Swap deal with China to be finalised soon - Cabraal | Sunday Observer

Swap deal with China to be finalised soon - Cabraal

28 February, 2021

Sri Lanka plans to repay International Sovereign Bonds (ISB) amounting to around USD 14 billion or 17 percent of the debt repayment through non-debt foreign inflows such as exports and not through access to the International Monetary Fund (IMF) for funding, State Minister of Finance AjithNivardCabraal told the media during a briefing on the current status of debt repayment.

Allaying fears and countering claims that the country is in a major debt crisis, Cabraal said the country has already repaid USD 1 billion of the USD 15 ISBs and is in a comfortable position to repay the remaining debts without having recourse to foreign borrowings. “Sri Lanka has never defaulted even one cent for the past 70 years and would never in the future,” Cabraal said, adding that  recourse to borrowing will only aggravate the country’s debt burden and would plunge the country further into the economic abyss.

He said as of now  the total ISBs outstanding is USD 14 billion, which is only 16.7 percent of Sri Lanka’s total debt. None of the other creditors who hold 83.3 percent of Sri Lanka’s debt seem to show any sign of concern or stress about its repayment ability. 

He said a task force has been set up by Basil Rajapaksa to help boost foreign inflows with the help of the Central Bank. “Non-debt inflows will help restore economic stability. Curtailing imports on non-essential goods helped the country in the repayment of debts,” the  Minister said, adding that there would be forex inflows of around USD 32 billion this year and  about USD 2-3 billion more  each year thereafter.

“We are working on the USD 1.5 billion swap arrangement with China and hopefully complete it within a couple of weeks,” Cabraal said.

“We have to re-pay only around USD 1.0 to 1.5 billion each year until 2029 in its ISB amortisations for the next eight years,” Cabraal said.

However, rating agencies downgraded the country’s sovereign ratings reflecting the low debt repayment ability.

The Opposition has been harping on the need for the country to seek IMF  assistance to get over the foreign reserves shortage adding that in this background, will the authorities default on a payment of around USD 1.0 to 1.5 billion per annum and risk its entire economy and impeccable credit history. Central Bank Governor Prof. W.D Lakshman said Sri Lanka will be a debt-free country soon and added that it must strive to move from being a net debtor status to a net creditor status taking a cue from India and Japan. “Seeking assistance from foreign donors is not the way out. We must strive to create a Current Account surplus and not a deficit.

If there is a deficit we must try to bring it down,” the Governor said.

Sri Lanka recorded Current Account surpluses in 1950-51, 1954-54 and 1977.

The country’s foreign reserves stood at USD 4.8 billion as at end January 2021.

Foreign reserves stood at USD 5.7 billion towards the end of 2020.

Treasury Secretary S.R Attygalle  said the Port City Bill will be presented to Parliament soon and when enacted will help boost foreign direct investments.