ECONOMYNEXT –The main opposition SJB would fight to defeat the government’s plans to restructure domestic debt, opposition leader Sajith Premadas said, offering the opposition’s assistance in sending a strong message to the international community.
Premadasa said at a meeting with representatives of the Ceylon Bank Employees’ Union on Thursday May 18 that the opposition is ready to tell the international community to not touch Sri Lanka’s domestic debt.
“We will fight both in and outside parliament and internationally the government’s attempt to restructure domestic debt,” Premadasa said.
The opposition leader claimed the government has changed its position on domestic debt restructuring (DDR). The government had maintained in March that there would be no restructuring of domestic debt, only to sing a different tune after the International Monetary Fund (IMF) programme was approved.
“In March, not even the president said domestic debt would be restructured,” he said.
“They’re now saying they have to do it. Why did you keep hoodwinking the people?” he asked, adding that DDR was first on the agenda.
“You can’t dance to your own tune, nor can you make the people dance,” said Premadasa. However, the SJB is ready to assist the government in reversing the decision.
“If the government wishes to, even at this last moment, send a message to the international community, with assistance from the opposition, to not touch domestic debt, we’re ready to work together with the government to communicate this to the international community,” said Premadasa.
A top IMF official told reporters on Monday May 15 that the international lender is in constant dialog with Sri Lanka over its DDR plans. The IMF defines a macro framework, ceilings on gross financing needs (annual debt volumes that are issued and re-issued), foreign debt service, and debt stocks on a timeline for a defaulted country to make its debt ‘sustainable’.
In April, President Ranil Wickermesinghe was reported to have told the cabinet of ministers hat a debt restructuring framework to negotiate with creditors would be announced by May.In parallel, discussions will also commence with private creditors. Sri Lanka met private creditors in Washington in April.
Sri Lanka also has to restructure its domestic debt to meet gross financing need (annual financing and debt roll-over totals) ceilings from 2027-2032 to make its debt ‘sustainable’ according to an IMF debt analysis.The central bank has said domestic debt restructuring will be voluntary, but fresh jitters hit the market last week triggering a rise in bond yields.
Several countries which were hit by monetary instability from flexible inflation targeting and flexible exchange rates or similar impossible trinity regimes, which had market access had defaulted in recent years and more are on the brink of default.
External sovereign defaults started in the early 1980s with similar policies in Latin America, which has among the worst central banks in the world and some Eastern European nations.