Representational image only. File
| Photo Credit: Reuters

Sri Lanka’s new government led by Anura Kumara Dissanayake on Monday (October 14, 2024) told the Supreme Court that it would reconsider the approval granted by the previous government to India’s Adani Group for a wind power project.

A five-member Supreme Court (SC) Bench was told on behalf of the attorney general that the decision to review the project had been taken at a Cabinet meeting held on October 7. “The final decision of the new government would be conveyed after the installation of the new Cabinet after the November 14 Parliamentary election,” the court was told.

President Dissanayake in the run-up to the September 21 Presidential election had pledged that his National People’s Power (NPP) alliance would annul the project. The NPP claimed that the project posed a threat to Sri Lanka’s energy sector sovereignty and promised that it would be cancelled in the event of their victory.

Colombo mulls converting Adani power project to a G2G deal: Sri Lankan media 

The Adani Group was set to invest more than $440 million in the 20-year agreement for the development of 484 megawatts of wind power in the northeastern regions of Mannar and Pooneryn. The project faced fundamental rights litigation in the Supreme Court of Sri Lanka.

Petitioners have raised environmental concerns and lack of transparency in the bidding process to grant Adani Green Energy the go-ahead. Petitioners have also argued that the agreed tariff of $0.0826 per kWh would be a loss to Sri Lanka and should be lowered to $0.005 per kWh.

During the two days of talks with the IMF authorities, President Anura Kumara Dissanayake reiterated Sri Lanka’s position that some of the rigid IMF conditions must be watered down to grant relief to the public.
| Photo Credit: AFP

The Sri Lankan government has announced a long-delayed debt restructuring agreement with its sovereign bondholders, in a major relief to the cash-strapped island nation.

In a statement on Friday (October 4, 2024), the Ministry of Finance said it reached an agreement with representatives of its international and local holders of International Sovereign Bonds (ISB) on September 19, 2024.

Sri Lankan authorities have “completed their consultations with Sri Lanka’s Official Creditor Committee (OCC) and the International Monetary Fund (IMF),” said the statement from the Treasury.

It added that the agreement is compatible with the comparative treatment principle.

The announcement came as the new National People’s Power (NPP) government led by President Anura Kumara Dissanayake expressed willingness to accept the agreement during the talks held with the visiting IMF delegation in Colombo on Thursday and Friday (October 3 and 4, 2024)

During the two days of talks, Mr. Dissanayake reiterated Sri Lanka’s position that some of the rigid IMF conditions must be watered down to grant relief to the public.

The IMF made external debt restructuring conditional to the $2.9 billion four-year facility clinched in March 2023 by the Ranil Wickremesinghe administration.

Sri Lanka has already obtained three tranches of about $360 million each under the Extended Fund Facility. The third tranche of the bailout package was released in mid-June as the Washington-headquartered global lender said on August 2, 2024, that Sri Lanka’s economic reform programme had yielded good results.

Days before the presidential elections, the then Mr. Wickremesinghe-led government, which undertook the laborious task of debt restructuring, announced an in-principle agreement with external commercial creditors for the restructuring of approximately $17.5 billion of external commercial debts.

Mr. Wickremesinghe, who was also the Finance Minister, was defeated in the presidential election last month.

The NPP in the run-up to the election had called the IMF deal a “death trap” and vowed to renegotiate it.

In April 2022, the island nation declared its first-ever sovereign default since gaining independence from Britain in 1948. The unprecedented financial crisis led Mr. Wickremesinghe’s predecessor Gotabaya Rajapaksa to quit office in 2022 amid civil unrest.

Anura Kumara Dissanayake takes oath as Sri Lanka’s new president during a ceremony, in Colombo, Sri Lanka. File
| Photo Credit: PTI

The new Sri Lankan government, during its first meeting with the International Monetary Fund (IMF), said it is committed to the global lender’s $2.9 billion bailout package clinched by the previous Ranil Wickremesinghe regime and hoped to renegotiate certain conditions.

The meeting between the IMF team and the Sri Lankan government on Wednesday (October 2, 2024) came two weeks after President Anura Kumara Dissanayake of the National People’s Power (NPP) was elected two weeks ago.

The government team was represented by its economic council members headed by Prof. A.J. Fernando, who was named as President Dissanayake’s economic and finance advisor only two days ago.

Sri Lanka to review sovereign bond restructure deal

On September 23, Mr. Dissanayake, the leader of the Marxist Janatha Vimukthi Peramuna party’s broader front, the NPP, was sworn in as Sri Lanka’s ninth President, amid hopes that he will bolster the country’s economy and eliminate corruption.

“The primary objective of the visit was to initiate discussions on the progress of the IMF Programme and necessary steps towards the release of the fourth tranche of the $2.9 billion Extended Fund Facility,” a statement from the President’s Media Division (PMD) said about the meeting.

Prof. Fernando told reporters that the talks were useful in exchanging ideas and said the NPP government would stay committed to the IMF’s $2.9 billion four-year facility clinched by the Ranil Wickremesinghe administration in March 2023.

The IMF has made external debt restructuring conditional to the $2.9 billion Extended Fund Facility (EFF). The third tranche of the bailout package was released in mid-June as the Washington-headquartered global lender said on August 2 that Sri Lanka’s economic reform programme had yielded good results.

Prof. Fernando said the NPP was keen to probe the possibility of suggesting alternative revenue-raising means for the state and that it would require further talks.

The NPP had been severely critical of the former President Ranil Wickremesinghe government’s IMF bailout package, which they described as “a death trap.” However, in the run up to the Presidential elections and in its manifesto, the party watered down criticism and mentioned its intention to renegotiate the conditions.

Prof. Fernando said the NPP government would stay committed to the IMF’s $2.9 billion four-year facility clinched by the Wickremesinghe administration in March 2023. The IMF team was headed by its Sri Lanka mission chief Peter Breuer.

Sri Lanka clinches $12.5 billion bond rework deal in pre-election dash

Sri Lanka has already obtained three tranches of about $360 million each. The third review for the release of the fourth tranche is expected to happen in Washington at the end of this month. NPP sources said Prof. Fernando would be part of the government delegation for the talks.

Prof. Fernando described the ongoing visit as a courtesy visit for the new Lanka team of negotiators to get familiar with the process and the personalities involved.

“The meeting reviewed the IMF programme thus far and outlined the way forward for future collaboration,” the PMD statement said, adding, “The IMF delegation expressed appreciation for the significant changes taking place in Sri Lanka, boosting the positive outlook on Sri Lanka under the present government.” “This meeting marks a crucial step in reinforcing Sri Lanka’s commitment to economic stability and securing continued support from the IMF,” it added.

In April 2022, the island nation declared its first-ever sovereign default since gaining Independence from Britain in 1948. The unprecedented financial crisis led President Ranil Wickremesinghe’s predecessor Gotabaya Rajapaksa to quit office in 2022 amid civil unrest.

Mr. Wickremesinghe negotiated the $2.9 billion bailout package with the IMF in March 2023 and days ahead of the Presidential voting, his government had announced that it has reached an in-principle agreement with external commercial creditors the restructuring of approximately $17.5 billion of external commercial debts.

New Delhi:

Anura Kumara Dissanayake – Sri Lanka’s new Marxist President – has said he wants to avoid being “sandwiched” between India and China but recognises each as a “valued partner”, as he tries to resolve a financial crisis that has roiled his country since 2019 and led to a sovereign default in April 2022.

The former grassroots leader made it clear he intends to steer clear of geopolitical rumblings in South Asia or the Indian Ocean region. He acknowledged that each can provide much-needed financial aid but said he also wanted closer ties with the West, the Middle East, and even Africa.

The remarks were made in an interview with The Monocle, a global affairs and lifestyle magazine, in early September (before his election win was confirmed), in which he spoke about his foreign policy.

“There are many power camps within a multipolar system… but we won’t be part of that geopolitical fight, nor will we be aligned with any party. We also don’t want to be sandwiched, especially between China and India. Both are valued friends and we expect them to become closer partners.”

Mr Dissanayake, 55, a previously fringe Left leader, was catapulted into the limelight after winning the presidential election; he pulled over 42 per cent of the votes.

READ | Marxist Leader Anura Dissanayake Wins Sri Lanka’s Prez Polls

Rumoured close ties to China raised eyebrows, particularly in Delhi, which expressed concerns over Beijing’s growing influence on Sri Lanka, which sits on key shipping lanes in the Indian Ocean. Added to that, the South China Morning Post claimed Beijing expects Dissanayake will seek “maximum support” via foreign direct investment.

That report cited an economics professor from the University of Colombo as saying it is “highly probable” Mr Dissanayake would prefer to work with Beijing over Delhi.

However, Mr Dissanayake has, publicly at least, sought to reassure both Delhi and the United States, which too is wary of China’s growing influence. 

READ | The Rise Of Lanka’s Anura Dissanayake From Grassroots To President

Speaking to an Indian publication on voting day (on Saturday), Mr Dissanayake said India is “crucial” to his country’s hopes for economic stability and regional security.

“We will consider how our economic measures impact our country (while) recognising the importance of India’s support in our development efforts,” he told The Week.

Prime Minister Narendra Modi has spoken to Mr Dissanayake, stating he looks forward to working closely with him to further strengthen the Indo-Lanka multifaceted cooperation. Mr Modi’s post on X also contained a reference to Colombo’s “special place” in Delhi’s Neighbourhood First policy.

READ | PM Congratulates Dissanayake For Victory In Sri Lankan Polls

Mr Dissanayake responded, “I share your commitment… Together, we can work towards enhancing cooperation for the benefit of our peoples and the entire region.”

The Sri Lankan leader also played down fears – expressed by both Delhi and Washington – his country would become a military base for Beijing; as recently as last month three Chinese Navy ships were berthed at Colombo Port, at the same time as India’s front-line warship, INS Mumbai, docked.

“We are committed to maintaining our sovereignty and will not become subordinate to any power in this geopolitical race…” Mr Dissanayake said this month.

Delhi has played a key role – recognised by the International Monetary Fund, which has provided a $3 billion bailout programme – in guiding Colombo through the ongoing financial crisis, having provided aid – food, medicines, fuel, etc., – worth nearly $4 billion since the storm broke.

READ | IMF To Work With Sri Lanka’s New President On $3 Billion Loan

Mr Dissanayake, however, has said he will try to renegotiate the IMF’s loan conditions, some of which led to tax hikes and spending cuts, which many in Colombo said actually exacerbated the cost-of-living crisis that sparked the violent protests of 2019 and 2020. Reviewing the debt plan, though, risks delaying additional loans he needs to meet fiscal criteria before more funds are released.

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