ECONOMYNEXT – Sri Lanka’s opposition lawmaker Harsha De Silva asked the government to clarify “domestic creditors” in the debt restructuring amid a wait and see approach by markets.
Sri Lanka government has started discussions with its external creditors for debt restructuring, but some of the external debts are held by local investors as some local banks have bought international sovereign bonds (ISBs) and Sri Lanka Development Bonds (SLDBs).
Speaking at the Foreign Ministry’s budget debate in the parliament, De Silva, an economist by profession, citing a local paper report said there are conflicting reports in “domestic creditors”.
“One (report) where the governor of central bank Nanadalal (Weerasinghe) saying that Sri Lanka will be able to get IMF board approval by January 2023. And the second by Standard Chartered CEO Bingumal Thewarathanthri saying perhaps by March,” he told the parliament.
“And I quote ‘when there is clarity on the haircuts that is going to be borne by the foreign bond holders, bilateral creditors and domestic creditors’. Who does he (Thewarathanthri) referred to as domestic creditors? Local banks and individuals who have invested in ISBs and SLDBs or those who invested in LKR (Sri Lanka Rupees).”
“There has to be clarity on this. There are so many conflicting stories on how well the restructuring discussions are moving forward.”
Sri Lankan economists and financial experts have said a local debt restructuring could have adverse consequences in the economy including banking sector collapse and people coming to street against respective banks and government if they go for a hair cut.
Opposition parliamentarian Eran Wickremeratne said the country’s first priority should be to make sure the banking system stays stable. ‘
“I have taken the position that I’m against the local debt restructuring we have negotiated our way. I understand that there are gross financial requirements and issues. In the negotiation the time is going to be the issue,” he told EconomyNext on Friday.
“We won’t be able to push through some reforms as fast as we think. We may have to take more time if going to basically not allow an immediate local debt restructuring. What I mean by restructuring is restructuring is not the problem, but I’m not for a haircut.” (Colombo/Nov28/2022)