Month: April 2022

In an exclusive interview, Ali Sabry conceded the government made a mistake when it almost halved the rate of value added tax (VAT) to 8% in 2019.

Mr Sabry says the nation needs $4bn (£3.2bn) over the next eight months to pay for imports of daily essentials.

His comments come amid mass protests over government economic policies.

Mr Sabry – who is leading negotiations with the IMF as well as other lenders such as India and one of its largest creditors China – said raising taxes was just one of the difficult decisions he would have to make as talks continue over a bailout deal.

“We have to increase the taxes. We need to find a way to bridge the revenue gap and expenditure which we have,” he said.

He added that the current level of VAT is “definitely not sustainable” for a country like Sri Lanka that is dependent on the imports of essentials and said the rate should be raised to 13% or 14%.

He also admitted that a move to cut taxes in 2019 soon after Gotabaya Rajapaksa became president was wrong, adding that the government had waited too long before calling on the IMF for help.

Mr Sabry was also cautiously optimistic that the country will be able to start paying its international creditors again by next year, but said it was “very, very difficult for me to give a timeline, I hope and pray that it is as soon as possible, probably six months one year down the line. But I don’t know.”

Earlier this month, the Sri Lankan government said it would temporarily default on $35.5bn (£27.3bn) in foreign debt as the pandemic and the war in Ukraine made it “impossible” to make payments to overseas creditors.

Since then, it has officially requested emergency financial help from the IMF as bailout talks got under way in Washington.

Mr Sabry is leading the negotiations with the country’s diverse set of creditors on restructuring its loans, a prerequisite for an IMF package.

China is one of Sri Lanka’s largest creditors and talks between the two countries may be tough after Beijing signalled its displeasure over Colombo approaching the IMF for help.

Last week, China’s ambassador to Sri Lanka, Qi Zhenhong, said “China did its best to help Sri Lanka not to default but the government chose “to go to the IMF on short notice has unavoidably had some impact on the current discussions.”

Successful negotiations with China are crucial for Sri Lanka.

“The ambassador for China in Sri Lanka had mentioned that it was not the most desired thing for the Sri Lanka to go for IMF. But on our part, we did not have a choice, we will explain to them and we will continue to discuss with them and they are a good friend of Sri Lanka for a long period of time,” he said.

Meanwhile, India has offered a $1.5bn credit line for fuel supplies and Mr Sabry said India has agreed to another $500m credit line in principle.

Sri Lanka is set to receive $400m-$600m from the World Bank immediately, which could be used for “cash transfers and building a social safety net for the vulnerable,” Mr Sabry added.

The coronavirus pandemic, rising energy prices, tax cuts and rapidly shrinking foreign currency reserves have left Sri Lanka without enough dollars to pay for vital imports of fuel, food and medicine.

The capital Colombo has seen huge protests in recent weeks as the country has been hit by soaring inflation, shortages of essential goods and major power cuts.

On Thursday, many schools in the city were closed and several train stations deserted as teachers and train drivers joined mass walkouts as they called for the resignation of President Gotabaya Rajapaksa and his government.

Hundreds of workers from Sri Lankan state-run banks also joined other bank trade unions in a protest march to the president’s office as thousands of people took to the streets around the country.

Even as he leads negotiations to resolve Sri Lanka’s economic crisis, Mr Sabry said he had no indication of when shortages of essential items will end: “It all depends on how much of foreign currency inflows come to the country.

“So that all depends when the Sri Lankans decide to send their money through the proper channels, the banking channel.”

There is little sign of improvement in the amount of foreign currency arriving in Sri Lanka as money sent to the country by its citizens living and working abroad fell to $318m in March, almost half the level seen last year.

Lt Gen Sami Sadat said that eight months of Taliban rule has convinced many Afghans that military action is the only way forward.

He said operations could begin next month after the Islamic Eid festival, when he plans to return to Afghanistan.

The Taliban took control of the country in a rapid offensive last August.

The hard-line Islamists swept across the country in just 10 days, as the last US-led Nato forces left following a 20-year military campaign.

Speaking for the first time about the plans, Lt Gen Sadat told the BBC he and others would “do anything and everything in our powers to make sure Afghanistan is freed from the Taliban and a democratic system is re-established”.

“Until we get our freedom, until we get our free will, we will continue to fight,” he said, while refusing to be drawn on a specific timeline.

The general underscored how the Taliban had been reintroducing increasingly harsh rule – including severe restrictions on the rights of women and girls – and it was time to stop their authoritarian order and start a new chapter.

“What we see in Afghanistan in eight months of Taliban rule has been nothing but more religious restrictions, misquotation, misinterpretation and misuse of the scripts from the Holy Koran for political purposes.”

He initially planned to give the Taliban 12 months to see if they would change, he said. “Unfortunately, every day you wake up the Taliban have had something new to do – torturing people, killing, disappearances, food shortages, child malnutrition.”

He said he received hundreds of messages daily from Afghans asking him what he was going to do about it.

But in a country shredded by more than forty years of conflict, many Afghans are weary of war, desperate to leave, or struggling to survive in the midst of a deepening economic crisis. The UN speaks of a country marked by “combat fatigue” with millions on the brink of starvation.

Many in rural areas which bore the brunt of Nato’s war against the Taliban have welcomed the relative calm now that US and Afghan warplanes have left the skies and Taliban attacks have ended.

Lt Gen Sadat, who commanded Afghan government forces in the southern province of Helmand in the last months of the Taliban offensive, is also accused of ordering attacks which killed civilians. When questioned about the charges he denied them.

In August last year he was appointed to head the Afghan special forces and arrived in Kabul the day the Taliban swept in and his commander-in-chief President Ashraf Ghani fled the country.

Asked whether there was any alternative to another war, Lt Gen Sadat said he hoped that moderate Taliban, known to be uncomfortable with a growing raft of restrictions reminiscent of draconian Taliban rule in 1990’s, could be part of a new government.

“We are not against the Taliban,” he said, just against their current “textbook,” describing an Afghanistan where “everyone fits in, not a country only for Taliban.”

In recent weeks, an audio message in which the general speaks about an armed fight against the Taliban with the aim of “re-liberating” Afghanistan was leaked to the media.

In the past, armed groups including the Taliban won Afghan wars with the support of neighbouring countries, a foothold in the country, and foreign funding.

It is not clear that Lt Gen Sadat’s allies, as well as the many other armed groups which have been forming, have any of these assets.

Multiple groups are now united by their goal of ousting the Taliban but they’re also divided along ethnic lines, and loyal to rival commanders.

Lt Gen Sadat said he was in touch with one of the most prominent groups known as the National Resistance Front (NRF) whose leading figure is Ahmad Massoud, son of the late legendary commander Ahmad Shah Massoud.

“I am in contact with my brother Ahmad Massoud and we support his actions in every way, I also contact and support other resistance groups,” he said in his leaked message.

He told the BBC their fight was an insurgency funded by patriotic Afghans. He said they had no foreign backers and were not seeking one. At 37, the former army’s charismatic and youngest general – who was educated in London and many western military academies – said his generation recognised that mistakes were made by the past administration he was part of.

But he said they were let down by corrupt Afghan politicians and US policies.

He believed, he said, that the chaotic US troop pullout in Afghanistan had shown America’s weakness and led to Russian President Vladimir Putin’s decision to invade Ukraine.

There was criticism of the chaotic US-led Nato pullout from the country, with questions raised over how the Taliban was able to seize control of the country at such speed.

Lt Gen Sadat said it was a bad for Afghanistan but he blamed it on politicians in Nato countries, most of all US President Biden, not western military commanders, many of whom he is still in touch with. “It’s not an ending that we could be proud of, or happy with.”

He expressed admiration for Ukraine’s resistance but warned that they too could one day be let down by Nato.

“I think they are holding their ground pretty well. But I also tell them to, you know, believe in themselves more, because the continued support from Nato and other countries could come to a halt.

“I hope they will get continued support as long as they need it.”

Mr Biden said it was “critical” for US lawmakers to approve the deal, which he said would help Ukraine defend itself.

The proposal includes more than $20bn in military aid, $8.5bn in economic aid and $3bn in humanitarian aid.

“It’s not cheap,” Mr Biden said on Thursday.

“But caving to aggression is going to be more costly if we allow it to happen.”

Although the US has already announced help for Ukraine, the proposals are a significant ramping up of aid.

President Biden said US military support to Ukraine has so far amounted to 10 anti-tank weapons for every tank that Russia has deployed to Ukraine.

But despite his strong rhetoric, he said the US was not attacking Russia. “We are helping Ukraine defend itself against Russian aggression,” he insisted.

On Thursday, a spokesperson for Russia’s Foreign Ministry said Western military support for Ukraine threatens “the security of the continent”.

President Biden is asking Congress to authorise an enormous sum of money for Ukraine – more than twice as much as the US has already spent on providing military equipment and humanitarian aid.

The US president wants to show he is undeterred by vague threats about the possible use of nuclear weapons, and a warning from Vladimir Putin that there could be retaliatory strikes against countries that intervene in Ukraine.

He shrugged off those comments – saying they show the desperation Russia is feeling about their abject failure to do what they set out to do.

Explaining to Americans why this money is needed – at a time when many are suffering from rising living costs – he said it was not cheap, but doing nothing was more costly.

An additional plan to allow US authorities to not just freeze but liquidate the assets of Russian oligarchs is bold – and it has raised concerns among civil liberties groups in America. But it is likely to gain bipartisan support in Congress.

Yet it will not begin to cover cost of the additional sums of money the White House wants to spend supporting Ukraine’s war efforts.

In his speech on Thursday, Mr Biden also addressed concerns over a nuclear confrontation. On Wednesday, Russian Foreign Minister Sergei Lavrov warned of a “serious” risk of nuclear war over Ukraine which “can’t be underestimated”.

“No one should be making idle comments about the use of nuclear weapons,” Mr Biden said.

Additionally, Mr Biden took aim at what he termed Russian “gas blackmail” to threaten European energy supplies. This week, Russia cut off gas supplies to Poland and Bulgaria.

“We will not let Russia intimidate or blackmail their way out of these sanctions,” he said. “We will not allow them to use their oil and gas to avoid consequences for their aggression.”

The announcement of the new Ukraine package comes at a difficult time for the US economy.

Data released by the Bureau of Economic Analysis on Thursday shows that the US economy shrank in the first quarter of 2022, with gross domestic product declining 1.4% between January and March.

But the package is likely to be approved by lawmakers, said BBC North America correspondent Anthony Zurcher.

“At a time when Biden is struggling to get congressional funding for his domestic priorities, Congress seems to have an unlimited willingness to bankroll military support for Ukraine,” he said.

“Thirty-three billion is a significant amount, but if the past is any guide it should be approved with relative ease – as long as Democrats don’t try to attach unrelated spending provisions to the legislation.”

Mr Biden’s first funding request after the war began, which was approved by Congress last month, was less than $14bn.

Last week, President Biden authorised a second $800m (£642m) military aid package in as many weeks, as well as $500m (£401m) in direct economic assistance.

The US has moved quickly to help Ukraine since the war began in late February. That includes:

The White House on Thursday also proposed making it easier for the US to seize and sell Russian oligarchs’ assets, and transfer their proceeds to Ukraine.

Western allies, including European Union member states, have been working together since March to track down the assets of Russian elites, from artwork and real estate to helicopters and yachts.

According to the White House, the US has now sanctioned and blocked vessels and aircraft worth over $1bn, while the EU has collectively frozen over $30bn.

Thursday’s sanctions would allow the US to use the funds from confiscated assets “to remediate harms of Russian aggression in Ukraine”.

The package will “establish new authorities for the forfeiture of property linked to Russian kleptocracy, allow the government to use the proceeds to support Ukraine and further strengthen related law enforcement tools,” the White House said in a statement.

Canada’s government also proposed legislation this week that would allow it to seize and sell off Russian assets.

Under pressure to expand its sanctions actions, the ruling Liberals are pushing for “any type of property” including money, digital assets and virtual currency to be subject to seizure.

Premier Andrew Fahie was detained in Miami by US agents posing as cocaine traffickers from a Mexican drug cartel.

He agreed a $700,000 (£560,000) payment to allow traffickers to use BVI ports with an undercover informant, charges filed in the US said.

Foreign Secretary Liz Truss has said she was “appalled” by the allegations.

Mr Fahie, the elected head of government of the British overseas territory, was arrested by US Drug Enforcement Agency (DEA) officials in Florida, alongside senior BVI port official Oleanvine Maynard.

A third person, Kadeem Maynard – Ms Maynard’s son – was also arrested on Thursday in connection with the undercover DEA case.

The arrests were made after DEA agents pretended to be cocaine traffickers from Mexico’s Sinaloa Cartel – said to be the largest supplier of illegal drugs to the US market and formerly run by now-imprisoned drug lord Joaquín ‘El Chapo’ Guzmán.

The trio have been charged with conspiracy to import more than 5kg (11lb) of cocaine into the US and conspiring to commit money laundering, authorities said.

In a criminal complaint filed in a US federal court, reviewed by the BBC, the DEA said the investigation was launched in October based on work carried out by a confidential informant.

The informant is said to have claimed in meetings with Mr Fahie to be a cartel member aiming to smuggle thousands of kilograms of Colombian cocaine worth tens of millions of dollars through the BVI, with the drugs to be shipped to US Caribbean territory Puerto Rico and then on to Miami and New York.

Mr Fahie and the DEA informant also discussed setting up pre-arranged drug busts of money and low-quality drugs to make it look like the BVI leader was fighting crime in the islands, the charges said.

He told the informant during one meeting that the UK government had been trying for years to remove him from office, the documents claimed.

Mr Fahie is quoted as saying: “I have plenty of people, and I don’t sell them out to the British with their plans… they always want to capture people, but me I see what they are doing and I protect the people.”

He and Ms Maynard were later arrested on a visit to Miami, after being separately shown a private plane and designer shopping bags, which authorities said contained $700,000, according to the charges.

There have long been questions about the way the British Virgin Islands have been run.

Since January last year, Andrew Fahie has been the subject of an inquiry into allegations of misgovernment and corruption.

But now the premier of the British Overseas Territory is in custody, facing charges of drug trafficking and money laundering.

Foreign Secretary Liz Truss said the arrest demonstrated the importance of the commission leading the inquiry, whose report she expected to be published soon

The commission hit the headlines last year when it emerged Mr Fahie was being defended by a Conservative MP, the former Attorney General, Sir Geoffrey Cox.

The BVI is a British overseas territory made up of more than 40 islands, located in the Caribbean to the east of Puerto Rico.

It operates as a parliamentary democracy, with the premier acting as the head of the elected government alongside the governor, John Rankin, who is appointed by the UK government.

Leaks of documents known as the “Panama Papers” and “Paradise Papers” revealed the islands to be a popular tax haven.

After being informed by the US government of the arrests, Ms Truss held talks with Mr Rankin – who is set to hold an emergency meeting of the territory’s cabinet later on Thursday.

She said: “This afternoon, the Premier of the British Virgin Islands, Andrew Fahie, was arrested in the United States on charges related to drugs trafficking and money laundering. I am appalled by these serious allegations.”

In January 2021 an independent inquiry into corruption in the islands was launched, amid long-standing allegations of state corruption.

In a statement, Mr Rankin confirmed the arrest was not related to the ongoing inquiry.

He declined to comment further, but added: “To avoid unnecessary speculation, I intend to move ahead urgently on publication of the inquiry report so the people of the BVI can see its contents and its recommendations in the areas it addresses.”

The BVI’s Deputy Premier Natalio Wheatly “will remain acting premier” of the territory, Mr Rankin said.

Mr Fahie and officials from the British Virgin Islands Ports Authority could not be reached for comment when contacted by Reuters news agency, and the premier’s office did not immediately respond to requests for more information.

The mortgage lender said that the increase in April was lower than in March, and the trend was likely to continue as budgets were squeezed.

The likelihood of further interest rate rises could also affect the market.

First-time buyers will still be concerned that annual price rises have been in double digits for months.

In all but one month in the past year, annual house price rises have been higher than 10%, the Nationwide said.

Across the UK, it said the average house price in April was £267,620.

The UK housing market is continuing to see demand for properties outstripping the number of homes on the market.

Employment levels have also been relatively steady, despite the pandemic, which has helped to keep demand high, said Robert Gardner, Nationwide’s chief economist. A survey for the building society suggested that 38% of those asked said they were either in the process of moving or considering a move.

This demand has pushed up house prices, despite householders also facing higher food and fuel bills.

Mr Gardner said that the cost of living squeeze would eventually have an impact.

“We continue to expect the housing market to slow in the quarters ahead. The squeeze on household incomes is set to intensify,” he said.

“Moreover, assuming that labour market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates.”

PC Ireland Murdock allegedly attacked his victim in Lambeth while he was off duty on 25 September last year.

He was arrested on 11 January and will appear at Croydon Magistrates’ Court on Friday.

PC Murdock has been suspended from duties. The Met’s Directorate of Professional Standards has been informed, as has the Independent Office for Police Conduct.

Specialist officers are supporting PC Murdock’s alleged victim, Scotland Yard said.

The non-profit Presidium Network said the men were detained at a checkpoint near the city of Zaporizhzhia in southern Ukraine on Monday.

The Foreign Office is said to be urgently seeking more information.

On Thursday, the government confirmed that one Briton had been killed in Ukraine and another was missing.

The two aid workers who were reportedly captured are believed to have been working independently, but were in touch with the Presidium Network.

They were said to be trying to rescue a family from a village south of Zaporizhzhia at the time of their capture.

Presidium Network’s founder, Dominic Byrne, told the BBC it had taken the men six hours of negotiation to get through the last Ukrainian checkpoint and into Russian territory, where they were detained.

Mr Byrne said he was making an appeal on behalf of the captured men “to get the support we need from the UK government and from the international community, as well as on the ground”.

He said he also wanted “to get clarification about how they are and how safe they are” and to know whether they were being “treated properly”.

Two other British men, Aiden Aslin, 28, and Shaun Pinner, 48, were captured earlier this month while fighting in the south-eastern city of Mariupol and shown on Russian state TV with apparent facial bruising.

In other developments: