- Positive discussions with Bond Holders
- IMF process on track
- Revenue generation programs needed
The following is an interview with Sagala Ratnayaka, Chief of Staff to the President and Senior Advisor to the President on National Security, at the Presidential Secretariat in Colombo regarding the upcoming talks on debt restructuring with International Sovereign Bond (ISB) holders, whether those agreements will affect the upcoming International Monetary Fund (IMF) loan tranche, how the Government will negotiate with ISB holders, and the ways to re-strengthen the country’s economy.
Excerpts from the dialogue
Q: The restructuring of the country’s foreign debt and the payment of the loan installment of the next IMF Extended Fund Facility (EFF) are scheduled to be given within the next three months. However, in this situation, the negotiations with the ISB holders have not yet been completed. Is this situation going to pose a problem for the third loan installment?
A: A group of Government representatives will leave for London after the delegates who participated in the mid-year conference of the World Bank held in Washington, USA return to this country. The purpose of the visit is to renegotiate with the sovereign bond creditors who have given loans to the country and reach the final agreements. We held discussions with sovereign bondholders last March. There we reached an agreement on two out of four points. But there are two more points to agree with them. The next round of negotiations with the Government has been arranged to be more flexible and closer to the creditors.
Arrangements are being made to obtain the assistance of legal advisors as well as financial advisors for these discussions. It is expected that the agreements will be made in the next few months. We have also arranged to get the support of the Lazard and Clifford Chance in this work. Our aim is to conclude these negotiations quickly and positively and proceed to obtain the next installment of the IMF loan.
Q: If these talks continue, will the receipt of the third IMF tranche due in June be delayed?
A: It will not happen at all; the IMF provides the necessary support for that. We expect to conclude the negotiations with the sovereign bondholders promptly. Therefore, there will be no problem regarding the expected date of receiving the third installment of the loan to our country.
Q: What are the initiatives being taken to address these trends?
A: We have brought the country to a certain economically stable place today, and those tasks were not just accomplished. We continued to discuss, repeatedly negotiating, and reaching a consensus.
In fact, the only way for both parties to reach these agreements is to discuss.
There is no option but to negotiate to overcome such crises. Accordingly, we will negotiate with the sovereign bond creditors in the coming days and make the necessary agreements.
Q: Is there no other way out of the economic crisis than turning to the IMF?
A: Of course, we will not recover economically from the US$ 2.9 billion IMF loan alone. Therefore, we must now turn to a program that will increase the country’s income. If we do that, we can be happy as a country. The salaries of Government employees were increased recently. But compared to that, the expenses have also increased in many spheres. Therefore, we should start a program to increase income. Something I always say is that the economy should grow at a considerable pace.
Q: What is the alternative for that – can you explain it?
A: The alternative is to find ways to mend and rebuild our broken economy. Meanwhile, we have the ability to prioritise matters such as rebuilding the tourism industry in a strong way. Also, we should utilise those opportunities with renewable energy. I meant the short-term ones. In addition to that, our country should be projected as a regional economic centre. A special program should be made to achieve that status.
If we develop the port system in a short time, we will be able to compete with other regional ports. In that situation, we need to consider what program we can take as a country and make plans. Bilateral (such as the Thailand-Sri Lanka Free Trade Agreement) and multilateral trade agreements (such as the Regional Comprehensive Economic Partnership) can also put us in an advantageous position. Sri Lanka is seeking to join the RCEP.
By exporting more valuable minerals, we will be able to further strengthen the existing sources of income as well as find new sources of income. Also, bringing investments into Sri Lanka becomes another way of earning revenue. This will also make it possible to increase the number of jobs in this country. Through such methods, we have the ability to create our economy as well as sources of income.
Q: What will the next tranche of IMF loan be used for?
A: Usually, we are given a guide as to what we need to do when offering such a loan installment. But there is no such condition in these loan installments. The IMF does not ask what our loan premium is for. But we work in a strict legal system; we work under various laws including cutting public spending.
Q: The strengthening of the Rupee has been happening rapidly, but the people are not getting the benefits?
A: When the price of something rises in our country, the price comes down again slowly. Such things cannot be done by a Government only by making and passing laws. We were entrusted with a bankrupt country. Now, we are gradually taking the country to a stable place. In about three more years, the country and the economy will be fully stabilised, and benefits will flow to the people in full. As the strength of the Dollar diminishes, the benefits of the strengthening of the Sri Lanka Rupee will affect our country in a good way in the long run. We have to balance the interests of exporters, importers and the public in doing so.
Translated by Dinuli Francisco
