IMF recommendations will help Sri Lanka to overcome crisis - Dr. Ranjith Siyambalapitiya | Sunday Observer

IMF recommendations will help Sri Lanka to overcome crisis - Dr. Ranjith Siyambalapitiya

26 March, 2023

Strategies to take country forward:

US$ 80 billion to be paid for local and international loans:

Another US$ 7 billion expected from ADB and World Bank:

State Minister of Finance Dr. Ranjith Siyambalapitiya said those who look at some issues from a traditional and political point of view may use certain conditions in the IMF agreement and try to blow them out of proportion to hurt the sentiments of the people. The State Minister in an interview with the Sunday Observer said, however, the IMF has made very important recommendations such as to strengthen the social security network, maintain transparency, continue the anti-corruption drive, strengthen the local banks and restructure loss-making state sector institutions.

He said these are the avenues that would help us to get the country out of the current crisis. When we look at it in a traditional manner, perhaps there may be certain recommendations that we don’t agree with. However, when looked at in a proper manner, we can’t say these are conditions. Actually, these are the strategies that we should adopt by ourselves to take the country forward.

Excerpts of the interview

Q: Following the approval of the Extended Fund Facility (EFF) by the IMF Executive Board, President Ranil Wickremesinghe in a special statement in Parliament on Tuesday said that Sri Lanka is no longer deemed bankrupt by the world. What is your comment on this?

A: Actually, that is the most important segment of the EFF given by the IMF. We have to pay nearly US$ 80 billion for local and international loans. Then some say whether this US$ 2.9 billion IMF loan is a match to that. The most important aspect is that we told the world on April 12, 2022 that we would not be able to pay our bilateral loans. It indirectly implied that we are bankrupt and that was a very unfortunate statement.

Then the only place to rectify that was to go to the IMF and reach a consensus with them so that they would tell the world that they can once again deal with us. Actually, that is what really happened because of the consensus that we reached with the IMF. As a country this is a very important achievement for us. As a result of the EFF, we will receive another US$ 7 billion from the ADB and World Bank.

That will happen as a result of this positive signal given by the IMF. We were in a situation where a businessman couldn’t open even a bank overdraft. However, that situation will be completely changed and our confidence will be ensured once again due to this development. Actually, that is what the President told Parliament.

Q: Sri Lanka received the first tranche of US$ 330 million on Monday. How would this help to restore macroeconomic stability and achieve debt sustainability?

A: The EFF would affect all this. The significance of this time is that at earlier occasions when the IMF credit facility was given, we could utilise those funds by keeping them only in the Central Bank account. That means we could utilise that money only to pay loans or balance of payments. This time, the IMF has properly realised our issue. Therefore, they have given us a special opportunity which was not given to us at 16 occasions earlier. This time we have been granted permission to convert this money to rupees or dollars into the account of the Deputy Secretary of the Treasury.

Then we can use this money based on the priority list of our expenditures either to pay loans or some other things. The IMF could realise we manage our expenditure heads in a very difficult manner and we stopped lengthy fuel and gas queues with a sound management system.

Some complain that money was not given to certain sectors. However, we properly selected our essential priorities such as fuel, gas, fertiliser, medicine and the payment of public sector salaries and Samurdhi subsidies.

Therefore, this IMF credit facility will help us to some extent when we prioritise our expenditure specially to pay the interests of local loans. The IMF credit facility would be very vital to restore macroeconomic stability and achieve debt sustainability. This time the IMF has asked us to further strengthen our social security network. Therefore, this EFF given by the IMF would be very vital to the entire economy starting from the poorest segments of society.

Q: Has the Government planned to engage in debt restructuring talks with bilateral and private creditors to recover debt sustainability?

A: We will commence that. That is the next major challenge before us. We will talk to them separately as to how we can obtain a grace period, reduce the interest rate and write-off some loans. Of the total amount of loans obtained, we hope to get a relief of nearly US$ 17 billion within the next five years.

The challenge before us is how we can fulfill this task. It will commence from this particular point. Once we reached the Staff Level Agreement, the IMF gave us the opportunity to meet the bilateral creditors and obtain their primary consent and they agreed to debt restructuring. After we gained that consent, we went to the next stage. The next major issue is to reach a consensus with them as to how their consent is practically obtained based on statistics.

Q: Certain sections who raise concern on IMF conditions say that the Government has agreed to 15 IMF conditions. Will these conditions have any adverse impact on us or these targets have to be achieved to take the country forward?

A: We should admit the fact that this would not be any advantage to the IMF. However, those who look at certain issues from a traditional and political point of view may use certain conditions in the IMF agreement and try to blow them out of proportion to hurt the sentiments of the people. However, the IMF has made very important recommendations such as to strengthen the social security network, maintain transparency, continue the anti-corruption drive, strengthen the local banks and restructure the loss-making State sector institutions.

I see these are the avenues that would help us to get the country out of the current crisis. When we look at it in a traditional form, perhaps there may be certain recommendations that we don’t agree with. In addition, we have to strictly manage State expenditure. When looked at in a justifiable manner, we can’t say these are conditions. Actually, these are the strategies that we should adopt by ourselves to take the country forward. Instead of IMF conditions, it is our prime responsibility to safeguard the low income families who have faced severe hardships to continue their livelihood.

Q: Can Sri Lanka expect a ‘positive economy’ this year especially with the approval of the EFF?

A: I hope we can expect a positive economy by the end of this year. The Central Bank has firm confidence that we would be able to bring the inflation rate to a single digit. At that time, we can also consider the interest rates. With the increase of revenue by that time, we are optimistic that we would be able to help both the State and private sector. We also hope our rupee will be stable at that time. One of the IMF conditions is also to maintain the rupee at a stable level. With all these developments, I hope we will be able to commence the beginning of macroeconomic stability by the end of this year.

Q: The main Opposition SJB says that the Government should provide some relief to the people now as it has been able to secure the Extended Fund Facility. Your comments?

A: Actually, these are not comments made with an honest intention. I heard some Opposition members said there won’t be a problem from tomorrow since the IMF credit facility has been given. These are comments made due to their hypocrisy. We saw the first stepping stone to get rid from the massive crisis that we have faced. Amid the pressure, we have to climb several steps to reach our targets. So, we have nothing to hide from the people. Actually, we were hopeless and got stranded without having a path to move forward. Someone has said that it’s like now we have to climb the ‘Mahagiri Damba’. Now we have seen it and started to climb it.

Q: However, some Opposition MPs like Dr. Harsha de Silva have praised President Ranil Wickremesinghe for spearheading efforts to get the Extended Fund Facility (EFF) arrangement for Sri Lanka from the IMF. Would you like to comment?

A: That is true and it is a very important statement made by him. We should thank Dr. Harsha de Silva for his statement. It is not only him but also the entire Opposition and the media should think in such a manner to get rid of this issue. However, that doesn’t mean they should praise the Government. They should see the positive aspects of this EFF without provoking the people by creating disputes.

Everyone has the responsibility to genuinely discuss with the entire community the importance of this IMF credit facility to rid the country from the current crisis. It is everyone’s duty to appreciate the leadership given by the President to make this endeavour a success. It is a significant victory that we achieved under the leadership of the President to recover from the current crisis situation within a short span of nearly six months.

Q: Do you think if not for President Ranil Wickremesinghe’s leadership, Sri Lanka will not be able to receive the Extended Fund Facility of the IMF?

A: Certainly. Otherwise, it would have been a very difficult task. I believe at this juncture there was no capable leader like President Wickremesinghe who can fulfill that task. Actually, I am not talking based on political grounds and I am not his party member as well. We all have joined hands on behalf of the country. I saw Opposition Leader Sajith Premadasa on Wednesday saying that the President waited nine months to accept his parliamentary seat as there was no auspicious time.

I think that auspicious time became so important to the country and not to the President. If the President was not there, who else would accept that challenge? Those who, along with a series of economic experts were requested to accept the challenge but they were reluctant to do so. If the President didn’t accept the challenge still the country would have been burning and parliament democracy would have been at a great risk. Fortunately, a capable and veteran political leader like Ranil Wickremesinghe accepted the challenge at that crucial juncture.

Q: We have gone to the IMF 16 times, but we have not completed the process. What has really happened?

A: That is mainly due to changing the country’s policies based on political popularity. Otherwise, on those 16 occasions we agreed to similar things that we have agreed today. We have to conduct five elections such as Presidential, Parliamentary, Provincial Council, Local Government and Cooperative. Some of our policies will not be popular.

However, the people will reap the benefits in the long run. If we attempt to shift them into instant policies, after a few installments, the IMF will suspend their installments and the country will also come to a standstill. Now the time has come to change that. We have also experienced serious repercussions. It is obvious the IMF also looks after us these days.

Q: The President addressing the Parliament on Wednesday sought the assistance of the Opposition to make the IMF program a success. Your views?

A: The Opposition also has a very important role to play in this regard. First, this nation should exist. There should be a country to shift the power and take the leadership by accepting portfolios. We are trying that. Then the Opposition, media personnel and the entire population have a big responsibility to realise and share this pressure and turn the country into normalcy by making use of this opportunity.

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