Wednesday, August 10, 2022
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Have Central Bank officials given Governor & Govt wrong advice?

Are we barking up the wrong tree? We often target the politicians little realizing that most often they act on advice given to them. In such a scenario, have we omitted to look into the role of senior offilicials & questioned if they could have misled the governors & the govt? Did they suggest to take $12b ISBs? If they didn’t, have they made any notes of their objections? Did they negotiate debt repayment before opting to default? What are the options they looked at before declaring Sri Lanka would default repayment? The role of Finance Minister Sabry is also to be questioned.

Questions for Indrajit Coomaraswamy (IC)

The primary cause that made debt repayment unsustainable was the $12billion international sovereign bond loans taken by Central Bank Governor Indrajit Coomaraswamy (2016-2019) – did he do so on his own initiative or was he advised? If he did so on his own will, what was his intention?

Questions for Central Bank Top Management (CBTM)

  • Did CBTM advise IC to take $12b ISBs
  • Was CBTM getting any external advice to promote taking of $12b ISBs or even defaulting repayment?
  • Was there a particular reason for CBTB to advise the Governor to take $12b ISB loan especially when they were aware of the roll-over maturing debt status
  • What was done with this $12b ISB loan
  • Was CBTM aware that taking $12b ISB loan would make Sri Lanka economically vulnerable on account of roll-over maturing debt repayment?
  • Did CBTM initiate discussions to delay repayment – if they did, do they have evidence of this? If they did not, why did they chose not to or did anyone ask them not to?
  • Why didn’t CBSL officials think of repaying debt using the inflows from 25% export conversions of $750m & roll-over maturing SLDBs of $363m (total $1133m)
  • Why didn’t CBTM consider utilizing the $1b plus trade loan of $1.5b from China that was to be received end of May 2022?
  • Why didn’t CBTM consider the Indian line of credit of $1b plus another $500m from postponement from Asian Clearing Union settlements?
  • Why did CBTM along with Finance Minister Sabry decide to declare Sri Lanka defaulting on loan repayment when there was 4 options available to them (renegotiate loan repayment / Chinese loan / Indian Credit line & export conversions/roll-over SLDBs)
  • With all the above options at hand, why did Finance Minister Sabry, present CBSL Governor & Mahinda Siriwardena opt to declare Sri Lanka would default on 12 April 2022 supported by the cream of Sri Lanka’s business circles and so-called politician econimists and financial gurus.
  • The above team are to be personally held responsible for reversing 74 years of debt-honoring by Sri Lanka – embarrassing the country beyond measure.

Questions for present Governor Nandala & then Finance Minister Sabry

  • Did you both take consent of CBSL Monetary Board & Sri Lanka’s Cabinet or even the Parliament before deciding to declare default on 12th April 2022? If not, who gave you both the green light to make such a public announcement that would impact the entire country?

Did the CBTM & Governor & former Finance Minister lead  Govt & Sri Lanka astray?

What the then Finance Minister Sabry & Central Bank Top Management were aware of

  • In 2022 Sri Lanka had to repay a debt of $7100m
  • $1166m had been repaid in March 2022 (balance $5934m to be paid)
  • $244m debt servicing to be paid in April 2022
  • $789m debt servicing to be paid for May-June 2022
  • $1033m debt servicing total for April-May-June 2022
  • Sabry-Nandalal-Siriwardena’s decision to declare default on 12th April 2022 was without approvals of Parliament, Cabinet or Monetary Board & fully aware that China was to extend $2.5b and India was to assist with $1.5b by end May 2022

What top businessmen/women were ignorant of in pushing to default repayment

  • A bevy of top businessmen/women issued statements appealing to default repayment in January 2022 arguing that the money should be used to buy essentials. They made public presentations to this effect.
  • In April 2022, Sabry-Nandalal-Siriwardena declared default, as a result not only did Sri Lanka become a country globally declared untrustworthy to deal with, there was no forex to buy essentials which was far more than what was required to pay off loan repayments. Rating agencies placed Sri Lanka under “D” default status.
  • Suppliers refused to give on credit & demanded up-front payment & inability to do so left people in queues.
  • Sabry & CBSL cannot claim they were unaware of the outcome of Sri Lanka being declared defaulting & should have known what would happen.

Why did they decide to take such a risky decision impacting entire country & its people & embarrassing the credibility of Sri Lanka too?

  • If they took a decision without consulting others – they should have had a backup plan as well – did they have one? what happened to that?
  • Is their only back-up plan to go running to the IMF? If so was it on their advice that no negotiations to defer payment of loans took place & instead they decided to float the rupee (IMF requirement) and thereafter declared default?
  • Why aren’t this group being held responsible for the default status of Sri Lanka unilaterally decided by them?

Either way it is not the Govt but CBSL Top Management and the CBSL Governor who are answerable along with the professional economists who also pushed for defaulting on loan repayment. Why are public not demanding accountability from them?

Shenali D Waduge

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