Open letter: Appeal for transparent disclosure on external debt restructuring

• Following is an open letter to the President, Central Bank Governor, Finance Secretary, and Parliamentary Committee on Public Finance

We in society respectfully recognise the committed role you have collectively led to achieve the current state of economic stabilisation and move towards assuring debt sustainability from 2028, once the IMF current Extended Fund Facility is duly completed meeting the agreed reform and governance commitments.

We in society, especially those in business, academia, analysts, media and civil society, earnestly wish post the aforementioned successful completion of the debt restructuring, that transparent disclosure of all terms agreed, commitments made with international financial agencies, bi-lateral creditors, commercial creditors and international sovereign bond holders would be made public.

However, most regrettably there was no transparent disclosure by State authorities of the outcomes of these bilateral debt restructuring arrangements, including the original and new terms, the effective haircut, discounted cash flow contribution and a comparison with the Debt Sustainability Analysis targets agreed with the IMF.

Societal stakeholders are thus denied an essential opportunity to assess independently, annually during the period 2025 to 2027 end and satisfy that:

•  The President’s assertion of a stronger and sustainable economy by 2028 will be realised
•  The outcomes from restructuring of external debt are in line with the targets as assumed in the IMF Debt Sustainability Analysis (DSA)
•  The different exchange rates used in the DSA vs. current rate; and expected derived outcome growth rates at end 2027, especially the GDP growth targets relevant in the macro bonds’ ultimate haircut will be adequate to assure debt sustainability
•  The estimated funds flow during 2025 to end 2027 expected from multilateral and bilateral partners of long-term loan facilities as per DSA estimates being committed to by these partners
•  The achievability of the year end IMF reserve targets set of 2025, 2026 and 2027, in the face of Chinese credit line not being treated as a useable reserve (unless its terms re-negotiated with options for currency swaps too being permitted)
•  The reasonableness of the estimated annual exports and services inflows as well as outflows in imports and services, especially considering the time lag in the development of sustainable tradable goods production and services income expansion in the new world of AI technology, job losses for expatriate workers and taking account of current taxation and other disincentives; further note the achievability of the estimates of imports 2025-2027 with the recent liberalisation of motor vehicle imports, being a high sensitivity outcome
•  The reassessment of contingencies in the event of possible impact from the likely lower global growth, cost implications of fuel/food supplies due to global wars/conflicts, impacts on account of any new inward-looking US tariff and trade/aid policies and associated counter moves by other countries
•  The ability to gain a triple B- rating to secure the funds flows from Commercial/ISB creditors in 2028 and 2029 and validate the Governor’s assertions “Sri Lanka is likely to regain access to global capital markets in two years and if the government maintains its current fiscal discipline, there will be no immediate need to tap international markets until at least 2028”

 Societal stakeholders demand an opportunity for validation of the accuracy of the levels of concessions obtained from ISBs and Bi-Laterals via external debt restructuring, where several inconsistencies are seen as pronounced by the former President Wickremesinghe being stated at varied levels of 25% to 35% write off concessions, as against and the Chinese Ambassador’s assertion that China has incurred a loss of $ 7 billion due to Sri Lanka’s external debt restructuring whereas the IMF most recent releases stating “External creditors have forgiven $3 billion in debt and stretched another $25 billion due in the near term”.

The above appeal for transparent disclosure on external debt restructuring comes in the wake of the untenable disclosure failures of the State, in providing essential disclosure information sought under Right to Information requests, calling for details of the final agreed terms, future commitments and likely outcome impacts against the IMF Debt Sustainability Analysis estimates, all as noted below:

1. RTI applications were submitted on 21 January 2025 addressed separately to the Central Bank and the Ministry of Finance, seeking the required public disclosures

2. CBSL acknowledged the RTI by letter dated 24 January 2025

3. The Ministry of Finance by letter of 31 January 2025 wrote to the Governor CBSL and Director General External Resources, attaching a copy of the RTI, requesting them within 14 day stipulated time limit to respond if information is available with them and can be released

4. On the same date as the above (i.e. 31 January 2025) CBSL responded, stating that they reject the request as the information is not in their possession, custody or control. They further note that they are forwarding the request to the Ministry of Finance, as it appears that the information requested is in their possession, custody and control.

5. CBSL by the aforesaid letter dated 31 January 2025, also forwarded a copy of the RTI to the Information Officer of the Ministry of Finance as the requested information appears to be in the possession, custody and control of the Ministry of Finance 

6. By letter dated 25 February 2025 the Department of External Resources requested that the aforesaid RTI request be addressed to the Public Debt Management Office.

7. Superintendent of Public Debt by a letter dated 17 March states that the information requested does not fall under the purview of the Public Debt Department of the Central Bank and recommends reaching to the Public Debt Management Office of the Ministry of Finance, Planning and Economic Development.

The above detailed series of correspondences passing the buck from one State Authority to another and returning back to the starting point, is most likely a strategic leadership driven attempt to frustrate the RTI process; and thereby deny the public, essential public information lawfully sought relating to the management of public finance and external debt of Sri Lanka, an obligation all the state authorities owe to the citizenry, especially in a new era of governance where transparency good governance is a foremost priority in a “Clean Sri Lanka”.

Despite the above frustrations, we still believe that there will be transparent regular feedback updates on the realisation of the key milestone targets, reform goals, and comparison of actuals vs. targets with the agreed MF Debt Sustainability analysis.

This is an essential priority need, especially to recognise the governance commitments of the new regime in power and a crying demand for assurance of interested public stakeholders to be focused on with commitment requiring leadership action by the President and Minister of Finance, Governor Central Bank, Secretary Finance and the Parliamentary Committee on Public Finance.

cc. Prime Minister, Deputy Ministers of Finance and Economic Planning, Media and RTI Commission