Dilrook Kannangara

Sri Lanka’s central government long term debt, excluding the debt of government entities, amounts to $84 billion as of 2023. About half of it is foreign debt and the other is domestic debt. After months of negotiations, foreign debt holders agreed to debt restructure. However, holders of domestic debt are dragging their feet on restructuring their debt! Worse still, they have turned it in to a political football and hired SJB and JVP politicians to disrupt the process. This is shameful and shows how greedy they are and how unreasonable.

The government simply cannot repay their debt at this stage. A five-year reprieve is needed. The economy has been shrinking for the past 3 years in a row and priority must be given to economic turnaround so that there is some hope of repaying debt and their interest. If this process is disrupted, no debt (other than foreign bilateral debt) can be repaid as there is no money.

There is no connection between a domestic debt restructure and the collapse of the banking sector. In fact, restructuring domestic debt will have a positive impact on banks in the long run as bank returns would be higher than investing in government bonds and bills. However, if depositors are terrorized with concocted horror stories, that can disrupt the banking industry. Holding the banking industry to hostage over domestic debt restructure by greedy local debt holders and their paid political lackeys is shameful especially when the average man on the street has sacrificed so much to turnaround the economy. They deserve no more than a default.