Sri Lanka President promised support for debt restructuring by Japan, other nations

ECONOMYNEXT – Sri Lanka’s debt re-structuring efforts were backed back Japan, France and other countries at an ambassador’s forum with President Ranil Wickremesinghe, an official said.

“Several missions, including Japan and France, extended their country’s support towards Sri Lanka and its debt restructuring efforts,” Dinouk Colombage, Director International Affairs for President Wickremesinghe said.

President Wickremesinghe had updated ambassadors of 23 Paris Club and non-Paris Club countries on the current economic crisis in the country.

He had promised transparency and equity in seeking debt re-structuring, the Presidents media office said.

Sri Lanka ran into a severe currency crisis in 2022 and defaulted on its foreign debt, after borrowing large volumes of commercial debt through two currency crises from 2015 to 2018, in the course of operating flexible inflation targeting with stimulus.

Government spending also ratcheted up from 17 to around 20 percent after spending based consolidation was abandoned under a politically naive strategy called revenue based fiscal consolidation. In 2020 tax cuts were added to monetary stimulus to target and output gap.

Sri Lanka has already hiked rates to slow private credit and raised taxes and energy utility prices to reduce public domestic credit to reduce outflows and stabilize the currency in the course of striking a staff level agreement with the International Monetary Fund

Sri Lanka needs creditor assurances to get 2.9 billion US dollars from the IMF and also unlock credit from others.

Sixteen Colombo-based Missions and six missions based in New Delhi participated virtually. (Colombo/Sept22/2022)

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