Friday Nov 22, 2024
Friday Nov 22, 2024
Monday, 21 November 2022 01:21 - - {{hitsCtrl.values.hits}}
President and Finance Minister Ranil Wickremesinghe on Friday said that the Government is trying to avoid the restructuring of domestic debt.
The announcement made at the Daily FT-Colombo University MBAA post-Budget forum where Wickremesinghe was the Chief Guest is likely to rest concerns within and outside the banking sector over domestic debt restructuring (DDR).
“We are trying to avoid damage to the domestic structure but everyone will have to take a fair share. So far, we have only looked at the foreign and as far as the local debt is concerned, we are working to minimise the impact. There is no need to panic. If all the taxes come in, we will be able to avoid it completely,” the President said in response to a question on DDR at the forum.
Given serious implications on the banking system, the Central Bank had ruled out DDR and asserted avoiding DDR will benefit external creditors to recover their liabilities faster than expected.
State Minister of Finance Shehan Semasinghe too on Thursday clarified that there are no plans for a DDR.
“Government has not made any decision to restructure domestic debt as negotiations of treatments on external debt are still being discussed with external bilateral and commercial creditors,” Semasinghe said in a tweet.
“GOSL has no intention to impose any treatment on domestic debt which will have adverse impact on the domestic banking sector, insurance sector and superannuation funds. There is no basis for recent speculation announced on restructuring domestic debt,” he added.
Some policy activists including Verité Research are strongly recommending a domestic debt restructuring by way of re-profiling Treasury Bonds as opposed to haircut on coupon or principal.
As of the end of July, Sri Lanka’s public debt amounted to 121% of GDP of which 59% is rupee debt.
The International Monetary Fund (IMF) from which the Government is planning to borrow $ 3 billion via a four-year Enhanced Fund Facility, has determined that Sri Lanka’s public debt is unsustainable. Sri Lanka has suspended servicing of all external debt outstanding as of 12 April.
