‘Country is bankrupt’: PM Wickremesinghe says Lanka to current debt restructuring programme to IMF by Aug

Sri Lanka will current a debt restructuring programme to the IMF by August to safe a bailout package deal, Prime Minister Ranil Wickremesinghe advised Parliament on Tuesday, however acknowledged that negotiations with the worldwide lender had been “more difficult and complicated” than prior to now because the nation is now “bankrupt.”

Sri Lanka goes by the worst financial disaster since its independence from Britain in 1948, and must acquire at the very least USD 4 billion to tide over the acute scarcity in overseas alternate reserves.

An International Monetary Fund (IMF) group visited Colombo on June 20 to proceed discussions on an financial programme that may very well be supported by an IMF lending association.

The IMF later stated it has concluded “constructive and productive” discussions with Sri Lankan authorities, however warned that the crisis-ridden island nation must do extra on debt restructuring and step up structural reforms to handle corruption vulnerabilities earlier than a bailout package deal is finalised.

“The first round of discussions with the IMF has been a success but the assistance depends on the debt restructuring programme which Sri Lanka has to come up with,” Wickremesinghe stated in Parliament.

Sri Lanka is at the moment engaged on the debt restructuring sustainability being ready by authorized and monetary specialists. “We hope to submit this report to the IMF by August. Once this is done we will be able to reach an agreement,” he stated.

The anticipated IMF facility is seen as being gradual to materialise because of the query of the island’s debt sustainability.

Wickremesinghe stated the financial disaster can be resolved by significant reforms and harassed that the assist of Parliament, together with the Opposition, is of paramount significance.

“A return to an open economy, devoid of state monopolies, is a must. Economic integration with the region mustn’t be feared, but pursued,” he said.

Wickremesinghe recalled that Sri Lanka held negotiations with the IMF on many occasions before, however at those times discussions were held as a developing country.

“But this time the state of affairs is totally different from all these earlier events. We at the moment are taking part within the negotiations as a bankrupt nation. Therefore, we have now to face a tougher and sophisticated state of affairs than in earlier negotiations,” he said.

“Once a staff-level settlement is reached, this can be submitted to the IMF Board of Directors for approval. But because of the state of chapter our nation is in, we have now to submit a plan on our debt sustainability to them individually.

“Only when they are satisfied with that plan can we reach an agreement at the staff level. This is not a straightforward process. We have been able to end the round of discussion effectively despite these difficulties,” Wickremesinghe stated.

He stated Sri Lanka’s financial system is at the moment shrinking and the federal government was making an attempt to reverse it.

“According to central bank statistics, our current economic growth rate is between negative four and negative five. According to IMF statistics, it is between negative six and negative seven. This is a serious situation,” he stated.

“By 2025, our aim is to create a surplus in the primary budget. Our effort is to raise the economic growth rate to a stable level. Our expectation is to establish a stable economic base by 2026,” he stated.

“It will take till 2026 to go back to the 2018 level. If we make a determined journey along this road map, we can achieve an economic growth rate of negative one by the end of 2023, he said.

He said the total debt burden of the government at the end of 2021 was Rs 17.5 trillion and by March 2022 it has increased to Rs 21.6 trillion.

The Prime Minister also presented the roadmap with proposed solutions to the existing economic problem. He said it was important to stabilise the rupee as soon as possible and strengthen the rupee without letting it fall.

“We have applied a plan to restrict the printing of cash sooner or later. In 2023, we must print cash with restrictions on a number of events. But by the tip of 2024, it’s our intention to cease printing cash utterly.”

Wickremesinghe said that Sri Lanka’s inflation by the year end would be over 50 per cent. “Our plan is to manage inflation. By the tip of this 12 months, inflation will rise to 60%. This is principally because of the improve within the costs of products on the planet and the autumn within the worth of the rupee,” he said.

He said the government aims to reduce the inflation rate to between 4 and 6 per cent by 2025.

The inflation in the month of June as measured by the Colombo Consumer Price Index (CCPI) was 54.6 per cent up from 39 per cent in May, it was announced last week.

“Another high precedence for us is to guard the banking and monetary system, he stated.

“We will have to restructure the Electricity Board, Ceylon Petroleum Corporation and Srilankan Airlines,” he said.

Tuesday’s Parliament session had to be suspended for ten minutes due to a tense situation which erupted in Parliament when Opposition MPs started shouting slogans against President Gotabaya Rajapaksa and displayed posters “Gota Go dwelling” when Wickremesinghe was making an announcement on the progress of the IMF talks.

President Rajapaksa, who was current within the House to attend classes, left the chamber after the session was suspended.

The nation, with an acute overseas foreign money disaster that resulted in overseas debt default, had introduced in April that it’s suspending almost USD 7 billion overseas debt reimbursement due for this 12 months out of about USD 25 billion due by 2026.

Sri Lanka’s whole overseas debt stands at USD 51 billion.