Sri Lanka’s Central Bank Governor Dr. Nandalal Weerasinghe said that the number one priority of Sri Lanka should be is to get the financial assurances from the external bilateral creditors, along with commercial creditors.
“Once we get the financial assurances, then only we will look at the negotiation process. And look at overall debt targets and debt restructuring parameters and where we would like to achieve,” said the Central Bank Governor, adding that Sri Lanka will also have to run some scenarios.
“We have to understand how we can manage it, but unfortunately, I can’t talk about it at this point because we are in the process, the negotiation process, we are still negotiating, and I don’t think i can share anything more than that,” he noted.
However, the Central Bank Chief said that the only thing he can say confidently, Central Bank can maintain the financial stability and stability to the banking sector. “Even under any kind of treatment on domestic debt, we are confident that we can maintain the financial stability.”
He said that in the negotiation with the external creditors, their interests they have expressed, and the external creditors want to maintain the stability of the banking sector in Sri Lanka. “They will not be asking for a solution which will have an adverse impact on the domestic banks.”
The Central Bank Governor said it is a mutual understanding with the creditors and the debtors. “For them to recover the relief that they will provide to Sri Lanka in terms of debt restructuring, we need to have stable banking system. That solution or the treatment is going to have a significant impact on the banking sector. That will not help anyone”
He said there is a mutual understanding on benefit and incentives are available for both parties to ensure the banking sector is stable.
The Governor said that different ways and means in handling domestic debt. “We can manage the situation, and we can have a reasonable kind of outcome and while maintaining the system stably and the stability of the financial system. And also reach a positive outcome in the debt restructuring process.”