Debt restructuring talks unaffected by unrest, assure IMF and CBSL

Both the International Monetary Fund (IMF) and the Central Bank of Sri Lanka (CBSL) yesterday (11) assured that despite the recent unrest, political instability, and resultant islandwide curfew, technical-level discussions on Sri Lanka’s debt restructuring would be carried out as usual.

Issuing a statement in response to media queries, the IMF yesterday (11) stated that despite the unrest that has been created in the country with the resignation of Prime Minister Mahinda Rajapaksa, the virtual mission which was to commence from 9 May until 23 May is to continue, so as to prepare for policy discussions that will take place under a new government.

“On our virtual mission during 9-23 May, discussions at the technical level have just started and will continue as planned, so as to be fully prepared for policy discussions once a new government has been formed.”

Meanwhile, CBSL Governor Dr. Nandalal Weerasinghe stated that since technical discussions are a standard process, they will be carried out as usual; however, policy implementations will require decisions to be made by state authorities.

“Active state institutions should be there to approve and implement fiscal policy decisions,” Weerasinghe said.

This statement was issued following local economists as well as Citigroup Global Markets expressing their concern over the repercussions that the country may face due to the declared state of emergency as a result of the political instability in the island.

The economists assumed that the negotiations with the IMF might be delayed, and thus entering into the IMF programme would take over six months. At the same time, on Tuesday (10), Bloomberg cited Citigroup as saying that the investment banking company foresees a possibility of delays in bailout talks.

The IMF statement further read that they are following the developments in Sri Lanka and “are concerned about rising social tensions and violence”.

However, the IMF said that they are to remain committed to assist the country in line with the IMF’s policies.

On Tuesday (10), speaking to The Morning Business, former Ceylon Chamber of Commerce Chairman Chandra Jayaratne expressed that the discussions with the IMF relating to debt sustainability could be carried out by relevant officials such as CBSL Governor Dr. Weerasinghe and Treasury Secretary Mahinda Siriwardena, without endorsement from Sri Lanka, as there is no official government in place after the resignation of the Prime Minister.

However, Jayaratne added that when it comes to presenting the plans for debt repayment in the future based on forecasts, the endorsement of the Government is required in implementing certain policies, such as reduction of expenditure, increase of government revenue, transfers for the poor to ease their suffering and other reforms.