Sunday Sep 08, 2024
Sunday Sep 08, 2024
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President Ranil Wickremesinghe seen making a special address in Parliament yesterday
President Ranil Wickremesinghe yesterday in a special address to Parliament made public a few of the salient features of the deal with official creditors holding $ 10 billion in external debt of Sri Lanka agreed upon last week.
As per the MoU signed with the Official Creditor Committee co-chaired by India, Japan, and France, as well as the EXIM Bank of China, regarding debt restructuring, the President said Sri Lanka has secured a grace period until 2028 for repaying the principal loan. Additionally “significant” reductions have been made to the interest rates, with the new rate set at 2.1% or lower.
He said the repayment period for clearing the entire loan has been extended by eight years, meaning the debt should now be fully settled by 2043. “There is flexibility to gradually increase principal loan repayments, allowing us to defer loan servicing costs. This has resulted in Sri Lanka retaining a debt service of $ 5 billion,” Wickremesinghe added.
The address revealed only these details as opposed to last week the President assuring that Prime Minister Dinesh Gunawardena will table the agreements in Parliament in the name of transparency. However Wickremesinghe clarified that in view of the final round of negotiations with commercial creditors including International Sovereign Bondholders, the agreements will be tabled in due course for full scrutiny of the House. The Opposition benches were disappointed and alleged that failure on the part of the President to make full disclosure is because a proper agreement hasn’t been reached with official creditors.
Wickremesinghe said the Government is in the process of finalising the restructuring plan for commercial debts totalling $ 14.7 billion. “Discussions on this matter are currently progressing successfully. We anticipate completing all these tasks within a short timeframe. Following this, I will submit all agreements and documents related to debt restructuring to the Committee on Public Finance of Parliament. I urge the Public Finance Committee to give careful and thorough consideration to these matters,” the President told the Parliament.
Notwithstanding concerns from the Opposition, the President stressed that through economic restructuring, rebuilding reserves, creating fiscal buffers, and enhancing debt repayment capacity, Sri Lanka aims to position the economy strongly for future debt repayments. This approach is creating considerable financial flexibility, he added.
To ensure the continued success of the Government’s initiatives and to carry the “Good News” into the future the President called upon all MPs to unite in the collective endeavour of advancing the country, transcending political affiliations.
Wickremesinghe stressed the importance of continuing the Government’s program without turning back, irrespective of future changes in leadership.
The President emphasised his non-involvement in politics over the past two years, highlighting his commitment to making decisions solely for the benefit of the country rather than for political gain or popularity. “I make decisions not for political gain but for the betterment of our country,” he stressed.
During his address Wickremesinghe also expressed regret over false propaganda regarding debt restructuring and related matters by various individuals both inside and outside the Parliament. He emphasised that while the Government pursues policies beneficial for the country, critics continue to fabricate different narratives solely for political gain.
“Official bilateral creditors never reduce the principal amount of a loan. What we can obtain are concessions such as extended loan repayment periods, grace periods, and reduced interest rates.
However, not understanding this reality, some blame the Sri Lankan Government for not requesting a basic debt write-off. Others claim that if they come to power, they will negotiate with creditor countries to cut 50% of the initial loan amount. We must recognise that such actions require mutual agreement. Creditors will not simply comply with our demands. These statements reveal a lack of understanding of international economic systems,” pointed out the President.
He underscored that Sri Lanka has achieved a significant milestone among middle-income countries by successfully navigating the debt restructuring process, which he described as a notable accomplishment and good news for the nation.
He singled out that reaching an agreement with bilateral official creditors within just 15 months of initiating the IMF program as a significant achievement.
“We were able to achieve such progress in a short period due to the strategic path we have followed,” said the President who highlighted multiple benefits to Sri Lanka resulting from these successful outcomes.
“Following this MoU, the possibility of bilateral foreign loans has reopened for us. We now have the opportunity to receive loan assistance again from our official creditors such as the Paris Club and the EXIM Bank of China. Additionally, several projects that were initiated with foreign loan assistance and halted projects can now be resumed. Being categorised as a country unable to meet its debt obligations led to the suspension of many development projects funded by various countries, particularly in the construction sector. Now, we can restart these projects anew. This marks a significant advancement for our construction industry, contributing greatly to our economic strength and expanding job opportunities,” said the President.
“Another consequence of halting foreign projects was a decline in our economic growth rate. Despite this setback, we have made some progress. Once these projects are resumed with international assistance, we will be able to accelerate our development even further,” he added.
