Straying from IMF debt plan could delay bailout: Finance Ministry

 Straying from IMF debt plan could delay bailout: Finance Ministry

By Bandula Sirimanna Sunday Times 15-09-2024

The Finance Ministry has issued a strong warning about the significant risks associated with challenging the country’s current debt sustainability assessment (DSA). Such actions could endanger Sri Lanka’s ongoing International Monetary Fund (IMF) bailout programme, potentially delaying vital financial support for months or even years.

In a detailed statement, the Ministry emphasised the critical need to adhere to the IMF’s established debt framework.

The IMF mandates that countries seeking financial aid must demonstrate sustainable debt levels. If Sri Lanka’s debt is deemed unsustainable, the IMF will not be able to proceed with the bailout.

This underscores the importance of aligning the country’s debt restructuring efforts with the IMF’s guidelines to secure the necessary relief and meet debt targets.

Sri Lanka has made notable progress under the current IMF programme, but the road to recovery is still precarious. According to IMF Senior Mission Chief Peter Breuer, continuing with reforms aimed at fostering stable and inclusive economic growth is essential to avoid a return to crisis.

A key challenge remains achieving the primary fiscal balance—excluding interest payments—required to restore debt sustainability. From 2025 onwards, this balance must reach at least 2-3 per cent of GDP, based on realistic budget assumptions, he added.

However, some economic experts, including a former Treasury Secretary who wished to remain anonymous, have criticised the IMF’s debt sustainability analysis (DSA) methodology.

They argue that the estimated reduction in external debt is insufficient and that domestic debt restructuring unfairly burdens the working population by imposing losses on pension funds, which hold sovereign debt.

These experts contend that the focus should be on reducing foreign exchange-denominated debt, as the current approach may not deliver the necessary relief.

Recent media reports indicated that
Sri Lanka did not devise its own DSA during debt restructuring negotiations.

The Finance Ministry responded by clarifying that while Sri Lanka has made amendments to IMF agreements in the past, the current situation is different due to the central role of debt restructuring in the ongoing IMF-supported economic reform programme.

Sri Lanka is now part of the IMF’s Market Access Sovereign Risk and Debt Sustainability Framework (MAC SRDSF), a model that assesses debt sustainability for middle-income countries. This framework is rigid, with debt targets that can only be adjusted under significant changes in circumstances.

Sri Lanka has developed its own internal DSA, with the assistance of debt advisors, to inform its negotiating strategy during talks. However, the IMF’s DSA remains the independent benchmark to ensure that any agreements with creditors meet the required debt relief targets.

The Ministry has warned that opposing the IMF’s DSA could lead to severe delays in securing financial support, which would be disastrous for Sri Lanka’s fragile economy. The Ministry advocates for a pragmatic approach, emphasising the importance of timely action to protect the nation’s economic future.

Northern youth as yet unconvinced amid joblessness

Despite the (ITAK) party central committee decision to support Mr.Premadasa, its supporters, backed by MPs launched pocket meetings canvassing votes for the Tamil common candidate. 

Northern youth as yet unconvinced amid joblessness

By S. Rubatheesan  Sunday Times 15-09-2024

Most Northern voters, particularly young people, are as yet undecided whom to vote for in the presidential election next Saturday.

For Sriharan Abilash, 20, of Aralay North, this will be the first time he is going to cast his vote, but he is not sure. “I’m going to wait for a couple of more days to decide.’’

He expects a stable economy and a boost for the rural economy since many districts in the province lack infrastructure and job opportunities for the youth who are leaving for work overseas.

“This is very critical for us since many youngsters, including my friends, are planning to leave since they don’t see many opportunities here to lead a decent life,” he said.

Along with prominent candidates, independent President Ranil Wickremesinghe, Samagi Jana Balawegaya leader and opposition leader Sajith Premadasa, candidate of National Peoples’ Power, Anura Kumara Dissanayake, another independent candidate known as the common Tamil candidate P. Ariyanenthiran is gaining traction.

Unlike previous presidential elections where Tamil people supported a leading candidate, Tamil nationalist parties and civil society outfits fielded a common candidate for the Tamil cause, a symbolic protest to register their disappointment over the failure of past governments to address the ethnic conflict in the country.

Driver Sriskantharaja Sivakumar, 42, from Jaffna town said, like many others in his village, he is confident of a Premadasa presidency.

“Among all the candidates, my support is for Sajith Premadasa. Because, like his father, the late Mr Premadasa, he also initiated many housing projects in the province for war-affected people. Other candidates did nothing for the Tamil people in terms of development,” Mr Sivakumar told the Sunday Times.

With mixed signals coming from the main Tamil constituent party of Ilankai Thamil Arasu Katchchi (ITAK) on the polls despite the party central committee decision to support Mr Premadasa, its supporters, backed by MPs launched pocket meetings canvassing votes for the Tamil common candidate.

ITAK leader, parliamentarian, S. Shritharan organised grassroots campaigns and pocket meetings supporting a Tamil common candidacy in Kilinochchi early this week mobilising a large crowd.

ITAK General Secretary Dr. P. Sathiyalingam wrote to all the regional wings of ITAK in eight districts reiterating the party’s decision to support Mr Premadasa this week and request Mr Ariyanenthiran, a member of the party central committee, to leave the presidential race.

The party is to meet this week to discuss electioneering and canvassing in support of Mr Premadasa despite internal disagreements among the MPs and senior leaders.

On Friday, a massive election canvassing meeting was organised in Mannar Bus stand premises where P. Ariyanenthiran urged voters to only vote for his symbol, the conch shell, as many activists canvassed to extend the preferential votes for other candidates. Leader of Tamil Eelam Liberation Organization (TELO) and ITAK MP Selvam Adaikalanathan organised the meeting.

Meanwhile, several low-key, grassroots campaigns and pocket meetings were launched this week in support of Tamil common candidate Mr Ariyanenthiran. Earlier this week, Mr Ariyanenthiran was in Batticaloa, his hometown, where he was given a grand welcome by locals and civil society groups.

Speaking in Jaffna yesterday, Mr Ariyanenthiran observed that there has been significant support for him in recent weeks as he travelled across the two provinces.

Claiming that he is merely a ‘symbol’ for the Tamil cause, Mr Ariyanenthiran said that Tamil people are forced to take up this position which he believes is a new path in the Tamil cause to let their voices be heard.

The Tamil National Peoples’ Front (TNPF) also carried out low-key campaigns urging Tamil people to boycott the polls saying all presidential candidates vowed to protect the unitary nature of the state and not under a federal-based structure.

TNPF parliamentarian S. Kajendran who was distributing leaflets along with his supporters in Kilinochchi on Friday was questioned by police and later released for canvassing for a boycott⍐.

Amidst concerns, IMF team coming two weeks after polls

 Amidst concerns, IMF team coming two weeks after polls

Sunday, September 15, 2024 Sunday Times

An International Monetary Fund (IMF) delegation will arrive in Sri Lanka two weeks after the presidential election is concluded to make an assessment for a new staff-level agreement and review the ongoing programme.

They will meet with the elected president and discuss any changes that the administration hopes to propose to the ongoing IMF programme, Finance Ministry officials said.

“One of their main concerns is the country’s political stability, without which the economy will not be stable. They have some concerns regarding the interim period between the conclusion of the presidential election and the general election,” a senior official said.

Treasury officials have also done an assessment on various scenarios to expect after the conclusion of the presidential election. They have studied in detail the manifestos of the main candidates and summarised how political developments could create an unfavourable situation for the continuity of the IMF programme.

Among these are concerns that the increase in the budget deficit of more than 11 percent of GDP due to tax cuts and excessive expenditures would pose difficulties in the preparation of the budget in line with the agreements with the IMF under the Extended Fund Facility (EFF), the Treasury officials said.

The assessment says that a situation created where there is a substantial primary deficit from 3% to 4% of GDP could be a serious violation of the IMF programme.

The assessment also voices concern over disruption to the ongoing agreements reached with external creditors under the debt restructuring process as well as fiscal imbalances that could have direct and indirect implications on the currency as well⍐.

Parliament: NPP concerned of dissolution

 Parliament: NPP concerned of dissolution

• NPP lawyers cite need for ‘peaceful power transition’

The Morning 16 Sep 2024 | BY Sahan Tennekoon

The Janatha Vimukthi Peramuna (JVP)-led National People's Power (NPP) expressed concern over a potential dissolution of Parliament by the President before the announcement of the Presidential Election results.

Speaking at a press conference yesterday (15), NPP Lawyers' Collective member President's Counsel Upul Kumarapperuma argued that if the President dissolves Parliament on 21 September, before the election results are announced, it would negatively impact the country. He made these remarks in response to a question posed regarding the allegations made by certain parties that the President is to dissolve the Parliament on the Election night.

He stressed the importance of a peaceful power transition without unnecessary chaos. "Although the Constitution grants the President the power to dissolve Parliament in such a situation, doing so amidst the election would create further issues," Kumarapperuma remarked. He highlighted that while the President does have constitutional authority, such an action could be detrimental to the citizens and exacerbate the country's problems.

Kumarapperuma also stated: "The President is granted power by the Constitution to act in such a manner, but if he proceeds with dissolving Parliament during the election period, it would be the worst thing for the country” stressing the importance of maintaining stability during the transition of power.

In contrast, Education Minister Dr. Susil Premajayntha, speaking at a rally recently, noted that if President Ranil Wickremesinghe is re-elected, he would only dissolve Parliament after ensuring the approval of benefits for the people and the passage of crucial legislation.

However, during an election rally held in June, senior NPP officials claimed that if they are victorious, they will dissolve the Parliament on the night they win⍐. 

Once considered foes, Iran-backed groups get a warm welcome from Iraq

Once considered foes, Iran-backed groups get a warm welcome from Iraq 

US, UK ‘want war,’ continue to fan the flames of the Russia-Ukraine conflict

 

US, UK ‘want war,’ continue to fan the flames of the Russia-Ukraine conflict

By Global Times

Published: Sep 12, 2024 The actions of the US and UK to fan the flames of the ongoing Russia-Ukraine conflict have further accelerated and intensified. On one hand, they discourage peace negotiations, and on the other, they exacerbate the escalation of the conflict, with Ukraine ultimately bearing the greatest cost.
US Secretary of State Antony Blinken and UK Foreign Secretary David Lammy announced new aid packages for Ukraine on Wednesday during their joint visit to the war-torn country, the first such visit in over a decade. According to reports, the US will give Ukraine $700 million in humanitarian and energy assistance, while the UK will allocate nearly $800 million in financial support and military equipment supplies. 
Regrettably, amid Western allies' belief that the conflict is entering a "critical moment," this rare joint visit still does not aim to bring peace. Experts suggest that this visit reflects a clear political posture of the US and UK. The two want to ensure that Ukraine adopts a hardline, uncompromising position and to exhaust Russia militarily through Western aid to Ukraine. For the US and UK, peace talks are not even an option. Their real intention is to fan the flames of war, ensuring that Ukraine continues to serve as a pawn in this protracted conflict.
The Ukraine crisis has now dragged on for more than two and a half years, and it is precisely under the overt and covert interference of Western countries like the US and UK that opportunities for peace have repeatedly slipped away. Recently, former US ambassador to NATO Victoria Nuland acknowledged that the US and its allies advised Ukraine to reject a peace deal with Russia in 2022. David Arakhamia, a Ukrainian politician, also said that British prime minister Boris Johnson visited Kiev in 2022 to inform Ukrainian officials that the West would not sign anything with Moscow, urging: "Let's just fight."
However, it is the people of Ukraine who have paid the price for the "let's just fight" instigation with their lives, while the US and UK, who continue to stoke the flames, are calculating the political and economic benefits they stand to gain. For the US, its self-serving "war economy" has caused immense damage and suffering to many countries, while simultaneously bringing enormous profits to the American military-industrial complex, fostering a vicious cycle between "war and profit." No wonder independent US presidential candidate Robert F. Kennedy Jr once bluntly stated that the US is disrupting peace negotiations because Washington "wanted the war."
As the US' front-runner in containing Russia, the UK has closely followed Washington in its military support for Ukraine, hoping to gain more benefits and influence from the Ukraine crisis while demonstrating its great power status and ability to maintain control over European security. However, the UK's continued arming of Ukraine has not come without a price. While the US profits immensely, the spillover effects of the Ukraine crisis have increased the risk of stagflation in the UK, and the massive military aid has exacerbated the country's financial difficulties, with social discontent continuing to grow. As Europe finds itself drawn into the vortex of the Russia-Ukraine conflict by the US and unable to extricate itself, the UK should carefully consider its true gains and losses as it follows Washington's lead. 
Ironically, while the US and UK are busy fueling the conflict and obstructing peace talks, they continue to baselessly accuse China of supporting Russia's military actions. During the US-UK joint press conference held on Tuesday, Blinken once again mentioned "China's support." In fact, China is neither a creator nor a party to the Ukraine crisis and is committed to promoting talks for peace. As the true instigators of the Russia-Ukraine conflict, the US and its allies should not shift the blame for the problems they created onto China. Their attempts to unjustly smear China and portray themselves as "defenders of peace" will ultimately be in vain⍐.

 

 A man looks as smoke billows after a missile attack from Yemen in central Israel, September 15, 2024.
REUTERS/Ronen Zvulun

Houthi missile from Yemen hits central Israel, no one hurt

By Reuters September 15, 2024

JERUSALEM, Sept 15 (Reuters) - The Iran-aligned Houthis who control northern Yemen fired a surface-to-surface missile that reached central Israel for the first time on Sunday, hitting an unpopulated area and causing no injuries.

Air raid sirens had sounded in Tel Aviv and across central Israel moments before the missile landed at around 6:35 a.m. local time (0335 GMT), sending residents running for shelter. Loud booms were heard, which the military said came from missile interceptors.

"Following the sirens that sounded a short while ago in central Israel, a surface-to-surface missile was identified crossing into central Israel from the east and fell in an open area. No injuries were reported," the military said.

The deputy head of the Houthi's media office, Nasruddin Amer, said in a post on X on Sunday that a Yemeni missile had reached Israel after "20 missiles failed to intercept" it, describing it as the "beginning".

In a statement on Telegram, the group said its military spokesman would soon give details about a "qualitative operation that targeted the depth of the Zionist entity".

Reuters saw smoke billowing in an open field in central Israel, though it was not immediately possible to determine if the fire was caused by the missile or interceptor debris.

Sunday's strike appears to be the first time the Houthis have penetrated deep into Israeli airspace with a missile. They have fired at Israel several times since the outbreak of the Gaza war last October in what they describe as solidarity with the Palestinians. Most such missiles have been shot down although one hit an open area near Israel's Red Sea port of Eilat in March.

In July, a Houthi drone reached Tel Aviv, killing one man and wounding four others. That attack, the first from abroad to target Tel Aviv with a drone, prompted Israel to carry out a major air strike on Houthi military targets near Yemen's Hodeidah port, killing six people and wounding 80.

The Israeli military also said that 40 projectiles were fired towards Israel from Lebanon on Sunday and were either intercepted or landed in open areas.

"No injuries were reported," the military said⍐.

 

Exclusive: US locks in steep China tariff hikes, many to start Sept. 27

By David Lawder September 13, 2024

Sept 13 (Reuters) - The Biden administration on Friday locked in steep tariff hikes on Chinese imports, including a 100% duty on electric vehicles, to strengthen protections for strategic domestic industries from China's state-driven excess production capacity.

The U.S. Trade Representative's office told Reuters that many of the tariffs, including a 100% duty on Chinese EVs, 50% on solar cells and 25% on steel, aluminum, EV batteries and key minerals, would go into effect on Sept. 27.

The USTR determination, first reviewed by Reuters, showed a 50% duty on Chinese semiconductors, which now include two new categories - polysilicon used in solar panels and silicon wafers - are due to start in 2025.

Adjustments to the punitive "Section 301" tariffs on $18 billion worth of goods announced in May by President Joe Biden were minimal and disregarded auto industry pleas for lower tariffs on graphite and critical minerals needed for EV battery production because they are still too dependent on Chinese supplies.

USTR left unchanged the tariff increase to 25% from zero on lithium-ion batteries, minerals and components, with the increase for batteries for EVs taking effect Sept. 27 and those for all other devices, including laptops and cell phones, on Jan. 1, 2026.

'TOUGH, TARGETED'

Lael Brainard, the top White House economic adviser, told Reuters that the decision was made to ensure that the U.S. EV industry diversifies away from China's dominant supply chain.

She said such "tough, targeted" tariffs are needed to counteract China's state-driven subsidies and technology transfer policies that have led to over-investment and excess production capacity. But Washington is investing hundreds of billions of dollars worth of its own tax subsidies to develop domestic EV, solar and semiconductor sectors.

"The 100% tariff on electric vehicles here does reflect the very significant unfair cost advantage that Chinese electric vehicles in particular are using to dominate car markets at a breathtaking pace in other parts of the world," Brainard said. "That's not going to take place here under the vice president's and the president's leadership."

China has vowed retaliation against the "bullying" tariff hikes and argued that its EV industry's success is due to innovation, not government support.

The higher U.S. tariffs take effect as Vice President Kamala Harris and former President Donald Trump are both courting voters in auto and steel producing states, trying to position themselves as tough on China ahead of the November presidential election. Trump has vowed to impose 60% tariffs on all Chinese imports.

The European Union and Canada also have announced new import tariffs on Chinese EVs, the latter matching the 100% U.S. duties.

PORT, MEDICAL RELIEF

The final tariff decision does provide some temporary relief for U.S. port operators who were facing a new 25% tariff on massive ship-to-shore cranes, an industry that China dominates with no U.S. producers.

The duty would add millions of dollars to the cost of each crane. USTR said it will allow exclusions from the tariffs for any Chinese port cranes that were ordered prior to the May 14 initial tariff announcements, as long as they are delivered by May 14, 2026.

USTR raised tariffs to 50% on medical face masks and surgical gloves, from an initially proposed 25%, but delayed their start to allow a shift to non-Chinese suppliers. The planned duty on Chinese syringes, which were in short supply during the COVID-19 pandemic, will immediately rise to 100% from a previously planned 50%, but USTR will allow a temporary exclusion for enteral syringes, used to feed infants, for a year.

The agency also said it will consider requests for tariff exclusions for five Chinese industrial machinery categories, including those for machinery for purifying or filtering liquids, industrial robots and printing machinery.

It will allow tariff exclusions for Chinese solar wafer and cell manufacturing equipment, but not for equipment used to make full solar modules⍐.

 

Boeing's US factory workers strike, halting 737 MAX production

SEATTLE, Sept 13 (Reuters) - Boeing's U.S. West Coast factory workers walked off the job early on Friday after overwhelmingly rejecting a contract deal, halting production of the planemaker's strongest-selling jet as it wrestles with severe output delays and heavy debt.

The workers' first strike since 2008 comes as the plane maker is under heavy scrutiny from U.S. regulators and customers after a door panel blew off a 737 MAX jet mid-air in January.

 A door panel blew off a 737 MAX jet mid-air in January

The mounting crises battered Boeing's stock and sparked a leadership upheaval. Boeing shares fell 4% in U.S. pre-market trading on Friday. The stock has fallen nearly 38% since the start of 2024.

New CEO Kelly Ortberg CEO Kelly Ortberg was brought in just weeks ago to restore faith in the planemaker and had proposed a deal including a pay rise of 25% over four years, far lower than the 40% workers had demanded.

Roughly 30,000 International Association of Machinists and Aerospace Workers (IAM) members who produce Boeing's 737 MAX and other jets in the Seattle and Portland areas voted on their first full contract in 16 years, with 94.6% rejecting it and 96% favoring a strike in a two-part ballot.

"This is about respect, this is about addressing the past, and this is about fighting for our future," said Jon Holden, who headed the negotiations for Boeing's largest union, before announcing the vote result on Thursday evening.

"We strike at midnight," said the union leader who had agreed to the just-defeated deal, as members in the union hall cheered and chanted: "Strike! Strike! Strike!"

BOEING, UNION KEEN TO GET BACK TO THE TABLE

A long strike could badly hit Boeing's finances, which are already groaning due to a $60 billion debt pile.

"We remain committed to resetting our relationship with our employees and the union, and we are ready to get back to the table to reach a new agreement," the planemaker said in a statement on Thursday.

The proposed deal included a $3,000 signing bonus and a pledge to build Boeing's next commercial jet in the Seattle area, provided the program was launched within the four years of the contract.

"The key question now is on the duration of the strike given the gap between the proposed wage increase and union members request," Jefferies analyst Chloe Lemarie said in a note, adding that a long strike represents a key risk for 737 MAX production levels.

Although IAM leadership recommended last Sunday that its members accept the contract, many workers had responded angrily, arguing for the original demand and lamenting the loss of an annual bonus⍐.

 

A pedestrian walks near the British embassy in Moscow, Russia
September 13, 2024. REUTERS/Evgenia Novozhenina

Russia expels six UK diplomats as tensions rise over Ukraine missiles

Sept 13 (Reuters) - Russia's FSB security service said on Friday it had revoked the accreditation of six British diplomats in Moscow after accusing them of spying and sabotage work, signalling the Kremlin's anger at what it sees as London's vital role in helping Ukraine.

Britain's embassy in Moscow and the UK government did not immediately respond to Reuters requests for comment.

Russia announced the expulsions hours ahead of planned talks in Washington between British Prime Minister Keir Starmer and U.S. President Joe Biden on the next steps in supporting Ukraine, centring on whether to allow Western missiles to be used to hit targets in Russia.

President Vladimir Putin said on Thursday that the West would be directly fighting with Russia if it allowed Ukraine to strike Russian territory with Western-made long-range missiles, a move he said would alter the nature and scope of the conflict.

The FSB, the main successor agency to the Soviet KGB, said it had documents showing that a British foreign office department in London responsible for Eastern Europe and Central Asia was coordinating what it called "the escalation of the political and military situation" and was tasked with ensuring Russia's strategic defeat in its war against Ukraine.

"The facts revealed give grounds to consider the activities of British diplomats sent to Moscow by the directorate as threatening the security of the Russian Federation," the FSB said in a statement.

"On the basis of documents provided by the Federal Security Service of Russia and as a response to the numerous unfriendly steps taken by London, the Ministry of Foreign Affairs of Russia, in co-operation with the agencies concerned, has terminated the accreditation of six members of the political department of the British Embassy in Moscow in whose actions signs of spying and sabotage were found," it said.

The six diplomats were named on Russian state TV, which also showed photographs of them. Surveillance footage of them was also released to Russian media, including covert video surveillance of a British diplomat meeting someone.

"The English did not take our hints about the need to stop this practice (of carrying out intelligence activities inside Russia), so we decided to expel these six to begin with," an FSB employee whose identity was hidden told the Rossiya-24 state TV channel.

The FSB said Russia would ask other British diplomats to go home early if they were found to be engaged in similar activity.

The Izvestia newspaper cited the FSB as saying that the British diplomats had recruited Russian teenagers, organised what it called provocations, and held talks in the British ambassador's Moscow residency with opposition figures.

It accused British diplomats of working with Russian activists to try to create divisions within Russian society around different ethnic groups and migrants and said many of the people involved in coordinating Britain's work on Ukraine based in London and Kyiv were working for the MI6 foreign intelligence service.

Russian Foreign Ministry spokeswoman Maria Zakharova said the activities of the British embassy in Moscow had gone well beyond the Vienna diplomatic conventions.

"More importantly, it is not just a question of formality and non-compliance with declared activities, but of subversive actions aimed at damaging our people," Zakharova said on Telegram⍐