Seek advice from non-partisan experts to find solution to crisis, urges BASL

Growing financial hardships in Sri Lanka have serious ramifications that citizens must bear, the Bar Association of Sri Lanka (BASL) said.

The BASL issuing a statement in response to the looming economic crisis in Sri Lanka and its potential impact to the Rule of Law and Democracy said that the downturn in the economy can have far reaching adverse consequences to the Rule of Law and Governance of a Country.

“The spiralling inflation, shortages of essential goods including gas, the unavailability of foreign currency, the inability to remit money overseas, the downgrading of Sri Lanka’s ratings by multiple international rating agencies; the temporary closure of the fuel refinery at Sapugaskanda; reports of the operations of certain foreign airlines being suspended; warnings of a possible power crisis are all indicators which demonstrate the urgency of the need for the Government to address the economic crisis without any further delay,” the statement read.

The BASL explained that it is an undisputed fact that since March 2020 there has been a gradual erosion of foreign reserves from approximately USD 7 billion. “Although it was announced by the Central Bank that the reserves have increased to USD 3 billion, it remains to be ascertained how much of that usable reserves to repay the debt are and used to redress the prevailing balance of payments crisis,” the statement said.

The BASL also noted that even out of the available reserves a large proportion contains moneys obtained in the form of short-term foreign exchange swaps.

Stating the global rankings that had been degraded recently by Fitch Rating Agency and Standard and Poor’s (S & P) to CC and CCC respectively, the statement mentions that the International Sovereign Bonds yields across all tenures have remained in double digits for over a period of two years, and this has made rollover of maturing sovereign bonds not feasible.

Further, the BASL questioned the ability of the Government to meet its debt servicing commitments of USD 6.9 billion in 2022, although the Central Bank has pledged that such commitments will be met, and that questions as to the stability of the financial sector are also being raised.

The BASL notes with deep concern the statement made in late December by the Joint Chambers of Commerce calling upon the government that if actions as envisaged by the recently announced Roadmap by the Central Bank of Sri Lanka are not materialised within the anticipated time frames to reconsider other alternative courses of action available to the country such as engaging with the IMF to explore the funding options they can offer.

The BASL statement also acknowledged that the government has been confronted with extraordinary challenges in the form of the pandemic which has caused disruptions to the economic activities, and states that it recognizes the fact that the government has taken measures to address the challenges arising thereof.

Adding that enjoyment of a living standard based on desired lifestyle choices and income has become a challenge, the statement said that BASL members who are mostly self-employed are particularly vulnerable and adversely impacted by these events as savings and assets form the bedrock of their economic safety net.

In concluding, the BASL urged the government to seek the assistance of acknowledged independent and non-partisan experts both domestically and internationally and also of multilateral institutions that have a proven record of providing resources financially as well as in the form of technical expertise that will enable sustainable solutions to this crisis.