Sri Lanka has paid off USD 500 million International Sovereign Bond (ISB) that matured today (January 18), says the Central Bank Governor.Ajith Nivard Cabraal stated this in a tweet published on his official account.
Meanwhile, USD 1 billion in sovereign bonds is falling due on July 25 this year, Dr. M. Z. M. Aazim, the Superintendent & Registrar of Central Bank’s Public Debt Department said joining Ada Derana ‘Aluth Parlimenthuwa’ last week.
As Sri Lanka was making arrangements to repay the first tranche of its maturing debt, the global rating agency Standard & Poor’s (S&P) last week lowered the long-term sovereign credit rating on the country from ‘CCC+’ to ‘CCC’ citing greater sovereign default risk.
The Sri Lankan government slammed the move, saying it is perturbed by the announcement by S&P Global Ratings, at a time when it has diligently lined up adequate funds to repay its maturing foreign debt liabilities and its repeated assurances over the strong commitment to oblige its debt service payments.Sri Lanka has a total of USD 6.9 billion in debt to be repaid in 2022.
There seems to be an increasing consensus among experts in the field and observers on the ground that IMF assistance is unavoidable in the present circumstances, several economic experts said.
To overcome financial difficulties, the main advantage of IMF help is the cheapness of its credit and flexibility in terms of settlement. Currently, the interest rate on loans is only 3.5%, which is the lowest available in the market.
The settlement of debt is over medium to long term and could take as long as ten years and that also in six-month instalments.
Compared to the currency swap arrangements with India, China and Bangladesh these are unbelievably attractive terms.
Incidentally, there seems to be utter secrecy surrounding the terms and conditions attached to the latest 1.5 billion yuan-rupee swap with the Bank of China. It may cost more than what has been publicly told
The conditionality attached to IMF loan depends on the state of the economy in question. The more serious is a patient’s illness more severe will the restrictions imposed by the doctor. Likewise, had the ruling regime approached IMF quite early in time its conditions and their impact on public would have been milder.
In general, IMF conditions are tied to two areas namely, improving internal fiscal strength by way of increasing taxes and reducing wasteful public expenditure, and carrying out economic reforms.
Economic reforms demanded by IMF would mean restructuring if not privatizing all loss-making parastatals.
The main reason why several state run corporations fail is because of corruption. This again is a perennial problem in Sri Lanka. When managers of state run corporations are appointed more on the basis of political affiliation than merit, corruption sets in.
When the top is corrupt how does one expect the ones in the middle and bottom levels to remain honest.