There is no guarantee that the all-party government will be able to solve the problem quickly
Bloomberg recently spoke with Dr. Harsha de Silva, an economist, politician, and parliamentarian. Dr. Harsha responded to the questions posed by Bloomberg journalists. The following is a synopsis of the interview.
The question posed regarding the IMF-Sri Lanka negotiations was, “What are the most recent developments in the negotiations between Sri Lanka and the IMF?”
“The issue is not with the IMF,” Dr. de Silva retorted, “but with the reorganization of indebtedness.” China is one of our official creditors, and our main creditors are foreign holders of sovereign bonds. Even if we quickly reach a staff level agreement, the IMF will not be able to release any funds under an enhanced fund facility until we have either reached or made significant progress toward a restructuring agreement.
As you can see, we recently hired Lazad and Clifford Chands to assist us with restructuring. They have not really begun negotiating, and already one creditor, a fund called Hamilton Federal Bank, has gone to court in New York against the government of Sri Lanka, demanding full payment of its $250 million due on July 25th due to the debt standstill. So, unless there is ‘significant’ progress, which is a subjective term, you know the IMF is not able to lend to us, and I believe it will take at least six months before any money starts flowing.
In response to the opposition’s current actions, he stated, “The opposition is trying to get all the opposition parties together, and I hope it will happen this week and force the president, who is not willing to budge even though there are protests across this country asking for him to step down and to try and get him within the demographic frame work to step down, and if that happens, it is quite possible that an all party government can take over running this country.”
There is no guarantee that the all-party government will be able to solve the problem quickly, but there is hope that the government will have legitimacy both internally and externally, as there appears to be no legitimacy for this government right now’.
The situation is completely unpatriotic. We were an upper middle-income country just a few days ago, and now we’ve dropped to the bottom, which is simply unbelievable to us. However, for a long time, reforms had been postponed and we were living beyond our means, but the real breakdown occurred when the president cut taxes even further, and now we are running a massive fiscal deficit as well as a large hole in our current account and other balance of payment.
We have to fix these things because there is no other way out, so the parliament will have to agree to large fiscal consolidation measures such as raising taxes, rationalizing subsidies, and so on.
We can’t get it done unless there is agreement across political parties, and if we don’t get it done, we’ll have a difficult time negotiating our debt. We will be unable to obtain funds from the IMF unless our debt is negotiated. So, we’re waiting for friends and neighbors to help us, which won’t get us very far.
Amendments to the Constitution
We are extremely dissatisfied. On the 11th of last month, the president offered to return the country to the 19th amendment of the constitution, which means he would relinquish the powers he gained in parliament in 2020.
For example, the power that he now has to sack the prime minister whenever he wants, the power that he has to hold any ministries, the power that he holds to appoint and sack ministers, these are the things that people wanted taken away from him because he himself has admitted in public that he has not been successful in managing this country, and people want the power to be returned to the parliament and it to be more democratice, but the president is not giving that in the 22nd am. So we are disappointed, and we are in talks with opposition parties; we want the amendment to pass, but not in this form.(RS)