Sri Lanka will repay bonds, holders should appreciate efforts made: Cabraal

Sri Lanka will repay a sovereign bond in 2020 and others as they fall due and there was no requirement for an International Monetary Fund bailout, State Minister for Money and Capital Markets Nivard Cabraal has said.

“There is no question that we will not repay,” Cabraal said after the yield on Sri Lanka July 2021 bond fell sharply this week.

He said similar predictions had been made in the past but had not turned out.

“They said we will not be able to pay in 2020. We paid it,” Cabral said.

“Then they said it is 2021 that they will not be able to pay. Now we are paying in 2021. When we are paying in 2021 they are saying no it will be 2022 the problem will come.

“In 2022 also we will pay. Nobody need to get excited, we will pay.”

Cabraal said there was no requirement for an International Monetary Fund bailout and a restructuring of debt as suggested by some.

IMF requires currency deprecation up front, he said which will imposed costs.

He said bond investors should also appreciate what the country is doing to maintain payments,

Sri Lanka has placed import controls and was also imposed requirements on exporters to sell dollar and on banks to sell remittances to conserve foreign exchange.

“Bond investors should realize the efforts we are taking,” he said.

An IMF restructuring will also imposed costs on bondholders, he pointed out.

He said the Chinese swap has come as promised, the Bangladesh swap was also coming and a 400 million dollar swap with the Indian Reserve Bank was also on line.

Sri Lanka’s central bank however has been printing money with the salary bill taking the bulk of taxes and analysts have warned that as long as money is printed there will be a BOP deficit and a run on the rupee.

Cabraal when he was central bank governor in 2008 battled a war and global collapse as the US tightened policy with a tight money, which caused a temporary downturn but prevented a monetary meltdown.