News

CB Governor says he preferred to avoid domestic debt restructuring

Published

2 years ago

2023/07/8

Thilina Walpola

CBSL Governor Dr. Nandalal Weerasinghe flanked by senior officials

By Rathindra Kuruwita

Ghas said that it was still his position that it is better if Sri Lanka could avoid restructuring its domestic debt.Dr. Weerasinghe, addressing the media, at the Central Bank on Thursday, said that the CBSL position was that because of high inflation, the country’s domestic debt had undergone restructuring in a way.

“At that time, we felt that there was no need to restructure domestic debt because that had already happened as a result of inflation. I still say it is better if we can avoid restructuring our domestic debt because it is already restructured.” He said that position had been changed due to the ongoing negotiation process,” he said.

Once the President of Sri Lanka reached a staff-level agreement with the IMF, the country was committed to sovereign debt sustainability. The country has agreed to certain debt targets for the next 10 years.

“When we ask our external creditors to make a significant contribution and take a cut, the external creditors want some more contributions from domestic lenders. This is a process of negotiations. There are two choices: you can hold on to a position and get nothing done, or compromise and get things done. We compromised while protecting the interests of the Central Bank,” he said.

Market interest rates have already declined in response to measures already taken to ease monetary conditions, Dr. Weerasinghe said.The interest rates on Treasury bonds issued by Sri Lanka were high in the past few years, but the rates have been coming down. The rates were high because of the uncertainty in the country.

“Last week, the interest rates of Treasury bonds touched the policy rates, just below 14 percent. As we have always said, the uncertain premium would collapse if there was stability and clarity about domestic debt restructuring,” he said.

When questioned by a journalist why the CBSL had sold Treasury bills on Thursday (06) worth over 130 billion rupees well above the policy rate, the Governor said that it had been a weekly bond auction to meet government expenditure requirements.

“We can’t decide on government cash flow operations and delay cash flows, anticipating policies to take effect. This amounts to market manipulation. If the government wants, it can ask us not to raise funds right now. Can the government wait, expecting interest rates to go down?” he said.

Dr. Weerasinghe said that in the future, the interest rate structure would return to normal with benchmark rates moving closer to policy rates.

“We hope that the rates will normalise so the economy will benefit. We will not hesitate to take on more administrative tasks to make sure this happens,” he said.

The Governor said that financial institutions had brought down interest rates on credit cards by 2 percent.

“We want to see rates for lending, especially for Small and Medium enterprises, lower faster,” he said.

The Governor said that with the drop in interest rates of Treasury bills, EPF would have to look at alternative investments. The EPF was able to make significant investments because there was a lot of demand for funds from the government, he said.

“Going forward, medium and long term investments strategies have to change for such funds,” he said.

The Governor also dismissed allegations that the EPF would lose 12 trillion rupees by 2038 as the government had decided, in the domestic debt restructuring proposals, only to pay an interest rate of nine percent instead of the average market rate for Treasury bills, which is 13.5 percent.

“Those assessments misrepresent the facts, figures, and reality. The argument is that the average interest payment for Treasury bills is 13.5 percent. I don’t know how that number even came up. However, EPF’s average yield on their medium and long-term fund is 11.5 percent. That’s why EPF paid nine percent interest to its beneficiaries,” he said.

Those who claim the EPF will lose 12 trillion rupees by 2038 assume that 13.5 percent interest can be made from investing Treasury bonds until then, he said.

“The inflation must be around 15–18 percent until 2038 to ensure a 13.5 percent interest rate for Treasury bonds. So, obviously, these are manipulated numbers. The assumption is that our debt will not be sustainable,” Dr. Weerasinghe said.

The Governor said that the Central Bank was responsible for the stability of the financial system, the Central Bank balance sheet, and being the custodian of the EPF.Dr. Weerasinghe said that the markets and international rating agencies had responded positively to domestic debt restructuring.

“We have finalised domestic debt restructuring, and this is important when it comes to dealing with foreign creditors. We are also having discussions with them. The discussions with the Paris Club are on. We have shared data analysis and proposals. We are making progress on the bilateral discussions with non-Paris Club countries like China. Discussions with Chinese banks are ongoing. When it comes to ISB holders, we had several rounds of discussions. Our advisor, Lazard, is conducting discussions with them. We hope that this process will make progress. We would like to expedite the process and reach agreements with both bilateral and ISB creditors before the first IMF review. This is our first objective,” he said.

The IMF, ADB and World Bank have approved another 900 million dollars in the near future, he said.

The Governor added that imports had stabilised at around 1.4 billion dollars a month. Exports stand at around 1 billion dollars. There is a gap of about 400 million dollars between the two.

“We can fill the gap with our worker remittances and tourism. There can be a balance. Even if imports go up to 1.6 or 1.7 billion dollars, we have a buffer,” he said.

Sri Lanka has already met the reserve levels agreed with the IMF. This will give investors more confidence and strengthen their ability to intervene in the market.

“All targets, except revenue targets, have been met. That’s because import tax collection was low due to lower imports. This is why we have recommended that the government relax import restrictions so that they can collect revenue. Value Added Tax and Income Tax are in line with expectations,” he said.

What import restrictions were relaxed and when that would be done would be decided by the Ministry of Finance, Dr. Weerasinghe said. The Central Bank had recommended relaxing restrictions on about 900 items, he added.

“Restrictions on about 300 items, including motor vehicles, remained,” he said.Sri Lankan economy would grow by the end of 2023, the Governor added. The economy contracted in the first two quarters of 2023.

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New Digitalization Policy draft reviewed

Published

3 hours ago

2025/12/13

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A meeting between representatives of UNICEF and Prime Minister Dr. Harini Amarasuriya was held on the 10th of December at the Prime Minister’s Office.

During the discussion, an initial review of the new digitalization policy draft was conducted, and it was emphasized that the new digital policy must be formulated to align with the ongoing education reforms.

The Prime Minister highlighted that the digital policy should be developed in a way that supports all five core pillars of the current education reforms, including curriculum reform, infrastructure development, and administrative restructuring.

It was further noted that the current draft is primarily focused on curriculum-related matters, and the digital policy should be structured to influence the overall education reform process.

Extensive discussions were also held on the importance of digital literacy, NEMIS, the provision of digital infrastructure, and minimizing the existing digital divide.

Attention was also drawn to the gaps in the current teacher training mechanisms , and the Prime Minister stressed the need to reduce paper usage.

The meeting was attended by the UNICEF representatives Dr. Emma Brigham and Deborah Wyburn, Secretary to the Prime Minister Pradeep Saputhanthri, Additional Secretary A.B.M. Ashraff, and several other officials.

[Prime Minister’s Media Division]

Business

The government is taking steps to streamline trade facilitation, customs processes, investment approvals, and improving export facilities – Prime Minister

Published

3 hours ago

2025/12/13

Priyan

Prime Minister Dr. Harini Amarasuriya stated that the government is taking steps to strengthen local exporters by making trade facilitation, customs procedures, and investment approvals more efficient, and by improving export services.

The Prime Minister made these remarks while addressing the 27th Presidential Export Awards 2024/25 ceremony organized by the Ministry of Industries and Industrial Development together with the Export Development Board.

At this ceremony, which was held to recognize the best exporters of Sri Lanka for the financial year 2024/2025, a total of 107 awards including 15 overall awards and 92 sectoral awards for products and services were presented. Merit awards were also presented to eligible sectors based on applicants’ performance and their contribution to national economic development. Awardees were selected on several criteria such as export market diversification, job creation, growth in export revenue, repatriation of export income, environmental sustainability, institutional social responsibility, and value addition.

Institutions that demonstrated outstanding performance in the export sector were presented with the prestigious Presidential Export Awards for the year under the patronage of Prime Minister Dr. Harini Amarasuriya and Minister of Industries and Industrial Development, Mr. Sunil Hadunnetti.

Further expressing her views, the Prime Minister stated:

“The Presidential Awards Ceremony for exporters reminds us that Sri Lanka’s progress depends not merely on policies or administration, but on the ability to produce, to create value, and to compete internationally.

Over the past year, we faced numerous challenges. As a result, global markets and supply chains were disrupted. Economic uncertainty prevailed. We faced natural disasters. Despite this, many exporters had to adjust to these changes, reorganize production processes, diversify customers, and adopt digital technologies in order to remain competitive in the market.

The impact of the Ditwah cyclone also affected several industries within the export sector. Production facilities, storage facilities, and transportation routes in affected areas were damaged. Production chains and delivery schedules were disrupted.

Under such a difficult situation, some exporters experienced significant setbacks while trying to meet international export demands.

The government is taking steps to support exporters by assessing the damages they suffered due to the emergency situation, restoring their operations, and helping them recover. The government is also working to strengthen resilience against future natural disasters and to rebuild affected areas in a way that minimizes the risk of similar situations arising again.

Sri Lanka is currently undergoing a new economic transformation. For many years, instability, policy inconsistencies, and administrative inefficiencies hindered the progress of the country. This weakened investor confidence and made it difficult for businesses to plan ahead.

However, the present government is committed to governance based on stability, transparency, and accountability. This is not a short-term approach. It is a long-term process to ensure that the country does not fall back into uncertainty.

For this purpose, the government is implementing strong fiscal management, predictable policies, clear and simplified regulations, anti-corruption measures, major institutional reforms, measures that allow businesses to plan ahead, instill investor confidence, minimize unnecessary barriers, and support the development of the private sector.

For a long time, we relied heavily on international loans to sustain national expenditures. However, this is not leading a path toward a stable future. Our progress depends on our ability to earn through trade, innovation, and global engagement.

Your ability to take Sri Lankan expertise and creativity to the world is a strength for the entire nation. The government is ready to extend the necessary support to achieve this.

We understand that issues such as policy inconsistencies, delays that increase operational costs, limited access to competitive financing, gaps in infrastructure and technology, weaknesses in trade facilitation, and slow progress in expanding market access have impacted you. I would like to assure you that the government is directly addressing these challenges.

The focus of the government has drawn to build efficient, transparent, and predictable systems, streamlining trade facilitation, customs processes, and investment approvals, improving export facilities, and minimizing the gap between local businesses and global markets.”

This event was attended by Ministers Kumara Jayakody, Ramalingam Chandrasekaran, Sunil Kumara Gamage; Deputy Ministers Chathuranga Abesingha, Eranga Weerarathna, Arun Hemachandra, Nishantha Jayaweera, Muditha Hansaka Wijayamuni; Governor of the Central Bank Nandalal Weerasinghe; Secretary to the Ministry of Industries and Industrial Development Tilaka Jayasundara; Chairman of the Export Development Board Mangala Wijesinghe, along with ambassadors, foreign delegates, exporters, and a large gathering.

[Prime Minister’s Media Division]