‘Country is bankrupt’: Lanka to present debt restructuring program to IMF by August, says PM Wickremesinghe

Prime Minister Ranil Wickremesinghe told parliament on Tuesday that Sri Lanka would present a debt restructuring program to the IMF by August, Prime Minister Ranil Wickremesinghe told parliament on Tuesday, but acknowledged that talks with the global lender were “more difficult than in the past”. more complicated”. Now “bankrupt”.

Sri Lanka is going through the worst economic crisis since independence from Britain in 1948, and needs to get at least USD 4 billion to deal with the acute shortage in foreign exchange reserves.

An International Monetary Fund (IMF) team visited Colombo on 20 June to continue discussions on an economic program that could be supported by an IMF loan arrangement.

The IMF later said it had concluded “constructive and productive” discussions with Sri Lankan officials, but warned that the beleaguered island nation needed to do more on debt restructuring and before finalizing a bailout package. Structural reforms need to be pursued to address the vulnerabilities of corruption.

“The first round of talks with the IMF has been successful, but aid depends on the debt restructuring program that Sri Lanka has to bring,” Wickremesinghe told parliament.

Sri Lanka is currently working on a debt restructuring sustainability plan being prepared by legal and financial experts. “We hope to submit this report to the IMF by August. Once that is done, we will be able to reach an agreement,” he said.

The anticipated IMF facility is seen as slow in implementation due to the question of the island’s debt stability.

Wickremesinghe said the economic crisis would be resolved through meaningful reforms and stressed that the support of Parliament, including the opposition, is paramount.

“A return to an open economy, devoid of state monopoly, is a must. Economic integration with the region should not be expected, but it should be pursued,” he said.

Wickremesinghe recalled that Sri Lanka had held talks with the IMF on several occasions in the past, though it was discussed as a developing country at that time.

He said, “But this time the situation is different from all those previous occasions. Now we are participating in the talks as a bankrupt country. Therefore, we are facing a more difficult and complicated situation than in the previous negotiations. “

“Once an employee-level agreement is in place, it will be submitted to the IMF’s board of directors for approval. But because of the bankruptcy situation our country is in, we have to separately submit a plan on our debt stability .

Wickremesinghe said, “Only when they are satisfied with that plan can we reach an agreement at the employee level. It is not a straightforward process. We have been able to effectively end the round of discussions despite these difficulties.”

He said Sri Lanka’s economy is currently shrinking and the government is trying to reverse it.

“According to central bank data, our current economic growth rate is between negative four and negative five. According to IMF data, it is between negative six and negative seven. This is a serious situation.”

“By 2025, we aim to create a surplus in the primary budget. Our endeavor is to raise the economic growth rate to a stable level. Our hope is to establish a stable economic base by 2026,” he said.

“It will take until 2026 to go back to 2018 levels. If we make a scheduled journey along this road map, we can achieve negative economic growth by the end of 2023,” he said.

He said the total debt burden of the government at the end of 2021 was Rs 17.5 trillion and by March 2022 it increased to Rs 21.6 trillion.

The Prime Minister also presented a roadmap with proposed solutions to the current economic problem. He said that it is important to stabilize the rupee at the earliest and strengthen the rupee without falling.

“We have implemented a plan to limit the printing of money in the future. In 2023, we will have to print money with restrictions on several occasions. But by the end of 2024, we intend to stop money completely.”

Wickremesinghe said Sri Lanka’s inflation would be over 50 per cent by the end of the year. “Our plan is to control inflation. By the end of this year, inflation will rise to 60%. This is mainly because of the rise in the prices of commodities in the world and the fall in the value of rupee,” he said. ,

He said the government aims to bring down the inflation rate to between 4 and 6 per cent by 2025.

Inflation in the month of June, as measured by the Colombo Consumer Price Index (CCPI), was up 54.6 per cent from 39 per cent in May, it was announced last week.

“Another top priority for us is to protect the banking and financial system,” he said.

“We have to restructure the Electricity Board, Ceylon Petroleum Corporation and Sri Lankan Airlines,” he said.

Tension in Parliament forced Tuesday’s session to be adjourned for ten minutes when opposition lawmakers started shouting slogans against President Gotabaya Rajapaksa and when Wickremesinghe was making a statement on the progress of IMF talks, he called “Gota go”. Home” posters displayed. ,

President Rajapaksa, who was present in the House to attend the session, left the House after the session was adjourned.

The country, with an acute foreign exchange crisis that resulted in foreign debt defaults, announced in April that it would suspend foreign debt repayments of about USD 7 billion for the year, out of about USD 25 billion due by 2026. doing.

Sri Lanka’s total external debt is $51 billion.