Cabraal says firm no to IMF bailout, debt restructuring

Ajith Nivard Cabraal

• Expresses confidence in govt.’s ability in tackling current debt situation
• Expects to tackle debt issue by focusing on three areas
• First is sale of underutilised state assets to ensure non-debt inflows
• Second is to retire some parts of international sovereign bonds with other debt
• Third is to enhance country’s merchandise export earnings

By Shabiya Ali Ahlam
Although a debt restructuring effort seems vital for Sri Lanka, as repeatedly called upon by some economic experts in the recent past, the government last week ruled out the need for such an endeavour, as it remains confident of honouring all its debt commitments on time. 

Newly-appointed Central Bank Governor Ajith Nivard Cabraal on Saturday expressed confidence in the government’s ability in tackling the current debt situation and said that calling for debt restructuring means it has been concluded the island nation would fall back on its repayments.

“I want to make it extremely clear to every single person. We will manage this. We will not need to do a restructuring. We will pay all the creditors on time like what we have done so far,” said Cabraal, while addressing a forum hosted by the International Chamber of Commerce of Sri Lanka (ICCSL) over 
the weekend. 

“Now how are we going to do that is the question that may be in the minds of so many people. The most important part in our view is to ensure that the vulnerability is addressed in the next few months and in the next year. That is an important part,” he added. 

According to Cabraal, efforts are already underway to address the debt repayment issue, while maintaining the foreign reserves at a certain level and ensuring inflow into the country, so Sri Lanka can “comfortably” carry out debt servicing.

The government expects to tackle the debt issue by focusing on three areas. The first is ensuring non-debt inflows into the county, which will be achieved by monetising the underutilised state-owned assets and arranging for a payment scheme with the international investment banks to settle the international sovereign bond for January 2022 upfront with a discount. 

The second is to retire some parts of international sovereign bonds with other debt, which will be carried out at a government-to-government level, whereas the third is to enhance Sri Lanka’s merchandise export earnings. 
Cabraal also stated that efforts would be rolled out to “culminate in cash” so that there would be new inflows coming into the overall system, which would make it possible for the government to meet the deadlines. 

Cabraal shared that to steer the endeavour forward, a task force would be set up under the purview of the Finance Minister, that would focus on implementing the debt settlement strategies, make certain the new projects perform as expected and options that can be embarked upon are explored. 

Affirming that timely measures are being taken to address the debt situation in a systematic manner, Cabraal reiterated that Sri Lanka does not need assistance from the International Monetary Fund (IMF).

“We don’t need to get the IMF to come here and say to do the same thing because we know that it was during the time that the IMF was in the country that some of these vulnerabilities were created. 

I’m not in any way finding fault with them since whilst they (IMF) were there, Sri Lanka could still have taken decisions on their own,” he said.