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Moody’s downgrade ‘unwarranted, erroneous suggesting reckless reaction’
Government wades into battle with facts, figures and projections
In an extraordinary hard-hitting rejoinder to Moody’s downgrade of their Sri Lanka rating from B2 to Caa1 with a stable outlook, the Ministry of Finance, State Ministry of Money, Capital Markets and Public Enterprise Reforms (headed by former Central Bank Governor Ajith Nivard Cabraal) and the Central Bank accused the well-known rating agency of an “unwarranted and erroneous” finding that suggests a “reckless reaction.”
It said that “instead of understanding the economic turnaround as well as awaiting the Budget that is due in November, the downgrade of SL at the beginning of the Economic Revival is inexplicable.”
“This hasty rating action seems similar to the previous premature and reckless downgrades by rating agencies in the immediate aftermath of the ending of the internal conflict in 2009 and during the political impasse at the end of 2018. In both instances, the rating actions were proven to be hasty and erroneous, and those actions only resulted in several investors suffering unnecessary loses and missing out on emerging opportunities.”
“Moody’s rating downgrade fails to recognize and do justice to the ground reality of the ongoing rapid economic recovery backed by vastly improved business confidence arising from the return of political stability and policy stability after a lapse of five years,” the presentation said.
It went on to stress that Sri Lanka, like many of its peers in the emerging market group, experienced initial capital outflows, exchange rate depreciation, showdown in activity and pressure on government finances in response to the effects of the Covid-19 pandemic.
“But, the swiftness with which decisions were taken followed by the landslide victory of the government, enabled Sri Lanka to move along a recovery path towards growth and stability,” it said.
Since May, merchandise exports had bounced back, and by July, had returned to pre-Covid monthly averages of USD one billion, the presentation supported by graphs and charts said.
It argued that SL recognized the probable external sector pressure early, and decisively curtailed non-essential imports in order to prioritize external debt service obligations. The cumulative trade deficit by end December is expected to be around only USD 5.8 billion, significantly down from USD eight billion the previous year.
“The savings on the import bill due to the curtailment of non-essential imports as well as significant reductions in the fuel import bill is expected to be over USD 2.0 billion,” the presentation said.
Discussing the vital tourism sector, it said that although inbound tourist movements are yet not possible given the global pandemic situation, other service exports, including IT services and shipping remain robust. It added that workers’ remittances have recorded a sharp increase in spite of the initial expectations of a slowdown and at current trends, “the cumulative decline in workers remittances is likely to be marginal, compared to previous expectations of a decline of 15%.”
On foreign direct investment, it admitted that FDI inflows had slowed, but the investment pipeline is strengthening. While FDI slowed in the first half of this year (from a peak of USD 2,000 billion in 2018), looking ahead prospects were promising particularly with expected inflows into the Port City project and for new manufacturing projects.
“The expected finalization of new legislation for the Port City within a month will result in the realization of investment by those who have already completed due diligence on such investment,” the presentation said. “Other expected investments include import alternative industries as well as investments by international financial institutions.”
“FDI inflows during 2020 are expected to be over USD 750 million, which is only about USD 400 million less that in 2019. At the start of the pandemic, FDIs were expected to be only around USD 300 million for the year 2020.”
The presentation further said that stock market indices have improved dramatically to pre-Covid levels and are likely to gain further momentum. Also, foreign inflows to the government securities market have already showed signs of resumption and according to initial responses, are likely to increase in the coming months, particularly in the wake of the attractive SWAP arrangements offered by the SL authorities.
With increased emphasis on domestic agriculture, agro-based industries and resource-based industries, domestic economic activities have turned around remarkably and recorded V-shaped recoveries. A bumper Yala crop was expected to follow the bumper Maha. Industrial production has rebounded, electricity generation is normalizing with greater reliance on hydropower generation and the construction sector has gradually gathered pace.
The exchange rate had appreciated sharply since mid-April and remains stable at appreciated levels, allowing the Central Bank to accumulate reserves through market purchases of foreign exchange. Foreign inflows following the Moody’s downgrade enabled the Central Bank to purchase USD 30 million from the forex market on Sept. 29.
The presentation further said that the Debt to GDP ration which increased in recent years is expected to improve in the medium term; that envisaged financing inflows for 2020 favours domestic markets and strategic foreign financing; and that foreign Treasury bills and bonds holdings are likely to attract a substantial volume of investments in coming months.
Other positives outlined includes that official reserves of CBSL had increased to USD 7.4 bn. by end August 2020; a policy environment facilitating high economic growth beyond the recovery stage while preserving macro-economic stability and a “deep and unwavering commitment to our investors.”
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PCoI on Easter Sunday attacks:
By Shamindra Ferdinando
Attorney General Dappula de Livera, PC is not bound by recommendations made by the Presidential Commission of Inquiry (P CoI) into the 2019 Easter Sunday carnage, or presidential directives in that regard, according to authoritative sources.
They said that the AG couldn’t under any circumstances initiate legal proceedings until he had received the full PCoI report.
President Gotabaya Rajapaksa received the PCoI report on Feb 1. The President’s Office delivered a set of PCoI reports to Speaker Mahinda Yapa Abeywardena on Feb 23, a day after the report was presented to the cabinet of ministers. The Island raised the matter with relevant authorities in the wake of a section of the media reporting the PCoI recommending punitive measures against former President Maithripala Sirisena, Defence Secretary Hemasiri Fernando, IGP Pujitha Jayasundera, Chief of State Intelligence Senior DIG Nilantha Jayawardena, Chief of National Intelligence retired DIG Sisira Mendis and All Ceylon Makkal Congress (ACMC) leader and Samagi Jana Balavegaya MP Rishad Bathiudeen et al over the Easter Sunday carnage.
Sources pointed out that due to the inordinate delay in sharing the PCoI report with the AG, the department hadn’t been able to take preliminary measures required to initiate the proceedings. Sources said that a team of officers would take at least six weeks or more to examine the report before tangible measures could be taken.
With the AG scheduled to retire on May 24, 2021, even if the AG Department received the P CoI it would be quite a tough task to initiate proceedings ahead of retirement, sources said. However, in terms of the 20th Amendment to the Constitution enacted in last October, both the AG and the IGP could receive extensions beyond 60 at the President’s discretion.
Dappula de Livera received an Acting appointment as the AG a week after the Easter Sunday carnage whereas his predecessor Jayantha Jayasuriya, PC, was elevated to Chief Justice.
Responding to another query, sources said that the Attorney General two weeks ago requested Secretary to the President for a copy of the P CoI. However, the AG was yet to receive one, sources said. In spite of the AG not receiving a P CoI copy, the AG had instructed the IGP to obtain a copy of the report when he requested the police to complete investigations into the Easter Sunday carnage. The AG issued specific instructions after having examined police files pertaining to the investigations.
The IGP, too, hadn’t received a copy so far though some sections of the report were in the public domain.
Agriculture Minister Mahindananda Aluthgamage displayed at a live political programme on Derana a copy of the P CoI report he received at the cabinet meeting earlier in the day.
Sources said that the Attorney General’s Department couldn’t decide on a course of action in respect of the Easter carnage on the basis of a section of the report. In terms of the Commission of Inquiry Act (Section 24), the AG enjoyed significant powers/authority in respect of investigations; sources said adding that the Department urgently required both the P CoI report and police investigations report. The Attorney General’s Department has raised the delay in receiving a P CoI report amidst the Catholic Church attacking the government over the same issue.
Sources said that ministerial committee appointed to study the P CoI report couldn’t decide on how to proceed with the recommendations and the matter was entirely in the hands of the AG. Sources pointed out that the delay on the part of the government to release the report had received the attention of sections of the international media, including the New York Times. Public Security Minister retired Rear Admiral Sarath Weerasekera having met Malcolm Cardinal Ranjith at the Bishop’s House on Dec 8, 2020 said that the AG would get a copy of the P CoI report once the President received it. Minister Weerasekera said that the CID had handed over the relevant files after having completed investigations into eight blasts. Referring to the Parliamentary Select Committee (PSC) report on the Easter Sunday carnage, the former Navy Chief of Staff said that all such documents would have to be brought to one place and considered before initiating legal proceedings. Acknowledging that there could be delays, lawmaker Weerasekera said that on the instructions of the Attorney General a 12-member team of lawyers was working on the case. The minister vowed to expose the mastermind behind the Easter Sunday attacks. Investigations continued while some of those wanted were overseas, the minister said.
The minister acknowledged that the Attorney General couldn’t proceed without the P CoI report. Minister Weerasekera reiterated that once the President received the P CoI report, it would be sent to the Attorney General. The minister said that there were documents two to three feet high that needed scrutiny. The minister assured comprehensive investigation. The minister said that investigations pertaining to eight blasts had been completed and the reports handed over to the AG. However, the Attorney General had found shortcomings in those investigations.
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By Saman Indrajith
The Presidential Commission of Inquiry on the Easter Sunday bombings had failed to identify the mastermind of , the JVP said yesterday.
Addressing the media at the party headquarters in Pelawatte, JVP Propaganda Secretary MP Vijitha Herath said that the PCoI report had levelled accusations against former President Maithripala Sirisena, former IGP and head of intelligence for their dereliction of duty, shirking of responsibilities and not taking action to prevent the attacks and negligence. There were reference to the causes of the terror attacks and actions to be taken to avoid such attacks and the influence of extremist organisations. “However, there is no mention of the mastermind of the attacks, the handlers of the attackers and those whose interests the carnage served. It is also not mentioned whether there has been any foreign or local organisation behind those attacks. As per the PCoI report the attack took place as a result of culmination of extremism.
“According to the PCoI the extremist activities were a result of the prevailing political situation then. The entire nation was waiting to see who was responsible and who masterminded those attacks. The PCoI has failed to identify the true culprits responsible for the terror attacks. The report says that the leader of the suicide cadres killed himself in the attacks and it was a puzzle. That means those who are actually responsible for the attacks are still at large. The report does not provide exact details of the sources of the attacks. The PCoI had sittings for one year and five months. It summoned various persons and got their statements but it has failed to shed any light on the terror attacks. Everybody knows that the top leaders of the government and heads of security and intelligence establishments failed in their duties. Ranil Wickremesinghe was the second in command and he too is bound by the responsibility but the PCoI report fails to identify him as one of the persons against whom legal action should be instituted. The PCoI has treated Wickremesinghe and former President Maithripala Sirisena differently. We are not telling that this report is a total failure but we cannot accept this as a complete report. The PCoI handed over its report to the President on Feb 1. After 23 days it was sent to Parliament. Now, a copy of the report is there in the parliamentary library for the perusal of MPs.”
Herath said that the PCoI did not have powers to take punitive action. “It only has powers to name those responsible and recommend action to be taken against those named.
