Sri Lanka debt relief prospects will become clearer at G20 meeting in Bengaluru: President

By Sanath Nanayakkare

The prospects for lightening the debt burden of low-income countries such as Sri Lanka will become clearer at the G20 meeting to be held in Bengaluru, President Ranil Wickremesinghe said in Colombo on Tuesday.

He said so referring to the G20 Finance Ministers and Central Bank Governors meeting under the G20 Indian presidency, scheduled during 24th-25th February, 2023.

‘By the end of this week, we will get to hear the outcome of these talks. Then we will know with greater clarity as to how they intend to cooperate on debt relief for Sri Lanka, and how we should go forward,” he said.

The President made these remarks at the Tax Forum organised by Sri Lanka Institute of Marketing (SLIM) at Kingsbury Colombo.

The 1st G20 meeting under the G20 Indian presidency will see the participation of finance ministers and central bank governors of the G20 members, invitee members and heads of international organisations. In total, there will be 72 delegation attending the meeting. According to Indian media, the Indian presidency has designed the meeting agenda in a manner that can foster a meaningful exchange of ideas among ministers and governors on pragmatic and meaningful approaches to address some of the key global economic issues including the debt crisis faced by low-income countries.

Further speaking, President Wickremesinghe recalled that India has already sent a letter ‘acceptable’ to the IMF giving their financial assurances for Sri Lanka, to facilitate a trade-off on Indian debt given to Sri Lanka

“The Paris Club also has formally announced their willingness to do the same. China has also informed us that they would stand with Sri Lanka and support us to resolve our debt crisis. The Chinese approach is different from the approach of the West in this regard. Wordings used by China is different from the wordings used by creditors in the West. And rather than joining a common platform, China has said that they would separately communicate with IMF, India and other creditors to explorer ways to help Sri Lanka lighten its debt burden. We are in discussions with China in this regard and I hope there will be a favourable outcome of these talks soon, ” he said.

“I know that people are experiencing many economic hardships. No politician would like to place economic burdens on the people. But several painful decisions had to be taken to restore significant tax revenue as a ratio to GDP, If those measures had been taken earlier, those could have been taken gradually without causing much pain. Now that the crisis has escalated, resurrection measures have to be taken faster and with greater intensity. I know that I am not popular for doing this. The IMF pointed out that our tax revenue needs to be elevated to 15% plus of the GDP at least as it was in 2019. Currently this stands at 9% plus. They asked us how we expect to get assistance from the tax money of the people of other countries while giving tax relief to our people. IMF also indicated that loss-making state owned enterprises need no longer be a burden on the Treasury.”

“The IMF listed 15 benchmarks for the government to complete by 31 December 2022. We fulfilled 14 of them in a timely manner but the electricity tariff hike dragged on. When it was finally cleared on February 15, we informed the IMF of fulfilling all benchmarks. IMF was amenable to giving us enough time till 2026 to optimize on these benchmarks by and by and improve our exports trade and foreign exchange liquidity to pay our way through the world on our own.””No country will bail us out of this crisis other than than the IMF. When the UNP ran the last election campaign on a platform that favoured an IMF bailout, we were sent home. And now the IMF benchmarks for Sri Lanka to fulfill and qualify for an IMF facility are much higher. We have to meet these benchmarks and as there is no other option. If there are alternative proposals to those of the government, please submit them to the IMF rather than talk to the press. So far only the Ceylon Chamber of Commerce has submitted a plan to the IMF with their proposals for recovery. I will be committed to continuing the government’s programme of rebuilding the country until a better set of proposals is submitted to IMF by a political party or any other organization. I hear that some trade unions are willing to talk to the IMF. I think that will be good if they go ahead and do so. Some political parties have said that if they are elected to office they will increase the tax threshold, but they have not announced how they will fill the resulting revenue deficit. They have also said that they would go the IMF and negotiate. If they do so, that’s good too because it will help accelerate the recovery process,” the President said.