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CB says it abides by stance that domestic debt doesn’t need to be restructured for debt sustainability

By: Isuru Parakrama

Colombo (LNW): The Central Bank of Sri Lanka (CBSL) said it continues to maintain its stance that domestic debt does not need to be restructured for debt sustainability, given that local debt has already been subject to restructuring towards high inflation and massive Rupee depreciation last year.

The CBSL originally intended to stand against domestic debt restructuring, but some form of restructuring had to be accepted during the debt negotiation process, in the bid to secure concessions from foreign creditors and facilitate an early resolution, thereby avoiding a prolonged economic crisis in the country, said Governor Nandalal Weerasinghe.

The CBSL Governor made this remark in response to rising queries on the Bank’s strong stance that domestic debt will not be subject to restructuring when the controversial sovereign ‘debt default’ was first announced on April 12, 2022, one that is highly contradictory to the government current policy on debt restructuring.  

Accordingly, the CBSL Chief emphasised that even today, he maintains the same position that domestic debt should not be restructured for debt sustainability, adding that the foreign creditors, on the other hand, had been lacking satisfaction on only fiscal and other structural adjustments being made in the economy.

He revealed that foreign creditors asked for more in terms of restructuring the domestic debt as they wanted equal treatment of both foreign and domestic debt.

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