The Samagi Jana Balawegaya (SJB) has urged the government to maintain transparency in the ongoing debt restructuring process as national elections are around the corner and that the next government will have to honour the conditions agreed upon by the incumbent administration.

The SJB said so soon after the government of Sri Lanka rejected international bondholders’ proposal in respect of restructuring more than $12 billion in debt.

Some of the proposal’s “baseline” assessments and a lack of a contingency option in the case of continued economic weakness were the two main reasons the deal was not agreed, the government said in a statement.

The following is the text of statement issued by Dr. Harsha de Silva, MP, on behalf of the SJB: “These initial comments are based on the first reading of the press release by the Finance Ministry moments ago.

“We reserve the right to make additional comments upon in depth study of the proposals in the attachments.

“At the outset, we note with disappointment that there has been absolutely no transparency in the government’s debt restructuring process even though we had requested for the same. In fact I personally requested a meeting with the relevant stakeholders, both as the economics spokesperson for the main Opposition SJB, and as the Chairman of the COPF. That opportunity was not provided, instead a meeting with government officials was arranged to discuss the IMF programme which we had no reason to attend as we anyway meet the delegation during their visits and exchange views on the same.

“From the media statement it is obvious that the government has failed to strike a deal favourable to the people of

Sri Lanka. We acknowledge however, that it is better to withdraw from the discussions than to agree to a bad deal.

“Having said that, the statement by the President’s Chief of Staff Sagala Ratnayaka that the two sides agreed on two of the four issues is not accurate when the note categorically states that no agreement had been reached, only that they ‘came closer to meeting of minds’ if a significant additional payment was made and even then, contingent upon the government side agreeing to the bondholders remaining conditions.

It is clear that the participating bond holders do not want to move away from the original macro linked bond (MLB) structure they proposed based on the performance of the Sri Lanka economy to be measured on their much higher ‘alternative baseline’ as opposed to that of the IMF. The main problem with this approach from the point of view of Sri Lanka is with their proposed structure of sharing the upside. It is not acceptable given the pain already incurred and will be incurred for decades to come by domestic creditors forced upon by the domestic debt restructure. It is now clear the alternative restructuring proposal by the government consisting of a mix of plain vanilla and MLB has been rejected by the bond holders.

“We do understand the need for some type of value recovery instrument (VRI) that could be a component of the final restructured series, but we are of the opinion that to link the same to every bond takes away the freedom of a future government to manage the nation’s liabilities in the most beneficial way for Sri Lanka. It is possible to discuss the VRI structure that is detachable from the main instrument.

“We are happy to note the inclusion of a discussion on a possible governance linked bond (GLB) structure and would be interested in discussing how that can be worked into a possible instrument to be agreed upon.

“We urge the government to be much more transparent in this restructuring process given that elections are around the corner and that the next government and those to come will be held responsible to honor the conditions agreed upon by this government in its final months. We are fully aware that any unilateral suspension of meeting any of the agreed payments would mean a second default which would be an absolute disaster.”