Work with the IMF to get breathing space and rebuild trust: Harsha

By Asiri Fernando

SJB MP Dr. Harsha de Silva addressing the media yesterday

Working with the International Monetary Fund (IMF) to negotiate reprofiling of debt will help the Government to restore international trust in the country’s ability of repayment, Samagi Jana Balawegaya (SJB) Parliamentarian Dr. Harsha de Silva said yesterday.

The Opposition MP stressed that Sri Lanka needed to regain international confidence in debt repayment if the country were to avoid a deepening of the current economic crisis. “Working with the IMF is the first step to restore confidence,” he opined.  

“Government must urgently work with the IMF to restructure debt or run the risk of the situation deteriorating further.” 

“If prompt action is not taken, the worsening crisis may cause significant socio-economic disruptions,” former State Minister of Economic Reforms warned, urging the Government not to be stubborn in the face of facts.

Addressing a press conference yesterday, Dr. de Silva stated that seeking IMF assistance will not add to the national debt situation.

Sri Lanka had debt worth $ 29 billion to be paid by 2026 while the banking system is at risk of collapsing, the opposition MP said, citing a recent report by Fitch Ratings. He blamed the Governments fiscal and foreign policies and not heeding the warning of analyst for worsening the crisis.

“My view is that we are facing the biggest balance of payment crisis since independence,” SJB Parliamentarian Dr. Harsha de Silva opined.

He argued that reprofiling of the national debt is inevitable, adding that if the Government fails to do so, a future SJB-led Government will act to that effect. Reprofiling of debt will have to be followed by significant reforms and austerity measures, he warned.  

“We must understand that moving forward from a debt reprofiling, Sri Lanka has to open up. There is no future without doing so. We have encouraged our entrepreneurs and industry to join global supply chains,” Dr de Silva opined.

The economist turned politician faulted poor policy decisions over several decades for creating the current crisis, adding that the concept of supporting the local industry by not opening the markets had proven to be a failure. However, Dr. de Silva said that there was “still hope” and the way out of the current crisis starts will rebuilding investor and lender confidence in Sri Lanka.  

“For the next four years, the Government has to pay back $ 4 to 5 billion of State debt each year. But the Government only has about $ 3.5 billion in reserves as of last week. This year, the accumulated debt from international sovereign bonds and project loans will amount to $ 3.8 billion. So, how can Sri Lanka pay that much?” Dr de Silva questioned. 

He argued that attempts by the Government in seeking short-term relief for the debt problem will only prolong the crisis and further deteriorate international trust in Sri Lanka.    

“Borrowing from the IMF does not mean that the country will pay back certain debts while being indebted to the IMF. The IMF will certainly not give us the entire $ 29 billion which is our international debt. They will perhaps provide us $ 2.5 billion. But the objective of this move is to regain the trust of the international community,” he explained, responding to a question on if turning to the IMF at this stage of the crisis will add to the national debt.

MP de Silva argued a recent Central Bank (CB) report validates the oppositions claim that tax cuts brought in by the Government have not given relief to the public and only serves to provide relief for some corporate giants. 

He also pointed out that despite strict price control measures by the Government, a Department of Census and Statistics report indicates that inflation has risen by 5% in the first four months of 2021, with food inflation up by 11%. He blamed the Government for excessive printing of money, arguing that it will only further complicate the issue and put pressure on the public.

The Opposition MP downplayed the importance of the expected return of Basil Rajapaksa with a new portfolio into Parliament, stating that the move will not change the economic crisis for the better. MP de Silva urged the President to listen to experts and take prompt action.