A Member of Parliament has recently tried to implicate me in some wrongdoing by accusing me of maintaining “potential links” between “Hamilton Reserve Bank” (HRB) and me, which has sued Sri Lanka for non-payment of the ISB bond. I have found that. I completely deny the allegation. During my tenure as Governor of the Central Bank, officials of the Central Bank, including myself, and officials of investors and foreign investment institutions were treated with respect and equality, and accordingly, it must be stated that no special treatment or insider information was given to HRB officials by the Central Bank or Mother. Indeed, as mainstream media and social media reports will attest, during my tenure as central bank governor, I have met with many leading global investors and central bank officials, all of whom I spoke to cordially, confidently and candidly. It must be said that these people are trying to ascribe ulterior motives to me, without even a shred of evidence, because I have done it. Sri Lanka Latest News
Furthermore, I have recently seen a certain Member of Parliament, through his publications; go to great lengths to demonstrate that the Government of Sri Lanka should have defaulted on the USD 500 million International Sovereign Bond (ISB) maturing on 18 January 2022. It is clear that around the end of December 2021, a concerted effort was initiated by various individuals to make Sri Lanka appreciate its mature ISB. Furthermore, some self-proclaimed professionals directly appealed to the Monetary Board and the government at various times to cancel and restructure the country’s foreign debt. Some others also made public appeals from popular newspapers to encourage such defaults. At the same time, there were others including current President and Finance Minister Ranil Wickramasinghe who warned that if Sri Lanka defaults on its foreign debt, it will be very damaging to the country and the economy. They said that the public debt must be paid. That position was also clearly explained by the current president in a popular television interview on March 28, 2022.
The USD 500 million international sovereign bonds, which matures on January 18, 2022, is a general debt repayment out of foreign exchange debt-service payments of approximately USD 7,100 million and domestic debt-service payments of around INR 3,000 billion approved by the Parliamentary Budget. According to the law, although the central bank manages the public debt as the agent of the government, the primary responsibility for borrowing and settling the debt is the legal responsibility of the government and not the central bank. As the agent, the central bank must act on the advice of the government regarding the management of the public debt, and the central bank cannot unilaterally decide to pay or not to pay any government debt. Furthermore, the central bank will be able to pay the debt on behalf of the government only if its funds are provided for domestic and foreign debt-servicing from the funds specially allocated by the parliament for debt repayment.
On this occasion, Finance Minister Basil Rajapaksa had given a special assurance regarding the ISB settlement that the foreign debt would be paid in Parliament when the budget debate was concluded on December 10, 2021, saying: “As the Minister of Finance, I am clearly stating in this Supreme Council, with the permission of the President and the Prime Minister, that we will definitely pay every dollar we have to pay next year. I guarantee it. I give that assurance with responsibility. First of all, we have to pay 500 million in January. 1000 million dollars have been paid in the next month of July. Meanwhile, we have to pay more. We have paid the amount of capital payments that we have taken, as well as the amount of interest for debt servicing. I am saying in this Supreme Council that we will pay all that.”
The settlement or non-settlement of the country’s sovereign debt or a specific part of it is not a matter that can be decided unilaterally by an individual. Nevertheless, various persons have made absurd claims that the settlement of the USD 500 million matured ISB on 18 January 2022 was at my sole discretion as the Governor of the Central Bank. They have even alleged that these settlements have been made so that some investors can get unwanted profits. I strongly reject such malicious and unsubstantiated insinuations. At the same time, it should also be stated that the Auditor General has already confirmed that a portion of the ISB of USD 108,899,000, worth about 21.8% of the respective USD 500,000,000 ISB, was held by local banks. Accordingly, since several Sri Lankan banks (Bank of Ceylon, Commercial, NDB, PanAsia, Sampath, Peoples, HNB and HSBC Colombo) were among the investors in ISB in January 2022, if the government defaulted on that ISB, those banks would also suffer huge losses. had So fortunately, Sri Lankan banks and their customers did not have to suffer such a loss as the January 22nd ISB bond was properly settled by the government.
However, at the time in question (January 2022), the government’s official policy was to pay off its sovereign debt. After independence, the policy was followed faithfully by the Ministry of Finance and the Central Bank. Therefore, if for any reason, the government had wanted to default on the repayment of the public debt, it should have been a decision of the government and not of the central bank. Confirming that basis, on 12 April 2022, the Ministry of Finance announced the “Debt Suspension”. Furthermore, the position was further confirmed by announcing that foreign exchange debt payments would be suspended and eventually restructured. Unfortunately, the declaration of default led to Sri Lanka going bankrupt, and as a result, as Mavisin has already warned on several occasions, the country has had to suffer many harmful and disastrous consequences. Some of them include:
a) The credibility of the country has been lost.
b) The country has not been able to obtain new foreign exchange loans except from multilateral institutions.
c) The country’s banking system has faced serious difficulties in carrying out foreign exchange transactions.
d) Almost all infrastructure projects built through foreign exchange funds have stopped.
e) Foreign direct investors have avoided the country.
e) Many small and medium scale enterprises have collapsed and many others have faced near collapse.
g) Lakhs of employment and livelihood opportunities have been lost.
U) Prices of goods and services have risen to unsustainable levels.
E) Interest rates have soared to unprecedented levels, causing the central bank to issue (money printing) a large stock of treasury bills, creating a massive negative impact on government budgets.
A) Due to the need to meet the strict loan conditions imposed by the International Monetary Fund, the government has had to sell the country’s valuable and strategic assets.
o) The country’s foreign policy has been seriously affected.
o) Some foreign exchange private creditors have already filed legal proceedings in foreign courts to recover their arrears from the government, thereby incurring huge legal expenses for the government.
A) Many foreign exchange creditors have put pressure on the government to restructure the domestic debt as well, and the act of writing off the domestic debt has now led to severe social unrest, causing serious socio-economic problems.
c) The value of the Sri Lankan Rupee has significantly depreciated, and there is a widespread public opinion that it will further collapse.
Logically, if the government and the central bank do not honor the legal commitment taken by the government to settle the USD 500 million ISB on January 18, 2022, then the catastrophic results mentioned above will occur as early as January 2022. Perhaps, if that had happened, ISB should not have been paid, and that MP and others who are now loudly declaring, will no doubt accuse me and others who held various responsibilities at that time of causing serious damage to the country and the economy as described above. .
But, what is surprising here is that while those MPs and others are very reluctant to demonstrate the massive damage done to the economy by the announcement of default on April 12, 2022, the ISB and other foreign exchange loans are very much outstanding till the end of March 2022. They are too quick to blame those who would have prevented such catastrophic consequences by taking steps to redress the injustice.
More than a year ago on September 5, 2022, I requested the President to launch a prompt and comprehensive investigation into the unauthorized sovereign debt default announcement announced on April 12, 2022. I further declare that if any inquiry is launched into the ISB issues and their settlements from 2007 to 2022, I will be happy and give my full support for it.
