Monday Jan 27, 2025
Monday Jan 27, 2025
Friday, 27 December 2024 00:00 - - {{hitsCtrl.values.hits}}
Labour Minister and Deputy Minister of Economic Development Dr. Anil Jayantha Fernando
Deputy Minister of Finance
and Planning
Dr. Harshana Suriyapperuma
Top ministers yesterday outlined the Government’s progress in economic stability and debt restructuring plans and its proposed relief measures for the public.
Labour Minister and Deputy Minister of Economic Development Dr. Anil Jayantha Fernando and Deputy Minister of Finance and Planning Dr. Harshana Suriyapperuma at a press briefing held at the Presidential Media Centre (PMC), explained on efforts taken to stabilise the economy and initiatives way forward.
In terms of economic stabilisation, Prof. Fernando stressed it is key to take the country out of the abyss created by past regimes.
“At the time the Government assumed office those who are responsible for the crisis had unilaterally suspended external debt servicing in April 2022, entered into IMF program for Extended Fund Facility (EFF) of approximately $ 3 billion over a period of four years to be received in eight instalments, and paddled through the IMF program and debt restructuring process connected to in in line with debt sustainability analysis connected to it. The delayed and complex nature of the debt restructuring process incurred additional costs to the country and created additional burdens on the people. However after, considering both pros and cons of the context prevailed at that time in terms of social, political and economic perspective, the Government proceeded with the options in the best interest of the people of the country,” he said.
He noted it was possible to reach the staff-level agreement of the third review on 26 November 2024, in line with the program parameters, and Government revenue measures with appropriate engagement, and timely facilitation. In the lead-up to the board approval from the IMF, the Government is engaging with necessary stakeholders to obtain the next tranche of the EFF.
Regarding debt restructuring Prof. Fernando stated that it consists of both domestic and external restructuring. Domestic debt restructuring was completed in July 2023. External restructuring excludes multilateral creditors on various grounds and arguments. The rest consists of official bilateral debt and private ISB holders.
He said the bilateral debt is dealt with the Official Creditor Committee (OCC) co-chaired by France, India and Japan representing 17 countries, China Exim Bank, China Development bank, other official creditors (Kuwait, Saudi Arabia, Iran and Pakistan) and other commercial creditors.
“OCC had agreed to the terms and conditions in June 2024 and the loans with China Exim Bank had already been restructured in October 2023 within the agreed framework, ensuring comparability of treatment (CoT). Except the other official creditors (Kuwait, Saudi Arabia, Iran and Pakistan) accounting roughly $ 300 million representing about 1% total external debt subject restructuring , all other bilateral creditors have already agreed for restructuring within the agreed framework,” he explained.
The Minister also noted that much delayed ISB restructuring had passed several stages of negotiations with agreements, disagreements, changes to proposals, adjustments in line with DSA and IMF consents, and had finally agreed in principle (AIP) on 19 September 2024 just two days prior to the presidential election. Ad Hoc Group (AHG) and Local Banking Consortium represent ISBs which account for $ 14.2 billion including a past due interest of $ 1.7 billion.
“By prioritising and facilitating actions in a timely manner, the new Government has demonstrated a strong political commitment to steering the country toward economic stability. These efforts toward financial stability have been independently acknowledged by third parties, including rating agencies which have upgraded the ratings by several notches, which was only possible due to the correct prioritisation and implementation of economic stabilisation measures. Hence, the Government continued with the restructuring process and facilitated it to ensure the successful completion of the issuance of new bonds for the exchange of existing ones on 20 December 2024 in order to achieve the critical objective of stabilising the economy in pursue of navigating the country with the growth and development trajectory towards a thriving nation and beautiful life,” Prof. Fernando explained.
In terms of the SME sector facilitation, Dr. Suriyapperuma elaborated on extending Parate law suspension.
He said instead of merely postponing the Parate execution date, the Government engaged with stakeholder groups to ensure acceptable solutions were found for this long-standing issue. As a result, the Parate execution has now been extended until 31 March 2025.
“The relief for businesses is not only in the form of an extension of time. Based on data provided by the Central Bank, 99% of borrowers with outstanding capital of less than Rs. 25 million in restructured loans have been granted a 12-month extension to renegotiate with banks and agree on a settlement path. Borrowers with debts between Rs. 25 and 50 million have been granted a nine-month extension, while all other borrowers are entitled to a six-month extension. This relief package, proposed by the Government and to be implemented through the Central Bank, also includes several other important measures, such as easing the credit rating status, extending the repayment period, offering low interest rates for restructured debt, and providing a transparent mechanism to resolve valuation disputes,” he explained.
Dr. Suriyapperuma said the package aims to ensure that the SME sector can actively contribute to the economy.
In terms of school stationary assistance for children particularly for Aswesuma recipient families, he said Rs. 6,000 per child has been allocated to purchase essential school books and stationery for the upcoming school term to ease the burden on parents from vulnerable groups in society.
He also said children from families who are not currently receiving Aswesuma, but are facing economic hardship will also be provided with this benefit, based on recommendations from the Ministry of Education.
“It is expected that the process will be finalised soon, and the disbursement scheme will start within a few days, ensuring that all deserving children facing economic hardship receive assistance,” Dr. Suriyapperuma assured.
