on health and relief measures will rise in response to the pandemic. The budget deficit will thus widen and the Government will need to borrow more. Sri Lanka’s inter-est bill this year alone will be Rs. 1 trillion. Even if public finances were robust, this would pose a significant chal-lenge, but Sri Lanka’s finances – sickly to begin with – were weakened by recent tax cuts. The fallout is difficult to esti-mate but a recap of the principal issues is useful to assess the available policy options

With its public finances in shambles, the IMF program derailed and inevitable debt down-grades expected from rating agencies it is impossible to return to the market to borrow. The yields on Sri Lanka’s sovereign bonds matur-ing this year have spiked. A new IMF program will restore confidence to the markets but that would mean a return to painful tightening. Appealing for further bailouts is thus the most attractive option

Following the Presidential Election of November 2019 the new Government announced sweeping tax cuts in December. Given the unpopularity of the tax increases, responding to public frustration could hardly be faulted, but the breadth of the cuts was astonishing. The objec-tive was to kick-start a floundering economy but the cost – around a quarter of Government revenues or 3-4% of GDP – destabilised pub-lic finances

COVID-19 has changed the world, economies and people, per-haps forever. As difficult as it has been Sri Lanka has done its best to rise to the challenge, partly by tapping into the power of technology.

For the first time in 126 years the Colombo tea auction went online last week with the less illustrious but 30-year-old coco-nut auction also shifting to an online system today. Given that this technology has been around for about a decade, it is positive that at least due to the virus people have been pushed to make use of it and improve the ease of business.

Taking tea auctions online has been debated within the industry for many decades and multiple initiatives were taken to make it a reality. However, the industry until last week failed to reach an agreement in unison shedding their differences of opinion. Thanks to partial shutdown, social dis-tancing and curfew as part containing the spread of the new coronavirus (COVID-19) in the country the tea industry was forced to take the online route.

The Colombo Tea Auctions, the world’s largest for single origin tea, wasn’t conducted for two weeks due to the COVID-19 crisis threatening the businesses of producers, buyers and brokers. After multiple round of discussions between the Colombo Tea Traders’ Association (CTTA), the Colombo Tea Brokers’ Association (CTBA) and the electronic platform and software provider CICRA Solutions, online tea auction became a reality on 4 April. Over 300 buyers registered to the online platform along with eight brokers. Between Saturday and Tuesday over three million kilos of tea worth Rs. 3 billion had been auctioned electronically.

A similar process will be followed for the coconut auction as well with the Government giving permission for the plan-tation sector to transport goods after the sales. While there is much sentimentality tied up with the tradition of auctions, especially for tea, it is nonetheless time to give way to the future and ensure this effort is continued.

Many other private sector companies, especially those engaged in transport and delivery services, have adapted technology swiftly. While some, such as supermarkets have struggled with the sheer volume of demand, they too are slow-ly rolling out better online services.

The improvement in going online has been embraced by the public sector as well. More and more services and informa-tion of public services is now online. Whether it is healthcare, details of Grama Niladharis and other local officials, or num-bers of COVID-19 patients and where they have been hospital-ised, the information is available online.

Perhaps the most important step has been the Government proactively releasing information. Measures initiated by the Government include release of funds for Samurdhi ben-eficiaries, availability and how to purchase essential items, imports of medicines and changes in regulations.

This openness is crucial for the public to have confidence in the Government and it is hoped that this transparency continues post-crisis as well. For too long limited access has been allowed for critical details of public finance, pro-gress on important projects, procurement and other criti-cal State activities. COVID-19 has demonstrated that if the Government so wishes it can be more transparent and release information on matters of public interest and that is to every-one’s benefit.

Wijeya Newspapers LtdNo 41, W.A.D. Ramanayake Mawatha, Colombo 2.

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Technology and transparency

Editorial8

www.ft.lkthursday april 09, 2020

THOSe who have taken an introductory course on micro-economics may recall the story about how people in a city get their food every day.

Without any central coordination, the grains, the vegetables, the fish, the meat, etc. are supplied in adequate quantity and variety day after day. The city dwellers get to eat; the farmers get rewarded for their work; the many in the middle who facilitate the process also make a living.

The story is told to drive home the basic lesson about the market as a decentral-ised coordinating mecha-nism: Adam Smith’s “invis-ible hand”.

The coordinating mecha-nism attracts attention only when it’s disrupted. Today it has. People have begun to understand how their food reaches their tables only when the most impor-tant questions in most households are about how to obtain essentials. But in many cases, they only see the problems with the parts of the supply chain that touch them directly, such as discovery of a seller with the required item, the plac-ing of an order, the fulfilling of that order and the pay-ment.

When these elements do not work, people become frustrated. Some develop workarounds. Suppliers also come up with solutions, because they have to get rid of inventory and earn revenues to cover costs. So over time, problems in the supply chains closest to the customer may get resolved. But it is important to look beyond what is immediate-ly perceptible.

The customer end of e commerce

We have been talking about e commerce for a long time. Seventy per cent of Sri Lankan internet users between 15 and 65 were aware of the possibility of buying remotely using the internet according to LIRNeasia’s After Access

survey, but only 43% of that group (1.6 million) had ever bought any good or service. The curfew imposed as a result of the COVID-19 pan-demic will, without ques-tion, drive up these num-bers dramatically.

even among those who had made purchases, fre-quency of use was very low. When asked how many pur-chases they had made in the past three months, 59% answered none and 31% answered 1-5. Only 10% had made more than five pur-chases within the past three months. Only 23% of those who had made any pur-chases used platforms for the full range of functions: search, ordering, paying and delivery. Thirty eight

per cent had used platforms only for search.

From the perspective of the buyer, the important elements are related to search or discovery func-tions (who has the item that I want? is the quality ade-quate? what is the price?) and how payment and deliv-ery could be arranged.

Because credit card use is quite low in Sri Lanka (only 1.79 million cards active in 2019 Q3, with the actual number of users even lower), it is understandable that only 11% of the few who had made purchases had paid using credit cards.

Cash on delivery (31%) and debit cards (30%) were more popular.

The curfew created a sudden spike of interest in remote purchasing of goods, especially grocery items. Simultaneously, it shut off the options of using con-ventional methods of deliv-ery such as picking up the ordered items at the store. Payment options were also affected because customers experienced difficulties in getting cash or were simply lacking funds because their earning opportunities had dried up. The vendors had to deliver the product using carriers with curfew passes.

It may safely be assumed that there is a phone in almost all households in our cities. But other assumptions are dangerous.

Assuming that WhatsApp could be used to transmit prescriptions was wrong. Only 37% of the 15-65 popu-lation had smartphones in 2018, according to the LIRNeasia survey. even though that number should have increased by now, and would have been consider-ably higher even back then in cities, one still could not assume that a major-ity of the people who needed

medicine has smartphones, used the internet, had downloaded WhatsApp, were capable of transmit-ting images of prescrip-tions, etc.

e commerce vendors in Sri Lanka were having a hard time making sales. And these were compa-nies that were dealing with items that do not go bad. The demand that spiked in the past weeks was mostly for goods such as dairy, fruit and vegetables that require care in storage and transportation. Obviously, any system that is designed for a low level of use will experience difficulties when there is a sudden spike in demand. And with perishables for which the greatest demand arose, the systems had to be developed from scratch.

Some supermarkets which had not made any arrangements for e com-merce announced tele-phone numbers to receive orders which were flooded with calls. Lacking the soft-ware and agents needed to handle multiple simul-taneous calls, those num-bers generated frustration instead of orders. Others had low-volume internet-

based platforms which also crashed because of high volumes of orders. Both did not have the requisite back-ends set up. The success of e commerce giants such as Amazon and Alibaba rests also entirely on standard-ised packaging, computer-ised (and robotic) retrieval, and the efficiency of their warehouses and logistics.

Simplifying order tak-ing by use of standard bun-dles or forms is one way that retailers can manage demand in the short term. If they have the prior orders of customers in loyalty databases, it may also pos-sible to simplify order taking and alleviate the frustration of potential customers.

The far end of e commerce

Given the difficulties many potential users have had in understanding the difficulties of scaling up the customer facing side of e commerce it should come as no surprise that there is even greater igno-rance about the far end of the supply chains.

For a chicken to be delivered to a customer by a retailer an enormously complex set of transac-tions over a period of months is required. If any parts of the supply chain break, the reper-cussions will work their way through the chain and impact the customer immediately or in a few weeks or months.

More will be written about this, but just for a taste, let me make a pre-diction. There will be shortages and/or price spikes in chicken and eggs in a few months. Disruptions in the sup-ply chain such as diffi-culties in obtaining feed have caused hatchery operators to sell eggs that were intended for breeding purposes. There may be eggs in the mar-ket today, but there will be less chicken and eggs tomorrow.

Simplifying order taking by use of standard bundles or forms is one way that retailers can manage demand in the short term – Pic by Shehan GunasekaraGuest

Column

By Professor Rohan Samarajiva

Let’s not take supply chains for granted

By Hans Woldring and susann rotH

bloGS.adb.oRG: With the impacts of the pan-demic on food and nutrition being felt around the region, planning is needed to avoid higher food prices, decreased nutrition and reduced food security.

COVID-19 has captured the full attention of governments across the world. Their immediate focus has been on strategies to manage both the pandemic from a public health perspective and the economic and financial fallout through the implementation of varying economic rescue packages. While understandably these are key priorities, people living in the locked down cities of Asia and the Pacific are worrying about fresh food markets that are closed, dwindling stocks in supermarkets and the broken supply chains of local fruit and vegetable deliveries while food is held up on the wharves. It’s getting harder every day to get food.

We need to start thinking about the possible impacts of the current crisis on food and nutrition security, and what options exist for governments to minimise food and nutrition security risks.

Reduced working hours or unemployment will cut incomes for tens of millions of workers in Asia. This reality is well underway. For many, household income could easily fall to levels that cause severe financial hardship, and both the quantity and quality of the weekly food basket will deteriorate. For families who live paycheck to paycheck, their resilience to reduced incomes is often limited, and the impact of reduced income will be rapid and potentially severe.

While efforts are underway to hand out basic food, it may not cover the nutrition needs of populations and definitely not those of children and pregnant women. Low nutrition food, even when consumed for just for a couple of months, has long-term impacts on children’s brain devel-opment and overall health.

Although businesses working in the essential services area, including food imports, deliver-ies and sales, are typically open for business, functionality is low as staff are unable to come to work, or are caught up with 14-day self-isolation. Clearing food imports at the ports has slowed down with a shortage of workers. The entire whole food processing sector is likely to suffer from worker shortages, at least in the coming three to four months.

As a result, supply chains are functioning at

reduced capacity, causing supply side stresses. With food consumption being relatively constant, buffer stocks currently allow supplies to be main-tained, however supply side shortages can easily flow through to price rises. In some countries, we can already observe increased prices in distant provinces. There is evidence that fruit and veg-etable farmers using e-commerce platforms are already demanding higher prices.

Lower income households disproportionately feel the impact of reduced financial resources and the effect of increased food prices. The flow-on effects of poor food and nutrition security at the household level in varying contexts are well-documented and have impacts far beyond health and nutrition. Countries are varied in their safety net mitigation mechanisms, but fundamentally well targeted assistance is required, whether through direct household cash transfers, food banks, food stamps or other similar means.

Timeliness is critical, and governments need to develop responsive policies and programs without hesitation. In response to the food price hikes of 2010/2011, many governments designed programs which were implemented to address the stresses at the time. New programs should consider the lessons learned from that period and be targeted for effectiveness within the constraints of a supply chain operating in

a partial lockdown situation. Looking forward there to six months, of real concern is the impact of COVID-19 on food production and supply. We know in many countries there are currently farm labor shortages as workers can’t travel to farms, are quarantined, ill, or caring for ill family members. This will affect the timeliness of farm operations, and the ability to complete various farm operations. Fertiliser shortages are being reported as supply chains in the production and transport phases are disrupted, and this will translate to a reduction in crop yields.

Some countries have implemented or are considering implementing a ban on rice exports, as in 2010/2011 which could cause alarm that protectionism has not been abandoned. Rice export bans in 2011 were a key reason behind rice price hikes at that time.

Countries vary in the level of buffer stocks they carry in the public and private sector. However, a slowdown in the supply chain from upstream of the farm gate, at the producer level, and post farm through processor to the fresh market or supermarket is underway, reducing stocks. Processed food items, with more complex sup-ply chains, have a greater risk of shortages. It will be critical that governments prioritise policies and investments in the food production value chain to reduce the level of COVID-19 impacts

on the supply chain to control food price rises. Governments can take a range of short-term actions to ensure domestic food supplies. Local food systems will have enhanced importance. Open borders and regular revision towards more targeted local lockdown policies to keep trans-port links open and food processors working are essential. Depending on the situation, each DMC should study its circumstances to ease the bur-den of access to inputs. Short term output-based stimulus payments can act as an incentive for farmers, including bonus payments per ton delivered, or matching grant programs for rapid adoption of proven and simple on farm drying and storage technologies to reduce losses.

The focus should be on staples food prod-ucts and fruit and vegetables. With the closure of markets, food delivery services and mobile food vans will be important, which can be brought to operation by the hundreds of stall holders from the now defunct markets. It will be crucial to help farmers stay connected with through the crises and lock downs increas-ingly decentralised markets and consumers. In the medium term, investments need to be made in upgrading of wholesale markets with proper cold storage facilities, which has been neglected for years.

Ultimately, the immediate impacts of COVID-19 on food and nutrition security are just begin-ning to emerge and many additional tensions will arise in the coming weeks, months and even years. While the focus of most govern-ments is presently on health, financial and economic impacts, planning is required today to avoid higher food prices, impact on populations’ nutrition status and reduced food security.

Reducing shocks in the food supply chain will help contain food price rises and will be a lower cost solution than managing food short-ages, higher prices and the risk of social insta-bility. The time to act is now, not later.

(Hans Woldring is the Principal Natural Resources and Agriculture

Specialist at the ADB and Susann Roth is the Principal Knowledge Sharing

and Services Specialist, Sustainable Development and Climate Change

Department at the ADB.)

Amid COVID-19, the time to act is now to protect food security

With the closure of many public markets in Asia, vendors are looking for other ways to get their food to the people who need it – Pic courtesy Megan Thomas

www.ft.lk

9

THURSDAY APRIL 09, 2020 OpinionTHE COVID-19 coronavirus is a mutation of all hitherto known coronaviruses. It poses the greatest threat to those who are older; those who have lasted longest. Similarly, in the realm of ideas and ideology, many long-standing negative ideas in sections of Sri Lankan society seem to be mutating into something new and more virulently danger-ous.

This mutating ideological coro-navirus in Sri Lanka threatens our oldest political survivor: Democracy, that has struck deep roots and lasted on our island through a World War, civil wars, revolutions and counterrevolu-tions, assassinations, terrorism and foreign intervention, from 1931, the year of the exercise of univer-sal adult suffrage a mere four years after its introduction in Britain.

Let us start with the least obvi-ously deadly of the virus of ideas and ideology in circulation, the policy of strictly curbing imports on the officially stated grounds that local agriculture and industry must be encouraged. In the contempo-rary social context, local demand, however shrunken by the fall in purchasing power due to the coro-na crisis, cannot be met by strictly domestic production and supply of goods effected by a policy guillotine on imports.

Local production must be s t r e n g t h e n e d a n d expanded at an accel-erated pace, not only because it is intrin-sical ly posit ive to have a more balanced economy but because it is imperative in the current context of a global pandemic. But local production be it agrarian or industri-al, requires imported inputs, while a middle-class society in an MDG country, cannot sustain itself without imported consumer goods includ-ing essentials. The 5% growth rate that we sustained throughout the wars years was possible only because of the resilience and dynamism of the Open Economy.

Why this tectonic shift? There could be one of two reasons, or both. The first is there’s a looming foreign exchange crunch. If this is the reason, just say it, instead of hailing the virtues of boosting local production through an imports quasi-lockdown.

Why not convene a virtual Emergency Economic Roundtable of Experts, imperatively including the Institute of Policy Studies (IPS), which could produce policy alter-natives, a roadmap for economic crisis management and a blueprint for a rational alternative economic strategy/model? Why not bring together stellar economists, the corporate sector, state economic managers, trade unions and leaders of all political parties for a virtual Emergency Economic Summit?

Ideological, not logicalThe second reason, which does

not negate the first, is the hegemo-ny of wrong ideas. The new policy will slit the throat of the goose that laid the golden eggs, the Open Economy of 1977.

While the SLFP was an early critic, both the SLFP and the for-mer Economics Ministers now in the SLPP have long since converted to a variant of the Open Economy, entailing a different policy mix. It is only the Sinhala Alt-Right that has consistently been against the Open Economy since 1977. Around 1990 the Sinhala ultranationalists propounded the slogan and model of a “Jathika Arthikaya” (Dr. Gunadasa Amarasekara’s coinage), a “National Economy”, a return to the closed economic policy of pre-1977 but with an ultraconserva-tive, fundamentalist twist. It is in the service of this ideology that the student unions of the radical Right (with “Nalin Sir” as guru) launched a coercive campaign in the early 1990s against Fanta and Coca Cola on campuses.

As Dr. Newton Gunasinghe noted in his ‘Open economy and its impact on ethnic relations in Sri Lanka,’ (Lanka Guardian 15 November 1983) the Sinhala mid-dle bourgeoisie felt that with its controlling interest in the State through arithmetical-electoral preponderance, a State-run ‘closed economy’ was more advantageous vis-a-vis their ethnic minority eco-nomic competitors than the rela-tively level playing field of the Open Economy. Minister of Industries, militant Sinhala ultranationalist

Cyril Mathew, was an ideologue of this perspective.

The Government has now embarked whether it knows it or not, on the path of de-linking and de-globalisation, while rational thinking among world leaders, including Putin and Xi Jinping, is for the retention of globalisation but with a shift to multilateralism and multipolarity. Russia, China and India have been critical of the unilateral nationalist ideological ‘turn’ away from globalisation. The banner of globalisation dropped by Trump has been picked up by China’s Xi.

Participating at the invitation of Prof. Sergei Karaganov (dubbed “Russia’s Kissinger”), in Moscow last November at the International Conference on “Globalisation in Asia” at the elite Higher School of Economics (HSE) I argued that the

problem is not g l o b a l i s a t i o n per se, but the specific form of g l o b a l i s a t i o n which is neo-liberal and uni-polar , urging that the false choices of “glo-balisation or no globalisation?”, “globalisation or de-globalisa-tion?” should be reframed as “what kind of g l o b a l i s a t i o n and who ben-efits from it?” and a model e n v i s i o n e d that is not an alternative TO g l o b a l i s a t i o n but an alterna-tive model OF globalisation. ( h t t p s : / / r u s -s i a n c o u n c i l .

ru/en/analytics-and-comments/analytics/the-intellectual-vector-where-russian-interventionism-is-imperative/)

A policy of import controls/import substitution/austerity as ‘shock therapy’ would lead to scar-cities, disgruntlement at unshared sacrifice, protest resulting in violent and possibly lethal crack-downs, and erosion of electoral pop-ularity. So, what’s the game-plan?

Garrison state, siege economy

Is a ‘self-sufficient’, minimal-imports, ruralised ‘National Economy’ actually a siege economy meant to withstand international isolation, be resistant to future international sanctions—and are citizens’ consumption patterns to be deliberately re-programmed for permanent scarcity?

Every macroeconomic policy regime has its inherent logic. The agro-based ‘siege economy’ model inevitably triggers a search for agrarian ‘Lebensraum’, which would be quite in order if it doesn’t take the shape of an expansion-ist, annexationist ‘settler-colonial’ model as was sought in the 1980s as geostrategic and demographic accompaniment of the Mahaweli scheme. That model resurfaced in 2008-9 as example and experience of foreign patrons during delib-erations in the last stage of the war regarding postwar security order planning. Those blueprints could be implemented.

World history proves that a closed ‘national economy’, delinked from the world economy and lean-ing towards state monopoly, exer-cises a gravitational pull towards totalitarianism. However, an ethno/religio-centric garrison state is unsustainable in a negative external climate, on a small island with a pluri-ethnic populace on the doorstep of a regional superpower which houses one of those ethnici-ties in numbers four times the size of this island’s population.

By “garrison state” I am not referring to the deployment of the military including those at the highest command levels, in the anti-corona campaign. Our mili-tary constitutes the most powerful instrument we have and we must throw everything our country possesses into the campaign. The

‘counter-terrorist’ intelligence-led nature of the anti-corona campaign is necessary to track and sequester the carriers of this viral bomb.

I have no issue with the appoint-ment of retired military officers because with or without the corona crisis we have to use their training and command experience to re-set and re-energise a sluggish State machine, though I am quite uncom-fortable with ex-military governors for Provinces – the optics are all wrong — and smart retired offic-ers heading or co-chairing State institutions pertaining to special-ised policy fields that it takes years of education and experience to achieve expertise in.

Putin it onThere are excellent, exemplary

public policy interventions by the GMOA which acts as a watchdog, tracks the global pandemic, absorbs the experiences and applies them to the local situation, makes propos-als and keeps the public informed. Six top Professors of Medicine have made pinpoint recommendations. Both groups apply the universal objective scientific method which knows no national/ethnic/reli-gious boundaries or biases.

Meanwhile the usual suspects post articles in Sinhala and English with titles such as ‘The Democracy Trap’ and FB slides which say ‘No to Elections! 9 Maj-Generals for the 9 Provinces! 25 Brigadiers for the 25 Districts! Like this if you agree!’

A n S L P P i d e o l o g u e , t h e ‘Yuthukama’ chief, posts a video denouncing the call for the recon-vening of Parliament on the grounds that the legislature is “stale” in that it doesn’t represent the outcome of the Presidential election, unaware that the US House of Representatives doesn’t mirror the outcome of the US Presidential Election either, but convened under bitter Trump opponent Nancy Pelosi and passed an 8.3 billion Emergency Corona Response Bill.

An SLPP academic urges the instant implementation of the Grama Rajya concept embraced by the party, ignoring its found-ing purpose in West Bengal under Marxist Chief Minister Jyoti Basu as sub-unit devolution for grass-roots participatory development, organically within the womb of a quasi-federal linguistic state.

Nationalist columnists defend the Ratnayake release (which should have been either a commu-tation of the death sentence, or part of a blanket amnesty covering both sides) while scornfully dismiss-ing the unanimous judgement of a five-judge bench of the Supreme Court chaired by the Chief Justice

in an attempted rebuttal which categorises as “circumstantial evidence” that which the highest Court deemed after deliberation as having passed the litmus test of “reasonable doubt”—while also redacting the fact that the accused who was convicted of the murder-ous atrocity, had confessed to the Military Police in 2000.

Just the other day, a person prox-imate to the power-elite posted on her FB, the cover of Mein Kampf illustrated with a glossy photo-graph of its monstrous author, and prefaced it with an empathetic nar-rative highlighting Adolf Hitler’s “nationalist” credentials and “love of his country”. There was no men-tion of the paranoia, xenophobia and agenda of exterminism of Jews and Slavs already prefigured in Mein Kampf, nor the Nazi Fascism, concentration camps and gas cham-bers of history’s most notorious genocidal maniac and symbol of pure, unbridled, political evil. The FB post was a shock and disap-pointment, but no surprise.

Apart from reflexive moral hor-ror and outrage, what flashed through my mind were the remarks of Russian Foreign Minister Sergei Lavrov in Colombo on 14 January 2020 in the presence of Foreign Minister Dinesh Gunawardena : “…We are grateful to our Sri Lankan friends for their tradi-tional support of Russian initia-tives at the UN General Assembly on the unacceptability of glorifi-cation of Nazism…We agreed to coordinate our positions on the events to celebrate the 75th anni-versary of Victory in WWII at the United Nations.” (MFA/Russian Federation website)

You can’t pose as a Putin fan, flirt with Putin’s Russia as an ideal, fantasise that you are support-ing a Putin equivalent, fake it as if embracing the Putinist model, and yet have a soft corner for Adolf Hitler, still less have him as a politi-cal pin-up even in the closet. It is an ineluctable choice between mod-ern, Realist, rational state-patriot-ism and xenophobic racist Fascism.

Coding, not hard driveMy problem is not with the

‘hard drive’ i.e., the State and/or the armed forces, the political leadership of President GR, Prime Minister MR, trouble-shooter BR, the Cabinet, the ruling Front. It is with the ‘software’, the ‘coding’: the dominant doctrine, discourse and direction.

The COVID-19 disaster is no less than a crisis of humanity. The best available brains in all sectors must be networked, nationally and inter-nationally, to manage, combat and overcome it. Insularity and invo-

lution obstruct. The mentality of political ‘self-reliance’ and the ‘self-sufficiency’ of its constituency even in this unprecedentedly exception-al and extreme situation, is mani-fested in a unilateralist-restrictive model of rule which refuses to reconvene Parliament and obtain broadest possible national consen-sus, drawing in all political and social stakeholders into the struc-tures, mechanisms and processes of feedback-policy formulation-imple-mentation-crisis management.

The keyword “Viyathun” i.e. the “learned” or “experts”, is warped by a dual distortion: pro-regime professionals/experts pronounce influentially on sensitive matters outside their fields of educational attainment such as complex politi-cal, foreign policy/diplomatic, legal-constitutional and ethnic/religious issues, while the tag ‘pro-fessionals/experts’ is reserved for those of ultranationalist persuasion rather than those who are nation-ally and internationally recognised as the best Sri Lankans in their fields.

Tyranny by design or default?Connect the dots, see the pattern.

What if there is a Constitutional deadlock or vacuum created inad-vertently or deliberately by a refus-al either to seek advice from the Supreme Court and/or reconvene Parliament, revoke the dissolution and obtain broad consensus for elections in September?

There are extremists who wish to leverage the COVID-19 crisis to install the Alt-Right totalitar-ian model of their fancy, with a Presidency that is not merely pre-eminent but supreme and absolute, ruling by edict.

The nexus of the ultranation-alists with a generation of the armed forces dates back to 2001-2003, when the military had been orphaned and rendered vulner-able by Wickremesinghe’s policy of appeasement (our Chamberlain-Petain experience) of Prabhakaran and the Tigers. That military gen-eration which was humiliated by Wickremesinghe’s CFA, went on to win the war, and many are retired but crucially influential. If the ultranationalist constituency has its way, our most valuable strategic asset and instrument of last resort, the Armed Forces, will find them-selves locked in a “civilian-military junta” (a Latin American category) overstretched by running a country and its citizens instead of defend-ing both, something they weren’t trained to do.

Especially after the unilateral UNHRC pullout and the Ratnayake pardon, if the country abandons the democratic path it will lose inter-

national legitimacy and be an easy target of universal jurisdiction and unilateral sanctions, which will compound the hardships of eco-nomic austerity through delinking/de-globalisation.

No military has ever sustainably succeeded in so complex a task in so unfavourable a context, and even under far fewer forbidding circum-stances, in country after country militaries have had to retreat into the barracks, having lost legitima-cy, popularity and status and been scapegoated for multiple failures including economic collapse result-ing from international isolation.

Having successfully defended our military at the UNHRC Geneva during the last war and chiefly in 2009, I’d rather not see our Armed Forces misled by the ultrana-tionalists, falling into a politico-economic quagmire, unable to extricate itself and make it to the exit ramps, and thus meeting their nemesis—as did the Serbian mili-tary.

Incredibly, a constitutional-liberal lawyer and northern (ex) parliamentarian of the Opposition argued in a leading newspaper this week for an apparently open-ended postponement of elections beyond 1 September, with a nod and a wink at a constitutional amendment (without a referen-dum in a matter of the franchise?), thereby opening a window for a replay of Referendum 1982 without the Referendum but with all the horrors in its wake starting with July ’83. When electoral pressure valves shut, racism runs riot.

Apart from a Victor Orban (Hungary) outcome of indefinite rule by decree, or tyranny by design or default, postponement of elections beyond September would remove any electoral incentive for the administration to do its utmost to curb COVID-19 expeditiously—and provide precisely the opposite incentive for cynical exploitation.

Remember contemporary his-tory. The German people never entertained narcissistic or maso-chistic notions of return to the decadent liberalism of the Weimar Republic, the megalomaniacal totalitarianism of the Third Reich, or the grey conformism of walled-in GDR. Nor will the Lankan people return to or remain in dead-ends. However long, dark, irrational and perilous a political experiment we shall be submitted to as a byproduct and under cover of the corona crisis, it will prove but a painful interregnum and tunnel of transition to the light of Democracy and Reason.

(Dr. Jayatilleka was Chairperson of the ILO Governing Body, 2007-2008.)

Coronomics and the mutating coronavirus of the mind

GUARDIAN Column

By Dr. Dayan Jayatilleka

LANKA

Is a ‘self-sufficient’, minimal-imports, ruralised ‘National Economy’ actually a siege economy meant to withstand international isolation, be resistant to future international sanctions—and are citizens’ consumption patterns to be deliberately re-programmed for permanent scarcity? – Pic by Shehan Gunasekara

Opinion/Issues www.ft.lk

10

THURSDAY APRIL 09, 2020

By a Special correSpondent

DEAR President Rajapaksa, I am sure you like most Buddhists remember the story of Kisa Gotami1 that we learned as children, and that the core lesson was that death is inevitable to all beings.

I bring this up s ince the Government’s strategy is very much at odds with the valuable self-realisation the Buddha enabled by asking Kisa Gotami to bring back a mustard seed from any house that had not experi-enced any deaths.

Lockdowns don’t prevent deaths of the vulnerable, they just delay them

The reality is that no matter how long the lockdown, the COVID-19 virus does not go away. The fatality rate for the sea-sonal flu is 0.1% (and about 1,000 people a day die of it around the world), and the current best guesstimate for Covid-19 is 1%, but that number will come down as more testing is done (the denominator increases) and they discover the many people around the world (current guess-timate is 80%) have become immune because they got infected with the virus and never even noticed any significant symptoms.

If we assume the high side number is correct, then 220,000 Sri Lankans may potentially die. If the number is closer to the seasonal flu, then 22,000 Sri Lankans may potentially die. Regardless of which number it turns out to be, the 500 ICU beds will not be able to handle the flood of patients when the curfew is lifted weeks, months or years out. And even if you have 220,000 ICU beds, the infected from the vulnerable groups may most probably die.

The worldwide mortality is domi-nantly from older people (I am one of them), and significantly from those with multiple pre-existing medical condi-tions2 such as heart disease, diabetes, chronic respiratory disease, high blood pressure, and cancer. And, Sri Lanka has many citizens, young and old, with these conditions, so our numbers may potentially be higher than the 1%. Currently, our death rate is about 1,000/day (365k/year) and the world death rate is about 150,00/day (55 million/year) and two-thirds of those deaths are from age related causes.

Lockdowns immediately ruin persons, nations, and immune systems

While the exact amount of COVID-19 related deaths to come if you lift the lock-down can never be predicted accurately, what is known for sure is the ruin to peo-

ple, families and the nation that started back on 20 March. There are millions of stories from all the citizens about the harm that started with the curfew. Daily wage earners, pola vendors, kadey own-ers, food outlets, transport providers, factories, hotels, and large companies went into a tail spin. Millions suddenly have no income, further millions have been fired, and fear psychosis is ram-pant. The ruination of the Sri Lankan economy because of the lockdown is nothing compared the immense harm done to the psyche and the immune sys-tems of all citizens. President Rajapaksa, when you were Secretary for Urban Development many years ago, you cre-ated many walking paths and exercise areas around the country. Exercise, sunshine, and fresh air is well estab-lished are excellent ways to boost one’s immune system. A balanced diet, social interactions, and freedom from worry are other ways to boost one’s immune system. With the lockdown, all of those aspects have been taken away, and whenever you lift the lockdown, the citizens that emerge will do so with weakened immune systems, potentially increasing the fatality rate in Sri Lanka.

Ignoring the lessons learned from defeating the LTTE

President Rajapaksa, you as Secretary of Defence along with the Tri-Forces Commanders architected a strat-egy that defeated the LTTE in two years after decades of a stalemated secession-ist conflict. The core part of that strategy was attrition in which the State would take heavy casualties but could recruit replacements, and the LTTE would take heavy casualties as well, but could not recruit replacements. During this final phase of the conflict over 6,000 of our armed forces were killed of the total of about 25,000 indicating a high casualty rate in the final two years. We as citizens were fully supportive of your strategy, and many citizens joined the Tri-Forces. Many who joined made the ultimate sac-rifice so that their fellow citizens would enjoy the peace that we have for the past 11 years.

The battle against COVID-19 unfor-tunately, is being conducted in a totally differently way where the primary goal is to avoid any fatalities. The best anal-ogy that I can come up with is that the

armed forces medical corps dictates to the generals on how to prosecute the war based on lockdowns to ensure their hospital capacity is not exceeded as the main KPI (Key Performance Indicator). All other consequences of the lockdowns are to be ignored accord-ing to the medical corps. Unfortunately, President Rajapaksa you have many more KPIs to be concerned about since you are responsible for the function-ing of an entire State and its citizens via the Government. The success of the State comes from the capability of its citizens to provide goods and services to themselves and to other countries. With the lockdown, all of this has ceased to exist, and as mentioned earlier, despair exists where hope was there starting on 17 November 2019 when you were elected as President by an unprece-dented majority of us. You started your Presidency with a many positive steps, and us citizens were heartened by that video of your visit to the RMV where you stated that your duty, and the duty of the Government officials, was to serve the people. That one visit has resulted in millions of us getting vastly improved services from the Government over the past few months up to early March this year. Much of that goodwill was erased on 20 March when the lockdowns were announced by the Government. While the subject of death is sensitive, the hue

and cry on social media and the press appears to be that COVID-19 related deaths are special deaths to be avoided at all costs. These same people are gob-smacked when I tell them Sri Lanka’s daily death rate is about 1,000 and that the global seasonal flu death rate is about 1,000/day. It appears that a vocal majority of our fellow citizens have become Kisa Gotamis who don’t know that death is a natural part of life. And, is inevitable.

A proposed way forwardUnless you are going to spend your

life in an isolation chamber, all of us will get infected by COVID-19 just like we all have been infected by the common cold virus. And no COVID-19 vaccine will be widely available for at least one to two years. These are the realities we have to face.

The proposed way forward is based on my empathy for the lives of the vast majority (99%+) who will get COVID-19 but won’t be fatally affected by it, AND also for the lives of the small minority (1% or less) that will get COVID-19 and will succumb to it. I am in that small minority (because of age), and many of my dear friends are potentially in the same small minority because of age and pre-existing medical conditions.

I respectfully submit the following

proposal elements for your kind consid-eration:1. Immediately lift the lockdown, and let

people get on with their lives. Remind them that most will contract the virus and won’t even know about it, and that some will die. The daily death rate can look sensational initially compared to our current death rate of a 1,000/day, until the herd develops immunity. The medical service will provide what they can with our lim-ited capabilities, but that is the real-ity in any country in the world when it comes to a Black Swan event such as this. Life and death decisions will be made by doctors, just as they have been made for decades when it comes to treating other common diseases like cardiac conditions, diabetes, kid-ney problems, cancer etc.

2. Encourage those who are in the vul-nerable category because of age or pre-existing medical conditions to take whatever precautions they choose to. This could include shelter-ing at home, or choosing to stay for an extended period at a quarantine facil-ity.

3. Take common sense precautions such as banning large gatherings, and encourage social distancing, tempera-ture scanning when entering public spaces, and having everyone register for contact tracing.

4. Start extensive antibody testing across the population to understand the level of herd immunity that has developed. If positive for antibodies, then they can potentially be issued a badge that show they are immune. This will help people get over the fear psychosis that currently exists where everyone is viewed with suspicion. Design the badge so that the wearer can easily be verified by the police or other officials, and take adequate common sense precautions (includ-ing fines and jail sentences) with the badge to make sure its owner does not give it to others for use for nefarious purposes.

5. Only grant entry visas for those who have tested positive for antibodies, to kick start our tourism industry, and for our citizens overseas to return.

6. In a show of reciprocal responsibil-ity, all departing citizens should be allowed to travel only if they are posi-

tive for antibodies. This will ensure that returning citizens are not carri-ers.

7. Foreigners are allowed to depart only if they are positive for antibodies or negative for a COVID-19 PCR test.

8. Provide compensation for daily wage earners and others who have been negatively impacted by the lock-downs.

9. Repurpose laid off workers to work in hundreds of Controlled Environment Farms (CEF) across the country to grow fresh food for us, and for same day export and delivery to 82% of the World’s population in the Eastern Hemisphere. These CEFs in addi-tion to providing new employment opportunities, addresses the press-ing problems that climate change has created in our food supply chain. No matter what virus comes along next, the world needs to eat, and we can pro-vide virus free, organic fresh food to the world.

The silver linings in the dark clouds

The silver lining in the dark cloud, is the amazing work our health care work-ers and Tri-Forces personnel have done in taking care of the sick and creating additional hospital care and quarantine facilities. I salute them and extend my heartfelt thanks for their service.

Another silver lining is the way that various people have come together to locally design and manufacture, or concept demonstrate products to address the COVID-19 crisis. These products have ranged from the apparel sector manufacturing PPE (Personal Protective Equipment) for the health care workers, to various mechatron-ics products such as ventilators, robots to deliver items to ward patients, even mobile crematoriums. This shows the creative product design engineering tal-ent of our people, and I encourage you to establish the appropriate Government policies to enable these locally designed and manufactured products to become part of our global exports.

Finally, the generosity of our fellow citizens is legendary, and this COVID-19 crisis was no exception. There were many citizens who unstintingly aided fellow citizens in need, at a personal level, or via organisations. They far exceed those who used this crisis to cre-ate racial and religious dissension and other strife, and are to be commended.

Footnotes1https://buddhiststories.wordpress.

com/2012/11/03/kisa-gotami-and-the-mustard-seed/

2 https://www.worldometers.info/coronavirus/coronavirus-age-sex-demo-graphics/

KARL Marx did not advocate the imple-mentation of his philosophy through death and destruction but he did pre-dict that like previous socio-economic systems, capitalism produced internal tensions which would lead to its self-destruction and replacement by a new system known as socialism.

While it’s too early to tell whether the destruction caused by the coronavirus is philosophically what Marx predicted, the after effect of it at least seems to offer opportunities for the world to seize upon and build a new house where there is much less inequality amongst its inhabit-ants. Socialism or by any other name, a governance system that takes the world towards a social organisation where the ownership of the means of production, distribution, and exchange is more broad based and where there is greater owner-ship by the community as a whole, might be on the cards.

Pandemics are nothing new and history records several that have killed many people, devastated liveli-hoods and ruined the economies of countries. Despite these, the world has survived.

The worst influenza pandemic recorded, the Spanish flu of 1918 which incidentally had not originated there but supposedly in New York and subsequently spread throughout the world killing some 50 million people and infecting over 500 million people. In percentage terms, taking the estimated population of the world at the time of 1.8 billion people, it killed around 3 % of the popula-tion and infected about 30% of the population. The pandemic lasted about two years.

Other large influenza pandemicsThe Spanish flu pandemic was the largest, but not

the only large recent influenza pandemic. Two decades before the Spanish flu the Russian flu pandemic (1889-1894) is believed to have killed one million people.

Estimates for the death toll of the “Asian Flu” (1957-1958) vary between 1.5 and 4 million. According to a WHO publication the ‘Hong Kong Flu’ (1968-1969) killed between one and four million people.

The Russian Flu pandemic of 1977-78 was caused by the same H1N1 virus that caused the Spanish flu.

According to estimates it had killed around 700,000 died worldwide. Compared to the period of the Spanish flu, differences in health systems infrastructure and medi-cines matter today and while the potential is there for the numbers being infected and dying to be substantial. The Spanish flu hit the world in the days before antibiot-ics were invented; and many deaths, perhaps most, were not caused by the influenza virus itself, but by sec-ondary bacterial infections.

It is said that health systems were different then, but also the health and living conditions of the global

population were worse than now. The 1918 pandemic hit a world population of which a very large share was extremely poor – large shares of the population were undernourished, in most parts of the world the populations lived in very poor health, and overcrowding, poor sanitation and low hygiene standards were common. Sadly, this situation is not very different today as will be shown later in this article.

The question before us now is not only about if and when the current pandemic will end, and how, as it will end without doubt, but about what we make of what is left behind in its wake. It is also the time to begin discussions as to what kind of world do we want and whether we should go back to the world before the pandemic struck it. Although many tend to describe the world today as wealthy and healthy, economic social

and health statistics do not support this claim when considering the number of people in poverty and when considering the health and wealth inequalities in the world.

The following sample of statistics are given to show that the world is not very healthy and wealthy and wealthy today1. Nearly half of the world’s population — more than

three billion people — live on less than $2.50 a day. More than 1.3 billion live in extreme poverty — less than $1.25 a day

2. One billion children worldwide are living in poverty. According to UNICEF, 22,000 children die each day due to poverty

3. 805 million people worldwide do not have enough food to eat.

4. More than 750 million people lack adequate access to clean drinking water. Diarrhoea caused by inad-equate drinking water, sanitation, and hand hygiene kills an estimated 842,000 people every year globally, or approximately 2,300 people per day.

5. In 2011, 165 million children under the age five were stunted (reduced rate of growth and development) due to chronic malnutrition.

6. Preventable diseases like diarrhoea and pneumonia

take the lives of two million children a year who are too poor to afford proper treatment.

7. As of 2013, 21.8 million children under one year of age worldwide had not received the three recom-mended doses of vaccine against diphtheria, tetanus and pertussis.

8. 1/4 of all humans live without electricity — approxi-mately 1.6 billion people.

9. 80% of the world population lives on less than $10 a day.

10. Oxfam estimates that it would take $60 billion annu-ally to end extreme global poverty—that’s less than one-fourth the income of the top 100 richest billion-aires.

11. The World Food Programme says, “The poor are hungry and their hunger traps them in poverty.” Hunger is the number one cause of death in the world, killing more than HIV/AIDS, malaria, and

tuberculosis combined. An article titled ‘If you see the big picture, then we can see eye to eye’ by Chandula Abeywickrema, Chairman of Lanka Impact Investing Network (LIIN) and Chairman of People’s Merchant Finance PLC (http://www.ft.lk/columns/If-you-see-the-big-picture-then-we-can-see-eye-to-eye/4-698258), quotes the stunning figures published by Oxfam in their 2018 report to the World Economic Forum (WEF) that the world’s 2,153 billionaires have more wealth than the 4.6 billion people whom make up to 60% of the planet’s population, that in the year 2018, the 26 richest people on earth had the same net-worth of poorest half, the 3.8 billion people of the planet earth. If this global inequality does not shock us, nothing

will. This gap between the rich and the poor is vulgar. This inequality is in the main, the result of exploitation of the many, by a few.

As Abeywickrema says, corporate greed, phenom-enal economic profit and irresponsible revenue genera-tion by totally sacrificing key fundamental and basic values of the planet and the people has brought all of us in this planet to the brink of annihilation and extinction.

It is difficult to imagine and link the coronavirus as a catalyst let loose to give the world a shock it needed. If its targeting was more discerning and less all-encompassing as being experienced now, one could have come to a conclusion that it is the work of a higher being or of invaders from another planet! The aftermath of its impact however is no different. It has shaken the foundations of the world as we knew it, and it has made the accumulation of unbridled wealth a meaningless exercise as the economic disorder that has been expe-rienced has made such wealth much less potent than it was in shaping that world of inequality.

The coronavirus has made the high and mighty kneel, and brought the world, its life style as it was before it, the economy before it, to a halt like nothing else could. No doubt those who were rich and powerful and those who were supported by them to maintain the status quo and propagate the inequality before the viral attack on the world are very likely longing for a return to “normality”, and the life of avarice and exploitation they practiced and wondering how to stitch a future to the past where they thrived. Their intelligentsia no doubt has been tasked to chart a way to get back to “normal”, the way the world was before December 2019.

However, for others and for those who wish to see a world of greater compassion, a world which is sustained by its climate and its natural eco system, a world less of inequality, a world that is driven by genuine needs rather than wants arising from avarice, where no one dies of hunger or lack of clean water to drink, where basic health needs are met for everyone, this pandemic offers opportunities to rethink and not begin building another time bomb that the world built for itself.

If we are to change course and think differently, noth-ing could be worse than a return to normality, as there was no normalcy for most people in the world and it was

in any event leading towards disaster anyway. Chandula Abeywickrema places some very interesting thoughts in us. He says wealth distribution is not about taking things from rich and giving to the poor or taking things from the people who have and distribution to people who do not have. It is not even the so-called Corporate Social Responsibility activities of many entities and institutions or many philanthropic donations given to community upliftment and benefits. The art of wealth distribution he says is the need to emotionally rationalise the use of many resources at our disposal continually to ensure the products and services are made available, acces-sible and affordable to more people in more places, and more often. As he says, if most of the products and services commercially viable, humanly needed and important are available, accessible and affordable only to a few people in few places more often, it’s not wealth distribution but wealth accumulation by few people.

That is indeed the current status of affaires in the world today, when we have 26 richest people in the world having the wealth equivalent to wealth of 3.8 bil-lion people, its wealth accumulated by them for them.

If one interprets this right, then, the paradigm being advocated is to turn the economic model that existed prior to the pandemic, upside down and for wealth generation and accumulation to happen at the grass roots so that more and more people acquire and have a share of capital rather than a few. Consequently, economic inequities, and many social and societal inequities that have their roots in economic inequities, will be addressed with greater sustainability. It needs to be said here that such a model could well be making an assumption that is fundamentally at odds with a weakness in many human beings, which capital-ism has exploited very successfully, and that is their avarice and the sense of power they derive through the accumulation of wealth far in excess of their real needs.

The challenge for all of us now is to think strategically and laterally, about the kind of world we would like to have and move on from a world that was destroying itself anyway by killing the very environment that had sustained it, and allowing the world to be controlled by 2000 billionaires whose only interest and ambition would have been to become trillionaires and perhaps leave for Mars if the Earth got destroyed.

Sri Lanka may not be able to determine the trajec-tory of other countries, but they can collectively give some thought to what they wish the new Sri Lanka to be. It is timely that our thoughts are directed towards the kind of world we would like to see rather than doing hundreds of analysis about the possible origins of the virus, its spread and its containment. While these are important, the origin of a virus spread is most likely something that people cannot control although pre-venting its spread is something people can control. It is important however to discuss how we could collectively face the aftermath of the pandemic and how we could chart a course that would give us a better country as that would be within our control.

Guest Column

By Raj Gonsalkorale

Is COVID-19 a path towards the philosophy of Karl Marx?We can choose to walk through it, dragging the carcasses of our prejudice and hatred, our avarice, our data banks and dead ideas, our dead rivers and smoky skies behind us. Or we can walk through lightly, with little luggage, ready to imagine another world. And ready to fight for it –Arundhati Roy

The Dhamma Dvipa that forgot Kisa Gotami and the mustard seed

If we are to change course and think differently, nothing could be worse than a return to normality, as there was no normalcy for most people in the world and it was in any event leading towards disaster anyway – Pic by Shehan Gunasekara

The Government’s strategy is very much at odds with the valuable self-realisa-tion the Buddha enabled by asking Kisa Gotami to bring back a mustard seed from any house that had not experienced any deaths

The COVID-19 pandemic is placing gar-gantuan pressure and stress on businesses and thereby the economy, as State-wide lock-downs and curfew in several coun-tries of the world has disrupted businesses. Consequently, several businesses are facing severe financial challenges which is mount-ing as the pandemic has paralysed the func-tioning and progress of businesses, and thereby forcing the businesses to consider serious cost cutting measures. It is reason-ably foreseeable that many businesses shall endeavour to retrench employees in order to cut down costs.

In a country where employment is rigor-ously protected by law, retrenchment can-not be a simple tread for the employers. On the other hand, it is crucial for the employ-ees to understand and appreciate the pro-tection accorded to them by law. This note shall briefly highlight the laws pertaining to retrenchment in Sri Lanka.

What is retrenchment of employees?Retrenchment is a type of dismissal of

an employee for non-disciplinary reasons, and due to no fault of the employee. The Industrial Disputes Act1 defines “retrench-ment” as “the termination by an employer of the services of a workman or workmen on the ground that such workman or work-men is or are in excess of the number of workmen required by such employer to carry on his industry”2.

Is an employer entitled to retrench?It is well established in law that a person

cannot be compelled to continue a busi-ness or a section of it, which he, for his own reasons intends to stop or is not will-ing to continue3. Furthermore, it is within the employer’s purview and discretion to decide the size of its labour force, and may make bona fide decisions in determining the necessary work force and to retrench excess employees. As a consequence, the employer may retrench employees who were employed in that business or section. The decision to discontinue a business or a section of it, or to reduce the size of the work force is within the purview and dis-cretion of the management and the manage-ment cannot be called into question as long as the said decision is not made in mala fide in order to victimise the employees.

however, Sri Lankan law does not permit for the freedom of “hire and fire”, and there-fore any retrenchment decision is subject to the laws governing employment and the ter-mination of it.

What are the laws governing retrenchment of the employees?

In Sri Lanka, Part IVB of the Industrial Disputes Act (IDA)4, and Termination of employment of Workmen (Special Provisions) Act (TeWA)5 govern the laws per-taining to retrenchment of employees.

Provisions of TeWA and Part IVB of the IDA does not apply to employers who employee on average less than 15 employees6.

For employees who are governed by TeWA, the pro-visions of TeWA apply and the provisions in Part IVB of the IDA does not apply7. For employees who are not gov-erned by the provisions of TeWA, Part IVB of the IDA applies.

It is noteworthy that neither TeWA nor the provisions under the IDA apply to persons employed by the Government. however, Part IVB IDA is applicable to the employees of public corporations.

Under TEWA, how can an employer retrench their employees?

Section 2 (1) of TeWA categorically states that no employer shall terminate the sched-uled employment of any workman without the prior consent in writing of the work-man; or the prior written approval of the Commissioner General of Labour.

The Commissioner is authorised to per-mit or refuse to approve the retrenchment, however, is required to make the deci-sion within three months from the date of receipt of the application from the employ-er8. The Commissioner is also entitled to decide on approving the retrenchment sub-ject to any terms and conditions, especially terms and conditions related to payment of compensation and gratuity to the employ-ees who are retrenched9.

What is “scheduled employment” under TEWA and to whom does TEWA apply?

According to section 19 of the TeWA “scheduled employment” means employ-ment in – (a) any trade, in respect of which a notifi-

cation has been published in the Gazette under subsection (2) of section 6 of the Wages Boards Ordinance of an order made under subsection (1) of that section and shall include the work of any worker referred to therein but excluded from the provisions of such order;

(b) every shop and every office within the meaning of the Shop and Office employees (Regulation of employment and Remuneration) Act; or

(c) every factory within the meaning of the Factories Ordinance;

Section 3(1) of the TeWA lists out the employees to whom TeWA doesn’t apply:

3. (1) The provisions of this Act, other than this section, shall not apply – (a) to an employer by whom less than fifteen workmen on an average have been employed during the period of six months preceding the month in which the employer seeks to terminate the employment of a workman; or(b) to the termination of employ-ment of any workman who has been employed by an employer for a period of less than one hun-dred and eighty days inclusive of- (i) every day of absence on any ground approved by the employ-er; (ii) every day of absence due to any injury to the workman caused by an accident arising out of, and in the course of his employment;

(iii) every day of absence due to anthrax or any occupational disease speci-fied in Schedule III of the Workman’s Compensation Ordinance (Chapter 139);

(iv) every day on which the employer fails to provide work for the workman;

(v) every day of absence due to a lockout, or strike that is not illegal, if such days do not in the aggregate exceed thirty days; and

(vi) every holiday or day of absence from work to which a workman is entitled, by or under, the provisions of any written law,

in the continuous period of twelve months commencing from the date of employment if such termination takes place within that period of twelve months; or (c) to the termination of employment of

any workman who has been employed by an employer where such termina-tion was effected by way of retirement in accordance with the provisions of –

(i) any collective agreement in force at the time of such retirement; and

(ii) any contract of employment wherein the age of retirement of such workman is expressly stipulated; or

(d) to the Government in its capacity as an employer; or

(e) to the Local Government Service Commission in its capacity as an employer; or

(f) to any local authority in its capacity as an employer; or

(g) to any co-operative society in its capac-ity as an employer; or

(h) to any public corporation in its capac-ity as an employer; or

(i) to the termination of employment of any workman who has been employed by an employer in contravention of the provisions of any law for the time being in force.This means, practically TeWA applies

to most of the private sector employees. however, it is also noteworthy that TeWA does not apply to probationers.

Under TEWA, what are the consequences of retrenching employees without their consent, or without the approval of the Commissioner General of Labour? What is the consequence of acting in contravention of the decision of the Commissioner General of Labour?

Any dismissal from employment in con-travention of the provisions of TeWA shall be illegal, null and void, and accordingly shall be of no effect10.

Where the written approval of the Commissioner is sought by the employer, and the Commissioner has made a decision, any person failing to comply with the said decision shall be guilty of an offence punish-able by a fine not exceeding one thousand rupees and/or imprisonment for a term not exceeding six months11.

Can a decision made by the Commissioner General of Labour be challenged before any other forum?

Section 2(2)(f) of TeWA explicitly pro-vides that any decision made by the Commissioner is final and conclusive and can not be called in question whether by way of a writ or otherwise in any court; or in any court, tribunal, or other institution established under the Industrial Disputes Act.

however, a statutory “ouster clause” like the aforesaid provision, will not protect a decision by the Commissioner which is ex facie ultra vires, illegal, and made with-out or outside any legal authority12. Any administrative action, if it is not in compli-ance with the statutory provision, then it is not protected by any “ouster clause”. It can be challenged on the basis of jurisdictional errors i.e. excess of jurisdiction, or absence of jurisdiction, or abuse of jurisdiction.

Furthermore, where a decision made by the Commissioner violates the fundamental rights guaranteed by the Constitution, the person affected may seek redress from the Supreme Court13. however, an application pertaining to the violation of fundamental rights must be filed within “one month”14 from the date of the decision.

In the event of the Commissioner ordering to pay compensation to the employees, how is the compensation payable under the provisions of TEWA calculated?

Section 6D of TeWA provides that the Commissioner in consultation with the

minister can decide the formula to calculate compensation and publish it in Gazette.

Currently, in accordance with the provi-sions in extraordinary Gazette No: 1384/07 of Tuesday, 15 March 2005, the formula to calculate compensation under TeWA is as shown in table 1.

however, the referred Gazette has pre-scribed the maximum compensation at Rs. 1,250,000.

Under Part IVB of the IDA, how can an employer retrench their employees?

According to the provisions in section 31F of the IDA, unless the retrenchment is done with the consensus of the employee or rep-resentative of the workman, the employer must give the workman and, if he belongs to a trade union, such trade union one month’s notice in writing of the intention of retrenchment, and also forward a copy of the same notice to the Commissioner General of Labour.

Generally, the retrenchment is to be completed and brought into effect within two months of the date of such notice15 unless16:

within the aforesaid two months’ peri-od, any industrial dispute which arises between the employer and employee per-taining to the said notice may be referred by the Commissioner General of Labour to conciliation by an authorised officer17, or settlement by arbitration by an arbitra-tor18, or by the subject Minister to an arbi-trator for settlement by arbitration, or to an industrial court for settlement19.

To whom does Part IVB of the IDA apply?

Section 31e(1) provides a list of employers to whom IDA does not apply:

31e. (1) The provisions of this Part shall not apply –

(a) to any employer by whom less than fifteen workmen on an average have been employed for a working day in the month preceding the month in which notice of the intention to effect retrenchment in respect of any workman employed is given by the employer to that workman, or

(b) to any industry which is of a seasonal character or in which work is performed intermittently, or

(c) to the retrenchment of any workman who has been employed in any industry for a period which is less than one year.

Furthermore, section 31e(2) provides that, “where the Minister is of the opin-ion that the application of this Part to an

industry is likely to affect that industry in such a manner as to cause serious repercus-sions to that industry, the Minister may by Order published in the Gazette declare that this Part shall not apply, or shall apply sub-ject to such conditions as may be specified in that Order, to that industry. Any Order made by the Minister under this subsection shall be placed as soon as practicable before Parliament for approval. Any Order not so approved shall be deemed to have been of no effect”. hence, it is within the discretion of the Minister to exempt any industry from the provisions of Part IVB of IDA, for the aforesaid reasons.

In addition, it must be reiterated that provisions in Part IVB of the IDA does not apply to employment to which TeWA applies20.

Summaryemployees governed by TeWA can only

be retrenched by the employer either with the consent of the employee or the approval of the Commissioner General of Labour.

Part IVB of IDA applies to employment not covered by TeWA, and such employees can be retrenched by giving one month’s notice of the intention of retrenchment to the employee with copy of the notice sent to the Commissioner General of Labour, and be effected after the expiry of two months from the date of the said notice, unless the dispute is referred to conciliation or arbi-tration by the Commissioner or to arbi-tration or industrial courts by the subject Minister.

The present situation of COVID-19 pan-demic does not give an employer any excep-tional power or authority to digress from the legal protections accorded to employ-ees against non-disciplinary dismissal or retrenchment. Any employee who is unlawfully dismissed may seek legal redress through inter alia the Labour Tribunals, and the Commissioner of Labour

[The writer, LLB (Honours) (UK); LLM (Distinction) (Edin) – Chevening Scholar, is an

Attorney-at-Law (Sri Lanka).]

Footnotes1 Act No 43 of 1950 (as amended)2 ibid section 483 vide Nidahas Karmika Sala Velanda

Sevaka Vurtheeya Samithiya Case (ID 35 CGG 11,297 of 11 April 1958), Jaya Bharat Tile Works v State of Madras ([1954] 1 LLJ 286)

4 Act No 43 of 1950 (as amended)5 Act No 45 of 1971 (as amended)6 ibid section 3(1)(a), and Section 31e(1)(a)

of IDA Act No 43 of 1950 (as amended)7 ibid section 48 ibid sections 2(2)(b), and 2(2)(c)9 ibid section 2(2)(e)10 ibid section 511 ibid section 2(3)12 Section 22 of the Interpretation

Ordinance No 21 of 1901 (as amended); Anisminic Ltd v Foreign Compensation Commission ([1969] 2 AC 147); Pure Beverages Company executive Officers Association v Commissioner of Labour ([2001] 2 Sri LR 258).

13 Articles 17 and 126 of the Constitution of the Democratic Socialist Republic of Sri Lanka

14 Article 126(2) of the Constitution of the Democratic Socialist Republic of Sri Lanka

15 Section 31G of the Industrial Disputes Act No 43 of 1950 (as amended)

16 cf. ibid section 31h17 ibid section 31h(a)18 ibid section 31h(b)19 ibid section 31h(c)20 Section 4 of the Termination of

employment of Workmen (Special Provisions) Act No 45 of 1971 (as amended)

www.ft.lk

11

thursday april 09, 2020 issues/Opinion

Table 1Number of Years of Service Number of Months’ Salary to be Maximum Completed at the Date Paid as Compensation for Compensation of Termination each year of service (Cumulative)

1 to 5 2.5 12.5 months 6 to 14 2.0 30.5 months 15 to 19 1.5 38.0 months 20 to 24 1.0 43.0 months 25 to 34 0.5 48.0 months

Guest Column

By N.K. Ashokbharan

In a country where employment is rigorously protected by law, retrenchment cannot be a simple tread for the employers. On the other hand, it is crucial for the employees to understand and appreciate the protection accorded to them by law

Salient points pertaining to laws governing retrenchment of employees in Sri Lanka

The present situation of COVID-19 pandemic does not give an employer any excep-tional power or authority to digress from the legal protec-tions accorded to employees against non-disciplinary dismissal or retrenchment. Any employee who is unlaw-fully dismissed may seek legal redress through inter alia the Labour Tribunals, and the Commissioner of Labour

www.ft.lkthursday april 09, 2020issues/Opinion

Sri Lanka’s economy after the ongoing coronavirus pandemic will be a Pandora’s Box. Nobody can predict job losses, decline in exports, tourism, and remit-tances, and the depreciation of the rupee currency. But the country is already witnessing all of these impacts and Sri Lanka’s post-COV-iD-19 economy is likely to have many trial-and-error policies.

Survival from the COViD-19 pandemic is of utmost impor-tance, above anything and eve-rything else at the moment. The Government, choosing its best option, has locked down the country with curfew. However, the main question is how the Government is going to manage the post-crisis economy which is fac-ing heavy debt repayment, depre-ciation pressure on the rupee, slug-gish economic growth, and widen-ing fiscal deficit even before the pandemic started.

The coronavirus is not only going to hit Sri Lanka alone, but all other countries on different scales depending on their exposure to global financial, goods and services markets. For Sri Lanka, the main concerns will be if it can borrow externally at cheaper rates, how the coun-try is going to face job losses for Sri Lankans locally and globally, and boost-ing economic activi-ties. The external funding from Sri Lanka’s friendly nations will be limited this time as most of them are also facing eco-nomic doldrums.

Gradually, the country is wit-nessing the impacts of the novel disease which has globally killed over 80,000 people and infected over 1.3 million. The pandemic is still in an exponential phase and has not showed any signs of dimin-ishing, especially in Europe and the United States, Sri Lanka’s main e x p o r t d e s t i n a -tions.

M o s t f l i g h t s have been ground-ed globally. Sri Lanka’s tourism, which accounts for nearly 5% of the economy, has come to a zero level. it will be very hard f o r h o t e l s a n d t o u r i s m - r e l a t e d businesses to sur-vive with no tour-ists. The indus-try survived last year even after the Easter suicide bomb attacks due to local tourists. But this year, it is going to be extremely difficult for the tourism industry globally.

The Asian Development Bank (ADB) in its latest outlook said: “Clearly a recovery in tourism is delayed and restrictions on normal economic activity will entail financial pressures on many firms and individu-als as experienced in countries having long-lasting lock-downs.”

T h e C e n t r a l Bank and Treasury h a v e p r o a c t i v e l y announced a wide range of financial and fiscal conces-sions to smoothen the tight finance for businesses and indi-viduals. However, the benefits of these measures are yet to reach the grassroot level partially due to lockdown and mainly due to local banks and financial insti-tutions which are yet to comply with the directives by the Central Bank despite warnings.

Inevitable job, salary cuts

Small and medium entrepreneurs and self-employed indi-viduals will find no or very low demand for their goods and service while job cuts and salary reduc-tions are likely to hurt most of pri-vate sector employees.

Already daily wage earners like three-wheel drivers and pave-

ment vendors have started to grumble on sustaining their liveli-hood while large companies have gone for job and salary cuts. The State-run SriLankan Airlines last week announced salary reduc-tions of 2.5%-25% for executive level employees and cancellation of payments and benefits for other employees including contracted

pilots.S r i L a n k a ’ s b i g -

gest apparel exporter Brandix Lanka Ltd. last week announced a series of cost-cutting moves, including pay cuts as high as 60% for execu-tive cadre to manage the impact from COViD-19 pandemic. The apparel industry has lost nearly $1.5 billion worth export orders for the second quarter of this year. Firing employees with or without compensa-tion is being considered by many top-level con-glomerates and compa-nies. in the absence of export demand, State intervention to retain

employees in private sector com-panies will only hurt business and investor sentiment.

The likely return of thousands of Sri Lankan expatriates in the face of overseas job cuts is going to add more oil to the burning fire. This will reduce foreign remit-tances, Sri Lanka’s top foreign exchange earner, significantly. Limited Government revenue is likely to force President Gotabaya

r a j a p a k s a ’ s Government to not expand its public sector and not grant transfer payments for these job losers.

Grim growth prospects

it is going to be one of the tough-est years for Sri Lanka’s economy, which in 2019 grew at 2.3%, its slowest pace since the con-traction in 2001 after the LTTE attacked the Bandaranaike i n t e r n a t i o n a l Airport. The econo-my expanded at 3.3% in 2018. The Central Bank had predicted a

growth of 2.8% last year.in the face of a possible financial

crisis with COViD-19 lockdown, the Central Bank has reduced its key policy rates by 25 basis points twice since 16 March to ease borrow-

ing cost and mini-mise the COViD-19 impacts on busi-nesses and person-al finance.

T h e C e n t r a l Bank has so far cut the rates by 100 basis points or 1% since 30 January. However, inves-tors and entrepre-neurs are unlikely to borrow in large sums unless they have the business confidence and the Central Bank’s rate cuts are unlikely to boost growth in the short term.

T h e C e n t r a l Bank had predicted the 2020 economic growth between 3.5%-4% in early March before the pandemic hit the island nation hard. The ADB in its out-look said: “Ebbing g l o b a l d e m a n d will stunt expan-sion in the tour-ism and garment industries, slowing growth to 2.2% in 2020 before expect-ed recovery to 3.5% in 2021.”

Hard political manoeuvringWhen rajapaksa overhauled the

tax policy soon after his election to give the public relief from econom-

ic hardship, the authorities were working on a new personal income tax policy. However, a new tax would be impossible now because the public would not have enough money to pay.

A c c o r d i n g t o the ADB, the rev-enue to GDP ratio fell to 12.2% last year from 13.4% in 2018 as indirect tax collection in particular suffered from weak excise and VAT tax col-lection because of the large decline in imports and subdued economic activity after the terror attacks.

in terms of taxes and price stabil-ity, the ruling Sri Lanka Podujana Peramuna (SLPP) is also forced to keep the voters happy at least until the Parliamentary Election, which is now postponed without a date. Any new tax poli-c i e s w i l l h a v e political implica-tions at the elec-t i o n s . i n a d d i -tion to this, if the main Opposition’s stance of President rajapaksa having no legal means to use public funds without Parliamentary approval after 31 April is true, that could complicate the economic crisis fur-ther, unless the President recon-venes Parliament.

When oil prices came down after rajapaksa’s election, his Government firmly said it would not reduce the fuel prices for one year in line with the previous Government’s price formula. That helped the Government to have a cushion from the higher margin in the fuel prices. However, with much reduced economic activities now, the revenue from fuel is not going to be significant to compen-sate for the nearly rs. 600 billion annual loss from tax reduction.

This means the Government will be forced look into external or local borrowing even at a higher cost due to downgrading of Sri Lanka’s outlook to Negative by two rating agencies and investors retreating to safe havens in times of crisis.

Difficult foreign borrowingBorrowing from foreign sources

to fill the gap between Government revenue and expenditure is one of

the main strategies successive govern-ments had been fol-lowing to postpone e c o n o m i c c r i s e s . But that has always come at a price of widening the budget deficit, which is the main concern of mul-tilateral lenders like the international M o n e t a r y F u n d ( i M F ) , W o r l d Bank, and Asian Development Bank (ADB). The coun-try’s budget deficit is expected to have wid-ened to 6.5% of the GDP from the target-ed 4.4%. This year, it is going to expand further.

The Government had been externally borrowing to meet timely repayment of the past loans and for other develop-ment projects. Sri Lanka has to repay a record $ 5.89 bil-lion foreign loans in currency, securities, and deposits in both principle and inter-est in the one year up to end January 2021, Central Bank data showed.

S r i L a n k a h a s hardly seen any failure in its for-eign currency borrowing efforts. Even at the peak of the 26-year war and recession due to 2008 finan-cial crisis, the country was able to borrow, of course at a higher risk premium. Similarly, it has never defaulted any foreign loans and never failed to meet timely repay-ment. The Central Bank borrowed $ 4.4 billion last year through sov-ereign bonds at a relatively cheap-er rate.

However, last week the Central Bank failed in its effort to raise US Dollars through Sri Lanka Development Bonds (SLDB). The auction for this borrowing in US Dollars on 30 March saw only it meeting around 5% of its borrow-ing requirement of up to $ 200 mil-lion. The Government last month took a $ 500 million, 10-year loan from China Development Bank and the Central Bank had said it is in discussions to borrow a further $ 2 billion from China.

Going forward, given global financial market conditions, it is going to be extremely difficult to borrow at the lower rate Sri Lanka had been used to. Sri Lanka’s larg-est foreign loan repayment for this year, which is the repayment of a maturing $ 1 billion sovereign bond, is scheduled for October.

Mindful of the heavy external debts, President rajapaksa last week requested World Health Organisation (WHO) Director General Tedros Adhanom to pur-sue with the iMF, World Bank, ADB, and leading bilateral lend-ing nations to provide debt mora-toriums for vulnerable develop-ing countries like Sri Lanka whose economies depend on COViD-19-hit tourism, exports, remittances and foreign investment in debt and equity markets.

Prime Minister M a h i n d a rajapaksa also has sought a three-year debt moratorium from the indian Government when he visited New Delhi early this year.

Desperate measures

As a desperate measure after fail-ing to raise dol-lars, Central Bank G o v e r n o r W . D . L a k s h m a n l a s t Friday appealed to Sri Lankan expatri-ates living abroad, charities, funds, and well-wishers abroad and in Sri Lanka to park their foreign currency deposits in local banks.

Lakshman in his official letter signed by both him and Treasury Secretary S.T. Attygalla stated Cabinet had decided to suspend restrictions on all foreign curren-cy inflows during the COViD-19 prevention period – three months from 2 April.

T h e n e w C e n t r a l B a n k Governor’s move comes as the rupee has been hovering at record lows. The rupee’s Central Bank quoted local selling price per US Dollar hit a fresh record low of 193.75 on Friday and the currency has fallen nearly 5.7% so far this year, Central Bank data showed.

With lower exports, remittances, and tourism revenue, the Central Bank Chief would have been com-pelled to go for this measure as the $ 87 billion economy hardly has any option at this juncture.

in his letter, Lakshman assured such deposits would be accepted without “any hindrance from the Government, Central Bank, or any other Government author-ity and assured foreign remit-tances would be exempted from exchange control regulations and taxes.

This desperate move a lso came after Sri Lanka’s stock and Government securities market

s u f f e r e d f o r e i g n outflows of rs. 5.23 billion and rs. 62.37 billion (nearly $ 365 million in total) this year up to 25 March, Bourse and Central Bank data showed.

“Your foreign cur-rency deposits in the Sri Lankan banking system at this dif-ficult stage will be of immense help to authorities to tide over the present crisis. Such remit-tances would go a long way to promote people’s welfare dur-ing the current peri-od of still spread-ing COViD-19 and economic revival in the immediate after-math,” Lakshman stated in the letter.

This was a tested and failed measure under former Prime M i n i s t e r r a n i l Wickremesinghe’s Government. When the rupee was facing heavy depreciation pressure in January 2016, then Finance

Minister ravi Karunanayake finalised a deal with an unnamed Belgian investor to park $ 1 bil-lion in Sri Lanka. However, the then Opposition led by cur-rent Prime Minister Mahinda rajapaksa, said Karunanayake was trying to launder black money. The deal never went through after Opposition criti-cism.

(The writer is former Reuters Economic Reporter for Sri Lanka.

He can be reached at shihara-neez@gmail.com.)

The coronavirus is not only going to hit Sri Lanka alone, but all other countries on different scales depending on their exposure to global financial, goods and ser-vices markets. For Sri Lanka, the main concerns will be if it can borrow externally at cheaper rates, how the country is going to face job losses for Sri Lankans locally and globally, and boosting economic activities. The external funding from Sri Lanka’s friendly nations will be limited this time as most of them are also facing eco-nomic doldrums – Pic by Shehan Gunasekara

Sri Lanka faces uphill task to revive post-COVID-19 economy

Guest Column

By Shihar Aneez

Survival from the

COVID-19 pandemic is of utmost impor-tance, above anything and everything else at the moment. The Government, choos-ing its best option, has locked down the country with curfew. However, the main question is how the Government is going to manage the post-crisis economy which is facing heavy debt repayment, depreciation pressure on the rupee, sluggish economic growth, and widening fiscal deficit even before the pandemic started

It is going to be one of the toughest years for Sri Lanka’s economy, which in 2019 grew at 2.3%, its slowest pace since the contraction in 2001 after the LTTE attacked the Bandaranaike International Airport. The economy expanded at 3.3% in 2018. The Central Bank had predict-ed a growth of 2.8% last year. In the face of a pos-sible financial crisis with COVID-19 lockdown, the Central Bank has reduced its key policy rates by 25 basis points twice since 16 March to ease borrowing cost and minimise the COVID-19 impacts on businesses and personal finance

Borrowing from foreign sources to fill the gap between Government revenue and expendi-ture is one of the main strategies successive governments had been following to postpone economic crises. But that has always come at a price of widening the budget deficit, which is the main concern of mul-tilateral lenders like the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB). The coun-try’s budget deficit is expected to have wid-ened to 6.5% of the GDP from the targeted 4.4%. This year, it is going to expand further

As a desperate measure after failing to raise dollars, Central Bank Governor W.D. Lakshman last Friday appealed to Sri Lankan expatriates living abroad, charities, funds, and well-wishers abroad and in Sri Lanka to park their foreign currency depos-its in local bank

Printed and published by Wijeya Newspapers Ltd. on Thursday April 09, 2020 at No. 8, Hunupitiya Cross Road, Colombo 02.