Government must present credible plan for debt repayment: Harsha
The Government should put forward a credible plan for debt management and begin a dialogue with international financial markets to seek a debt moratorium or risk losing investor confidence after multiple sovereign downgrades, Samagi Jana Balawegaya (SJB) Parliamentarian Dr. Harsha de Silva warned yesterday.
Recalling sovereign downgrades by the three major international rating agencies of Moody’s, Fitch and Standard and Poor’s in the last few weeks over what they termed as debt sustainability and unrealistic fiscal and growth expectations outlined in the Budget, Dr. de Silva questioned as to why the Government was slow to address market concerns and outline a clear game plan for 2021.
He voiced concern that continued import controls and projections of Foreign Direct Investments (FDI) would be insufficient to meet scheduled debt repayments next year. The Finance Ministry has indicated foreign debt repayment will be about $ 4.5 billion but Dr. de Silva put the total figure closer to $ 5.99 billion for 2021.
“The Government claims that investment into the Port City and a tyre factory will help bring in the necessary funds to meet next year’s debt repayment needs. This is misleading as that money will come in stages which will span several years and most of it will be used to import equipment and materials needed for those investments,” the economist argued, pointing out that the Government had failed to put forward a credible plan to face the looming crisis.
Dr. de Silva said Sri Lanka’s reserves by 2020 end would likely fall to $5.3 billion. The Government will have to repay a $ 1 billion sovereign bond in July with other staggered payments throughout the year.
“So, where will the Government find the shortfall?” he questioned.
Dr. de Silva pointed out that the Government had repeatedly insisted it would not seek assistance from the International Monetary Fund (IMF) and, with burgeoning interest rates due to the downgrades, would not be able to raise funds in international financial markets for most of next year, if at all.
He warned that continued inaction by the Government could push Sri Lanka to a precarious position and undermine macroeconomic stability.
“Even if Sri Lanka experiences zero growth this year, which will not be the cause because all projections indicate a contraction, the debt to GDP ratio will exceed 100%. So, we need to find a solution to this without formulating fantasies. As a responsible Opposition, we have a duty to point out the reality to the Government and public. The Government has the responsibility to stop a default, to prevent Sri Lanka being blacklisted and protect the public and the economy from repercussions,” Dr. de Silva argued.
The Parliamentarian was also concerned about continued import restrictions, which he warned, if further tightened, could affect growth. The Government has denied limiting imports has had an adverse impact on the economy, pointing out that only specific items such as personal vehicles have been halted. Top Government officials have also contended that import suspensions were specifically done to reduce pressure on reserves and create space for Sri Lanka to be better able to face its debt repayment obligations.
“We can’t commit all our reserves for debt because it will be difficult to make payments for essential imports and the rupee will depreciate rapidly.”
Dr. de Silva appealed to the Government to put forward a credible plan before the situation further declines and begin a dialogue with international financial markets to seek a debt repayment moratorium.
“Nearly 70 countries in our category negotiated with the IMF and obtained a debt moratorium from May this year till July 2021, which those countries can further extend later on. Sri Lanka has asked for a moratorium from India and China but neither has committed to it yet. This is a serious situation,” the Opposition MP said.
(Source: Daily FT – By Asiri Fernando)
Latest Headlines in Sri Lanka
- Fire at Steuart hotel in Colombo Fort extinguished December 5, 2024
- Sri Lanka Government unveils interim budget for early 2025 December 5, 2024
- Lohan Ratwatte and wife granted bail over illegal vehicle charges December 5, 2024
- Renuka Perera arrested over false social media claims December 5, 2024
- Vote on Account presented to Sri Lanka Parliament December 5, 2024
Under the circumstances, any sensible credible plan is imposing restrictions (on luxury items) & increasing local production (of essential items). This will help to save foreign reserves and the country become self-sufficient in a great way. All others appears to be highly technical and difficult to understand by the ordinary public !
Well, Dr. Harsha de Silva was there any such plan during Yaha-Palanaya era? If there was a such plan we don’t have to invent the wheel again!