Sri Lanka is now severely feeling the pinch of controversial declaration of preemptive debt default hinting the country’s bankruptcy made by the Central Bank Governor Nandalal Weerasinghe on April 12 as the finance ministry engagement of creditors debt on restructuring process dragging on without any positive results.
The Central Bank’ monetary board is currently compelled to reconsider the revising of present extremely high interest rates which are unsustainable and a threat to all businesses in every industry, especially considering the many difficulties of operating businesses during this economic crisis, several eminent economists said.
President Ranil Wickremasinghe is now bravely facing the repercussions of the decisions taken by the Central Bank in accordance with its Monetary Board consent.
President Wickremasinghe shouldering the gigantic task of correcting the wrong ill advice and back firing actions of high handed arrogant officials’ who misled all previous regimes in collaboration with corrupt ministers in those regimes.
However this not the time of blaming and shaming for past deeds as the the government has an urgent responsibility to tackle the the man made economic crisis and direct the ill-fated economy towards a corrective path, patriotic group of government officials claimed.
Expressing his concerns about the need to ensure sufficient steps to wipe out the mal-effects arising out of the self- declared Label of Bankruptcy, the President who is also the country’s Finance Minister has already spelled out his package of plans to resolve the current issues according priority to conserve foreign exchange and limit imports emphasizing that it did not work initially but ok now.
He also stated that as the revenue is dried up, measures have to be taken to increase revenue and this too is in the scope of the plans envisaged.
The controversial “debt default” announcement on 12 April 2022 pushed the country into default, and it is seriously suspicious as to why that was done when the “pipeline of inflows” at that time amounted to $ 10.7 billion without the necessary formal approvals.
Sri Lanka is now facing frightful repercussions of defaulting sovereign forex loans which led to the loss of the credibility and Investors shun that country.
The defaulting country cannot obtain new forex loans thereafter. Access to International Bond Markets is lost.
The banking system is placed under pressure. Banks face serious difficulties when opening letters of credit and doing forex transactions. Forex loans and investments are halted. Local firms doing business overseas face hardships. Most forex-funded infrastructure Projects halted.
Foreign Direct Investors adopt a “wait and see” attitude. Small and medium sized import-based businesses and entrepreneurs face the risk of collapse.
Hundreds of thousands of jobs and livelihoods are in jeopardy. Inflation and interest rates rise. The Government is compelled to sell valuable state assets. Forex creditors institute legal action to recover their dues. The Government incurs huge litigation costs and experiences “black-listing”.
