SL to officially present IMF deal, debt restructuring plans to creditors tomorrow

22 September 2022 04:20 am - 10 - {{hitsCtrl.values.hits}}

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“On Friday, we are making the announcement and making a public presentation inviting all external creditors and we present our programme”- CB Governor
Sri Lanka is looking to restructure about US $ 29bn, out of which bilateral credit accounts for about US $ 10bn and ISBs US $ 19bn
CB Governor says expecting to treat all creditors in a fair and equal manner and will be asking for similar relief from all creditors
Expresses confidence in reaching a deal with creditors and stabilising economy

By Indika Sakalasooriya
Sri Lanka will present its programme agreed with the International Monetary Fund (IMF) to its official and private creditors tomorrow for the first time, seeking debt relief, as the US $ 81 billion crisis-hit economy seeks to turnaround its fortunes.

The country entered into a staff-level agreement with the IMF on September 1 for a four-year, US $ 2.9 billion Extended Fund Facility (EFF), after it froze all its external debt repayments on April 12 and defaulted on its debt for the first time in its history in the following month.

The disbursement of the IMF funds however is contingent upon Sri Lanka gaining what the IMF calls ‘debt assurances’ from its creditors.

Sri Lanka is looking to restructure about US $ 29 billion, out of which International Sovereign Bonds (ISBs) account for US $ 19 billion.

Addressing a conference in Colombo, organised by the Post Graduate Institute of Management Alumni (PIMA), Central Bank Governor Dr. Nandalal Weerasinghe on Wednesday confirmed that Sri Lanka would be formally commencing the debt restructuring process tomorrow (23).

“We did some background work with the advisors appointed to help us—Lazard and Clifford Chance. On Friday, we are making the announcement and making a public presentation inviting all the external creditors and we present our programme. The IMF will also be helping us,” he said.

He noted that for the IMF to present the agreement entered at staff-level to its executive board to obtain approval to start disbursing the money, Sri Lanka has to secure collective assurance from the creditors that they are willing to support Sri Lanka in its debt restructuring process.

“We are expecting to treat all our creditors in a fair and equal manner and we will be asking for similar relief from all creditors,” Dr. Weerasinghe said.

However, commenting on how long the process will take, he said that “everything is in their hands”, referring to both official and private creditors of Sri Lanka. “The shorter the time they take to give us the assurance, sooner we can expect the IMF to start disbursing money.”

Dr. Weerasinghe said if Sri Lanka were able to reach a deal with its creditors, along with the IMF, a lot of other investors and multilateral partners would step in and enhance their support to Sri Lanka. “That is crucial to stabilise the economy,” he said.

While expressing his confidence in reaching a deal with the creditors and stabilising the economy, Dr. Weerasinghe stressed that as of now, Sri Lanka is not at all “out of woods”, as the country would continue to face hardships in the interim period until a deal with the creditors is struck.

He said even after that Sri Lanka cannot go back to its former ways, where the country ran massive budget deficits, current account deficits and trade deficits, as both successive Sri Lankan governments and the country’s people lived beyond their means.

“Going forward, we have to change our mindset. We should correct ourselves. We should be able to earn sufficient foreign exchange without relying on credit,” he said.

“Hopefully creditors will give us a chance this time but there won’t be a second chance. If we don’t address our internal economic imbalances—fiscal, BoP, current account, import-export—then we will have to go back to them again. Countries like Argentina are repeatedly going back to debt restructuring. I don’t think we want to go there,” he added.

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Comments - 10

Chryshan Thursday, 22 September 2022 06:56 AM

When govt froze debt payments in April total debt was $51 billion. How did it go to $81 billion now.

Shiran Thursday, 22 September 2022 08:05 AM

Well said, Governor. Earn foreign exchange calls for hard work, discipline and business integrity. We are yet to hear our Leaders espousing the need for hard work and less public holidays. Poya holidays are a joke. Liquor sales shoot up the day before poya

Our leaders! My foot! Thursday, 22 September 2022 08:25 AM

When currency crisis hit Singapore decades ago, the PM, all politicians and Dept. heads voluntarily sacrificed their salary and perks, until the situation improved. Has any of the MPs on both sides of aisle sacrificed a single cent to help the country while Ranil goes begging? We still see them competing with Wimal in empty rhetoric! and they call themselves Jathika Weerayos?

Jude Thursday, 22 September 2022 08:31 AM

The first tranche of IMF BAILOUT GONNA come in next 8 to 12 months!! Yeah!!

Wrong, Wrong wrong Thursday, 22 September 2022 08:48 AM

The CB Governor is trying to make us all believe Sri Lanka is like emperor with new clothes. All the creditor will say how elegant Sri Lanka activity is and bow and agree to what Sri Lanka says. Anyway taking out any loan would know, all the person/business owed money wants is the money. They decide on how harsh the action to take (which then costs them more) based on how soon they can get their failed to paid back money back again. Sri lanka doesn't have knowledge or skills enough so had to already hire foreign capablity even to talk with creditor. The Central Bank is trying to dim our vision to the true situation, putting cause of action on IMF. The IMF move is really a sham, as it depends on creditor, who just don't have to agree if it we give them bad solution. Worst is government should've just done more than IMF wanted before going there. Relying on IMF to provide guidance shows how incompetent our officials and experts are. Have to be told by foreigner how to run the country.

Priyantha77 Thursday, 22 September 2022 09:36 AM

Government should encourage export and discourage car sales and similar unproductive trading businesses

Jef Thursday, 22 September 2022 09:43 AM

Is the finding that you indicate have put sri lanka in a mess and bank crupsy or purely mismanagement and corruption if country needs to overcome

Mama rata yanva Thursday, 22 September 2022 11:24 AM

@Wrong, Wrong wrong I would say having foreigner run manage Central Bank to agreed upon goals in much better than having our citizens do it. Most things in this country are learned locally after knowing about it overseas. There is absolutely nothing wrong with learning how to better, more efficiently, more effectively or even more compassionately if that is done better overseas. If it takes a decade to learn the mindset to do well, better get the foreigner to do it, until our people learn the more effective attitude. Note I am going overseas on PR, because my skills are more in demand, and cannot be done by local where I am going. I of course won't make a show I am still only Sri Lankan citizen, and will thoroughly be respecting other PR immigrants just much as the citizens born in that country - until I get my citizen there too. Other Sri Lankan there tell me path and mindset about it already!

Mama rata yanva Thursday, 22 September 2022 11:34 AM

The CB Governor saying he will treat all creditor equally sounds like desperate talk. Recently I saw Ecuador got just six months no interest payment, but had all their other debt to Chinese bank just keep on going. If there is extra relief for us, then Ecuador will demand the same. Central Bank must talk better about our failed state. Declare for complete bankruptcy might provide for greater relief than trying to dictate terms to creditor, the ones who will actually lose with any concession they provide. Better get team of English speaking foreigner to run the whole Central Bank than have this fool Nandalal keep making more of a mess. Ranil last time got Mahendan, but Mahendran then already had his daughter married before he got job even to local. Maybe even before Mahendran came in he may have planned the bond scam. People with previous Lankan Cental Bank experience are probably the worst with weakest mindset to run our Central Bank. We must get those without any connec

Reformist Thursday, 22 September 2022 12:37 PM

Of course SL can't go into former ways which got it into trouble in the first place. But can that happen with a jumbo Cabinet full of criminals and those accused of demanding bribes? SL will never change Governor; corruption, mismanagement and ballooning public service full of political goons are a way of SL life. Until such things change, this country will never be out of the woods. You can wait until cows come home. They won't Governor!

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SL to officially present IMF deal, debt restructuring plans to creditors tomorrow

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