8 February 2024 12:33 am Views - 215
“We must break free from the shackles of a debt-driven mentality to secure the future of our country”- Ranil Wickremesinghe
As Sri Lanka strives to come out of its debt vulnerability, the government assured efforts are underway to implement a debt restructuring framework within the first half of the year 2024.
President Ranil Wickremesinghe, while detailing out the progress achieved in the nation’s economy since he took leadership, noted that the restructuring plan is poised to form the foundational framework for restoring Sri Lanka’s economy to normalcy.
“It will serve as a pivotal juncture in alleviating the burden of debt,” he said, delivering the policy statement at the inauguration of fifth session of the ninth Parliament of Sri Lanka.
The domestic debt restructuring plan has been successfully executed as the first step and a policy agreement for restructuring has been reached with foreign creditors as the second step. Negotiations are currently underway with private creditors.
Wickremesinghe underscored the urgent necessity of establishing equilibrium between income and expenditure to ensure sustainable management of debt obligations, since the island nation’s budget deficit is at an acute stage and if left unchecked, would exacerbate the already substantial debt burden.
Sri Lanka’s government revenue stood at Rs.4,127 billion and expenditure was Rs.6,978 billion. Out of this, Rs.2,651 billion is for debt repayment.
“We must break free from the shackles of a debt-driven mentality to secure the future of our country. The elimination of the debt economy is paramount and we need to focus on building a robust, independent economy,”
said Wickremesinghe.
Rapidly increasing the export income and foreign investment are crucial components of this transformative journey, he added.
Sri Lanka is currently not repaying any loans from foreign countries and external commercial bases. While the impending restructuring signals a shift towards debt repayment, rupees and dollars are essential to realise the obligations. By September 2023, the total debt burden of the island nation was US $ 91 billion.
“It will take a considerable period of time to settle this debt. In order to meet our debt, we need to source the funds locally. It is imperative that we generate this income; otherwise, we risk falling into the debt trap once again,” Wickremesinghe cautioned. As a result of debt restructuring, Sri Lanka will be able to reduce the annual payment but will still have to pay around US $ 3 billion per year.
Sri Lanka’s approach since 1950 involved extensive borrowing, encompassing all aspects of governance. The leaders and populace became accustomed to a debt-centric economy, with concessions provided on various fronts, including free rice distribution, subsided electricity bills, educational endeavours and proliferation of government jobs. Wickremesinghe also provided a snapshot of the progress made in the economy since last year. Some of the key highlights included inflation decreasing from 50.6 percent to 6.4 percent, exchange rate showing positive movement, with a dollar worth Rs.362 in the past being currently valued at Rs.314.