Sri Lankan economists oppose government allocation of $ 500 million for repayment of maturity bonds

The Sri Lankan government has secured $ 500 million to repay bonds that are maturing, central bank governor Ajith Nivard Cabraal said on January 5 that some economists are wrong given the lack of foreign currency to pay for imports. I believe.

Cabraal announced to twitter $ 500 million was allocated to international sovereign debt, which matures on January 18, but some economists opposed the move and instead asked the government to restructure its debt.

Sri Lanka is reported to have to repay about $ 4.5 billion in debt in 2022, starting with the repayment of $ 500 million in international sovereign debt on January 18.

Former World Bank Chief Economist in Sri Lanka, Shanta de Barajan, said that repayment of maturing bonds only exacerbates the country’s “uncoordinated defaults” and is the country’s “unsustainable” debt daily. He said it would not mitigate FT. report..

“Sri Lanka is facing a serious forex shortage. People are in long lines to buy cooking gas. There is no powdered milk. Food prices are rising rapidly. Power outages are frequent. “We do,” said Devarajan.

“This $ 500 million could allow people, especially the poor, to buy and cook food for themselves and their children. Instead, the government holds bonds that aren’t very poor. I choose to repay the person. “

Inflation in the country reached a record high of 11.1% in November 2021, and food inflation rose to 16.9, according to the report. data Announced by the Central Bank of Sri Lanka. The rise in prices was triggered by the depreciation of the local currency, which fell 7.5% against the US dollar in 2021.

The government then declared an economic emergency under the Public Safety Ordinance and appointed service commissioners essential to regulate food prices charged by merchants and retailers.

Vish Govindasamy, chairman of the Ceylon Chamber of Commerce, also made available to the government the influx of foreign exchange to restructure national debt and ease citizens’ difficulties in obtaining basic necessities. Asked to find a way to do it.

Govindasamy said Sri Lanka cannot afford to send a message to the world about the country’s food shortages, given that tourism is the country’s main source of foreign currency income.

Cabraal defended the move, arguing that not paying debt could pose great challenges to the country.

“We need a more comprehensive and long-term plan to address debt and other issues in the Sri Lankan economy. [international sovereign bonds] It will lead Sri Lanka to a path of pain, “he said at an event on January 12.

India announced on January 13 that it will expand $ 900 million to Sri Lanka, provide a $ 400 million currency swap, and postpone the $ 500 million settlement to the Asian Clearing Union.

Sri Lanka’s President Gotabaya Rajapaksa also urged China to help rebuild billions of dollars in debt repayment, and urged China to offer concessional trade credit plans for Chinese imports.

Cabraal said negotiations with Qatar on a $ 1 billion credit line are underway and the government may consider a new loan from Sri Lanka’s fourth-largest lender, China.

Over the last decade, China has financed Sri Lanka over $ 5 billion in highways, ports, airports and coal-fired power plants. However, critics say the money was used for a low-profit white elephant project, which China has denied.

In December 2017, the Sri Lankan government leased the entire Hambantota Harbor to China for 99 years and converted $ 1.4 billion in debt into equity, which has led tens of thousands of protesters to oppose the deal.

Reuters contributed to this report.

Aldograph Redley


Aldgra Fredly is a Malaysia-based freelance writer featuring the Epoch Times Asia Pacific News.