President appeals for “unconditional” budget support from intl. lenders to revive economy

President Gotabaya Rajapaksa

• Says multilateral and bilateral official creditors have “special responsibility” to be innovative to create such space
• Stresses that leading agencies and leaders should act fast “without” placing conditionalities
• Tells intl. community such support will help restore confidence, re-energise growth and investments

 By Shabiya Ali Ahlam
President Gotabaya Rajapaksa this week appealed for “unconditional” support from the international community so that middle-income countries like Sri Lanka can maintain confidence in the private debt and equity market since the ongoing COVID crisis has spiraled out of control from the hands of governments and businesses.

Pointing out that multilateral and bilateral official creditors have a “special responsibility” towards developing countries to be innovative in creating such space for the developing world to revive their economies, President Rajapaksa expressed that such parties “should not” insist on normal conditionalities of lending.

“As this is a crisis beyond the control of government and businesses, international support by way of unconditional budget support and compensatory debt deferment facilities for official debt will have to come from multilateral and bilateral official lenders so that private debt and equity markets will not lose confidence,” President Rajapaksa told a virtual ‘High-Level Event on Financing for Development in the Era of COVID-19 and Beyond’ organised by the Prime Ministers of Canada, Jamaica and the UN Secretary General on May 28.

According to Rajapaksa, financial support of such nature should be extended to the developing and aspiring nations as most countries in that category have honoured their debt obligations. “Time has come to provide new space through a decent haircut by official creditors,” he said.

Sharing the areas identified as priority by the Sri Lankan government, the President said the island nation’s prime focus is on developing agriculture and food security, environment conservation, renewable energy resources, digital economy and digital governance, rural economy and poverty reduction, market access to people and business community.

The stated developments would take place through improved connectivity to villages and creating green cities in line with the country’s environment conservation strategies which suffered a setback with almost two months lockdown in the economy.

“We have taken steps to ease restrictions from this week while keeping health quarantine standards to ensure community will not be vulnerable to COVID-19 health risks.

“However as two months loss in the real economy and likely timeline to reach normalcy will be longer, external funding must be ‘development centric’ by all aspects of such facilities,” said Rajapaksa.

The President noted that the profiling of official debt and medium term emergency budget support loans by each major bilateral and multilateral lender will not only provide macroeconomic space to meet private debt obligations and relax trade and payments systems, but would also restore confidence among private sector creditors to re-energise growth and investments.

Rajapaksa reiterated that it is the responsibility of leading agencies and leaders of the world to act fast in this time of crisis “without” placing conditionalities among themselves and coming forward as development partners in respective developing and middle-income economies.

“This dialogue must concentrate on how developing and middle income countries are assisted with emergency funding facility,” he asserted whilst pointing out that countries should be encouraged to focus on human development aspects including education, health, women and children, new export industries, food security and environment, to ensure a better and stable world,” he said.