3 July 2024 08:12 am Views - 132
By Yohan Perera
In response to the criticism made by some political parties that government has not requested for a principal loan reduction, President Ranil Wickremesinghe said yesterday that bilateral creditors do not reduce principal amounts.
“Many have suggested obtaining concessions for foreign loans without any sacrifices. This is impractical and inconsistent with international practice. Some parties criticize us saying the government has not requested a principal loan reduction. However, bilateral creditors do not reduce the principal amount. Instead, concessions are typically provided through extended repayment periods, loan grace periods and lower interest rates. Final decision on the extent of debt restructuring is not made by the creditor or the borrower, but by the International Monetary Fund (IMF). IMF will determine the necessary restructuring plan to ensure the country’s debt is sustainable. Sri Lanka is among the first middle-income countries to utilize the new debt sustainability analysis framework, introduced specifically for middle-income nations, to undertake debt restructuring. Despite numerous challenges, including current geopolitical trends, Sri Lanka achieved an agreement with bilateral official creditors within a short span of 15 months since the commencement of the IMF programme. The country stands among middle-income nations that have successfully navigated the debt restructuring process in such a brief time frame” President told Parliament.
The President underscored that this achievement represents a significant milestone. “I would like to highlight specific details of the agreements which we have come to with the official creditor committee co-chaired by India, Japan, France, China Exim Bank on debt restructuring. The agreements include a grace period for principal repayment extended until 2028 while interest rates maintained at or below 2.1 percent.
He noted that the change of government in France will not affect Sri Lanka in any way.
“Sri Lanka’s foreign debt totals $37 billion. This includes $10.6 billion in bilateral debt, $11.7 billion in multilateral debt, $14.7 billion in commercial debt and $12.5 billion in sovereign bonds. Some opposition parties are misleading the people by giving false information on Sri Lanka’s debts. NPP Leader Anura Kumara Dissanayake’s disciples have resorted to low-down insults making misleading and inaccurate claims that, when I came to power the country’s total foreign debt stood at $71 billion and now it is at $100 billion but the actual total foreign debt is $37 billion,” he stressed.
He said the debt restructure agreements with official creditor nations have brought economic resilience and will help the nation to restart development projects that are on standstill. “We will be able to restart development projects that were at a standstill. We will be able to complete the central expressway project and we will also be able to implement projects especially in the construction sector. This is because Sri Lanka has come to a position where it could borrow more from the creditor nations. Are these not positive moves?,” the President questioned during his address in the House.
“However, we will not make the mistake of spending borrowed funds for wage hike for public servants and to provide employment in the state sector,” he added. Based on the agreements reached on debt restructuring, the repayment of the principal loan amount can be incrementally increased, thereby deferring debt servicing costs. Consequently, the President mentioned that Sri Lanka will have remaining debt service of $5 billion.
President once again called for the support of all parties to revive the nation. “Some politicians criticized me while some supported me openly while there were others who supported me silently. I invite even those who ridicule me to join us. Come let’s revive the nation together and make Sri Lanka a great nation,” he told all MPs.