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Tuesday September 27th, 2022

Political stability will help Sri Lanka turn a corner, president tells WSJ

ECONOMYNEXT – Sri Lanka has experienced the worst of its economic crisis and political stability will help the country turn a corner, starting with finalising negotiations for an International Monetary Fund (IMF) bailout, President Ranil Wickremesinghe has told The Wall Street Journal.

“I think we’ve already hit the bottom. I can see the light at the end of the tunnel; it’s how fast we can get to it,” the New York City-based business daily quoted Wickremesinghe as saying on Sunday July 31.

However, it will be some months before most Sri Lankans begin to see their economic situation noticeably improve, he had said.

President Wickremesinghe told the WSJ that he expects an IMF staff level agreement to be reached by end August, after which the country would be able to further talks with sovereign bondholders and bilateral creditors.

“We are down to the nitty-gritty,” he said. “We would have had it this month [July] if it were not for the unstable political condition.”

On a separate note, Wickremesinghe had said it was not the right time for former President Gotabaya Rajapaksa, who fled the country after protestors stormed his official residence on July 09, to return. Nor had Rajapaksa indicated any plans to return, Wickremesinghe was quoted as saying.

“I don’t believe it’s the time for him to return,” he said. “I have no indication of him returning soon.”

Wickremesinghe also defended the legitimacy of his presidency to the WSJ. His election by parliament following Rajapaksa’s resignation has been controversial, with some opposition members and sections of Sri Lanka’s youth-led protest movement claiming that he lacks a popular mandate and that the current parliament does not reflect the will of the people.

“I came in by chance. Basically the president had resigned. The country was on fire. They were taking over the buildings,” he said. “I have been elected constitutionally… it’s up to us to perform now.”

The president noted that, once an IMF agreement was in place, Sri Lanka would have to work out debt restructuring with creditors who have differing approaches.

“It’s an issue between the different approaches to debt relief between India and Japan on one side, supported by the U.S., and China on the other side,” he said. “It’s a question of getting them to agree on one plan. It’s a question of how do you deal with the haircut? How do you deal with having new money given to pay off the old loans?”

Wickremesinghe told the WSJ that the Central Bank of Sri Lanka (CBSL) was confident of “finding the cash to cover enough fuel imports.”

However, even with an IMF agreement in place, Wickremesinghe said Sri Lanka needs to secure upwards of 3 billion US dollars from other sources next year to help pay for key imports like fuel, food and fertilizers. He is also keeping an eye on the process that unfolded in Zambiya, he added. (Colombo/Aug01/2022)

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