Debt restructuring teams set to get Cabinet nod this week – Reuters

  • IMF expected to release statement on progress of technical talks with Sri Lanka soon

The Central Bank said it had finalized the two sets of financial and legal advisers to negotiate with several Sri Lankan creditors and the selected parties would be subject to final approval.

According to remarks by the Governor of the Central Bank, Dr Nandalal Weerasinghe, the selected groups would be sent to the first Cabinet meeting because the absence of a full Cabinet of Ministers after the violent incidents on May 9 that led the resignation of then Prime Minister Mahinda Rajapaksa delayed the final stage of the appointment process for the two specialties.

On April 9, shortly after Dr. Weerasinghe took office as the new Governor, the Central Bank issued Requests for Proposals (RFPs) from financial and legal advisers who had the professional competence and experience in dealing with sovereign lenders to restructure the country’s debt. in the event of sovereign default, the government having decided to suspend payment of the external debt on 12 April.

Although the authorities wanted to quickly appoint the experts in the two fields within two weeks, the process took longer than expected because the responses to the tenders were lukewarm during the first week, which then had to be extended for an additional week.

And then the country went even further into the abyss and anarchy with the violence that erupted on May 9 where people took the law into their own hands, prompting Dr Weerasinghe to call for political stability without which he said he would not continue in his position.

However, with the appointment of former Prime Minister and leader of the United National Party, Ranil Wickremesinghe immediately brought a semblance of stability which was further cemented with the appointment of a Cabinet, although a post of Finance Minister was still
remains vacant.

While immediate former finance minister Ali Sabry was expected to take the job, there were calls for Prime Minister Wickremesinghe to take the job given his experience and prowess in economic diplomacy. .
Meanwhile, Dr Weerasinghe briefed the public on the progress being made in negotiations with the International Monetary Fund (IMF), said Fund staff were working closely with Central Bank staff during their negotiations at the technical level which should succeed. concluded on May 24.

Dr Weerasinghe said they will provide the IMF with Sri Lanka’s reform plan for the coming year which will then be assessed by the IMF team to see if it meets their debt sustainability criteria, before proposing their own reform program for the country.

It goes without saying that Sri Lanka should engage with the IMF in a three-year program in the style of an expanded financing facility that provides a difficult economic stabilization program in the medium term.
However, it is still uncertain how long the process will take, although it is expected that a program will be finalized within the next three months before any disbursement.

Either way, the IMF is expected to issue a statement after the upcoming conclusion of its technical-level discussions with the Sri Lankan authorities.

Sri Lanka is considering a bailout worth US$3.0-4.0 billion over the three years during which the country will have to redress its balance of payments, budget deficit by raising taxes and reducing wasteful spending and subsidies, restructuring or selling loss-making state enterprises, and ensuring price stability through responsible monetary policy.

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