‘… restructuring debt, fiscal discipline urgently needed, we’ll implement it when we get to office’

By Shamindra Ferdinando

The Samagi Jana Balavegaya (SJB) MP Dr. Harsha de Silva insists Sri Lanka is left with no alternative but to seek immediate assistance of the IMF to tackle what he calls an unprecedented debt crisis. “The SJB is in general agreement with my view that outstanding external debt should be restructured, “Dr de Silva said.

The Island sought the SJB MP’s views against the backdrop of State Minister of Finance, Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal ruling out IMF’s intervention. The former Governor of the Central Bank (2006-2015) said so in response to Dr. de Silva’s original call for the IMF’s assistance.

Asked whether he still believed the government should ask for the IMF’s intervention, Dr. de Silva said that the IMF in itself was not the answer. Stressing the need for fiscal discipline, the former UNP minister said Sri Lanka needed the IMF assistance primarily for two reasons as Sri Lanka could not address the current financial crunch under its own steam.

MP de Silva said that IMF’s assistance was needed to facilitate restructuring of debt. Referring to President Gotabaya Rajapaksa’s recent admission that his government was faced with the challenge of settling loans amounting to USD 4 bn annually, Dr. de Silva said that the IMF could provide Sri Lanka the platform to negotiate with hundreds of International Sovereign Bond (ISB) investors to reach a consensus.

Asked to explain, the MP said that if the government initiated the process, an understanding could be reached on postponement of interest and capital payment by 36 to 48 months.  Delay on Sri Lanka’s part to take action to address the overwhelming threat though politically such measures seemed disadvantageous could be catastrophic, the SJB MP said.

Dr. de silva urged the SLPP MPs to peruse the statement issued by the President’s Office on June 13 in the wake of the SLPP General Secretary attorney-at-law Sagara Kariyawasam demanding Energy Minister Udaya Gammanpila’s resignation over the fuel price hike. The President’s Office admitted the unbearable burden on the banking sector by staggering borrowings run up by CPC and CEB amounting to Rs 737 bn.

Dr. de Silva said now that the government had revealed the true status of the economy, it should go the whole hog to address the issue. “These ISB agreements are mainly in New York jurisdiction and there are clauses that need 3/4 of investors (by value) having to agree. So it’s not easy. We need to arrive at an acceptable debt sustainability plan and to do that the IMF is needed. Once we do that, confidence in Sri Lanka’s ability to manage our debt will return and we can participate in the international financial markets again. When we have space without having to make large debt payments in the next few years we can undertake essential economic reforms without which we cannot move forward.”

Asked whether he had been able to convince the SJB to go with his views on restoring financial confidence, Dr. de Silva emphasised that the SJB was in agreement with his stance that Sri Lanka had to restructure its debt. “Look at what is happening today. Look at the indicators? How much is the USD? Now they want to restrict even more imports. We are going back to 1973—77 period. We have a plan to get Sri Lanka back on its feet by integrating with the world. That is how we will strengthen the domestic economy. Not by hoodwinking the people. We will implement it when we form a government.”

Responding to queries on the need for urgent action and consensus on the crisis, Dr. de Silva said that remedial measures should be undertaken immediately. The MP emphasised that the issue at hand should not be blamed on rampaging Covid-19 pandemic. Declaring that the trouble had been brewing for years, the MP said that the country had been consuming much more than it had been producing.

The MP said: “Our savings have been low. Our investments have been unproductive. Our subsidies have been wasted. Our exports have been falling as a percentage of global shares. The inward looking policies of this government that once failed in the 1970s have caused rapid deterioration. The unwise steps starting from the massive tax give away in December 2019 long before Corona only exacerbated the problem.”

National People’s Power MP Dr. Harini Amarasuriya said now that State Minister Cabraal on behalf of the government had ruled out IMF intervention, he should explain how the incumbent administration was going to tackle the problem.  MP Amarasuriya emphasised that the public had a right to know the conditions, modalities as well as those involved if the IMF was not. The MP alleged decades of waste, corruption, irregularities, negligence and mismanagement had weakened the national economy and the country was now in a perilous state.