Monday, June 17, 2024

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SL to temporarily suspend debt servicing. Are repercussions being handled?

The Ministry of Finance has announced that all normal debt servicing will be suspended for an interim period pending a consensual restructuring of the obligations consistent with an International Monetary Fund (IMF) supposed economic adjusted programme. 

The government intends these emergency measures as temporary expedients designed to preserve the financial status quo until with the assistance of the IMF and Sri Lanka’s other official sector partners, a full economic recovery program can be made, the notice says.

The Government is taking the emergency measures described in this memorandum only as a last resort in order to prevent a further deterioration of the Republic’s financial position and to endure fair and equitable treatment of all creditors – commercial and bilateral – in the comprehensive debt restructuring that now seems inescapable, it added.

Conclusively, this would be an official statement to confirm that Sri Lanka is now bankrupt.

This begs the question as to whether the President and the Cabinet are aware of such a decision and whether the move has been approved by either party with regard to the very serious repercussions that might follow with such a decision.

The Finance Ministry has to explain whether a comprehensive Cabinet paper has been submitted prior to such an announcement and whether the IMF and the World Bank supported the move.

It should also explain whether such assurances have been obtained from the IMF and the World Bank themselves prior to making such a far-reaching announcement.

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