The new government plans to resume discussions with the International Monetary Fund (IMF) on reducing the debt burden that bloated under the previous regime, Bloomberg said quoting Sri Lanka’s new Finance Minister Ravi Karunanayake.According to Bloomberg, Karunanayake was scheduled to meet IMF officials yesterday.Sri Lanka’s total debt is estimated to be at Rs.7.2 trillion and the new President Maithripala Sirisena wants to reduce the massive interest payments on the debt pile.
“We are initiating discussions on a new program,” Bloomberg quoted Karunanayake as saying. However he had declined to give further details, saying only that “we will not be dictated to by any of these multilateral agencies.”President Sirisena is seeking to clean up Sri Lanka’s finances and review the country’s growing ties with China, which has provided funding for mega infrastructure projects.
He plans to maintain fiscal discipline and eliminate corruption while taxing the “super rich” to benefit the poor, Karunanayake was quoted as saying.Sri Lanka successfully completed an IMF stand-by facility amounting to US $ 2.6 billion in 2012.According to Moody’s Investor Service, about 40 percent of government revenue go to replaying interest on borrowings, one of the highest among countries rated by the credit rating agency.
Sri Lanka’s total debt stands at 78 percent of the GDP and remains higher than similarly rated peers such as Vietnam and Kenya, in which the median is 41 percent of GDP, Moody’s said in a recent report. During former President Mahinda Rajapaksa’s regime, China became the country’s largest lender, overtaking Japan. Chinese funds were sought for expressways, ports, airports, power plants and a US $ 1.4 billion project to reclaim the sea in front of Galle Face Green.“What we are telling the Chinese is that nobody is prevented from doing projects here. But basically we cannot be told to endorse projects where costs are inflated,” Karunanayake had told Bloomberg.
When Prime Minister Ranil Wickramasinghe and President Sirisena met with Sri Lanka’ business community before the election, as the Opposition Leader and the Common Presidential Candidate respectively, they said they would reinvigorate the country’s links with the European Union and USA.
Wickramasinghe also said the new government will explore the possibilities of renewing the GSP+ preferential trade scheme with the European Union.
According t o Bloomberg data, t he European Union’s proportion of Sri Lanka’s total trade fell to 14 percent in 2013 from 23 percent a decade earlier, while China’s grew to 12 percent from 3 percent during that time.As the Finance Minister, Karunanayake is scheduled to present an interim budget to the parliament on January 29.Fitch Ratings recently said perceived improvement in governance with the election result was overall positive and likely t o boost foreign i nvestor confidence on Sri Lanka.
However, Standard and Poor’s in a brief report cautioned that the election result may pose changes to fiscal and economic policies due to the coalition of parties in the government with various political and economic ideologies, which could in turn erode the country’s credit rating.
“The overall budget deficit will not be increased. “We will not burden the people. We are reducing costs, eradicating corruption,” Karunanayake was quoted as saying.“We will have a transparent environment for foreign investors. We will maintain macro-economic fundamentals conducive for investors,” he stressed.