Sri Lanka has found way out of crisis and debt payments
2023.01.24 02:51
Sri Lanka has found way out of crisis and debt payments
By Kristina Sobol
Budrigannews.com – P. Nandalal Weerasinghe, the head of the country’s central bank, stated on Tuesday that Sri Lanka is committed to meeting all of its debt repayment obligations and hopes to conclude debt restructuring negotiations within the next six months.
“This month has seen positive developments, with India promising financing assurances. At an event titled “Economic Outlook 2023,” Weerasinghe stated, “We expect assurances from China and Japan soon.”
The 22 million-person island nation has faced difficulties over the past year, including a severe recession, runaway inflation, and a lack of foreign currency—the worst crisis of its kind since it gained independence from Britain in 1948.
Sri Lanka is vying for a $2.9 billion bailout from the International Monetary Fund (IMF), but in order to reach a final agreement with the global lender, it needs the support of both China and India, its largest bilateral creditors.
The debt restructuring plan for Sri Lanka has the full support of India, India informed the IMF last week.
The head of the apex bank stated, “Once the IMF program is unlocked, then we will start specific debt restructuring negotiations with both commercial and bilateral lenders.”
“We anticipate finishing this procedure within six months.” The duration of the debt restructuring is the greatest area of uncertainty. Sri Lanka cannot return to a sustainable growth path until debt sustainability is guaranteed,” he added.
Weerasinghe went on to say that negotiations with other creditors and the countries in the Paris Club have made significant headway.
He stated that although discussions with local banks to reduce rates were ongoing on the domestic front, the restructuring of domestic debt remained uncertain.
Separately, Weerasinghe predicted that Sri Lanka’s inflation would fall faster in 2023 and reach single digits by the end of the year.
He added that once the IMF program is unlocked, the central bank will be able to accelerate the process of lowering interest rates to meet inflation expectations.
According to data released on Monday, Sri Lanka’s National Consumer Price Index (NCPI) decreased by 59.2% year-over-year in December, following a rise of 65% in November.
