EXPLAINER: Sri Lanka’s reluctance to tap IMF helped push it into an economic abyss

Sri Lankans protest near the president's office in Colombo on April 17, 2022, demanding the resignation of President Gotabaya Rajapaksa over the country's crippling economic crisis. (Ishara S. Kodikara / AFP)
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Updated 18 April 2022
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EXPLAINER: Sri Lanka’s reluctance to tap IMF helped push it into an economic abyss

  • Faced with a rapidly deteriorating economic environment, the Rajapaksa government chose to wait, instead of moving quickly and seeking help from the IMF and other sources

COLOMBO: Sri Lanka’s worst economic crisis has triggered an unprecedented wave of spontaneous protests as the island nation of 22 million people struggles with prolonged power cuts and a shortage of essentials, including fuel and medicines.
President Gotabaya Rajapaksa’s government has come under growing pressure for its mishandling of the economy, and the country has suspended foreign debt payments in an effort to preserve its paltry foreign exchange reserves.
On Monday, Sri Lanka will begin talks with the International Monetary Fund (IMF) for a loan program, even as it seeks help from other countries, including neighboring India, and China.

How did it get to this?
Economic mismanagement by successive governments weakened Sri Lanka’s public finances, leaving its national expenditure in excess of its income, and the production of tradable goods and services at an inadequate level.
The situation was exacerbated by deep tax cuts enacted by the Rajapaksa government soon after it took office in 2019, which came just months before the COVID-19 crisis.
The pandemic wiped out parts of its economy — mainly the lucrative tourism industry — while an inflexible foreign exchange rate sapped remittances from its foreign workers.
Rating agencies, concerned about government finances and its inability to repay large foreign debt, downgraded Sri Lanka’s credit ratings from 2020 onwards, eventually locking the country out of international financial markets.
But to keep its economy afloat, the government still leaned heavily on its foreign exchange reserves, eroding them by more than 70 percent in two years.
By March, Sri Lanka’s reserves stood at only $1.93 billion, insufficient to even cover a month of imports, and leading to spiralling shortages of everything from diesel to some food items.
J.P. Morgan analysts estimate the country’s gross debt servicing would amount to $7 billion this year, with the current account deficit coming in around $3 billion.

What did the government do?
Faced with a rapidly deteriorating economic environment, the Rajapaksa government chose to wait, instead of moving quickly and seeking help from the IMF and other sources.
For months, opposition leaders and experts urged the government to act, but it held its ground, hoping for tourism to bounce back and remittances to recover.
Newly appointed Finance Minister Ali Sabry told Reuters in an interview earlier this month that key officials within the government and Sri Lanka’s central bank did not understand the gravity of the problem and were reluctant to have the IMF step in. Sabry, along with a new central bank governor, was brought in as part of a new team to tackle the situation.
But, aware of the brewing crisis, the government did seek help from countries, including India and China. Last December, the then finance minister traveled to New Delhi to arrange $1.9 billion in credit lines and swaps from India.
A month later, President Rajapaksa asked China to restructure repayments on around $3.5 billion of debt owed to Beijing, which in late 2021 also provided Sri Lanka with a $1.5 billion yuan-denominated swap.

What happens next?
Finance Minister Sabry will start talks with the IMF for a loan package of up to $3 billion over three years.
An IMF program, which typically mandates fiscal discipline from borrowers, is also expected to help Sri Lanka draw assistance of another $1 billion from other multilateral agencies such as the World Bank and the Asian Development Bank.
In all, the country needs around $3 billion in bridge financing over the next six months to help restore supplies of essential items including fuel and medicine.
India is open to providing Sri Lanka with another $2 billion to reduce the country’s dependence on China, sources have told Reuters.
Sri Lanka has also sought a further $500 million credit line from India for fuel.
With China, too, the government is in discussions for a $1.5 billion credit line and a syndicated loan of up to $1 billion. Besides the swap last year, Beijing also extended a $1.3 billion syndicated loan to Sri Lanka at the start of the pandemic.
 


Race against time to rescue Brazil flood victims after dozens killed

Updated 6 sec ago
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Race against time to rescue Brazil flood victims after dozens killed

  • The rainfall eased Saturday night but was expected to continue for the next 24-36 hours, with authorities warning of landslides

PORTO ALEGRE, Brazil: Authorities were racing against time on Sunday to rescue people from raging floods and mudslides that have killed more than 50 and forced nearly 70,000 to flee their homes in southern Brazil.
Viewed from the air, Porto Alegre, the capital of Rio Grande do Sul state, is completely flooded, with streets waterlogged and the roofs of some houses barely visible.
The Guaiba River, which flows through the city of 1.4 million people, reached a record high level of 5.09 meters, according to the local municipality, well above the historic peak of 4.76 meters that had stood as a record since devastating 1941 floods.
The water was still advancing into economically important Porto Alegre and around a hundred other localities, with increasingly dramatic consequences.

FASTFACT

The Guaiba River, which flows through the city of 1.4 million people, reached a record high level of 5.09 meters, according to the local municipality, well above the historic peak of 4.76 meters that had stood as a record since devastating 1941 floods.

In addition to some 70,000 residents forced from their homes, Brazil’s civil defense agency also said more than a million people lacked access to potable water amid the flooding, describing the damage as incalculable.
The agency put the death toll at 55, although that did not include two people killed in an explosion at a flooded gas station in Porto Alegre that was witnessed by an AFP journalist.
At least 74 people are also missing, it said.
Rosana Custodio, a 37-year-old nurse, fled her flooded Porto Alegre home with her husband and three children.
“During the night on Thursday the waters began to rise very quickly,” she told AFP via a WhatsApp message.
“In a hurry, we went out to look for a safer place. But we couldn’t walk … My husband put our two little ones in a kayak and rowed with a bamboo. My son and I swam to the end of the street,” she said.
Her family was safe but “we’ve lost everything we had.”
The rainfall eased Saturday night but was expected to continue for the next 24-36 hours, with authorities warning of landslides.
Authorities scrambled to evacuate swamped neighborhoods as rescue workers used four-wheel-drive vehicles — and even jet skis — to maneuver through waist-deep water in search of the stranded.

 


UK Labour official acknowledges electoral backlash over Gaza

Updated 30 sec ago
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UK Labour official acknowledges electoral backlash over Gaza

  • Analysis shows decline of nearly 18 percent in Labour vote in areas where over a fifth of the population are Muslim

LONDON: A senior Labour official on Sunday said the party has to recalibrate its campaigning strategy to win back voters opposing its position on Gaza, The Observer reported.
Pat McFadden, Labour’s national election coordinator, told the BBC program “Sunday with Laura Kuenssberg” that it would “work to get people’s support back,” and that the Middle East is a “high foreign policy priority” for the party.
Analysis has revealed that despite substantial gains in Thursday’s local elections in England, as well as Sadiq Khan securing a third term as mayor of London, there was a decline of nearly 18 percent in the Labour vote in areas of the country where over a fifth of the population identify as Muslim.
The analysis, conducted across 930 wards by Prof. Will Jennings from the University of Southampton, highlighted the extent of the protest vote against Labour leader Keir Starmer’s stance on Gaza, particularly his delay in calling for a ceasefire.
Ali Milani, chair of the Labour Muslim Network, voiced concern over the sense of betrayal within the Muslim community.
“We are now seeing the electoral consequence of that,” Milani told The Obsever. “If I was a Labour MP in Bradford or Birmingham or Leicester or parts of London or Manchester, I would be seriously concerned.”
Jennings said: “What this highlights is certainly that Labour is in an uncomfortable position on Gaza. And it is not just Muslim voters.
“But in a general election when we are looking at an anti-incumbent mood and there are fewer small parties and independents, we shouldn’t expect the pattern to be repeated.”
Labour MP Ellie Reeves said: “We have recognized the strength of feeling on this issue. We have called for an immediate ceasefire, we have also said there should absolutely be no ground offensive on Rafah.”
When questioned about Labour’s previous stance on the war, she told The Observer: “Keir Starmer has always been clear that our position would always respond to what is happening there.”
 


Syrian asylum-seeker plans suicide if sent to Rwanda

Updated 35 min 5 sec ago
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Syrian asylum-seeker plans suicide if sent to Rwanda

  • Man identified as Khaled among more than 100 people set to be sent to East African country
  • ‘I will not be safe in Rwanda. If they manage to send me there, I will kill myself on arrival’

LONDON: A Syrian asylum-seeker in the UK set to be deported to Rwanda has said he will kill himself if sent to the East African country.

The man, identified as Khaled, is being held at Colnbrook Immigration Removal Centre with a number of other people due to be sent to Rwanda.

He told The Guardian: “Everyone is so stressed in here because of Rwanda. We can’t eat and we can’t sleep. I was displaced in Syria for nine years and was imprisoned there and I was also detained and tortured in Libya.

“Being in detention is very triggering for me. What matters to asylum-seekers is to be safe. I will not be safe in Rwanda. If they manage to send me there, I will kill myself on arrival in that country.”

Khaled has been in the UK since 2022, and discovered he could be sent to Kigali for the first time in February 2023. He was detained with a view to removal last week.

“They arrested me and put me in handcuffs in a police cell. The same thing happened to two other people who were reporting — Iraqi Kurds. After we were taken out of the cell we were handcuffed again and taken in a van to the detention centre,” he said. 

“I have been trying to see a doctor in the detention centre because of an infection in my leg I need antibiotics for but so far I haven’t managed to get an appointment.”

Another asylum-seeker who did not give his name, and who arrived in the UK from Sudan in 2022, told The Guardian that he had traveled via the Mediterranean and the boat he had been on almost sank.

“I would have been happy to claim asylum in Italy but Italian officials did not fingerprint me and told me to move on to France. There I was told it would be four years before they could consider my asylum claim so I waited in the jungle in Calais to cross to the UK. Crossing the Channel in an overcrowded boat was even more terrifying than crossing the Mediterranean,” he said.

“When I heard about the government’s plans to send asylum-seekers to Rwanda at the beginning of 2023 I was very frightened.

“I escaped from an African country because it was not safe and I am very scared to be deported to another African country because I know it will not be safe for me.

“I was arrested last week when I went to report in Newcastle. They didn’t mention Rwanda until I reached the detention centre and at first just said ‘We are deporting you to a safe third country.’”

The two men told The Guardian that they were struggling to contact legal representatives while in detention, with a seven-day deadline imposed by the Home Office for those wishing to appeal the decision to send them to Rwanda.

The charity Care4Calais has published data suggesting that of the more than 100 people detained to be sent to Rwanda, most come from war zones.

The charity’s head of legal access, Hannah Harwood, said: “The people detained have not had their asylum claims processed, and it’s clear from the first cohort we are in contact with that if their claims were processed they would probably be granted refugee status in the UK. It reaffirms how shameful the Rwanda plan is and why it must be stopped.”

A Home Office spokesperson said: “We take the welfare of people in our care extremely seriously. There are robust safeguarding measures in place to ensure everyone is treated with dignity and has the support they need.

“All detained individuals have access to a mobile phone, internet and landline telephones so they can keep in contact with friends, family and other support.”


Philippines seeks to position itself as top tourism destination at Arabian Travel Market

Tourists visit the White Beach on Boracay Island, Philippines on Dec. 1, 2021. (Reuters)
Updated 05 May 2024
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Philippines seeks to position itself as top tourism destination at Arabian Travel Market

  • Philippines has recorded 10 percent increase in visitors arriving from Gulf countries this year
  • The country wants to become a preferred destination in Asia and the world 

MANILA: The Philippines is working to attract more visitors from the Middle East and position itself as a preferred destination for international travelers, its tourism stakeholders said ahead of the Arabian Travel Market in Dubai. 

More than 2,300 exhibitors and delegates from over 165 countries are joining the annual Arabian Travel Market, which this year will take place from May 6 to 9 at the Dubai World Trade Center. 

In the Philippines, known for its white sandy beaches, diving spots and diverse culture, tourism is a key sector, contributing nearly 13 percent, or about $44 billion, to its gross domestic product in 2019. 

The Department of Tourism will be leading the Philippine delegation in Dubai, as officials set their eyes on promoting the country’s best tourism to the international market. 

“We look forward to these opportunities to share the Filipino story to the rest of the world … and to reinforce the Philippines’ position as a preferred destination and top-of-mind choice for travelers,” Secretary of Tourism Christina Garcia Frasco said in a statement. 

With its participation at the Arabian Travel Market, the Philippines hopes to sustain the momentum from increased tourist arrivals from the Middle East, she added.

The Philippine tourism industry will not only promote their strengths, such as their tropical and natural attractions, but also diverse offerings in gastronomy and culture, as well as the Filipino tourism workers, “who serve as our best asset for their distinct hospitality and warmth,” Frasco said. 

The Philippines has welcomed more 2 million international travelers since the beginning of the year, according to data from the tourism department. This includes a 10 percent increase in visitors arriving from Gulf countries, especially Saudi Arabia and the UAE, which has been among the Philippine government’s key emerging-market targets. 

“There’s been a remarkable surge in outbound tourism from the Middle East, particularly from Gulf Cooperation Council countries … We see a growing appetite for international travel among GCC citizens and we see this trend continuing to rise in the coming years,” said Maria Margarita Montemayor Nograles, chief operating officer of the Tourism Promotions Board.

“This is one of the major reasons why we are doubling down on our efforts to maintain and enhance our presence in the Middle East. With our continued participation at the ATM, we aim to position the Philippines as a top-of-mind destination in Asia.” 

Tourists from the Middle East are growing more important for some Filipino tourism operators, and represent a significant segment of their clientele, said Manih Karay, president of CTPH Tour. 

“To appeal to tourists from Arab countries and promote the Philippines, we highlight the country’s natural beauty, rich cultural heritage, and warm hospitality … Their interest in exploring new destinations and cultural experiences aligns well with our commitment to providing inclusive and diverse travel services,” Karay told Arab News. 

Arab tourists also contribute to the growth of the Philippines’ tourism industry, Karay said, adding that they foster cultural exchange and economic development. 

“Their visits not only enrich our travel experiences but also promote mutual understanding and appreciation among different cultures,” she said. 


Suspected Kashmir rebels kill Indian air force corporal

Updated 05 May 2024
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Suspected Kashmir rebels kill Indian air force corporal

  • Suspected rebels ambushed military convoy in Indian-administered Kashmir, Indian Air Force says 
  • Since 1989, rebel groups opposed to Indian rule have waged insurgency in disputed territory 

SRINAGAR, India: An Indian air force member was killed and four more injured when suspected rebels ambushed a military convoy in Indian-administered Kashmir, an official statement said, as campaigning for national elections continues in the disputed territory.

The convoy was attacked by an unknown number of armed militants who sprayed automatic rifle fire toward at least one air force truck in the mountainous Poonch area, 200 kilometers (124 miles) south of the main city of Srinagar, the air force said in a statement.

Five air force personnel were hit in the firefight late Saturday and “one Air Warrior succumbed to his injuries later,” it said, identifying the dead man as a corporal.

A neighboring constituency took part in the first phase of India’s general election on April 19, and Poonch voters were originally scheduled to cast their ballots this week but the Election Commission of India has postponed the polling to May 25 because of inclement weather in recent days.

Kashmir has been divided between India and Pakistan since their independence in 1947, with both claiming the high-altitude territory in full but administering it in parts.

Since 1989, rebel groups opposed to Indian rule have waged an insurgency in Indian-controlled Kashmir, demanding either independence or a merger with Pakistan.

The conflict has left tens of thousands of civilians, soldiers and militants dead.

Rebel activity in the territory has registered an uptick since last month as campaigning for the elections picked up in the restive region.

In April, three suspected rebels were killed and a police officer and three soldiers wounded in three separate clashes across the territory.

Violence has drastically dropped since 2019, when Prime Minister Narendra Modi’s government revoked the region’s limited autonomy and stepped up a security chokehold.

Voting in India’s six-week-long national election, which started last month, will end on June 1.