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IMF says Sri Lanka has made “sufficiently strong progress” on debt for June review

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The International Monetary Fund has assessed that there has been “sufficiently strong progress on the debt restructuring” for a review of Sri Lanka’s program by its board on June 12, an official said.

The authorities have been holding extensive discussions with external official creditors regarding an MOU with the official creditor committee and the final agreements with the Export-Import Bank of China,” IMF Communication Director Julie Kozack told reporters in Washington.

“Discussions with external bondholders continue with the aim of reaching agreements in principle soon. Negotiations with the China Development Bank are also at an advanced stage.

“There is a strong expectation that agreements with external commercial creditors consistent with program parameters will be reached soon.

“So overall, we assess that there has been sufficiently strong progress on the debt restructuring front.”

Sri Lanka has also made progress on restoring stability and meeting IMF targets.

“In Sri Lanka, we do see macroeconomic policy reform starting to bear fruit,” Kozack said.

“Commendable outcomes include rapid disinflation, robust reserve accumulation, and initial signs of economic growth, while preserving the stability of the financial system.

“Program performance is strong, with most quantitative and structural conditionality for the second review met or implemented with delay, and reforms are still ongoing in some areas.

“The next steps on the debt restructuring are indeed to conclude negotiations with external commercial creditors and to implement agreements in principle with the official creditors.

“The domestic debt operations are largely completed. Debt restructuring discussions are continuing.”

Sri Lanka has regained monetary stability, and inflation, as measured by the island’s Consumer Price Index, has halted its increase.

Since then, private companies have largely been engaged in deleveraging, and the central bank has generally run a deflationary policy to build reserves (selling sterilization securities to banks).

Going against past practice, the central bank has also allowed the rupee to appreciate while collecting reserves through an ad hoc pegging mechanism (under a clean float, reserve collection is not possible).

The central bank has so far not cut rates and has enforced them by printing money, claiming that historical 12-month inflation is low (flexible inflation targeting), real interest rates are high (a frequent claim made by inflationists restating the same doctrine in a different way), or that there is a potential output gap that can be bridged by printing money.

All rate reductions so far have been achieved through actual domestic credit developments and the confidence created by the central bank itself by maintaining monetary stability and not engaging in restructuring all domestic debt and spooking all government securities buyers.

Sri Lanka’s monetary operating framework, which has since been legalized in a new law, is likely to lead to external instability in the future as soon as private credit recovers, analysts have warned.

In a series of currency crises since the end of the war, the central bank has printed money, citing low inflation, and undermined the currency through ‘exchange rate as a first line of defense’ to avoid market pricing rates, critics say.

The IMF’s ‘reserve adequacy metrics’ and the ‘exchange rate as a first line of defense’ are directly contradictory doctrines, which are on a collision course whenever short- or long-term rates are enforced with overnight term, outright injections, or non-penal rate standing facilities, critics have said.

Source -Economynext

Economy

Sri Lanka Govt to launch GovPay

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The initial step in the digitalisation of government services, ‘GovPay’, will be officially launched under the patronage of President Anura Kumara Disanayake on February 7th, 2025.

“This ground-breaking initiative will streamline and modernize how government institutions handle payments, enabling seamless transactions through a secure and efficient digital platform” President’s office said in a statement. 

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AKD Government revokes contentious 500 MW Adani wind power contract

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The Cabinet of Ministers chaired by President Anura Kumara Dissanayake has revoked a decision made by his predecessor Ranil Wickremesinghe in June last year to award a controversial 484 MW of wind power plants in Mannar and Pooneryn to Adani Green Energy SL Ltd.

The project was challenged on multiple grounds, including the arbitrary and excessive price of US cents 8.26 per kilowatt hour at a time when local bidders were offering prices as low as 4.88 cents.

Many environmental organisations, including the Wildlife and Nature Protection Society and Environmental Foundation Ltd., opposed the project owing to deficiencies in the Environmental Impact Assessment and because Mannar is a critical habitat for migratory birds. The local community, represented by the Bishop of Mannar too, vehemently opposed the project because of the harm to local industries and livelihoods.

In the course of his election campaign, the present President pledged to cancel the deal and call for international tenders to develop wind power in Sri Lanka. 

Consistent with that pledge, on 30 December the Cabinet decided “To revoke the cabinet decision dated 2024-05-06 numbered CP No. 24/0850/621/047 submitted by the then Minister of Power and Energy on ‘Proposal of Adani Green Energy SL Limited for the Development of 484 MW of Wind Power Plants in Mannar and Pooneryn.”

Biodiversity scientist Rohan Pethiyagoda, who for the last year fought tirelessly against the proposal award told the Daily FT: “Everyone interested in environmental integrity and financial transparency will celebrate the fact that President Dissanayake has delivered on his promise to defeat this conspiracy to defraud the people of Sri Lanka.” 

“Personally, I am delighted by this decision. But it is not enough. The Government must now release all the related files to the Bribery Commission and request a full investigation as to how this scam was perpetrated in the first place. Who was the mastermind behind it? Remember, the last Government agreed to buy electricity from Adani at a rate that was 70% higher than the locally tendered price. Into whose pockets was that 70% going? It added up to billions of dollars,” he said.

Commenting on the culture shift brought about by the NPP Government, Pethiyagoda said: “The degree of transparency we are now seeing is unprecedented. There was no song and dance from the NPP about this hugely consequential Cabinet decision. Instead, the attorney general routinely filed it in court as part of a 174-page submission that reads like something out of Wikileaks. This is a huge victory for environmental and social justice. Much kudos to AKD.”

Pethiyagoda also told the Daily FT that by the same decision, the Cabinet has appointed a new Project Committee and Procurement Committee to make recommendations regarding Adani’s proposal, but that that committee would be constrained by the President’s election pledge to invite international bids for the project. “It could be that the President is under pressure to give this project to an Indian company,” he said, “in which case it is likely that bids will be restricted to companies incorporated in India. Then, Adani too can compete in an open and transparent manner.”

Source – DailyFt

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BBC has named Sri Lanka one of the 25 Best Places to Travel in 2025

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Recognized by the BBC as the ninth destination on its prestigious list of “The 25 Best Places to Travel in 2025,” Sri Lanka continues to capture the imagination of travelers worldwide. 

The UK-based media powerhouse praised the island nation for its enchanting blend of natural beauty and cultural treasures, from mist-shrouded hilltop tea plantations and freely roaming wild elephants to ancient temples steeped in history and idyllic waves ideal for surfers.

Despite declaring bankruptcy in April 2022, Sri Lanka has demonstrated remarkable resilience under new leadership. The recently appointed President has focused on revitalizing the country after the dual challenges of a global pandemic and civil unrest. 

Tourism plays a pivotal role in this effort, with the country leaning on its breathtaking landscapes, vibrant culture, and storied heritage to attract global visitors.

Sri Lanka’s recovery narrative and diverse offerings—from serene beaches to lush, misty highlands—make it a destination that appeals to travelers seeking both beauty and inspiration in 2025.

Sri Lanka is aiming to attract an impressive 3 million visitors in 2025 and has started the year on a promising note, welcoming nearly 80,000 travelers within the first 10 days of January.

India and Russia have emerged as the leading source markets, contributing 11,749 (16.6%) and 11,629 (16.4%) arrivals, respectively, between January 1 and 9.

The United Kingdom ranked third with 5,520 visitors (7.8%), followed by Germany at 5,049 (7.1%), Australia with 3,055 (4.3%), and France contributing 2,714 (3.8%). Notably, January 2 and 3 stood out with impressive daily arrival figures of 9,392 and 8,974, respectively.

Meanwhile, Chinese arrivals, which are traditionally lower during the Lunar New Year as families celebrate at home, ranked seventh. However, a surge in connectivity with expanded routes by Chinese airlines is expected to boost these numbers in the coming months.

Source: TTW

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