Colombo President Ranil Wickremesinghe on Tuesday said "substantial progress" has been made in Sri Lanka's debt restructuring, which he said provided much-needed breathing room for the cash-strapped country to transform its economy into bankruptcy in a resilient and stable economy.
Briefing Parliament on the benefits accruing to the country from a correct course of action, President Wickremesinghe also responded to opposition criticism of the debt restructuring agreement with major bilateral creditors and promised to present all related agreements and documents with it to a parliamentary panel.
In April 2022, the island nation declared its first sovereign default since gaining independence from Britain in 1948. The unprecedented financial crisis led President Ranil Wickremesinghe's predecessor, Gotabaya Rajapaksa, to resign from office in 2022 amid civil unrest. .Early last week, President Wickremesinghe announced that debt restructuring agreements with bilateral lenders, including India and China, had been finalized in Paris on June 26, describing it as an “important milestone” in bolstering international confidence. in the indebted economy.
On Tuesday, while making a special statement in Parliament, Wickremesinghe said: “Sri Lanka's external debt now stands at $37 billion, which includes $10.6 billion in bilateral credit and $11.7 billion in multilateral credit. The commercial debt is 14.7 billion dollars, of which 12.5 billion dollars are sovereign bonds.”
Debt restructuring is aimed at making it sustainable and freeing up funds for public services, said Wickremesinghe, who also holds the portfolio as finance minister. “However, this crucial moment must not be wasted. This respite should not be wasted,” news portal NewsFirst.lk quoted him as saying.
“In the past, Sri Lanka's economic growth was dominated by the non-tradable sector. During this period, particularly after the war, the economy expanded but tax revenues and exports as a percentage of GDP declined. Debt servicing capacity continued to decline.
"To reverse the trend, we must transform Sri Lanka into an economy where growth is driven by foreign exchange inflows that do not generate debt," the portal quoted him as saying. The President said Sri Lanka must now follow a high growth trajectory of at least seven percent of annual GDP and, although ambitious, this goal is achievable, as demonstrated by nations such as Vietnam.
Achieving two decades of seven percent growth could potentially quadruple Sri Lanka's GDP from about $85 billion to about $350 billion, Wickremesinghe said.
Dismissing opposition criticism of debt restructuring as “inaccurate”, Wickremesinghe argued: “No bilateral creditor would accept a reduction in the principal amount. Instead, concessions are allowed through extended repayment periods, grace periods and lower interest rates.” The president said agreements with bilateral creditors include extending principal payments until 2028, maintaining interest rates by below 2.1 percent and extend the full grace period for debt settlement until 2043.
President Wickremesinghe said he would present all agreements and documents related to the debt restructuring to Parliament's Public Finance Committee, emphasizing the need for thorough scrutiny and wide attention to the matter, his office published in X.
"The country can now obtain foreign loans and resume projects that had been stopped mid-course due to lack of foreign financing," Wickremesinghe said. "Although some argue that debt restructuring is pointless as credit ratings do not have improved, the president said this is incorrect, adding that international financial institutions are working to improve credit ratings based on the success of the debt restructuring process and its economic indicators," the president said. the Media Division said in a post on X.
“Based on the agreements reached on debt restructuring, the repayment of the loan principal can be progressively increased, thereby deferring debt service costs. President Ranil Wickremesinghe mentioned that Sri Lanka will have a debt service of $5 million left,” he added in X.
The President also acknowledged the short-term credit assistance provided by India and Bangladesh during that period. “At that time, we were helped by two friendly nations, India and Bangladesh, who provided us with short-term credit assistance. No other country was allowed to grant long-term loans,” he said. In his speech, the President also highlighted the specific details of the agreements reached with the official committee of creditors co-chaired by India, Japan, France and the Exim Bank of China on debt restructuring and noted that the agreements include a grace period for principal repayment extended until 2028.
"Interest rates have been kept at or below 2.1 percent and a grace period for full debt repayment was extended until 2043," he said, quoted by news portal Adaderana.lk.
Wickremesinghe's statement was followed by main opposition leader Sajith Premadasa, who reiterated that the government has failed to secure the best possible deal in the debt restructuring process. However, the planned two-day debate at the Parliament on the agreement was postponed because opposition members protested the lack of transparency regarding the agreements reached.
Briefing Parliament on the benefits accruing to the country from a correct course of action, President Wickremesinghe also responded to opposition criticism of the debt restructuring agreement with major bilateral creditors and promised to present all related agreements and documents with it to a parliamentary panel.
In April 2022, the island nation declared its first sovereign default since gaining independence from Britain in 1948. The unprecedented financial crisis led President Ranil Wickremesinghe's predecessor, Gotabaya Rajapaksa, to resign from office in 2022 amid civil unrest. .Early last week, President Wickremesinghe announced that debt restructuring agreements with bilateral lenders, including India and China, had been finalized in Paris on June 26, describing it as an “important milestone” in bolstering international confidence. in the indebted economy.
On Tuesday, while making a special statement in Parliament, Wickremesinghe said: “Sri Lanka's external debt now stands at $37 billion, which includes $10.6 billion in bilateral credit and $11.7 billion in multilateral credit. The commercial debt is 14.7 billion dollars, of which 12.5 billion dollars are sovereign bonds.”
Debt restructuring is aimed at making it sustainable and freeing up funds for public services, said Wickremesinghe, who also holds the portfolio as finance minister. “However, this crucial moment must not be wasted. This respite should not be wasted,” news portal NewsFirst.lk quoted him as saying.
“In the past, Sri Lanka's economic growth was dominated by the non-tradable sector. During this period, particularly after the war, the economy expanded but tax revenues and exports as a percentage of GDP declined. Debt servicing capacity continued to decline.
"To reverse the trend, we must transform Sri Lanka into an economy where growth is driven by foreign exchange inflows that do not generate debt," the portal quoted him as saying. The President said Sri Lanka must now follow a high growth trajectory of at least seven percent of annual GDP and, although ambitious, this goal is achievable, as demonstrated by nations such as Vietnam.
Achieving two decades of seven percent growth could potentially quadruple Sri Lanka's GDP from about $85 billion to about $350 billion, Wickremesinghe said.
Dismissing opposition criticism of debt restructuring as “inaccurate”, Wickremesinghe argued: “No bilateral creditor would accept a reduction in the principal amount. Instead, concessions are allowed through extended repayment periods, grace periods and lower interest rates.” The president said agreements with bilateral creditors include extending principal payments until 2028, maintaining interest rates by below 2.1 percent and extend the full grace period for debt settlement until 2043.
President Wickremesinghe said he would present all agreements and documents related to the debt restructuring to Parliament's Public Finance Committee, emphasizing the need for thorough scrutiny and wide attention to the matter, his office published in X.
"The country can now obtain foreign loans and resume projects that had been stopped mid-course due to lack of foreign financing," Wickremesinghe said. "Although some argue that debt restructuring is pointless as credit ratings do not have improved, the president said this is incorrect, adding that international financial institutions are working to improve credit ratings based on the success of the debt restructuring process and its economic indicators," the president said. the Media Division said in a post on X.
“Based on the agreements reached on debt restructuring, the repayment of the loan principal can be progressively increased, thereby deferring debt service costs. President Ranil Wickremesinghe mentioned that Sri Lanka will have a debt service of $5 million left,” he added in X.
The President also acknowledged the short-term credit assistance provided by India and Bangladesh during that period. “At that time, we were helped by two friendly nations, India and Bangladesh, who provided us with short-term credit assistance. No other country was allowed to grant long-term loans,” he said. In his speech, the President also highlighted the specific details of the agreements reached with the official committee of creditors co-chaired by India, Japan, France and the Exim Bank of China on debt restructuring and noted that the agreements include a grace period for principal repayment extended until 2028.
"Interest rates have been kept at or below 2.1 percent and a grace period for full debt repayment was extended until 2043," he said, quoted by news portal Adaderana.lk.
Wickremesinghe's statement was followed by main opposition leader Sajith Premadasa, who reiterated that the government has failed to secure the best possible deal in the debt restructuring process. However, the planned two-day debate at the Parliament on the agreement was postponed because opposition members protested the lack of transparency regarding the agreements reached.
