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Accountable governance and international support vital to manage debt crisis: Semasinghe

21 Jun 2024 - {{hitsCtrl.values.hits}}      

Transparent and accountable governance, along with international support and cooperation are vital for effective debt management in times of crises, State Minister of Finance Shehan Semasinghe said.

Addressing the 14th Debt Management Facility (DMF) Stakeholders’ Forum held in Zambia this week, the State Minister highlighted the need for a multifaceted approach in navigating fiscal liabilities.

“Sri Lanka’s experience demonstrates that effective debt management is not just about managing numbers but also about building robust institutions and capacities. This journey underscores the importance of transparent, accountable governance and the need for international support and cooperation in times of crisis,” Semasinghe said.

He listed out investing in capacity building, sound practices, and strategic debt management as critical elements that assist countries to withstand economic shocks and achieve sustainable recovery.

Sri Lanka prioritised addressing public debt management gaps by drafting a Public Debt Management Act and creating a centralised office to ensure clarity, legal robustness and autonomy, according to the State Minister.
The country was able to let out a sigh of relief this month with the Internal Monetary Fund (IMF) approving the second review under the Extended Fund Facility (EFF) programme which will release US$ 337 million.
However, the IMF cautioned that Sri Lanka’s economy is still vulnerable and the path to debt sustainability remains knife-edged, despite positive developments being observed.

“To restore fiscal sustainability, sustained revenue mobilisation efforts, promptly finalising the debt restructuring in line with programme targets, and protecting social and capital spending remain critical,” the IMF said in a statement after its approval of the third tranche to the country.

The fund has urged the country to prioritise the restoration of capital adequacy of banks and the strengthening of governance in state-owned banks to revive the Sri Lanka’s credit growth and economic recovery.