One of the most damaging consequences of the economic crisis is that many development projects have been put on hold, including several that have already got off the ground. Among them are the Central and Ruwanpura (Ratnapura) Expressways, the flyovers at Kompanna Veediya, Colombo and Kohuwela and the Kandy City Development Project. Most, if not all, of these projects are being done with foreign assistance.
Since Sri Lanka has currently defaulted on its US$ 51 billion worth of foreign loans, the nations and multilateral agencies that had pledged to assist some of these projects have not released the funds as there is no reassurance that the loans can be repaid on schedule. But if Sri Lanka manages to get the US$ 2.9 billion Extended Fund Facility (EFF) from the International Monetary Fund (IMF) at least by April 2023, these countries will get an assurance of Sri Lanka’s debt sustainability and probably agree to release the funds. Apart from riding out the economic storm, this is one more reason why Sri Lanka needs the IMF facility at this juncture.
Nevertheless, there is no point in delaying important development projects almost indefinitely for want of funds. Hence President Ranil Wickremesinghe’s prudent decision to go ahead with the stalled Kandy City Development Project. A committee made up of the Urban Development Authority (UDA), the Kandy District Development Committee, Parliamentarians and Ministers representing the District, and city planning experts will prepare the development plan for Kandy. This urban plan for Senkadagala, the historic name for the world famous Hill City, will cover Katugastota, Kandy and the Kundasale areas. The Central Expressway will also be completed up to Kandy under this plan, along with a Multi-Modal Transport Hub on the lines of the one in Makumbura, Homagama. Kandy is a traffic-clogged urban centre that deserves renewal and this plan offers the best hope in that regard.
This is just one among the 261 large-scale development projects that have been affected as a result of the economic crisis. President Wickremesinghe recently reviewed these projects in his capacity as the Finance Minister and initiated an investment framework which will be implemented through the proposed National Operations Centre (NOC) and the responsible Line Ministries. This proposal has been approved by the Cabinet of Ministers. Now the challenge is to secure funds for the completion of these vital projects via either domestic or foreign sources. The latter will get a boost if Sri Lanka receives the IMF EFF soon.
Under the terms of the Appropriation Bill, Rs.4,979 billion can be raised as loans from local and foreign sources in 2023 for debt repayment, interest payments and development projects. Accordingly, Rs.3,526 billion can be raised domestically while Rs.1,453 billion has to be obtained from foreign sources. Among the local sources are Treasury Bills, Treasury Bonds and Sri Lanka Development Bonds (SLDBs). This will be a challenging task at any time, leave alone a time when the country is facing an economic crisis, given that Sri Lanka also has to bear foreign debt servicing to the tune of US$ 2,609 million in the first six months of 2023 alone. This comprises a loan repayment component of US$ 2,069 million and interest payments of US$ 540 million, including SLDBs amounting to US$ 709 million and the related interest payment of US$ 46 million. The Cabinet of Ministers recently endorsed President Wickremesinghe’s proposal to empower the Treasury Secretary to raise the funds as explained above.
None of the development projects now on hold can reach completion if such funds are not secured, not to mention infrastructure and other projects related to services such as health and education. There is also another proposal to pay outstanding payments to contractors and suppliers of development projects via Treasury Bonds to streamline the payment resettlement process. This too should help expedite the development projects that have now come to a halt.
While the Rs.10 billion earmarked for the Local Government (LG) election may seem miniscule in comparison to the above figures, any dispassionate observer will ask the question whether such an expense can be justified for an inconsequential poll at this point of time when there are far more pressing issues to be resolved, such as the shortage of medicines in Government hospitals. This was explained in detail by the President during his speech in Parliament on Thursday. Indeed, it is prudent to slash the number of LG members to 4,000 as proposed and then hold the polls, as the country cannot afford to maintain 8,000 local Councillors right now. The Opposition too should come around to this view and in any case, the President has pledged to hold elections as soon as the financial conditions allow. At this crucial juncture, it is vital to save Government funds for critically important areas such as health. This is a time for sensible fiscal management, not careless spending.
How to reach us
If you would like to comment on the articles that appear in our editorial/opinion and features pages, please write to us at: editor.suo@lakehouse.
If you have a news item to share with us, please send to: [email protected]
If you wish to write a Letter to the Editor, a tribute, an opinion piece, feature article, a correction or a Right of Reply (RoR) under the guidelines of the Press Complaints Commission of Sri Lanka (PCCSL), you can forward them to: [email protected]
Note that your contributions may be edited for clarity and brevity. The editor’s decision is final with regard to all correspondence.