Harsha warns against linking bonds to GDP

MP Dr. Harsha de Silva 

• Says IMF target on GDP pessimistic, upside will go to bondholders
• Stresses SL must act soon to avoid second default
• Calls for concerted plan for economy and external debt restructuring
• Opines Speaker has violated democratic principles in Parliament over vote on GP appointment

By Darshana Abayasingha

Main Opposition Samagi Jana Balawegaya (SJB) MP Dr. Harsha de Silva, yesterday called for greater transparency in external debt restructuring discussions, and said the deliberations must be an inclusive process during an election year.

He warned against Sri Lanka painting itself into a corner and being forced into a second default that would bring grave consequences, and noted the SJB is against linking new bonds issued to debtors to GDP and instead called for detachable warrants.

“The entire series of bonds to be given in exchange to the ones they currently hold, cannot be and shouldn’t be linked to GDP. It’s fine to have a detachable instrument, which can have its own life. The new series of bonds will remain as is. The detachable warrant can be traded in the market if they wish. 

There can be a discussion to figure it out. What they are saying is that the IMF forecast for GDP is too pessimistic, and the bondholders forecast of GDP is much higher than the IMF. The baseline is based on that figure. What happens if the GDP is something else, then that entire upside goes to the bond-holder,” De Silva explained. 

The Chairman of the Parliamentary Committee on Public Finance, Dr. De Silva, also noted the Central Bank of Sri Lanka will come before the committee on Tuesday to discuss the controversial salary hike granted to staff of the bank, and he had invited all members of Parliament to this discussion as the matter had been discussed extensively in the house. He noted that whilst salaries of the governing board are regulated by Parliament, salaries of other officials are not under the purview of the house, but the Government may reconsider this in time to come.

De Silva also delved into the No Confidence Motion brought against the Speaker of Parliament, and charged the speaker was acting with a significant bias in discharging his duties. De Silva said the Speaker had acted in violation of regulations when he cast his vote on the debate on the extension of the Acting Inspector General of Police, and stressed the Speaker’s move to count votes of those that abstained was undemocratic. “The Speaker has made a grave error, how can we move ahead in the house with a Speaker that acts in this manner. He can only cast his vote if there is a tie in the house”, he stated.

De Silva also pointed to discrepancies in parliamentary proceedings during the debate on the Online Safety Bill, and charged the Speaker had ignored advice that amendments cannot be moved during the committee stage discussions. The SJB MP dismissed suggestions that the Speaker’s matter could be resolved in court, and said this was a matter for the house.

Responding to queries if Sri Lanka had turned around and achieved economic stability as espoused by the Government, De Silva said that though there is a degree of stability the equilibrium is not the same. “There were three million people in poverty before the crisis, now there are seven million people who are living in poverty.”

He stated Sri Lanka is still in a somewhat difficult position, and noted the Government alongside the wider political machinery must present a viable plan on how they will steer Sri Lanka out of its mess. “People need to see a plan, understand it and then decide wisely.” However, with welfare programs like ‘Aswesuma’ moving ahead alongside highly politicised programs like ‘Samurdhi’; feeding those who were removed from the latter, De Silva asked if the President was merely feeding the political objectives of the SLPP. The presence of both programs results in twice the administrative costs, he added.