Journey ahead for Sri Lanka is not a bed of roses: State Minister of Finance

Sri Lanka has to raise USD 17 billion to repay its loans between 2023 and 2027

By Sanath Nanayakkare

Speaking to the media on April 15, State Minister of Finance Ranjith Siyambalapitiya hinted that debt restructuring and recovery path the country has taken is not as pleasant as it seems.

“The journey ahead for Sri Lanka is not a bed of roses and the country would have to deviate from its traditional economic norms and practices,” he said.

Meanwhile, the IMF has indicated that Sri Lanka would require USD 17 billion to repay its loans between 2023 and 2027.

Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department said at a recent press conference that the financing deficit of Sri Lanka would be about USD 24 billion during these four years, and Sri Lanka would have to raise an amount of USD 17 billion from international financial institutions.

However, State Minister of Finance Shehan Semasinghe who represented Sri Lanka at the Spring Meetings with the IMF and the World Bank held from April 10 in Washington DC, said that IMF had reiterated its support for Sri Lanka to overcome the economic crisis.

“We re-affirmed our commitment to complete the IMF programme while continuing to implement our ambitious reform agenda to achieve debt sustainability and restore economic stability. We also reiterated our dedication at this historic time to build a prosperous country with the support and trust of our international partners by building on the lessons learnt from the crisis. And the officials told me they would further extend their support to Sri Lanka for its economic stability.”

Striking a similar optimistic chord, State Minister of Finance Ranjith Siyambalapitiya said that Sri Lanka’s efforts in rebounding its economy have received international approval.

“The IMF programme that Sri Lanka has entered into is the recovery programme the international community recognizes. That is why the finance ministers of India, Japan and France said at a recent press briefing that if Sri Lanka moves ahead on this path, it won’t persist in the difficulty of unsustainable debt. So, the country is on the right track in the direction of recovery. But let me say that the journey ahead is not a bed of roses. We may have to deviate from our traditional economic norms and practices,” he said.

“Today, we have been able to get the first tranche of assistance from the IMF and we are creating the background for obtaining the second tranche. We are not lost anymore. We are on the right track having earned international confidence in our debt sustainability and reforms programme,” he said.

Meanwhile, according to Reuters, a committee of Sri Lanka’s international private creditors sent its first debt rework proposal to the country’s authorities regarding over $12 billion in bonds outstanding, according to three sources with direct knowledge of the matter.

It is the first bondholder proposal after Sri Lanka defaulted on its debt a year ago. It is a first formal step to engage with the country’s authorities, Reuters report said.

Bondholders and government officials met in Washington last week, with legal and financial advisers for both sides present.

The group of about 30 creditors included global investment companies Amundi Asset Management, BlackRock, HBK Capital Management and T. Rowe Price Associates.

Separately, the Paris Club of creditor governments said last Friday that it aimed to start negotiations to restructure Sri Lanka’s bilateral debt after a committee was set up by French, Japanese and Indian finance ministers, and representatives of Sri Lanka.

However, China – Sri Lanka’s biggest bilateral creditor- did not join the announcement.

Further according to Reuters:

Japan, India and France last Thursday announced a common platform for talks among bilateral creditors to coordinate restructuring of Sri Lanka’s debt, a move they hope would serve as a model for solving the debt woes of middle-income economies.

“To be able to launch this negotiation process gathering such a broad-based group of creditors is a historical outcome,” Japanese Finance Minister Shunichi Suzuki told a briefing. “This committee is open to all creditors,” he said, voicing hope China will join in the effort. French Director General of the Treasury Emmanuel Moulin told the briefing that the group was ready to hold the first round of talks “as soon as possible.”

Sri Lanka’s Central Bank Governor had told Reuters last week that having a single platform for talks would be a welcome move that would make it easier to discuss and share information.

Japan’s top currency diplomat Masato Kanda told reporters the group has sent an invitation to all of Sri Lanka’s bilateral creditors, including China, and hopes to hold the first round of talks at the earliest date possible.

Sri Lanka owes $7.1 billion to bilateral creditors, according to official data from its government, with $3 billion owed to China, followed by $2.4 billion to the Paris Club and $1.6 billion to India. The government also needs to renegotiate more than $12 billion of debt in eurobonds with overseas private creditors, and $2.7 billion on other commercial loans.

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