Yohan Perera and Ajith Siriwardana
First round of discussions with the International Monetary Fund (IMF) has been a success but the assistance depends on the debt restructuring program which Sri Lanka has to come up with, Prime Minister Ranil Wickremesinghe told Parliament.
Making a special statement in the House Mr. Wickremesinghe said Sri Lanka will hand over a debt restructuring program report to IMF in August this year. “The expert companies which we have hired are in the process of preparing a debt restructuring program and we will hand over the report on it to IMF in August this year,” the Prime Minister said.
“Our country has held talks with the IMF on many occasions before. But this time the situation is different from all those previous occasions. In the past, we have held discussions as a developing country. In such a case, both parties have only to reach an agreement on the EFF or Extended Credit Facility. It is like moving along a straight line.However now the situation is different. We are now participating in the negotiations as a bankrupt country.
Therefore, we have to face a more difficult and complicated situation than previous negotiations. Once a staff-level agreement is reached, this will be submitted to the IMF Board of Directors for approval. But due to the state of bankruptcy our country is in, we have to submit a plan on our debt sustainability to them separately. Only when they are satisfied with that plan can we reach an agreement at the staff level. This is not a straight-forward process. We have been able to end the round of discussion effectively despite these difficulties.
According to the IMF’s official announcement, “Positive and productive discussions were held on supportive economic policies and reforms. Significant progress was achieved.”Now the next step is to submit to them the plan on debt restructuring and sustainability, which is being prepared by financial and legal experts Lazard and Clifford Chance. We hope to submit this report to the IMF by August,” he added.
“Our economy is currently shrinking. We are trying to reverse it. According to central bank statistics, our current economic growth rate is between negative four and negative five. According to IMF statistics, it is between negative six and negative seven. This is a serious situation. If we make a determined journey along this road map, we can achieve an economic growth rate of negative one by the end of 2023.By 2025, our aim is to create a surplus in the primary budget. Our effort is to raise the economic growth rate to a stable level. Our expectation is to establish a stable economic base by 2026.I would like to give you an idea of the debt we have to pay off so far. $3.4 billion between June and December this year. $5.8 billion in 2023. $4.9 billion in 2024. $6.2 billion in 2025. $4.0 billion in 2026. $4.3 billion in 2027.The total debt burden of the government at the end of 2021 was Rs 17.5 trillion and by March 2022 it has increased to Rs 21.6 trillion.
This is the real situation. In addition, we are facing the effects of many problems that have worsened in the past two or three years. These are not problems that can be solved in two days. We are suffering from the effects of certain traditional ideas that have been followed in our country for many years. Therefore, as I mentioned earlier, we will have to face difficulties in 2023 as well. This is the truth. This is the reality. Some may try to cover up this reality by showing the people a false image. But this reality will be confirmed in time. Our plan is to control inflation.
By the end of this year, inflation will rise to 60%. This is mainly due to the increase in the prices of goods in the world and the fall in the value of the rupee,” he also said.
Due to the current inflation, the depreciation of the rupee has reduced the value of the money in the Employees’ Provident Fund and the Employees’ Trust Fund by 50% and the real value of pensions has also decreased by 50%. Think about how this situation affects our senior citizens. Poverty is spreading among all of them. The value of the money they receive has decreased by 50%. Their purchasing power has decreased by about 50%. Presenting positive ideas is easy.
But it is difficult to find answers to these problems.What is the solution to this? Stabilizing the rupee as soon as possible, strengthening the rupee without letting it fall. For that purpose, 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, it is our intention to stop printing money completely.We aim to reduce the inflation rate to between 4 and 6 percent by 2025.Another top priority for us is to protect the banking and financial system. The pressure on these systems during an economic crisis does not need to be explained anew to this House. But due to this pressure, we will not allow the banking system to be pressured by poor policies. The government has given priority to strengthening the banking and financial system,” the Prime Minister said.
Meanwhile, we pay special attention to state banks. They have been beaten from both sides. On the one hand, the economic crisis, on the other hand, the huge amount of loans they have given to state enterprises. As of March 31, 2021, SriLankan Airlines owes Rs. 541 billion as of May 31, 2022, the Electricity Board owes Rs. 418 billion. Petroleum Corporation owes Rs. 1.46 trillion.When public enterprises continue to incur losses, the entire citizenry suffers. People who have never traveled on a plane in their lifetime are suffering for the loss of SriLankan Airlines. The people who have paid money for fuel all their lives are suffering for the loss of the petroleum corporation.
After hours, days and days of waiting in queues to get fuel, they pay compensation to the oil company to cover the loss of the company. The people who get electricity by paying money all their life, sit in the dark for several hours a day and suffer for the loss of the electricity board. We will have to restructure Electricity Board, Ceylon Petroleum Corporation and Srilankan Airlines,” he also highlighted.