{"id":112149,"date":"2021-02-28T16:32:00","date_gmt":"2021-02-28T23:32:00","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=112149"},"modified":"2021-02-28T16:32:00","modified_gmt":"2021-02-28T23:32:00","slug":"veemansa-initiatives-discussion-on-external-debt-situation-in-sri-lanka","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2021\/02\/28\/veemansa-initiatives-discussion-on-external-debt-situation-in-sri-lanka\/","title":{"rendered":"Veemansa Initiatives\u2019 discussion on \u2018external debt situation in Sri Lanka;"},"content":{"rendered":"<h2><span style=\"color: #0000ff;\"><em><strong data-rich-text-format-boundary=\"true\">Veemansa Initiative,<\/strong><\/em><\/span><\/h2>\n\n\n<p>Veemansa Initiatives\u2019 discussion\non \u2018external debt situation in Sri Lanka; Are we heading for a resolution or\ncrisis?\u2019.&nbsp; The Governor Central Bank is\nconfident all debt obligations will be met. &nbsp;<\/p>\n\n\n\n<p>&#8211;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;\nThe Central\nBank Governor affirms the government\u2019s commitment and ability to honor all debt\nobligations. <\/p>\n\n\n\n<p>&#8211;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;\nSri Lanka to\nmobilize domestic financing to meet countries investment requirements. <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>The\nmeasures to increase foreign currency inflows and restrict outflows to\ncontinue.<\/strong><\/li><li><strong>A\nLow-Interest regime and monetary expansion is sustainable in the prevailing\nconditions of suppressed demand and the absence of inflationary pressures.<\/strong><\/li><li><strong>Doomsday\npredictions prompted by forthcoming UNHRC Session on Sri Lanka <\/strong><\/li><\/ul>\n\n\n\n<p>Colombo, 28\nFebruary 2021- The inaugural webinar of the Veemansa Initiative, a newly launched\npolicy development and advocacy think tank on the external debt situation in Sri Lanka\nwas held on 24<sup>th<\/sup> Wednesday, February 2021. It highlighted\nseveral challenges facing the country\u2019s economy and concluded with valuable policy\nresponses from expert panelists and participants. <\/p>\n\n\n\n<p>Delivering the keynote address on the topic, External<em> Debt Situation in Sri Lanka: Our Route to\nResolution<\/em>, the Governor of the\nCentral Bank, Deshamanya Professor W D Lakshman said that despite the COVID-19\npandemic and its impact Sri Lanka will maintain its unblemished records of debt\nservice. &nbsp;The following are the key point\nof the Governor\u2019s speech.<\/p>\n\n\n\n<p><em>COVID-19 pandemic and its wide-ranging\nimpacts have compelled the country to rethink its economic strategies. In the\npast, we borrowed from multilateral agencies, initially on concessional terms, and\nover time, our foreign debt had increased slowly but steadily. While graduating\nto the middle-income country status, Sri Lanka has become less eligible for\nconcessionary funding and had to move increasingly into commercial borrowing to\nfinance its investments as well as to meet its consumer imports and debt\nservicing obligations,\u201d <\/em><\/p>\n\n\n\n<p><em>The Government has decided that reliance on\nforeign borrowings, particularly commercial borrowings, should be phased out\ngradually to reduce the burden of debt service. The Government is of the view\nthat the country\u2019s development projects should be as far as possible domestically\noriented, both in terms of the implementing parties involved and the funding sources,\nwherever possible. The medium-term objective is to reduce the foreign to\ndomestic ratio in Sri Lanka\u2019s public debt to 33:67 from the current level of\n43:57. Although this could have been done during the 2<sup>nd<\/sup> half of the\nlast decade, the foreign debt volume has increased from $ 24.6 billion in 2015\nto $ 34.7 billion in 2020. <\/em><\/p>\n\n\n\n<p><em>This will no doubt require some austerity in\nterms of mostly cutting down of import of non-essential consumer goods and\nenhancing all forms of foreign currency inflows. Due to these measures, the\ncurrent account deficit of the balance of payments (BOP) in 2020 is estimated\nto have reduced to $ 1 billion compared to $ 1.8 billion in 2019.&nbsp; This tendency will strengthen further in 2021\nand the target is to achieve a surplus in the current account in 2021. These\ninflows to the current account will be complemented with FDI on the Capital\nAccount.&nbsp; The Colombo Port City and\nHambantota Industrial Zone are expected to be major contributors of FDIs. <\/em><\/p>\n\n\n\n<p><em>The necessity of adopting such policies have\nbecome very important in the current conditions in the global financial markets\nafter the outbreak of Covid19 pandemic. Particularly for Sri Lanka, the\nprospects of external financing have been constrained by risk aversion and\nvolatility in global financial markets,\u201d<\/em><\/p>\n\n\n\n<p><em>While stability in the price level, the rate\nof interest rate and rate of exchange to a politically stable and economically\nfeasible level is desirable when conflicts emerge on these objectives, required\ntrade-offs have to be worked out.&nbsp; The\nproduction in the Sri Lankan economy remains below the potential and demand-led\ninflation pressures remain weak in the aftermath of the pandemic. There are\npossibilities for monetary expansion within reasonable limits to meet the\ngovernment\u2019s expenditure to meet COVID-29 related social protection needs as\nwell as capital expenditure. The limits here are dictated by domestic inflation\nand changing external reserve position. &nbsp;The empirical research carried out in a number\nof countries including Sri Lank has failed to establish a direct relationship\nbetween changes in money supply and price level. &nbsp;<\/em><\/p>\n\n\n\n<p><em>Despite these challenges, and adverse predictions\nby many parties who projected doomsday scenarios, the Central Bank of Sri Lanka\naffirms to all foreign stakeholders, that Sri Lanka remains committed to meet its\ndebt obligations, as it has done impeccably in the past and it has the ability\nto so in the future. &nbsp;Of around US\ndollars 3.7 billion to repay in external debt in 2021, we have already paid a\nconsiderable chunk in the first two months of the year.\u201d<\/em> the Governor said. <\/p>\n\n\n\n<p>The Governor also indicated that gloom and\ndoom predictions are seemed to have coincided with the UN Human Rights Council\nSessions where a resolution is moved against Sri Lanka by a group of western\ncountries. &nbsp;The governor has outlined a number\nof measures that the government and the Central bank has undertaken to increase\nnon-debt creating foreign currency reserves.<\/p>\n\n\n\n<p>The keynote speech of the governor followed by\na discussion among an eminent panel of experts chaired by &nbsp;&nbsp;Prof. Sirimal Abeyratne \u2013 Head of Department\nof Economics, University of Colombo. &nbsp;Mr.\nSumanasiri Liyanage \u2013 Senior Academic, Formally of the University of Peradeniya\nand Sanasa Campus, Dr. Nishan de Mel-Head of Verite Research, a renowned think\ntank, and Dr. Ravi Liyanage Chairman Raigama Group, participated in the panel\ndiscussion. <\/p>\n\n\n\n<p>The experts also discussed the need to\ncreate a conducive environment for investment through tax reforms as well as\nlegislative reforms, thereby making Sri Lanka a destination of promise for\ninvestment, domestic and foreign alike. The panelists agreed that maintaining\nthe interest rates low is conducive to post COVID -19 economic recovery. &nbsp;In this context, a panelist suggested a more\ngradual and phased approach to the transition from external financing of\ngovernment debt to predominantly domestic financing. <\/p>\n\n\n\n<p>Over 150 participants from Australia, China, India,\nPhilippines, US, etc. joined online sharing experiences on a range of issues\nthat included import substitution, fiscal gap, the debt obligation for this\nyear, non-debt creating financial measures, that the focus of the government in\nthe short and medium-term. <\/p>\n\n\n\n<p>Veemansa initiative has made provisions to make available the\nrecorded session on its website. https:\/\/veemansa.org.&nbsp; . &nbsp;<\/p>\n\n\n\n<p>Follow\non social media:&nbsp;&nbsp;<a href=\"https:\/\/www.facebook.com\/Veemansa-101970975254803\">https:\/\/www.facebook.com\/Veemansa-101970975254803<\/a><\/p>\n\n\n\n<p>Call:&nbsp;<strong>Mr. Luxman\nSiriwardena, Managing Director, Veemansa Initiative, via 0773660520<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Veemansa Initiative, Veemansa Initiatives\u2019 discussion on \u2018external debt situation in Sri Lanka; Are we heading for a resolution or crisis?\u2019.&nbsp; The Governor Central Bank is confident all debt obligations will be met. &nbsp; &#8211;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Central Bank Governor affirms the government\u2019s commitment and ability to honor all debt obligations. &#8211;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Sri Lanka to mobilize domestic [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[],"class_list":["post-112149","post","type-post","status-publish","format-standard","hentry","category-economy"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/112149","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=112149"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/112149\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=112149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=112149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=112149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}