The government intends to proceed with domestic debt restructuring (DDR), with a final decision on how to proceed expected next week.
Given the gravity of the situation, a senior Treasury official told the Sunday Times that the country would have to complete the process before restructuring its international debt, and that the Finance Ministry was already making plans to begin the DDR process next month.
“Sri Lanka’s international creditors are willing to make concessions in order to assist the country.” Domestic creditors must put forth the same effort. If not, obtaining assistance from international bodies such as the International Monetary Fund (IMF) will become more difficult,” the official said.
A special meeting of party leaders has been called for next week to decide whether to hold a weekend session of Parliament to approve the process. According to government sources, a parliamentary vote on the issue was planned.
Treasury officials insisted that restructuring domestic debt would not lead to the failure of local banks or have a negative impact on the country’s financial stability. “Debt restructuring is entirely voluntary.” “We can’t make anyone do it,” the official said.
While Sri Lanka would not be able to pay off its debts immediately, it would become possible as the economy gradually improves in several years, he added.
Treasury holdings of the Central Bank of Sri Lanka (CBSL) too will have to be restructured as part of the debt restructuring process.
President Ranil Wickremesinghe was due back in Colombo over the weekend and will have high-level meetings on the outcome of his talks in Britain and during the recently concluded Paris Summit on a new global financial pact.
