Sri Lanka not in a debt trap – State Minister Cabraal

Sri Lanka does not need to seek assistance from the International Monetary Fund (IMF) to meet any debt requirements of the country, State Minister of Finance, Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal stated yesterday.

State Minister Cabraal also debunked the assumption that borrowing from China would put Sri Lanka in a debt trap, which will ultimately affect the sovereignty of the country.

The State Minister made these observations at a press briefing held at the Department of Government Information.

State Minister Cabraal pointed out that the Government is confident that the country will not default on its obligations and promised to continue the good reputation it has maintained up to date on meeting debt requirements.

State Minister Cabraal observed, “Many have drawn attention towards a shortage on foreign exchange. Sri Lanka was a country that was depending highly on the tourism industry. So we did have a challenge on our hands as the pandemic struck. So we had to deal with the inflows and the reserves that we have in a manner that we can still manage our debt services and all our other activities in a stable manner. It did need some special balancing skills and our Government

had to impose certain restrictions on some imports like vehicles. That had to be done in order to ensure that we have sufficient funds available to meet our debt and the foreign exchange required is available for our country. It did cause a certain amount of apprehension among people. However, all essential items are available and no one can say that there has been any change in the lifestyles of people in their normal day today activities.”

Speaking on debt requirements of the government, State Minister Cabraal pointed out, “We do not have a need to go to the IMF to meet our debt requirements. We do have respect for the IMF and we have worked with them in the past. However, at the moment, we have identified the needs and the requirements of our economy. We are working that out in the best way possible along with all our stakeholders. We are confident that with our plan that we have put in place and the initiatives that we are taking, we would be able to make sure that Sri Lanka would not default at any time in future. We shall make sure that the country meets every single debt requirement and Sri Lanka has an impeccable record on that. So we want to keep it as it is. We have the necessary resources, commitment and plans, which will give us the opportunity as well as the ability to make that happen.

Sri Lanka will not default. All these stories are only speculative.” Cabraal said, “Several such reports have referred to China. I want to mention that Sri Lanka’s debt to China is extremely well manageable. The debts have been taken for very reasonable rates. Sometimes, much less costly than some of the debts we have incurred from International Sovereign Bonds. Loans that we have taken are all long term, and all are very well managed and paid on time. There have been reports saying that there is stress on Sri Lanka because of debts obtained from China. We want to assure all creditors that there is no such situation. In fact, the debts we have taken from Japan are larger than those from China. So are all other debts such as the ones we have obtained from the World Bank. Our debts on international sovereign bonds are larger than what we have obtained from China. Those debts are from American, European and Asian investors. Therefore, this myth that Sri Lanka is in a debt trap because of borrowing from China is not true.

If anyone is to look at our debt profile, they would come to the conclusion that Sri Lanka perfectly has the ability to service all the debts it has taken and that no single lender has had the ability to control Sri Lanka’s way forward in any way.”

(Source: Daily News – By Amali Mallawaarachchi)