Harsha warns against signing flawed external debt restructuring plan

Tuesday, 14 May 2024 00:01 –      – {{hitsCtrl.values.hits}}

SJB MP Dr. Harsha de Silva 

  • Highlights in Parliament inaccuracies in variables used to determine proposed haircut for bondholders, urging for revision to ensure fair outcome
  • Asserts need for economic policies that prioritise domestic industries, sustainable growth, rather than blindly following IMF directives
  • Proposes abolishing 30% tax on export companies under SJB Govt. to empower local entrepreneurs, facilitate greater access to global markets
  • Advocates for reforms that consider impact on households, while also addressing concerns about mounting debt burden

Main Opposition SJB MP Dr. Harsha de Silva yesterday in Parliament delivered a stern warning regarding the proposed external debt restructuring plan, emphasising the potential pitfalls and urging against signing the agreement in its current form.

Speaking out against the restructuring proposal put forth in April, he highlighted critical flaws in the plan. De Silva pointed out that the proposed haircut for bondholders, set to be implemented in first quarter of 2028 is fundamentally flawed and based on incorrect variables, whilst cautioning against measuring GDP in dollars, arguing that such an approach is erroneous and would lead to unfavourable outcomes.

“Signing the proposed agreement without addressing these flaws would be a grave mistake. It would amount to a betrayal of the country’s interests,” he asserted.

MP Dr. de Silva who is also Chairman of parliamentary oversight body the Committee on Public Finance (COPF) stressed the need for substantial changes to the variables governing the debt restructuring plan, advocating for a haircut of at least 30% for bondholders. He warned against succumbing to all the directives of the International Monetary Fund (IMF), stressing the importance of charting an independent course for economic recovery. He warned the Government not to dance to the whims and fancies of advisors Clifford Chance and Lazard.

“In this agreement, we must prioritise policies that boost domestic industries particularly those Dollar generating firms and foster sustainable growth,” he added.

Proposing significant reforms, Dr. de Silva outlined plans under a SJB Government to abolish the 30% tax on merchandise export companies, thereby providing local entrepreneurs with greater access to global markets.

He underscored the importance of connecting with diverse economies including India which has seen rapid economic growth.

“Today we cannot do trade without connecting with the rest of the world. The iPhone itself is being assembled with the components provided by 43 countries,” he said, adding that within the next two years, South India will see a rapid boost particularly in the ICT sector in states such as Tamil Nadu, Karnataka, Andra, Kerala and Telangana. “Our aim is achieving 10 years of 10% economic growth,” he added.

Reflecting on past economic trends, Dr. de Silva noted that while the highest economic growth was recorded during Mahinda Rajapaksa’s tenure in 2011 and 2012, subsequent year saw a 3.5% decline. “Concerns about high debt levels emerged in 2014, leading to regime change in 2015. In 2020, the entire economy collapsed,” he claimed, underscoring the need for careful economic management.

Addressing recent claims about loans, Dr. de Silva clarified that the $ 12 billion borrowed in 2019 was primarily used to service interest payments on debt acquired during the Mahinda Rajapaksa regime in 2014.

SJB MP also cautioned that reforms must be implemented judiciously, taking into account their impact on households and vulnerable populations. He also addressed concerns about the mounting debt burden, clarifying that loans acquired in the previous year were primarily used to service interest payments on debts accrued during the previous administration.