Sri Lanka not going for IMF bailout: Cabraal

Ajith Nivard Cabraal

• Says no need to approach IMF as the country’s finances are effectively managed
• Points out import restrictions slowly eased amid faster than expected domestic economic recovery 
• Says earnings from worker remittances and IT services higher than expected during last few months 
• Says will engage with other two credit rating companies providing them with necessary information and data

By Yohan Perera and Ajith Siriwardana
The government has no intention of going for an International Monetary Fund (IMF) bailout programme as there is no need for such a move as the country’s debt services have been effectively managed, Minister of Finance, Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal told Parliament yesterday.

State Minister Cabraal came out with this statement in response to a question raised by Opposition Leader Sajith Premadasa as to whether the government intended to go for a bailout  programme with the IMF in the wake of Sri Lanka’s sovereign credit downgrade by Moody’s.

“We have managed the finances effectively and there is no need to go for a bailout programme with the IMF. We have also begun easing the importation curtailment. Also, foreign remittances, which the country had received during the past few months, have been higher than expected. Besides, Sri Lanka has been able to earn considerable amount of funds through IT services during the past months. Therefore the situation is going to be brighter than expected,” the State Minister said.

“We are also expecting new foreign investments after the legislations pertaining to Colombo Port City are approved by Parliament. We will be bringing in new legislations soon,” he added.
The State Minister noted that Moody’s had not considered several ground realities such as the rapid recovery of the domestic economy, improved business confidence and the booming stock market, where local investors remain extremely positive. 

He informed the House that Sri Lanka secured about US$ 1 billion during the last few months through swap arrangements and syndicated loans. Cabraal also said Sri Lanka intends to use tools such as Samurai and Panda bonds to bring in more funds into the country.

Sri Lanka settled a US$ 1 billion sovereign bond issue on October 4 along with due coupon payments. As at end-August, Sri Lanka’s foreign reserves stood at US$ 7.4 billion. For the remainder of the year, Sri Lanka’s external debt repayments are estimated at less than US$ 450 million. However, Moody’s estimates US$ 4 billion debt repayments per annum from 2021 to 2025.

In response to another question raised by Premadasa as to whether Sri Lanka will engage with other credit rating agencies, the State Minister said the government will engage with other rating agencies and will provide whatever information they need.Prior to last month’s downgrade by Moody’s by two notches to Caa1 (equivalent to CCC+), Sri Lanka’s sovereign rating was downgraded by both Fitch and S&P by one notch in April and May respectively.

Premadasa, who painted a grim picture on the country’s economy said, the budget deficit is expected to be 10 percent this year and said Sri Lanka will have to face a major crisis with regard to debt services soon.