News

The Central Bank of Sri Lanka (CBSL) and the People’s Bank of China (PBC) entered into a bilateral currency swap agreement with a view to promoting bilateral trade and direct investment for economic development of the two countries, and to be used for other purposes agreed upon by both parties.

The People’s Republic of China remains Sri Lanka’s largest source of imports. In 2020, imports from China amounted to USD 3.6 billion 22.3% of Sri Lanka’s imports.

This Swap agreement has been approved by the Cabinet of Ministers with the recommendation of the Monetary Board of CBSL. Governors of the two Central Banks, Prof. WD Lakshman and Dr. Yi Gang, from the CBSL and PBC respectively were the signatories to the agreement.

Under this agreement, CBSL is entitled for a swap facility amounting to CNY 10 billion (approximately USD1.5 billion which is equivalent to around LKR 225 billion.

The agreement is valid for a period of three (3) years. Economic experts say if implemented completely, agreement could keep in check rupee’s volatility against the USD.

Experts noted that once the currency swap agreement between China and Sri Lanka comes into full force, it will significantly lift pressure off the foreign exchange reserves and the dependency on the dollar will decrease.

They added that according to the pact, the limit for exchange of local currencies of the two cannot be used for the repayment of debt or import of goods from other countries.

This means at the end of the three years of the agreement, if PBC has accumulated LKR 225 billion, the PBC can ask for 10 billion yuan in exchange for LKR 225 billion.

The Sri Lanka Central Bank is obligated to pay it under the agreement. If the Sri Lanka Central Bank has only 2 billion yuan, Sri Lanka can’t pay the amount in yuan, veteran economic analyst said.  

Instead Sri Lanka has to pay the balance amount in a currency acceptable to PBC and that currency could possibly be U.S. dollars and this will put pressure on the country's foreign reserves.

Sri Lanka has faced a similar situation when it has re-payed USD 400 million currency swap to India before its due date on Indian  request from the island nations current reserves.

If this happens again Sri Lanka will be pushed into fire from the frying pan, he commented.Meanwhile Sri Lanka and Bangladesh central banks will conduct talks over a swap arrangement, a joint communiqué said after a visit by Prime Minister Mahinda Rajapaksa to the South Asian neighbour.

Minority community leaders in Sri Lanka have urged the United Nations Human Rights Council (UNHRC) members to consider the discrimination faced by minorities on the island nation ahead of a key vote on its human rights record.

Sri Lanka ranked 129 out of 149 countries in the World Happiness Report 2021, released by the UN Sustainable Development Solutions Network.

More damning details of the infamous hedging deal of the Ceylon Petroleum Corporation (CPC) have come to light once again with the revelation of a recent report by the Auditor General. In 2009, the country was shocked with the breaking news of a dubious and illegal deal which had taken place at the CPC causing huge losses of LKR 10.2 billion to the country.

The Supreme Court Judgement in January 2009 annulled all interim orders related to the hedging deals on controlling fuel prices. Since then, it has halted the hearing of the petitions against the hedging agreements citing that the Executive has failed to implement court orders.

The public interest activists were more than jubilant when it was announced that the newly created investigative arm of the then Yahapalana government, the FCID, had been directed to take over the investigations of the hedging scam and the case was referred to the AG’s Department for action in 2016.

The matter is now under the carpet or in the dustbin and the Sri Lankans with short memories are suffering without any hard feelings about the economic loss.

As per the arbitration deeds agreed upon by the parties, a sum of USD 60 million (LKR 7,613 million) had been paid to the Standard Chartered Bank (SCB) on 03 June 2013 whilst a sum of USD 27 million (LKR 3,881 million ) had been paid to the Deutsche Bank on 04 August 2016, the Auditor General's report said.  

According to the information received, the CPC had sustained a loss of LKR 13,641 million by the year 2019 due to those transactions.

The Central Bank had spent a sum of LKR 941.2 million as legal fees relating to Hedging Deals of the Corporation, and LKR 370.6 million therefrom had been incurred by the Central Bank whereas a sum of LKR 567 million had not been reimbursed by the CPC to the Central Bank of Sri Lanka during the period 2011- 2014.

However, even by the end of the year under review, a sum of LKR 3.1 million had not been reimbursed by the CPC, a government audit inspection disclosed.  

Furthermore, a case had been filed by the Commercial Bank at the Commercial High Court of Colombo against the Ceylon Petroleum Corporation with respect to a right of USD 8.6 million.

That case however was still progressing even by the end of the year 2019, the report divulged.

Commenting on the passing of the UNHRC resolution, a Tamil Diaspora representative told LNW that former minister Mangala Samaraweera's retirement from active politics was the major reason behind this victory.

Had Mr. Samaraweera continued to serve as the Minister of Foreign Affairs, or remained in active politics, this resolution would have never passed at the UNHRC, in the event that his influence could have changed the opinion of many member states who have voted in favour today, according to Dr. Arujun Sivananthan, Chair of British Tamil Conservatives and former Chairman of Barclays Capital. The resolution tabled against Sri Lanka at the 46th Sitting of the United Nations Human Rights Council (UNHRC) has passed with a majority vote today (23), winning 22 votes in favour and 11 votes in opposition. 14 member states abstained themselves from casting votes. The passing of the resolution enables the Human Rights High Commissioner's Office to directly intervene in the human rights affairs and reconciliation process in Sri Lanka paving the way for the UNHRC to table resolutions in view of progress.

Despite the Sri Lankan government's anticipation of securing votes of the member states from the global south at the Council, a majority has voted against the island nation, whilst some have abstained themselves from voting.

Every attempt made by the Tamil Diaspora since 2016 to pass a resolution of this nature was barricaded by the efforts made by Samaraweera, Dr. Sivananthan said, adding that the former Minister had used his personal ties to influence against the Tamil Diaspora, thereby suggesting that Samaraweera's retirement was the biggest victory the Tamil Diaspora worldwide has achieved to date.

Accordingly, the Tamil Diaspora extends its thanks to Samaraweera for retiring from politics, he told LNW.

Denoting that no minister or diplomat of the present regime can even step close to the role played by Samaraweera, Dr. Sivananthan further emphasised that the vote at the UNHRC today stood in advantage of the Tamil Diaspora. (Source: LNW)

After wasting millions of rupees of public money in a failed bid to win the status of host country for the Commonwealth Games in 2011, the present government is eyeing it for the second time in 10 years.

It has been estimated that Sri Lanka has spent between LKR 300 million and LKR 400 million on Sri Lanka’s bid process at that time

The Times of India reported a figure of USD 2.3 million. Another news report put the figure at between USD 7 to 8 million.

However, according to the latest report of the Auditor General, a sum of LKR 689.9 million in financial losses had been made in the money collected from local donors for obtaining the hospitality of the Commonwealth Games in 2018 as the money was not utilised efficiently and effectively.

It has been reported that large donations have been received from Sri Lankan financial institutions, private sector companies and leading businessmen towards meeting the expenses of the Bid Committee and the preparation of the proposal during the then Rjapaksa regime.  

The bid was promoted as an attempt to rebuild this tsunami-devastated town, building a completely new International Sports City, international class hotels and an international airport, on a green field site, in seven years, using taxpayers’ money through State revenue and private donations from businesses.

Representatives from sports organisations in the Commonwealth were invited to Sri Lanka, extensively and expensively entertained, all state agencies, the armed forces, non state institutions, etc., threw their weight behind the promotional extravaganza.

The then government had underwritten the total cost estimate, saying it would fill the shortfall if necessary.

In the second attempt also under the present Rajapaksa regime, Sri Lanka has emerged as a potential bidder for the 2026 Commonwealth Games, at a time when efforts to stage the event in Hamilton, Canada have stalled.

The National Olympic Committee of Sri Lanka (NOCSL) - which also organises the country's participation in the Commonwealth Games - is planning a bid for the 2026 Games.

"Sri Lankan city Hambantota bid for the 2018 Commonwealth Games, but lost to Gold Coast in Australia by 43 votes to 27.

The then Ministry of Sports has taken measures in the year 2010 to obtain the hospitality of the 2018 Commonwealth Games in Sri Lanka.

According to a special audit report, a state-owned company called CWG 2018 (private) had been incorporated for the execution, implementation and presenting bids of the procurement process.

It was expected that the then Government would hold 51 per cent of the company's share capital and 49 per cent by public institutions.

Accordingly, LKR 110 million from the initial capital had been provided by the  Ministry of Sports and the General Treasury, while LKR 18 million from the Sri Lanka Export Development Board (EDB) and Sri Lanka Telecom (SLT) at that time.

In addition to that, actions had been taken to obtain cash grants from private organisations and individuals.

Even though the company had been incorporated by raising a sum of Rs. 689.9 million, the hosting of the Games was not received by  Sri Lanka.

Further, it was observed that the money which was provided was not properly monitored and spent without much transparency and financial control that the administration activities of the company were not also compliant with the relevant rules and according to the books, bills, various documents, interviews and statements.

The Committee on Public Enterprises (COPE) has come across glaring irregularities in the execution of the Central Expressway project particularly because of construction delays, lack of proper procurement and feasibility studies.

This has resulted in extra cost of construction running up to billions of rupees giving undue benefits for some contractors and several foreign and local consultancy firms, a recent COPE report revealed.

Based on mathematical assumption, there was clear forensic evidence that such projects were 55 per cent costlier than those that were bid competitively in 2011.

According to the Chairman of COPE Prof. Charitha Herath, some of the feasibility study reports were of no use for the present expressway.

He stressed the importance of managing all future financial activities of the project properly as poor planning results in expensive changes to schedules, traces, relocations of interchanges and other critical control points.

A sum of LKR 1,759 million had been paid to an Australian company to conduct the feasibility study of the Central Expressway comprising four stages.

Without taking action to obtain feasibility reports from that company, agreements valued at LKR 97 million had been spent for several local institutions to further conduct feasibility studies, COPE divulged.

Another feasibility study was conducted for the construction of this expressway prior to 2012 at a cost of around LKR 284 million.

The delay in the commencement of work on the first section of the Central Expressway extending from Kadawatha to Mirigama between 2015 and 2019, had caused a financial loss of LKR 8 billion.

The progress report of COPE on the Central Expressway revealed that only 5 per cent of the work on the Kadawatha-Mirigama first section has been completed by China MCC and the work is now in progress.

81.44 per cent of the construction work on the second section of the project from Mirigama to Kurunegala had been completed. The total cost is around LKR 158 billion.

This 40.91 km stretch of road is divided into four sections and four consortiums of contractors have been awarded the contract.

Bids have been called for the third phase of the 31 km stretch from Pothuhera to Galagedera but construction commenced in December 2020 by Urban Development Authority (UDA) in haste at an estimated cost of LKR 142 billion.

The reason is not known for calling of bids at a time where the selection of foreign contractor is still pending but according to official sources if a foreign contractor is selected then the project would be handed over to them to carry out the balance work under BOT system.

The procurement process has not been completed yet due to irregularities in the procurement process in the third phase.

The Construction work of the fourth phase of the 60.3 km stretch of road from Kurunegala to Dambulla is yet to start.

The United Nations Human Rights Council (UNHRC) in Geneva on Tuesday (23) adopted a resolution against Sri Lanka's rights record, in a setback to Colombo, which made determined efforts to garner international support ahead of the voting.

The largest state owned retail chain - Lanka Sathosa (Cooperative Wholesale Establishment/CWE) has incurred a loss of over Rs.75 million in the massive sugar scam, informed official sources divulged.

Some of the stocks had also been dumped on state-run Lanka Sathosa above the cleared price, similar to the Central Bank bond scam style of the bonds that were bought at low prices had been dumped on the Employees Provident Fund, it had been alleged.

The opposition charged that a large commodity trader with close links to the current administration had made large profits by selling sugar above the cleared price, and the Treasury had ‘lost’ Rs. 15.6 billion in taxes as a result.

The private company which is alleged to have imported the largest stock of sugar during the period of unprecedented tax reduction of up to Rs.25, has sold stocks of sugar to Lanka Sathosa in four occasions at different prices of Rs. 127.49 per kilo, Rs 121.50, Rs.92.00 and Rs.110.00 per kilo, official documents indicated.  

After October 13, this company has sold 700 metric tons of sugar to Lanka Sathosa at a price of Rs. 127.49 per kilo in the same month, 700 mt at Rs.121.50 per kilo on October, 750 mt at Rs. 92.00 per kilo on October 20 and 600 mt at Rs 110.00 per kilo.

Accordingly, a loss of Rs.75.54 million has been incurred by Lanka Sathosa by purchasing the stocks of sugar from this supplier at a price higher than the government’s gazetted maximum retail price in four instances and selling it to consumers at this gazetted price.

After the revelation of the sugar scam by local media, Sathosa chairman had been transferred to thenSri Lanka Standards Institute.

According to official data, Sathosa has paid Rs 309.29 million to purchase 2750 mt of sugar from this company and has earned only Rs. 233.75 million by selling it to consumers at concessionary prices.