Cabraal sets record straight on loans and investments

Thursday, 10 June 2021 02:17 - - {{hitsCtrl.values.hits}}

With Sri Lanka coming under flak for borrowing from Bangladesh, Money and Capital Markets State Minister Nivard Cabraal yesterday set the record straight over loans versus investments and some people’s misrepresentations.

“Loans to rich and advanced countries is regarded as investments but when it’s advanced to lesser-developed countries it is considered as loans. We need to get that nomenclature right,” Cabraal told the final day of the three-day virtually-held Sri Lanka Investment Forum.

“Investments are also debt instruments. In some instances, investment could be capital instruments, but that again is a debt due from the company to the investor. At some stage, it has to be provided back to the investor. Big or small, all countries need investments.

“USA, one of the richest countries in the world, has investments in treasuries which are more than $ 15 trillion, and this means people from all over the world have given the US loans of that amount of money. But if somebody gives money to Sri Lanka, we do have that feeling it is loan, but it must be clarified they are investments as well,” added Cabraal.

With Sri Lanka engaging with China, India and Bangladesh for currency swaps, the importance of South-South cooperation being expanded to do more financial transactions than solely relying on the West was also stressed by Cabraal.

He also said “global problems and challenges, (including when a country's external account is being threatened), demand global solutions so there is no contagion”.

“The world has a responsibility to ensure all these countries are given necessary protection and support to prevent themselves from having additional difficulties,” Cabraal opined.

In that context, he welcomed the International Monetary Fund’s decision to make a new allocation additional Special Drawing Rights (SDR) worth $ 650 billion.

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