Former Sri Lankan President Gotabaya Rajapaksa’s return to the country will further be delayed dismissing early reports on his return on August 24.

Although the ex President is expecting to return to the island his return will not take place on the 24th, according to Private Secretary Sugeeshwara Senadheera.

His exact date of return has not been confirmed yet.

Rajapaksa fled the nation amidst growing objections from the public leading to the historic ‘Aragalaya’ anti-government protests and he landed on Maldives and later Singapore. His route continued to Thailand and the ex Sri Lankan President has been allowed to stay there for several months.

MIAP

Central Bank Governor Dr. Nandalal Weerasinghe expressed confidence on the gradual recovery of the ailing economy and reaching debt sustainability without re-structuring domestic debt with forex inflows coming in normal banking channels following the ban on open account transactions.

The economic growth is projected to contract to over 8 percent this year from the earlier projection of 7.5 percent while the inflation would come down to around 60- to 65 percent from the earlier projection of over 70 percent.

Foreign exchange inflows are now adequate to pay for essential food, fuel and medicine imports owing to Central Bank’s policy measures, he claimed.

Contradicting the President’s view of possible restructuring of massive domestic debt, Dr Weerasinghe said that there was no need to restructure domestic debt at present as the monetary authority has taken measures towards debt sustainability safe guarding the banking sector.

At least two recent public meetings President Ranil Wickremasinghe categorically stated that domestic debt stock was serious and it needs to be restructured as well and that external consultants were looking into it.

He told the Organisation of Professional Associations (OPA) annual conference and awards ceremony held in Colombo this week that Sri Lanka’s International Sovereign Bond (ISB) holders may exert pressure on the government to restructure the domestic debt

He noted that they alone may not be keen to accept a steep haircut under a debt sustainability plan, which is a prerequisite to secure an International Monetary Fund (IMF) bailout.

However Dr Weerasinghe disclosed that still there was no request for domestic debt restructuring and the Central Bank is fully convinced that it would be able to make it sustainable.

“The government position is to re-structure external debt,” Dr Weerasinghe said adding that the banks liquidity position will be affected by domestic debt restructuring. .

The Central Bank is holding one to one talks with banks to discuss ways and means to minimise the impact on the local banking system and maintain debt sustainability.

He emphasised the need of minimising any adverse impact on banking system, to maintain financial stability which will help expedite economic recovery.

The Governor expressed the belief that external creditors could recover their liabilities faster than expected with relief on dues by not resorting to domestic debt restructure.

He revealed that International Monetary Fund (IMF) team will be visiting Sri Lanka by the end of this month to reach Staff-Level Agreement on macroeconomic programme and debt restructuring target in the next 10 years’.

The country’s forex inflows were much better at present following the restriction on non essential imports and prohibition of open account transactions of importers and high export earnings.

The essential food commodity importers were given a relief to import essential food items on open account transactions on directive from the high authority and released them with required foeign exchange via banks, he revealed.

This has helped to tackle shortage of essential food items and reduce prices to some extent adding that the ban will be re-imposed soon.

The government will go all out to convince China to support Sri Lanka with the aim of finalising the International Monetary Fund (IMF) bailout loan although it has to repay more debt to the West as International Sovereign Bond payments official sources closely connected to ongoing negotiations said.

Sri Lanka is set to submit a comprehensive economic reform programme including the policies needed to correct structural imbalances over an extended period along with debt restructuring report prepared by financial and legal advisory firms Lazard and Clifford Chance LLP very soon (this month) a senior official said. .

He noted that those negotiations with the IMF were more difficult and complex due to the country’s inability to service debts owing to dwindling reserves and dollar scarcity.

Once a staff-level agreement is reached, the country’s economic reform and debt restructuring plan (structural adjustment) will be submitted to the IMF Board of Directors for approval.

As of 2021, a staggering 81 percent of Sri Lanka’s foreign debt was owed to U.S. and European financial institutions, as well as Japan and India and 10 percent owed to China Finance Ministry data shows. .

According to ministry statistics as of the end of April 2021, the majority of ists foreign debt around 47 percent is owned by Western venture funds and banks..

The top holders of the Sri Lankan government’s debt, in the form of international sovereign bonds (ISBs), are BlackRock (U.S.),Ashmore Group (Britain),Allianz (Germany),BS Switzerland), HSBC (Britain), JPMorgan Chase (U.S.) and Prudential (U.S.), a senior government official said.

The Asian Development Bank and World Bank were the other debtors which, own 13 percent and 9 percent of Sri Lanka’s foreign debt, respectively. Asian Development Bank (ADB) also owns a marginal percentage.

Japan, owns 10% of Sri Lanka’s foreign debt while India 2 percent by end of last year. According to Sri Lanka’s economic programme (structural adjustment plan) the government has to make at least nine commitments via fiscal policy measures.

According to the Plan, major policy decisions to be taken on Increase income tax rates, reduce income tax thresholds, increase VAT rate and reduce VAT threshold, setting up an independent debt office, Continuation of high interest rate, Continuation of high interest rate, and no more fixed exchange rates.

The other commitments are the listing minority stakes of some SOEs in the stock market, making SOEs more transparent, restructure Sri Lankan Airlines, CPC and CEB and consider Samurdhi as more targeted welfare.

The government is also committed to introduce several other policy measures such as to introduce cost-based fuel pricing formula, Electricity pricing formula, electricity bill increase, repeal Monetary Law Act and pass the Central Bank bill to reduce political intervention in CB as well as relaxing import restrictions