Sabry outlines three-pronged strategy to resolve debt crisis; apologises to the people

The Government is relying on bridge financing with friendly countries and global lending agencies to face the current economic challenges in the short term before International Monetary Fund (IMF) assistance is finalised, Finance Minister Ali Sabry said on Friday.

“For emergency financing, the Government is considering options from various countries such as India, China and Japan in addition to the World Bank and the Asian Development Bank ( ADB),” the Finance Minister said in a virtual media briefing from Washington DC following the talks IMF officials on Friday. With Sri Lanka starting official talk with IMF this week, the Government is pursuing a threepronged strategy to face the current and long time economic challenges.

The three-part strategy consists of securing immediate funds, finalising bridge financing through bilateral ties and potential return to a growth trajectory.

A special IMF instrument called Rapid Financing Instrument (RFI) is also under discussion between the two parties.

"We have not come here to ask for RFI specifically. We came here to get into a programme -- Extended Fund Facility (EFF) -- but we also requested RFI as well. Any release of funds from IMF is preconditioned to the fact that debt needs to be sustainable. So in order to do that, we need to talk to the creditors and convince them that we are serious about getting into repairing and get into some sort of an agreement," Minister Sabry said while stressing the Ministry was also engaged with staff- level consultations as regards fiscal reforms, institutional reforms and tax reforms.

Minister Sabry added, "It depends on how quickly and efficiently we are going to negotiate with our creditors, get into a debt restructuring programme and how serious we are about tax reforms.

"Right now, we just get 8.6 percent as revenue of the GDP to run the country. No country can be run with this kind of revenue collection. So you need to go to 13-14 percent otherwise the inevitable fall is there," Mr Sabry noted.

Reflecting on what ordinary Sri Lankans are going through in their daily lives these days, Minister Sabry apologised to the people for "putting them through these hardships," and noted it was not the government's problem but a problem created by the culmination of policies of successive governments.

"We understand as much as you… Right now, what is important is to look after our people and restore their supply lines. They don't deserve the kind of hardships they undergo. It's heartbreaking to say that…We have come here to find a solution to that," Minister Sabry added.

On restructuring Chinese loans, he said Sri Lanka was yet to engage in official level talks on the matter but noted a positive development this week where China committed to joining Zambia's creditor committee as the country was struggling with debt restructuring. "When it comes to debt restructuring, there has to be transparency, uniformity and no preferential treatment. We need to talk to all of them. I'm sure they will understand, particularly we should not be too pessimistic and give hopelessness to the public. If that's the case, India is not going to put so much money including urgent medical assistance and USD 2-5 billion worth of deferment of repayment. That means, more than our people, they must be confident that Sri Lanka will pull through and I'm also confident,” Minister Sabry said.