Lanka awaits statement from external creditors

By Sanath Nanayakkare

Central Bank Governor Dr. Nandalal Weerasinghe said in Colombo on Tuesday that the country would be awaiting an ‘important statement’ from its external creditors following a presentation made to them on Friday, laying out the full extent of the country’s economic crisis and plans for debt restructuring in the run-up to an International Monetary Fund bailout.

Earlier, the Finance Ministry said in a statement that the online call arranged by legal firm Clifford Chance on 23 Sept. would be open to all of Sri Lanka’s external creditors and be ‘an interactive session’ in which participants can ask questions.

“We have to obtain financial assurances collectively from our bilateral and other creditors that they are willing to support Sri Lanka in its debt restructuring process for the IMF Executive Board to start disbursing funds to Sri Lanka,” the Central Bank Governor said.

“That assurance is the next crucial step for us to get from our international creditors, friends and partners for us to be able to demonstrate that they will be supporting Sri Lanka in its debt restructuring plans and its IMF programme,” he said.

“That is what we are going to do from Friday onwards and we will be seeking that important statement from them. All our friendly countries have been helping at this difficult time. However, we need to lay out the restructuring plan in an open and transparent manner so that everyone will clearly see what they and what others are offered in the process. Hopefully they will give us that assurance and the sooner we get it the better. That’s the time-frame. A lot of people ask me how long it would take. I have to say that it depends on our international partners; as soon as they give us necessary financial assurances, the IMF can start disbursing the four-year extended fund facility to Sri Lanka. Then there will be a lot of investors as well as other valued partners such as the World Bank to enhance their support to Sri Lanka from that point onwards.

That I hope will be a crucial turning point for us to stabilize the economy.”

The Governor also pointed out that the people would have to go through a difficult period as the economy has contracted.

“We have had to manage our imports within our export incomes, and we also have to manage through way too high interest rates and slowing down of economic activities. These have to be dealt with while protecting the most affected vulnerable sections of the society, and in this context, others will have to bear some of the pain. That’s why we have had to take some difficult measures while ensuring the pain would not be too substantial. Once we get the assurances from our creditors for the restructuring plan and subsequently the approval from the Executive Board, I am very confident that we can stabilise the economy and we all can gradually get back to normal economic and business activities as we used to do in the past.”

Meanwhile, India said on Tuesday it had started bilateral discussions with Sri Lanka on restructuring Sri Lanka’s debt. The first round was held on Sept. 16 in a cordial atmosphere that showed India’s support for an early conclusion and approval of an International Monetary Fund loan programme for Sri Lanka.

Meanwhile a news report in The Hindu on Sept. 20 titled ‘China keeps Pakistan, Sri Lanka waiting on loan deals’ said: “While Japan and India have been very supportive of the IMF process from the beginning, all eyes are on China as to how it would react to debt restructuring with Sri Lanka”.

However, Beijing in response to Sri Lanka’s IMF agreement had earlier made a statement favorable to Colombo as a ‘traditional friendly neighbour’ of Sri Lanka and a ‘major shareholder’ of the IMF. It said that China has always been encouraging the IMF and other international financial institutions to continue to play a positive role in supporting Sri Lanka’s response to its current difficulties and its efforts to ease debt burden and realise sustainable development.