President stresses need for improved interaction in debt restructuring process

• Says there needs to be “some improvement” in current process
• Stresses need for debt restructuring negotiations to move faster

As Sri Lanka is looking to firm up the debt restructuring process, President Ranil Wickremesinghe said there needs to be “some improvement” in the interaction between the committee and debtors.

The reason being, the debt restructuring process is a negotiation and it should in essence be “interactive”, he said.

“Looking at the dealing with the Paris Club and non-Paris Club, we need a new approach because this is basically a geopolitical issue. The mistrust between the US and China and the growing tension, it has to be addressed by all, not merely by Sri Lanka or the country concerned,” said Wickremesinghe.

He presented his comments while addressing a high-level panel discussion at the Global Leaders’ Summit for a New Global Financing Pact, in Paris, on Thursday.

Wickremesinghe cautioned that if the tensions between the US and China do not resolve, Asia and Africa would get caught in another situation that is not of their making.

In terms of the pace of debt restructuring, he acknowledged it has to move faster, else most countries, whether low-income countries or middle-income countries, would not have much hope and are likely to witness instability, political and economic instability.

“Without creating a separate process under this roundtable, we should deal with the issues of middle-income countries because most are under stress. It’s better to deal with them under stress than when they are bankrupt. So that the process has to evolve,” he suggested. Furthermore, in terms of the progress made thus far, Wickremesinghe said it is the data-led approach that was the key to Sri Lanka’s success.

“It was our programme, not an IMF programme. Secondly, we found a sponsor for us among the official creditor community.”

Calling on other nations to be pragmatic in similar efforts taken, Wickremesinghe noted that the approach for a middle-income country would be to move.

“If you have a common framework, what happens is we move as fast as the slowest creditor. So, we get tied down. So, that’s why we are not in favour of a common framework,” he said.