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Harsha calls for legislative amendment to protect holders of domestic debt

By: Staff Writer

Colombo (LNW):The government has been urged to follow cautious approach toward domestic debt optimization calling for legislative amendment to protect holders of domestic debt in a possible restructure.

This appeal was made by SJBMP Harsha De Silva a press conference held at the Leader of the Opposition’s office, MP Harsha de Silva, expressing his thoughts and suggestions regarding the upcoming domestic debt-restructuring plan in Sri Lanka.

He divulged that opposition parties, while cautious about the potential consequences, would discuss the need for careful domestic debt optimization if deemed absolutely necessary. The government plan is set to be presented to the Cabinet on the 28th and will subsequently undergo deliberation in the Committee on Public Finance over the following two days. Pending agreement at the Party Leaders’ meetings, a special parliamentary session is planned for the weekend of July 1st and 2nd to debate the plan.

The government’s blueprint, published last year and revised earlier this year, stressed the need to guarantee the stability of Sri Lanka’s financial sector and prevent any unfair treatment of depositors, particularly the EPF and ETF. The Opposition firmly opposes any haircut on domestic debt and warned against it. He referred to a haircut as a ‘Do Not Cross’ line.

He said while his party was totally opposed to any plans that include a haircut on domestic debt, they remain committed to protecting the interests of the nation. They emphasize the importance of fair treatment for pension funds and depositors without causing further harm to the economy.

The government has indicated that only treasury bonds will be subject to optimization, not treasury bills. Thus, as treasury bonds carry higher risk, they demand a risk premium. Lowering the risk through the debt optimization program will subsequently lead to a decrease in interest rates, benefiting small and medium-sized enterprises (SMEs) and other businesses, revitalizing the economy. This urgency underscores the importance of implementing the domestic debt optimization plan as soon as possible.

MP Harsha de Silva and the opposition parties are prepared to draft laws and regulations in Parliament to safeguard the interests of the people and creditors

One of the potential positive outcomes of an effective domestic debt optimization program would be the revival of the Micro, Small, and Medium Enterprises (MSME) sector. MP Harsha highlighted the importance of providing support and opportunities for these businesses, which are currently facing significant challenges. A well-executed debt optimization program could help uplift the MSME sector from its current state and foster growth and economic recovery.

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