Debt issues are due to borrowing of previous Govt – Cabraal
By Rajiesh Seetharam
Sri Lanka is facing economic crises due to borrowings by the previous Government, stated Central Bank Governor Ajith Nivard Cabraal. Speaking at post-monetary review press conference. He said, “Between April 2018 and July 2019, Sri Lanka had borrowed USD 6.9 billion through ISBs. Sri Lanka’s GDP had increased from USD 24 billion in 2006 to 79 billion in 2014. By 2014 end, Sri Lanka’s total borrowings through ISB’s were five billion. However, by end 2019, the total borrowings through ISB increased to USD 15 billion, whereas the GDP grew only to USD 84 billion. “
The Governor said that the debt has to be serviced, however, going to the IMF may not be solution. “We have been to the IMF in the 2009-10 period. The Yahapalanya Government also went to the IMF, however the debt issues have not been solved. IMF would advise us on debt restructuring. Do we need an outside agency to advise us on how to restructure our debt? I am confident of our talents in Central Bank, who have good qualifications from best universities in the world. We are already doing Debt restructuring in a professional manner.
If we go to the IMF, they would ask the Government to depreciate the rupee, raise interest rates by 30-40%, reduce Public sector employees and cut pensions. We feel we don’t need such reforms now.”
Cabraal noted that efforts are being made to encourage remittance transfer through official channels that will give more benefits to Sri Lankan expatriates in other countries. He said action will be taken against those indulging in such unofficial transactions. He also noted that some clearing houses are also making ‘mirror image’ transactions.
He noted that fifty thousand tourists are expected this month, and seventy-five thousand in the next. With a gradual growth in tourism and other sectors, we expect a growth of 6% next year.
CBSL decided to keep rates unchanged, at SDFR (5%), SLFR (6%), Bank Rates (9%).
“Globally commodity prices are high and we don’t have control over it. As a result, inflation is high in many countries. Some countries like USA, show inflation at a 30 year-high.
We were able to obtain the necessary funds through the Treasury Bills at the levels we need. Money printing is reducing, so we decided to keep the rates at current levels, stated Cabraal.