Govt. needs to formulate long-term debt strategy: Harsha

• Says SL can buffer impact if strategy in place 
• Reiterates need for transparency from Govt. 
• Warns reserves dangerously low, concerned of looming balance of payment crisis 
• Wants clarity on swap deals  

By Asiri Fernando

Samagi Jana Balawegaya (SJB) Parliamentarian Dr. Harsha de Silva yesterday called for a long-term debt repayment plan underpinned by transparency from the Government, warning that reserves were falling to “dangerously” low levels and arguing greater clarity would assist local businesses to prepare for currency depreciation and other economic impacts.  

Dr. de Silva told reporters Sri Lanka's ability to service its debt was questionable, as reserves had fallen to a 'dangerous' level. The former State Minister for Economic Reforms, called on the Government to face realities and formulate a well-thought-out long-term debt repayment plan, as the country will have to meet about $ 4 billion in annual payments over the next five years. 

The Opposition MP made the comments addressing a press conference at the Opposition Leader's office where he was joined by fellow SJB MP Mayantha Dissanayake. 

Dr. de Silva urged the Government to formulate a long-term debt servicing plan and to be transparent about it, pointing out that ad-hoc short-term measures taken to face the crisis had failed to deliver confidence.  

Citing a recent Central Bank report, Dr. de Silva explained that Sri Lanka had to honour over $ 200 million sovereign and development bonds this month. The Central Bank earlier this month put reserves at about $ 4.6 billion. Sri Lanka repaid a $ 400 million Indian swap in the first week of February.  

“Our reserves are depleting rapidly. Doesn't this raise a question as to how we will repay our debt? In economics, we normally measure reserves by how many months of imports it can support. Sri Lanka needs about $ 1.5 billion a month for imports. So, there is only three months’ worth of reserves. This is a dangerous situation,” Dr. de Silva stressed. 

The SJB MP argued that short-term efforts by the Government to secure swap agreements from China to the amount of $ 1.5 billion has not yet materialised, which was increasing concerns on debt sustainability. 

“Recent reports have indicated the Government's efforts to secure a short-term solution for the crisis by arranging swap agreements and loans have failed. We have been told that only support of $ 600 million has been offered. What will they do now?” the MP questioned.

Dr. de Silva also emphasised that if Sri Lankan businesses and general public were made more aware of the debt repayment challenges facing the country and its linked consequences such as a depreciating currency, they would be able to build buffers and attempt to reduce their impact. He warned that leaving such concerns unaddressed could cause additional challenges for the private sector, particularly exporters, who were already struggling with COVID-19 impact. 

“What we need are long-term solutions that are practical, not short-term measures. Denial will not help anyone. The Government needs to face reality and stop telling fairy-tales to the public. Please don't run this country to the ground, it is the public who will suffer and as a country, we have more debt to repay in the coming years."