Credible and specific financing assurances received
Central Bank Governor Dr Nandalal Weerasinghe on an Anti-Chinese questioning line by Bloomberg noted that China would take part in a transparent and equitable debt restructuring process. The Chinese government in its debt negotiation stance has signalled that it will not take a disproportionate economic loss and that it would be swift to support the government in its new financing needs post-debt restructuring.
He said, “We have been able to obtain credible and specific financing assurances from all the Paris Club and Non-Paris Club members. This has been done in a very open and transparent manner. If you compare it is in record time that we have been able to get this from all our creditors,” Weerasinghe told Bloomberg Television on April 12.
The most pressing concern at the moment is the swift and unhindered debt restructuring exercise. He said, “We have to do it as soon as possible.” The domestic debt optimization process shall be announced formally by the end of April. Weerasinghe insisted that Sri Lanka would pursue parallelly operating restructuring efforts for commercial, international, and local creditors.
Weerasinghe declined to entertain a line of questioning that cast aspersions on China’s commitment to Sri Lankan debt sustainability. He said, “This is probably the first time China has given assurances that fast.”
China has signalled that it will participate in an IMF restructuring program. He later added, “Obviously this is happening with the help of the IMF and other partners sharing information. The Chinese have been helping Sri Lanka for a long time with lots of investment.”
Weerasinghe noted that further measures are being taken by the government to ensure debt sustainability. He said, “A few weeks ago we set out in public how we expect to bring about a local contribution towards debt optimization. The Central Bank holdings would be considered for treatment and additionally, there would be a voluntary treatment for Treasury Bonds which would be comparable to other treatments.”
Weerasinghe reiterated the need for the IMF program and the initial debt restructuring process. He said, “There is a better understanding of the general public on the needs of these reforms. Once we conclude the restructuring the next step is going to see the benefits of this program and the people will realize what is needed.”
Weerasinghe was optimistic about the growth path ahead. He said, “What we see this year from the tight monetary policy is disinflation. We will see single-digit inflation by the end of this year. There will be a recovery in the second half. We expect a small negative contraction of GDP by about 1-2%.” TP