Foreign creditors want swift proceedings – Dr. Coomaraswamy
Former Central Bank Governor Dr. Indrajit Coomaraswamy speaking in a non-official role said that foreign creditors would want to get the debt restructuring exercise over with as quickly as possible.
He noted that it wouldn’t be in the interests of foreign creditors to put the local banking sector into crisis. He added that macroeconomic indicators had improved in excess of the projections made by the IMF and other multilateral institutions. When asked about the potential delaying of processes due to demands of further domestic debt restructuring Dr. Coomaraswamy said, “My understanding is that most of the creditors want to get this done quickly.”
He went on to explain that there must be equitable treatment amongst debtor groups. “Domestic creditors have already taken a big hit. Through the depreciation of the currency, interest rate movements etc. What has already been done is above and beyond what anyone else has faced.”
Dr. Coomaraswamy was speaking at a recent NDB Securities Rupee Round Table discussion. On the extent of a voluntary domestic debt restructuring, Dr. Coomaraswamy noted that the impact on the financial system could not exceed the cost of funds deposit-taking institutions will face in the period ahead. He said, “You do not want to create a situation where the domestic system’s financial stability is brought into question.”
On foreign creditors calling for further domestic debt restructuring he said, “It isn’t in their interests to create a system of instability.”
He highlighted that macroeconomic indicators had improved better than the projections of the IMF. He said, “Inflation is down faster than the IMF predicted. Reserve buildup is faster than expected in the program. Total reserves are US 2.3 billion. Usable reserves are about US$ 800 million.”
“As the economy stabilizes and improves it will need to start importing more.” Hopefully, China will step through on acting as a guarantor on new issuances of international debt once the debt restructuring exercise is finalized.
Dr. Coomaraswamy quelled fears of a prolonged debt restructuring exercise. He said, “I do not anticipate impediments. Other than Hamilton Reserve where there was a judgement against us, I don’t hear any noises. Many of the significant creditors in our books still see Sri Lanka as a place they can make money in the future.”
Concerning the scale of the debt restructuring, he said, “The amounts are not very large in the global scheme of things.”
He added, “We are going to get money from multilateral entities. Money from the World Bank will come in May. The ADB is trying to get money in as fast as possible.” (TP)