(UTV | COLOMBO) – Governor of the Central Bank of Sri Lanka Dr. Nandalal Weerasinghe says the International Monetary Fund’s disbursement of the Extended Fund Facility to Sri Lanka can be expected by the end of the year, subject to the success of debt restructuring with creditors and successful negotiations with the IMF.
In an interview, when asked whether he can assure the IMF that Sri Lanka’s debt is sustainable without restructuring domestic debt, the Governor said: “This is exactly what we are discussing with the IMF.”
Governor Weerasinghe said “First part is to reach a staff-level agreement on the overall macro fiscal policy framework for the next 3-4 years and the medium-term framework, that we are coming closer to reaching an agreement on a macro fiscal framework.”
“The second part is for us to agree and negotiate with the debt targets for us to make our medium to long term debt sustainable. We are in the process of having this discussion. Only after that basically what we can say where the debt targets, we have to meet.”
The Governor further said “In terms of domestic debt, we are restructuring our position as I mentioned earlier. That remains as we announced on 12th of April; we would like to restructure only external debt and if we touch domestic debt now that will have a significant impact on our banking sector.”
“That will not help any even the external creditors in terms of recovery of the economy. We need to have a stable banking system. That is why our position as we announced earlier remains. That this is a balance of payment crisis.”
“We want to restructure our external debt because of the balance of payment situation and our ability to meet external debt service payments. We don’t see a problem with us meeting the domestic debt targets. So, this is why we think we can manage that situation without touching domestic debt.”
When questioned over when Sri Lanka will receive the funding, Weerasinghe claimed “This is where we think….. for an example now once we reach the staff-level agreement, then the timeline is set.”
“Then we have to approach all our external creditors and start negotiating and discussing in good faith for us to obtain a relief on the debt service payments.”
Commenting on the foreign exchange crisis, the Governor stated “I think we can see the situation is much easing. And even without any bridging financing now we can manage the requirement for essential imports with higher exports and curtailing imports.”
“And we are managing the situation much better than what we had earlier. So, going forward we can manage the forex situation much better. We can see the currency stabilizing.”