Central Bank Governor Ajith Nivard Cabraal stated that the country will diligently honour its debts and will make all necessary measures to complete all payments.
Addressing a media briefing at the Government Information Department yesterday he stated that the Sri Lankan government is competent to handle the situation although certain parties play the same chorus for several years highlighting that the country will go bankrupt. The Governor categorically highlighted that the US$ 500 million International Sovereign Bonds (ISBs) which are to be matured this month will be paid diligently. “Individuals who said that Sri Lanka will not be able to pay the ISBs are now screaming that we should not pay it. Claims that Sri Lanka is heading towards bankruptcy has been prevalent since 2020, both local and international groups are unfortunately not held accountable over such claims. Allegations were also levelled in 2020 that Sri Lanka will fail and that debt repayment will not be followed through. The same groups carried forward such statements to 2021 as well including charges of a lack of foreign reserves that would lead to the country crashing”, he said.
Governor Cabraal remarked that the government has declared openly that Sri Lanka has USD 3 billion reserve and debts will be settled in 2022, refuting all such charges.
He further added that if the $500 million International Sovereign Bonds were not paid, the prevailing crisis will aggravate thus every arrangement is made for the payments.
At the same time, he stated that Sri Lanka’s imports have increased in 2021 to US$21.6 billion, from US$16.1 billion in 2020 and US$19.9 billion in 2019.
Cabraal further said that the Government expects a 5.5% economic growth this year.
When questioned regarding the restructuring of debts Governor Cabraal stated that restructuring does not mean that one will go forward and say that we are incapable of paying the debts. “It involves changing some of our debt payments into instruments. We will be having negotiations with other countries to have lower rates of interest and increase the time period for settlements”, he added.
The Governor also stated that receiving a new loan from China for debt restructuring purposes is a possibility. “We have a very good understanding with China, about our debt and key payments and investments. The assistance that has been sought has been connected to the key payments that we are having, but it is only with regard to China’s transactions. So, there is a possibility that we would have a new loan coming from China, in order to cushion the effect of our debt repayments to China itself. China is one country we import heavily from. So, we have a good understanding as far as imports are concerned. India is another country that we get a lot of imports from. We are also negotiating with India to have a dollar facility in order to import goods from India. So, it’s an arrangement that would encourage us as well as help us to make repayments to those countries and at the same time promote more trade between the two countries as well,” he elaborated. Moreover, he added that the debt portfolio will be restructured without inflicting pain on the investors who kept faith in the country.
He said that the Ministry of Finance assured that the relief package provided to the state sector will not impose an additional burden on the economy thus it is budget neutral.
Meanwhile, the Governor stated that all non-essential commodities, with the exception of vehicles, tiles and strategic manufacturing, are being imported. The Governor stated that a large amount of foreign exchange will be released through this to the country. However, with the resurgence of tourism, which could bring a large amount of foreign exchange back into the country, it will be possible to allow the re-import of vehicles through stability in the coming months, he added.
Commenting regarding the rising inflation Cabraal stated that 80% of the inflation figures are as a result of imported commodities such as fuel, food and oil. He also added that Sri Lanka is not the only country that is facing inflation but it is a global reality adding that the US inflation rate seems to be the highest rate.
Governor Cabraal said that going to the International Monetary Fund is a crucial decision. “Going to the IMF is a serious decision. We need to be careful when we go to the IMF and we need to have a future plan as to how we implement our plans with the IMF. Therefore, we see the IMF as an alternative. Are there other options? What are those options? If so, we need to see if this is a better option than going to the IMF. The decision of the Central Bank and the Monetary Board is that at this juncture we are confident that the journey we are on now, the journey through other alternatives, will be a more satisfying journey for us than the journey to the IMF”, he highlighted.
Add new comment