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SL awaiting assurances from India, China – CBSL Governor

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Sri Lanka is waiting for financing assurances from its bilateral creditors, including India and China, to tap support from the International Monetary Fund (IMF), according to Sri Lanka’s Central Bank Governor P. Nandalal Weerasinghe.

Over the past few months, Sri Lanka has been in talks with China, Japan, and India, its three major bilateral creditors, to restructure the billions of dollars owed to them. “We have shared all the information possible with our bilateral creditors, on an open, comparable, and transparent basis. Now they will have to look at it, make their decisions internally and come back to us…we hope they will do that soon,” the Governor of the apex Bank told The Hindu in an interview.

Although Sri Lanka aimed to secure IMF relief before the end of this year it failed to, as bilateral negotiations dragged. Talks with China got a “little delayed”, Governor Weerasinghe observed, citing “internal issues” such as the Chinese Communist Party (CCP)’s national congress held in October, and “COVID-19 restrictions” in China.

In addition to bilateral loans, the island nation has over the years borrowed heavily from private creditors, the country’s largest external credit source, holding nearly $13 billion of its outstanding debt, apart from multilateral agencies. The focus, however, is on bilateral creditors whose role is key for Sri Lanka to obtain crucial IMF support.

“We can manage without bridge financing now, that is how we have been managing since July,” Weerasinghe said. “With our export proceeds, worker remittances, and some support from the Asian Development Bank and World Bank we can manage,” he said.

Official data showed earnings from tourism crossed over $1 billion from January to October 2022, while workers’ remittances went up to $3 billion during the period. The Central Bank recently said there was a “notable contraction” in merchandise trade deficit in October 2022, compared to the previous year, even as Sri Lanka’s imports continue to exceed exports by millions of dollars.

On how Sri Lanka planned to exit the cycle of debt going forward, Weerasinghe said Sri Lanka was looking at more “concessional, long-term loans” only from multilateral agencies.

“And the relief we are expecting from other creditors is a grace period and maturity extensions so that our debt service burden in the next few years will be much lower than if we did not opt for debt restructure,” he said. Sri Lanka has debt service commitments to the tune of $6 billion a year for the next several years.

“So, what we are seeking from our creditors is some relief, so we repay this over the next 20 years rather than in the next four, five years.”


Friday, December 23, 2022 – 01:00

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