Hands off Our Armed Forces: Apologize Chief Minister Nazeer
Posted on May 27th, 2016

Shenali D Waduge

Rudeness is the weak man’s imitation of strength.”
― Edmund Burke

In less than 7 years people appear to have forgotten that they are today living in peace because of the sacrifices of the armed forces. Chief Ministers Wigneswaran and Nazeer can hold portfolios because of the Armed Forces. They would never have become Chief Ministers if LTTE prevailed. Wigneswaran, Nazeer and all of the TNA including sections of the SLMC who are throwing their weight at the armed forces were dead scared to even imaging doing the same to Prabakaran or the LTTE. Sambanthan would not have sited a LTTE camp, Wigneswaran was scared to visit the North and no one even heard of Nazeer until the Armed Forces annihilated LTTE and its ground force. Today, seven years after the freedom has been given to 20million people, those who feared the LTTE are coming out roaring like tigers at the Sri Lankan Armed Forces who provided them that freedom. This is when the public must stand up in disgust at all parties and individuals who jeered at the Armed Forces, laughed at them when victory was within reach, those who shied from calling LTTE as terrorists and ironically enough it is these very parties who have been propped to rule Sri Lanka and their silence at the cheap theatrics being displayed boldly in front of a foreign ambassador shows the despicable heights the quality of leadership as today stooped to. If all their supporters watch in silence it only goes to show their quality as well.


The Muslims have forgotten much. They wore the brunt of LTTE’s wrath. Their children were murdered and cut to pieces. LTTE stormed their mosques. LTTE cared not that people were in prayer. Hundreds of people were cut to pieces. Kattankudy mosque was washed in blood.

LTTE’s Kattankudi Muslim Mosque Massacre (03 August 1990) – 175 Muslims killed



Even after making a fool of himself in public the CM has come out with a pool of lies as conveyed by the media. Anyone seeing the video can judge for themselves the manner of his behaviour. Whatever our opinion of the Ambassador he was a foreign guest and it brought the country to much disrespect. Moreover, he hit the child standing near him and didnt so much as pat the child to say sorry.


Quoting DBS Jeyraj on LTTE’s ethnic cleansing of Muslims http://dbsjeyaraj.com/dbsj/archives/43660

It was in October 1990 that the tiger organization (LTTE) forcibly expelled the Tamil speaking Muslim people from the Northern Province in an atrocious act amounting to ethnic cleansing. Within a few days the Muslims were chased out of their homeland where they had lived for many, many centuries. The mass expulsion of Muslims from the North in 1990 was a humanitarian catastrophe. Uprooting a people from their habitat at gun point and driving them away after depriving them of their cash and jewellery was despicable and unpardonable.”

More than 50,00 Muslims were expelled from the northern mainland by the LTTE. Together with those of the peninsula the Muslims driven out from the Northern Province numbered around 75,000 in 1990.”

The Sammanthurai and Kattankudi attacks on Mosques and killing of Muslims while praying and the massacres of civilians at the Saddham Hussein model village of Eravur being notorious examples. A delegation led by Karikalan the then LTTE eastern political chief came to the North to persuade tiger supremo Prabhakaran that stern” action should be taken against Muslims. Karikalan apparently wanted a lesson to be taught to the Muslims. Even as this pressure was being exerted on the tiger hierarchy an incident occurred at Chavakachcheri in the Thenmaraaatchi sector of the Jaffna peninsula.”

However all that the LTTE did to Muslims did not mean anything to the SLMC Leader Hakeem seen here shaking hands with the very man who ordered the massacres.


CM Nazeer’s apology is like Tony Blair saying sorry… it means nothing. The video is enough evidence of the venom inside the man, repeatedly humiliating a gentlemen in uniform who apologized politely. Anyone watching the video could see how CM dealt a blow to the little child watching in shock at the drama taking place. There is little that needs to be said of the Governor who’s appeasing character is known and nothing that should surprise us. The look of controlled shock on the ambassador was also clear as were other officials who did not know how to handle the situation. We really do not know what encompassed after the video ended but there is little doubt that this cheap minister would have continued his tirade. What was he expecting? That the ambassador would call him aside and tap him for his performance? Was he also aspiring to be the next Western stooge when West begins to eye the East? Are all these performances calculated and delivering a bigger message than the display of buffoonery we saw? We care less. What we do care about is that our Armed Forces have earned for themselves a special place in history. A hand on one is a hand on all the armed forces who have done their duty by us and the nation. The armed forces are one of the two forces that protect and preserve the identity of the nation. The other is the Buddhist priest as seen by the manner they came to assist the flood victims. The historical place they hold through history cannot be erased easily or forgotten.

It would be also good to read Izeth Husseins Tamils are the worst racists ever says a Sri Lankan Muslim” http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=142638 and a commentary on it http://www.lankaweb.com/news/items/2016/03/27/tamils-are-the-worst-racists-ever-says-a-sri-lankan-muslim/

Two incidents of shocking proportion have taken place of late. The Tamil representative Sambanthan and a coterie of NGOs stormed the Army Camp demanding deeds to the North. The yahapalana pooh-poohed the incident and took the side of the TNA. Taking confidence from this the Eastern Chief Minister thought of taking advantage of the presence of the American ambassador the key player in Sri Lanka’s regime change and began a verbal tirade against the naval officer. It is a relief that the Navy high command has taken a strong stand and yahapalana cannot brush the episode like it did to Sambanthan’s irate behavior. This is where we have to draw the line. If minorities want to live in peace they must learn to live in co-existence and harmony. Their representatives must stop hoisting the minority card and behaving like monkeys. Thankfully the Muslims themselves are disassociating themselves from the CM. It would have been nice if the Tamils had done the same when Sambanthan and Wigneswarans theatrics started. Only a few Tamils did come forward though. If the international community were not as biased and hypocrites they would by now have demanded an apology. Instead even the US embassy is stoic silent.

These incidents are not to be taken in isolation. The minorities are presently behaving as they are because they have got international nods of approval. The yahapalana’s undoing will be the same minorities that the yahapalana depends on for sustenance.

The condemnation of the armed forces are tied to the western objective as seen in the UNHRC resolutions. LTTE fronts are today calling the shots and the yahapalana for lack of spine are taking all lying down and has even agreed to fast forward constitutional changes much of which is being drafted by questionable characters and putting at stake all that the armed forces sacrificed to save. 30,000 men sacrificed and a similar number lie injured for life not to have a few power hungry politicians hand over a country on a platter to others or divide the country for it aligns to what was promised to bring them to power? Why have strategic entry points and land areas being specifically targeted to be removed? Why are intelligence personnel being locked up for no legal reason? It has been a shock to most the manner the government downgraded a military victory to a cultural show while allowing LTTE sympathizers to hold remembrance ceremonies when it was clearly to mourn dead LTTE cadres. The irony of it all was seen when these memorials supposed to be meant for civilians had eelam and LTTE flags including the eelam map. These are questions that the citizens of Sri Lanka must seriously wonder about. These power hungry politicians and minority leaders cannot be allowed to bring down a nation that has a history and identity that many are jealous of in particular the feat of annihilating an internationally banned terrorist movement.

We are yet to hear the Governments stand on the rowdy behaviour of Chief Minister Nazeer

Shenali D Waduge


17 Responses to “Hands off Our Armed Forces: Apologize Chief Minister Nazeer”

  1. Ananda-USA Says:

    MORE Foreign BORROWING (3.5 Billion USD) to FIX the Balance of Payments!

    We are well and truly FIXED indeed! Do we TRUST these Financial BUNGLERS who allowed Mahendran to LOOT the TREASURY??

    What is they IMPORT MORE Cars for Politicos, allow their pals to REMIT MORE assets to foreign SAFE HAVENS, and BRIBE the government servants with ANOTHER Rs 10,000/mth to win the next Local Govt Elections?

    DEBTS will Balloon on INCREASED CONSUMPTION without building any INFRASTRUCTURAL CAPITAL ASSETS, The rupee will INFLATE through the celing (10.5% inflation in the last 12 mths from Rs 133/USD to Rs 147/USD now) allowing Foreign Bankers and Western Powers to DICTATE NATIONAL POLICY of the Beggared Sri Lankan State!

    New Capital Gains taxes will be added to supplement the increased VAT and the NBT to pay the interest on the foreign debt.

    Do you hear that WOOSHING sound growing into a CRESENDO??

    That, my friends, is the SOUND of money flying out of ordinary people’s pockets to maintain the LUXURIOUS life style of the Yamapalanaya politicians!

    Sri Lanka seeking to borrow $3.5 bln through foreign debt

    Wed, May 25, 2016, 08:38 pm SL Time, ColomboPage News Desk, Sri Lanka.

    May 25 (Reuters) Sri Lanka is in the process of borrowing up to $3.5 billion from foreign sources via syndicated loans, sovereign bonds, and sukuk, the country’s finance minister said on Wednesday.

    The borrowing plan comes as the South Asian nation seeks to fix its precarious balance of payments position after a sharp depletion of its foreign exchange reserves – a legacy of massive debt piled up under the previous government.

    “A $500 million syndicated loan is almost done with Credit Suisse. Once that is done, we will be going for another $500 million syndicated loan,” Ravi Karunanayake told a Foreign Correspondents Association forum.

    “Then we will go for the sovereign bond within two to three weeks. We will also go for a sukuk.”

    Karunanayake also said the government has appointed eight banks and four non-banking institutions as the lead managers for the upcoming sovereign bond but did not name the institutions. He added the government may look to sell bonds to Chinese and Japanese investors.

    Sri Lanka is heavily indebted, partly due to borrowing by the previous government during its nine-year tenure that ended in January 2015. It faces a balance of payments crisis with around $2 billion in foreign outflows leaving the government securities market since October 2014.

    The finance minister said the refinancing debt will be used to ease the pressure on the repayment of expensive loans in the past.

    The $82.2 billion economy delayed its 2016 borrowing plan until it reached an agreement with the International Monetary Fund (IMF) for a $1.5 billion bailout to help the island nation avert a balance of payments crisis.

    The island nation has been taking steps to ease the pressure on foreign debt repayment including requesting China swap some of the $8 billion Sri Lanka owes Beijing for equity in infrastructure projects and offering to sell stakes in its companies to Chinese ones.

    It has also planned reforms in loss-making state-owned enterprises while raising taxes to increase government revenue, after repeated requests from the IMF.

    Read More:: Reuters (Source)

  2. Christie Says:

    Is the guy at right end the US ambassador the Indian vermin from the US. His picturesays it all.

  3. Christie Says:

    I just had a look at the video in the youtube. Look at the body language and US Indian vermin face expressions. What is he doing in a small function in a small school. This Indian knows how to serve his Empire the Indian Empire.

  4. mario_perera Says:

    As for Sambandan et all storming the army camp in the North, the simple question is:why the hell did the army not prevent it?

    As for Nazeer’s disgraceful behaviour insulting the armed forces, an apology is too trivial when compared to the nature of the offense.

    NAZEER MUST RESIGN or BE SACKED. If none of this happens, he must get a BULLET IN HIS HEAD.

    As Ratnapala commented elsewhere, we need a Sinhala Prabhakaran to see that traitors ‘do not die natural deaths’.

    Our political situation is going from bad to worse. the guardians deities the SANGHA is asleep. Some one has to rise from the realm of the shadows and clean up the rot. The Sinhala nation has to be awakened from its dogmatic slumber. That wake up call must come from the sound of a gun and the effect of a bullet piercing Nazeer’s head.

    Even the army appears to be asleep. Sambandan was allowed to penetrate an army camp without the least resistance. No army man offered the least resistance.

    Nazeer insulted a navy officer in the most abusive manner while the Governor grinned like a fool. Now we praise the navy man for being ‘polite’.

    The insult of Nazeer was not offered to the individual personality who is Captain so and so, but to the entire armed force of this country. The Captain should have thought of this and reacted in an appropriate manner.

    Nazeer, RESIGN or BE EXPELLED, or DIE

    Mario Perera

  5. mario_perera Says:

    This is what the Sate Minister for Defense had to say about the humiliating incident:

    “The Minister expressed hope that the Chief Minister Ahmed will conduct himself as a responsible people’s representative in the future.”

    The reactions of the government leaders was already spelt out in the stupid grinning face of the Governor Austin Fernando.

    Sate Minister for Defense, let me tell you this: to hell with Ahmed and his future behaviour. Deal with what happened in the Present.

    Sack the bugger or…let the armed forces do it their way.

    What is the death of a brute when considering the flower of the Sinhala nation that died to make such brutes rule the roost.

    We are assisting at the slow death of the Sinhala nation. Traitors to the Sinhala Nation, whatever be their race or religion must not be allowed to ‘die natural deaths’.

    Mario Perera

  6. Ananda-USA Says:

    Dear Mario_Perera,

    Although I share your anger at the way our heroes have been treated, for your safety I advise you not to go to the extreme limit of calling for the idiot’s death.

    Say it in an indirect way that will not expose you to retaliation by the Yamapalanaya goons.

  7. mario_perera Says:

    Dear Ananda,

    Thank you.

    Wasn’t it Macaulay who said: How can man die better than facing fearful odds?

    With every kind wish to you


  8. Dham Says:

    It does not warrant death penalty. We should blame the Battara Mullas who removed the Military Governors and installed “Ponnayas” ( sorry Ruwan). I appreciate MR kept Chandrasiri despite pressure.
    These two provinces ( as long as 13A is there) shall be governed by Military Governors.
    Battara Mullas listen to he howling of the Mullas – curse of our land.

  9. mario_perera Says:


    Everything has to be seen within its own particular context and within its own perspectives.

    We are not dealing with the Criminal code and with crime and punishment laid down in it.

    Consider the killings that have happened in the South with JVP…in the North with the LTTE…and the military suppression at least, of the JVP against which the State was NOT in a state of war. Consider also MaRa’s white vans murders. Did those deaths warrant the death penalty? For the parties concerned, they did. Their goals were outside the four corners of the Criminal Code and its tenets.

    For the JVP the circumstances were those of a revolution. For the LTTE is was those of a separatist WAR.For the armed forces, it was the safeguard of the State. I am not referring to the excesses.

    You read the articles and comments on this forum. All that is said and commented on does not fall on all fours with existing legal and constitutional provisions.

    The context of my comments is a grave threat to the existence and survival of the Sinhala nation. How often in these columns have writers and commentators spoken of military ‘coups d’Etats’, of revolutions to change the existing ‘laissez faire’ policies of the governments in favour of minorities, that are pushing the majority community to determine new frontiers of a separate homeland for itself?

    What is happening in the north and the east are ‘bells that toll’ for the Sinhala nation due to the self-serving and backbone-less behaviour of its leaders. What we are seeing with open eyes is the tragedy of our own eventual demise with the carving of homelands within our Unitary State. What we are hearing with our ears are the ‘sounds of distant drums’ that spell our doom.

    The Ealam war with its tragic toll of Sinhala lives occurred because our leaders did not read the signs of the things to come.

    What is happening today is also a gross misreading of ‘things to come’

    In this particular context Vigneswaran’s and Nazeer’s conduct and utterances cannot be taken with grinning faces. What they already preconize is what was preconized by events that led to the Ealam war. All this cannot be circumscribed with existing legal codes and constitutional provisions.

    The conduct and utterances of the two CM’s in question are treacherous in nature.

    Do you remember what Gota said about Fonseka during his BBC interview when the ‘white flag’ issue was raised. He said: that is treason, and the punishment for treason is death.

    The question we have to ask ourselves is: do we have to wait until treachery leads to collective slaughter, or do we consider it our duty to eliminate the deadly snakes that raise their hoods and exhibit their fangs with government granted total immunity?

    Mario Perera

  10. Dilrook Says:

    I have to agree with Mario on an objective basis. What starts like this ends up in a bloodbath. It can be prevented by nipping it in the bud. However, such proactive thinking is never practiced in Sri Lanka due to various moral and religious reasons. I pity the tens of thousands of youth these two racists are misleading, and their victims. By the time the highly corrupt and inefficient law catches up with them (if ever), the damage will be done.

    Had the LTTE not eliminated ‘moderate Tamil leaders’, they would be the biggest extremists today!
    (Kadirgamar and Fernandopulle were national leaders and not Tamil leaders).

  11. Dham Says:

    I understand. Thank you.

  12. plumblossom Says:

    Why was the US ambassador invited to this event? The Us ambassador should never ever have been invited to this event. It is the US imperialists who have brought a resolution against Sri Lanka the US resolution and is trying to using totally false accusations concocted up by the LTTE supporters domiciled in Western countries to condemn our war heroes in courts of law using foreign judges, prosecutors, investigators. The treacherous Sirisena, Ranil, CBK and Mangala are the ones who have placed our war heroes in such a perilous situation. The treacherous Sirisena, Ranil, CBK and Mangala are also trying to partition Sri Lanka by way of constitutional changes by providing further powers to the provincial councils inclusive of land, police and fiscal powers. The treacherous Sirisena, ranil, CBK and Mangala are trying to merge the North adn the East to try to create an eelam by stealth. These moves are extremely dangerous to the unitary status of Sri Lanka and should be defeated. Then there is the defence secretary who has equated our ranaviruwoes to the LTTE terrorists such as Prabhakaran and suggested that safeguarding our independence and freedom should not be commemorated. Naval camps in the North and the East are being dismantled rapidly to please the US imperialists, the UK, Norway, Canada, the EU, Sweden, India and the TNA racist separatists. The most strategic naval camp at Sampur was dismantled too. The naval cordon which existed around the Northern seas has been dismantled and Indian fishermen are devastating the Sri Lankan marine eco system by illegally fishing in our waters using illegal fishing methods and large trawlers. Contra brand, illegal immigrants, illegal drugs in the meanwhile are now I am sure easily reaching Sri Lanka after the naval cordon around the Northern seas was dismantled. There are quite a number of naval personnel, army personnel and army intelligence personnel in prison without any evidence whatsoever at the behest of treacherous Sirisena, Ranil. CBK and Mangala to please the US imperialists, the UK, Canada, Norway, Sweden, the EU and India. When Sirsena, Ranil, CBK and Mangala are behaving in such a treacherous what do you expect from those who are subordinate to them?

  13. plumblossom Says:

    When treacherous Sirisena, Ranil, CBK and Mangala have betrayed our armed forces by accepting the US resolution and condemned our armed forces as having committed war crimes which actually they never ever committed, what do you expect from those who are subordinate to them? There is no evidence that our armed forces ever even broke any international laws during the last stages of the war. The defence secretary has stated that our armed forces are equal to the terrorist prabhakaran and so we should not commemorate the war heroes day. Quite a number of naval officers are imprisoned by this government with no evidence whatsoever to imprison them just to please the US imperialists, the UK, Canada, Norway, Sweden and India. The naval cordon around the Northern seas have been removed and the Indian fishermen is devastating our marine eco system. Contra brand, illegal immigrants, illegal drugs are pouring in due to there being no naval cordon. Naval camps are being dismantled at an alarming rate in the North and the East. UN representatives are allowed to storm naval camps such as at Trincomalee. Why was the US ambassador even allowed anywhere near Trincomalee. The US wants to set up their naval and air bases in Sri Lanka. That is why they want an eelam. Why are we so concerned about subordinate persons conduct when we should be asking Sirisena, Ranil CBK and Mangala why they are betraying Sri Lanka first? These traitors Sirisena, Ranil, CBK, Mangala should be told in no uncertain terms to stop these treacherous activities against Sri Lanka first before we focus on any subordinates who are working under them.

  14. plumblossom Says:

    I have gone and visited the Sampur naval camp which was dismantled by this treacherous government. Trincomalee is extremely strategic due to it being the second largest natural harbour in the world with a submarine canyon which can hide submarines which cannot be detected by radar. The US imperialists want to set up a naval and air base at trincomalee. This is one reason why they are trying to create an eelam. There is oil and gas offshore in the Northern and Eastern provinces. There also minerals in the North and also in the East. 66% of our coastline and our oceans are in the North and the East. This is the reason that the US imperialists want to create an eelam. Our armed forces sacrificed over 35,000 lives and thousands of our brave civilians perished at the hands of the LTTE and prabhakaran to safeguard our independence and our freedom. The US imperialists want a rift between the Sinhala, Tamils and Muslims in order to create this eelam. The treacherous Sirisena, Ranil, CBK and Mangala are busy betraying the country. Historically the Eastern and even the North was part of the Kandyan Kingdom and prior to that the Kingdom of Rajarata. The archaeological and historical evidence is very clear about this. Tamils only settled in the North during Dutch and British times when they were brought over by the Dutch and the British to work on tobacco plantations. Therefore there were no ancient two thousand years of Tamil settlements in the North or anywhere else. However there were invasions from time to time but it was not only the cholas that invaded but pandyas, cheras, kalingas and others as well. So those were invasions only not settlements. So Sri Lanka is one country and we should live in peace with one another now and not create rifts as the US imperialists want so that they can create s separate state or eelam for their own nefarious purposes.

  15. Christie Says:

    Jai hind to all commenters. Looks like I am the odd one. The US ambassador is an Indian Vermi.

    I hope when Trump wins he will stop more Indian vermin getting a foot hold in the US.

    LTTE and JVP both are Indian terrorists. Their victims were non Indians.

  16. Ananda-USA Says:

    This is what happens when the country begins to PANDER to COMMUNAL DEMANDS!

    Muslim parents demand that ONLY MUSLIM TEACHERS be hired at Madina Central College in Madawela!


    Public Schools should be COMPELLED to be SECULAR! Only Private schools, especially those associated with Temples/Mosques/Chiurches should be permitted to RESTRICT students and terachers of other faiths! If these Muslim Parents want to educate their children in PRIVATE Madrassas … they should do so, but NOT IN PUBLIC SCHOOLS!

    ALL such COMMUNAL demands should be STOPPED now by LAW before religious fanatics become EVEN MORE AGRESSIVE!! This is the DIVERSITY that the West LOVES TO PROMOTE in the name of human rights and democracy!

    Minister rejects racial issue behind Madawala school incident

    Daily Mirror.lk
    May 27, 2016

    Education Minister Akila Viraj Kariyawasam today rejected reports of an alleged incident that had taken place during a parent-teacher meeting at the Madina Central College in Madawala, a national school in Kandy as being racially motivated.

    Reports circulating in websites and social media claimed that the parents of the school are demanding that only Muslim teachers be appointed to the school.

    When contacted by Daily Mirror, the minister dismissed the claims but said that there was an issue about the school. “I’m not aware as to the details of the issue and have to contact the additional secretary for further information,” he said.

    Meanwhile, Ceylon Teachers’ Union Secretary Joseph Stalin also denied the reports but said a tense situation had arisen during a parent-teacher meeting of the grade-11 class Tuesday.

    “The parents have complained to the ministry against the School Principal. During the parent-teacher meeting, a Sinhalese teacher had reportedly defended the Principal and that was when the tense situation arose. Some parents had brought eggs and tomatoes to be thrown at the Principal,” he said.

    Our reporter said seven parents had been arrested by the Wattegama Police after eggs were thrown at the Principal and that they were released after being produced in the Theldeniya Magistrate’s Court on Friday.

    Ceylon Teachers’ Services Union (CTSU) General Secretary Mahinda Jayasinghe also said that there was a complaint against the Principal by the parents over allegations of financial misappropriation and administration issues. (Lahiru Pothmulla and Nadeeka Daya Bandara)

  17. Ananda-USA Says:

    The Yamapalanaya BUNGLERS who inherited a Nation in GREAT FINANCIAL SHAPE from the previous government on Jan 8, 2015, have RUINED the ECONOMY in 15 short months!

    ONCE AGAIN, after 7 years of PROUD EXISTENCE, the WESTERN WORLD is MOCKING Sri Lanka after HELPING to Engineer the REGIME CHANGE!

    This has ALWAYS BEEN the DISMAL PERFORMANCE of governments led by the UNPatriotic Party who help the minorities PROSPER at the expense of the Motherland!

    Those few Sinhala Buddhist LOTUS EATERS who helped assorted enemies of Sri Lanka to EMPOWER this set of CONGENITAL IDIOTS, must ACCEPT THE BLAME for their GULLIBILITY & IDIOCY!

    Fixing Sri Lanka’s Mess
    Sat, May 28, 2016, 09:14 am SL Time, ColomboPage News Desk, Sri Lanka.

    May 28 (Economy Watch) Sri Lanka’s balance of payments is in dire straits. The country’s mounting foreign and domestic public debt, a huge fiscal deficit and a severe foreign exchange shortfall have led to potentially calamitous economic circumstances.

    Sri Lanka’s balance of payments is in dire straits. The country’s mounting foreign and domestic public debt, a huge fiscal deficit and a severe foreign exchange shortfall have led to potentially calamitous economic circumstances. Sri Lanka has not yet secured the means to meet its upcoming foreign loan repayments — US$4.5 billion is due over the next year, to be followed by another US$4 billion in the subsequent year.

    Credit rating agencies Fitch and Standard and Poor’s downgraded Sri Lanka’s international sovereign rating in early 2016 in light of its rising fiscal deficit and foreign debt — the highest among Asia’s emerging markets — compounded by sluggish growth prospects.

    While excessive public debt has been accruing over generations, the debt trap that the country is experiencing today is principally due to non-concessional commercial loans taken out between 2009 and 2014 by the previous government, led by Mahinda Rajapaksa. The loans, which went towards infrastructure development projects, roughly doubled the country’s external debt.

    The current administration, led by President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, manifestly worsened the country’s fiscal conditions in 2015. Outstanding domestic debts rose by over 12 percent due to excessive government spending and foreign debt had increased by 25 percent by the end of that year, albeit primarily to finance the previous government’s loans.

    Sri Lanka’s foreign currency earnings and reserves are insufficient to meet its external financing requirements. The depletion in reserves is a consequence of large foreign capital outflows, reduced exports due to the global economic downturn, and falling remittances from migrant workers employed in the distressed Middle East region.

    As temporary measures to avert a foreign exchange crisis, the government initiated a US$1.5 billion currency swap with the Reserve Bank of India and a US$1 billion currency swap with the Central Bank of China in March. Sri Lanka’s Central Bank also plans to raise up to US$3 billion through the issuance of international sovereign bonds this year.

    Sri Lanka has resorted to extended foreign borrowing to counteract the rising fiscal deficit and strengthen foreign reserves. An IMF loan of US$1.5 billion has been granted on a 36-month Extended Fund Facility program, subject to formal approval by the IMF’s Executive Board in June. The Governor of the Central Bank of Sri Lanka has said that the country hopes to obtain an additional US$5 billion in loans from other sources, including the World Bank and the Asian Development Bank, once the IMF loan — a mark of international confidence — is in effect.

    The IMF loan has come only as the Sri Lankan government has agreed to tough conditions, including restrictions on budget deficit sizes and tax-to-GDP ratio requirements. The government has since proposed a range of structural changes to its fiscal policy. On 8 March, emergency tax measures were announced.

    The changes include widening the tax base by increasing corporate income tax, increasing value-added tax (VAT), reintroducing income tax on capital gains, and removing certain previous exemptions on VAT and the Nation Building Tax (a consumption tax introduced in 2009 to fund security forces and rebuild infrastructure damaged by terrorism and war). A Share Transaction Levy was reimposed on all share transactions. The government also shared its plans to introduce a carbon tax on vehicles with the IMF delegation in mid-April.

    Two primary aims of the Sri Lankan government are to attract foreign direct investment and encourage the private sector to invest more. However, the government’s sudden changes to the budget — including unplanned and ad hoc tax policy changes — have dented investor sentiment, causing capital outflows. These post-budget policy changes have led to a state of economic uncertainty. Predictability and consistency in economic policy are key to a positive business and investment environment.

    Downward economic momentum is expected in the short term, as the proposed higher taxes will negatively affect low- and middle-income consumers, small- and medium-sized enterprises, and organisations importing raw and intermediate materials (which include those in the already ailing export sector).

    While it is necessary to increase tax revenue to meet growing public debt and stabilise the economy, higher tax rates discourage business and investment and reduce consumption, leading to less growth. With more than half of the registered taxpayers in Sri Lanka known to be evading taxes, the country should focus instead on developing an efficient and comprehensive tax collection mechanism.

    To reduce public debt, the government is looking to privatise state-owned enterprises (SOEs) that are currently running at a loss. These SOEs account for more than 80 percent of domestic debt. Sri Lanka has invited Chinese companies and others to invest in these SOEs, proposing a debt-equity swap. Chinese companies have not yet responded to these proposals.

    Despite the deterioration in its balance of payments, Sri Lanka showed growth momentum last year. There is hope for an economic turnaround in the medium term, following the IMF loan. As an emerging market, Sri Lanka has many lucrative areas for investment, including the booming tourism sector, construction and infrastructure development.

    That said, some commentators believe the country lacks a clear sense of direction on economic policy and suspect that the government may not be able to effectively manage the widening balance of payments gap.

    This scepticism stems from the fragmented political landscape marked by the tense alliance between arch political rivals, the right-leaning United National Party and a segment of the more socialist Sri Lanka Freedom Party. The unpredictable economic management of the Ministry of Finance adds to this cautionary mood.

    Such a coalition causes paralysis and a lack of debate around policy implementation. The gloomy short-term economic forecast is bound to test the strength of this coalition. In managing painful economic reforms, the government’s hard work is only beginning.

    Read More:: EW (Source)

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