Lanka President Wickremesinghe assures transparency, fair debt restructuring to its creditors

NewsDrum Desk
16 Mar 2023

Colombo, Mar 16 (PTI) Sri Lankan President Ranil Wickremesinghe has assured the country's official bilateral creditors of transparency, equal treatment of all creditors, and equitable burden-sharing of all restructured debt in resolving the country's economic crisis.

President Wickremesinghe in an open letter addressed to the country's creditors, including India, China and Japan, said that necessary safeguards will be put in place to ensure all-around equitable burden sharing and comparability of treatment.

"We also understand and acknowledge that we must ensure that appropriate safeguards are in place to ensure equitable burden sharing and comparability of treatment. To alleviate any legitimate concern on the issue, there are commitments that we can make to those of you willing to take action ahead of others," Wickremesinghe said in the letter dated March 14.

"The first of these commitments, probably the most important one, is transparency. We commit to communicating transparently with all of you on any debt treatment terms that are agreed upon with any creditor or group of creditors, before being formalised. In the same vein, we commit to reporting regularly on our indebtedness, ensuring no financial liabilities incurred by the country are undisclosed," the letter read.

The Executive Board of the IMF is scheduled to meet on March 20 to consider Sri Lanka’s request for a bailout, and if approved, the first tranche of the facility would be released shortly.

Sri Lanka would need to restore debt sustainability over a 10-year period as per the agreement with the IMF, and debt treatment remains the most critical aspect of that exercise.

The IMF in September last year approved Sri Lanka a 2.9 billion dollar bailout package over 4 years pending its ability to restructure its debt with creditors -- both bilateral and sovereign bondholders.

Wickremesinghe had earlier said that all of IMF’s pre-conditions for the bailout have been fulfilled and the prescribed reforms like raising personal taxes and utility bills were a must for implementation.

The IMF bailout process made slow progress due to the need to restructure Sri Lanka’s nearly 50 billion dollar external debt.

By the end of June 2022, Sri Lanka owed nearly USD 40 billion to bilateral, multilateral, and commercial loans, according to the figures released by the Treasury.

Chinese loans amounted to 20 per cent of the total debt owed and 43 per cent of the bilateral loans.

The cash-strapped country in April declared its first-ever debt default in its history as the economic crisis since independence from Britain in 1948 triggered by forex shortages sparked public protests.

Months-long street protests led to the ouster of the then-president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after refusing to tap the global lender for support. PTI FZH AKJ FZH

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