President makes ambiguous claim on debt restructuring

18 May 2023 09:45 am Views - 909

The information presented by the president is most easily interpreted as Sri Lanka pursuing a USD 17 billion reduction on the total stock of debt. However, it does not preclude another interpretation: a reduction in the flow of debt related repayments due from 2023-2027. 

To check the claim, Factcheck.lk consulted the IMF Country Report on Sri Lanka (IMFCR) (No.23/116) and the investor presentation by the Ministry of Finance (MoF) in March 2023. IMFCR states that “debt service reduction during 2023-27 should be sufficient to close external financing gaps. Under the staff baseline scenario, USD 17 billion in [external] debt service reduction is required”. The president’s claim uses this same language.

The MoF investor presentation in March 2023 shows this as a USD 17 billion reduction in the flow of re-payments between 2023-2027, not the stock of debt (see Exhibit 1). The flow of repayments on new loans taken, and to multilateral creditors, are not expected to be reduced. Instead, the USD 17 billion reduction is through an expected reduction of 75% in the flow of repayments currently due between 2023-2027 to existing bilateral and private creditors.

The president challenges parliament: “So, we are trying to get a 17 billion debt reduction on that side. Do you want it or not” – allowing the interpretation that the reduction will be in the debt stock. However, the description of the reduction that he provides uses the language of the IMFCR, where the reference is to the flow of repayments.
Therefore, FactCheck.lk resolves the ambiguity and classifies his statement as TRUE.

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