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Friday January 27th, 2023

US welcomes India’s assurance of support to Sri Lanka’s debt restructuring plans

Julie Chung – Image credit: Un Yarat]/Flickr

ECONOMYNEXT – The United States welcomes India’s decision to support Sri Lanka’s debt restructuring plans and stands ready to assist the island nation unlock the International Monetary Fund’s extended fund facility (EFF) once all creditors come on board, US Ambassador Julie Chung said.

The diplomat tweeted Thursday January 19 that the US was pleased to see India confirm its strong support to Sri Lanka’s prospective EFF programme and commit to providing financing/debt relief transparently and in coordination with the Paris Club.

“The US stands ready to assist SL to unlock IMF assistance when all creditors agree to fair and equitable treatment,” she said.

Ahead of a two-day official visit by India’s external affairs minister S Jaishankar, the Indian government informed the IMF that it strongly supports Sri Lanka’s debt restructuring efforts in the latter’s bid to secure a 2.9 billion dollar bailout package over a four-year period.

“We hereby confirm our strong support for Sri Lanka’s prospective EFF-supported programme and commit to supporting Sri Lanka with financing/debt relief consistent with restoring Sri Lanka’s public debt sustainability under the IMF-supported programme and ensuring that the programme is fully financed as projected by IMF staff,” a letter dated January 16 and addressed to IMF chief Kristalina Georgieva by Indian finance ministry official Rajat Kumar Mishra said.

The financing and debt relief will be provided by the Export-Import Bank of India, said Mishra in his letter.

Related:

India tells IMF it strongly supports Sri Lanka’s debt restructuring efforts

According to the official, India will continue to negotiate with the Sri Lankan government and with the Paris Club on a medium-to-long term debt treatment through maturity extension and interest rate reduction or any other financial operations that would deliver similar financing/debt relief.

“We understand that the IMF’s debt sustainability assessment will be underpinned by the programme targets of (i) reducing the ratio of public debt to GDP to below 95 percent by 2032, the central government’s annual gross financing needs below 13 percent of GDP on average in 2027-32, and the central government’s annual foreign currency debt service below 4.5 percent of GDP in every year 2027-32; and (ii) closing Sri Lanka’s external financing gap,” the letter to the IMF managing director said.

“We would like to stress that the Sri Lankan authorities are expected to seek equitable debt treatments from all commercial creditors and other official bilateral creditors, as well as adequate financing contributions from the multilateral development banks. We stand ready to support your efforts on these,” it said.

The Indian official added that his government looks forward to cordial and in-depth discussions with the Sri Lankan authorities, the IMF and the Paris Club with a view to finalising the specifics of the matter in the coming weeks.

The letter ahead of a planned visit by India’s External Affairs Minister S Jaishankar who is scheduled to engage in official discussions with Sri Lanka President Ranil Wickremesinghe, Prime Minister Dinesh Gunawardena, Foreign Minister Ali Sabry and other officials.

The government of Sri Lanka has yet to officially comment on India’s communication to the IMF as Sri Lanka awaits assurances from both India and China on their assistance with debt restructuring, a prerequisite for securing the IMF bailout.

Opposition MP Harsha de Silva, who tweeted a copy of the letter Wednesday evening, thanked India for helping Sri Lanka restructure its debt to the emerging superpower adding that he assumes China will follow suit.

IMF board approval for the EFF is contingent upon debt sustainability and a successful restructure of Sri Lanka’s external debt.

Tensions have been simmering between China and the West and regional power India over Sri Lanka, which all countries have expressed a strategic interest in, and all parties have made overtures to the island nation with regard to its worsening currency crisis since it blew up in early 2022.

Colombo owes Beijing some 7 billion US dollars while India is owed up to a billion. China has reportedly been reluctant to write down Sri Lanka’s debt because of possible implications to loans it has extended to other developing countries.

President Wickremesinghe, however, told parliament on Tuesday that talks with China and India have been successful.

“We will have an answer very soon,” he said.

A high level delegation of China’s Communist Party (CPC), led by Vice Minister Chen Zhou, Head of the CPC International Department called on Sri Lanka’s Prime Minister Dinesh Gunawardena on January 16.

“Sri Lanka is a very special friend of China and we are considering how we could assist Sri Lanka to get over the current crisis,” Chen Zhou was quoted as saying.

“You will have some good news soon.”

Meanwhile, the Chinese embassy in Colombo has taken umbrage at what it called the hypocrisy of US Ambassador Julie Chung for an alleged “China China China” mantra and for calling Beijing a “spoiler” in Sri Lanka’s negotiations with the global lender.

In a statement issued in not-uncharacteristically scathing and borderline undiplomatic language, the Chinese embassy chastised their “US colleague” for remarks she had made in a recent interview given to the BBC on Sri Lanka’s ongoing currency crisis.

Related:

Chinese embassy fumes over US ambassador’s remarks on Sri Lanka debt

(Colombo/Jan19/2023)

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Sri Lanka’s Dialog Axiata hopes to hold prices despite rising costs

ECONOMYNEXT – Sri Lanka’s Dialog Axiata hopes to hold prices despite higher taxes, rising costs like energy, officials said as the country goes through the worst currency crisis in the history of its intermediate regime central bank.

High inflation following a collapse of the currency has reduced real incomes of customers.

“There are many factors to consider, especially with the last price increase we did in last year did not resulted in a significant increase in revenue” Pradeep De Almeida · Group Chief Technology Officer at Dialog Axiata said at the launch of its Future zone at Lotus tower.

In September,2022 following an electricity tarrif hike dialog increased its tariffs on Mobile, Fixed Telephone, Broadband Plans and Value Added Services (Prepaid and Postpaid) by 20 percent while tariffs on all Pay Television Services were raised 25 percent.

Value Added Tax (VAT) was also raised by the government from 12 percent to 15 percent on all Telecommunications and Pay TV services.

“Even though we increase the prices we only saw around 8-9 percent increase in revenue,” Almeida said.

“That is because many users cut off their usage to limit the spending”.

Over the 24 months to December 2022, the central bank has generated inflation of 76 percent, based on the Colombo Consumer Price Index official data shows.

Dialog will increase efficiencies and manage costs in an attempt to avoid prices increases for customs, he said.

“We are trying to mainly bear the cost from our side. We are getting a massive support from our parent company Telekom Malaysia International,” Navin Peiris, Group Chief Enterprise Officer at Dialog told EconomyNext.

“Therefore as of now, there is no plan to increase prices”. (Colombo/Jan 26/2023)

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Sri Lanka shares fall at market close on profit taking

ECONOMYNEXT – Sri Lanka shares fell on Thursday as profit taking entered the market mainly on financial and diversified sectors, brokers said.

The main All Share Price Index (ASPI) fell 0.13 percent or 11.50 points to close at 8,926.56.

“The market was trading on dull trade mainly due to profit taking,” an analyst said.

“Also we saw investors taking a sideline as quarterly reports started to come”.

The earnings in the first quarter of 2023 are expected to be negative with revised up taxes and an imminent electricity tariff hike.

Earnings in the second quarter are expected to be more positive with the anticipation of IMF loan and possible reduction in the market interest rates as the tax revenue has started to generate funds.

The central bank’s policy decision was expected and investors have been eying on IMF deal with hopes of rapid economic recovery from the current unprecedented economic crisis, however since the market gained in the last sessions profit taking has come about, analysts said.

The market has been on a rising trend on the hopes of a faster IMF deal. However, the central bank government said the IMF deal is likely in the quarter or in the first month of the second quarter.

The most liquid index S&P SL20 fell  0.33 percent or 9.21 points to 2,798.

LOLC had seen some attention by investors as the firm disposed 90,256,750 shares held with Agstar PLC at 15-17.50 rupees a share.

The market witnessed a turnover of 1.2 billion rupees, lower than the month’s daily average of 1.9 billion rupees.

Expolanka dragging the market down closed 2.36 percent down at 186.7 rupees a share. Sampath bank fell 1.41 percent to close at 42 rupees a share while Royal Ceramic Lanka closed 2.59 percent dwn at 30.1 rupees a share.

(Colombo/Jan26/2023)

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Sri Lanka bonds yields steady at close

ECONOMYNEXT – Sri Lanka bond yields were steady at close on Thursday, dealers said, while a guidance peg for interbank transactions by the Central Bank remained steady.

A bond maturing on 01.05.2024 closed at 31.00/20 percent unchanged from the last close.

A bond maturing on 15.05.2026 closed at 26.60/90 percent, up from 28.50/70 percent on Wednesday.

A bond maturing on 15.09.2027 closed at 28.60/85 percent, up from 28.50/60 percent at the last close.

The three months bill closed at 29.75/30.25 percent unchanged from the last close.

The Central Bank’s guidance peg for interbank US dollar transactions appreciated by another 2 cents to 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 360.49 rupees on Thursday, data showed.  (Colombo/Jan 26/2022)

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