Sri Lanka doesn’t need to go on bended knees to outside agency : Cabraal

Sri Lanka does not need to go on bended knees to an outside agency to solve the country’s debt problems, Central Bank Governor Ajith Nivard Cabraal said yesterday, amid concerns over debt repayments.

Cabraal made these observations while addressing the Economic Summit which was hosted by the Ceylon Chamber of Commerce which began yesterday. There was nothing wrong with changing the debt profile on one’s own, Cabraal told the Economic Summit. He said a private business when faced with excessive debt will try to extend the maturities, negotiate with lenders to reduce interest rates and reduce foreign debt and increase domestic debt. Cabraal said Sri Lanka was also doing the same thing to reduce vulnerabilities in the debt profile. “We are now on that path to debt sustainability,” Cabraal said. “We are changing our debt profile.”

He said Sri Lanka was moving away from only borrowings to non-debt creating inflows. Sri Lanka was also reducing exposure to commercial debt and going for a government credit line, he said. Attempts were also being made to improve remittance through a ‘carrot and stick’ approach. A large share of Sri Lanka’s remittances has shifted out of banks after money was printed and exchange and trade controls were imposed, creating a parallel market for dollars. It is now being partly filled with unofficial remittances. Sri Lanka’s soft peg with the US dollar frequently comes under pressure due to monetary stimulus involving aggressive open market operations to short term rates down.