Central Bank Governor Nandalal Weerasinghe has ignored President Ranil Wickremasinge’s prior warning of debt default repercussions issued by him when he was an MP.
The President’s views on the consequences of default were expressed in a TV interview at a “Derana 360” programme on 28th March 2022 when he was an MP has become a reality today three months after the Central Bank Governor Nandalal Weerasinghe’s. declaration of preemptive debt default on April 12.
He noted that If we fail to pay our debt, we won’t be able to get any money from anywhere claiming that some persons or countries who have already given us loans will call back those loans making the country bankrupt.
Mr Wickremesinghe: said the country will face the situation where foreign investors will not have trust and confidence. Even local business people will not have confidence. Not only large businesses, but even a small boutique owner will lose confidence when the country is bankrupt.
If the debt is not paid, essential goods can’t be purchased. If we are to get essential items into the country, we have to transact business with foreign banks. Then, if the country is bankrupt, those foreign banks won’t do business with us, will they?he asked.
Sri Lanka fell into debt evasion for the first time in its history following declaration of preemptive debt default on April 12 2022 by Central Bank Governor Nadalal Weerasingheina haste pushing the people into economic hardships in high cost of living, economic analysts said.
Policy makers had flagged to creditors that the nation wouldn’t be able to make payments until the debt is restructured,he disclosed at a time where confimed foreign inflows to the cumulative value of around US$ 4,950 million as at March 4 2022,Central Bank, data on foreign exchange recipt on pipe line revealed.
Of the pipeline, a sum of $ 4,500 mn was confirmed as being in the final stages by 3rd April 2022, and a further amount of about $ 2,650 mn was very likely to materialize over the short term, which would have enabled the Government to settle the maturing payments due in 2022, while also rolling over several other existing loans, including Dvelopment Bonds and FCBU loans.
Sri Lanka was on the verge of receiving a significant inflow of funds of $ 1 billion and access to a trade loan of $1.5 billion from China that were expected to materialize towards the latter part of April 2022 or early May 2022. These inflows were officially announced on March 21 2022.
The government is due to make a $36 million interest payment on a 2023 dollar bond April 18, as well as $42.2 million on a 2028 note.and a $1 billion sovereign bond was maturing July 25.
Therefore Central Bank Governor Nandalals statement to media that it had not been able to make some $ 200 mn including $87 million in interest payments was unbelievable, economic analysts claimed.
This policy action further deepens the country’s economic crisis, which has sparked mass protests and left the country struggling with fuel shortages.
Not only did the Government previously settle the maturing ISB of $ 500 mn in January 2022 and all other maturing debts and interest in the months of January and February 2022, during the month of March 2022, the Government paid back and rolled-over sovereign Forex debt payments of a substantial sum of $1,166 million out of the total amount of repayments of approximately USD 7,100 million that was due in 2022.
Thereafter, in April 2022, the Forex debt servicing was comparatively less at only $244 million, while the Forex debt servicing for May and June was only another $789 million.
Thhe sudden “default” announcement of 12th April 2022, completely disrupted all the above expected inflows, with the possible exception of the roll-over of the India and Bangladesh SWAPs that had been previously negotiated.
