Sri Lanka’s debt restructuring should be ‘equal for all’ – Ali Sabry

Minister of Foreign Affairs Ali Sabry has spoken on Sri Lanka’s debt restructuring process, stating that encouraging signs have been seen thus far, although Sri Lanka is not ‘completely out of the woods’.

In an interview with Channel News Asia (CNA), the Minister said “there is a glimmer of hope for us, but we are not out of the woods” when inquired as to where Sri Lanka’s optimism pertaining to economic recovery is coming from, despite the Asian Development Bank (ADB) predicting that things will get worse later this year, before seeing gradual improvement in 2024.

Sabry, who is currently attending the ADB annual meeting in Incheon, South Korea, noted that there are several factors contributing towards this ‘optimism’, including the stabilisation of the US Dollar, the increase of inbound tourists and the fact that inflation too, is relatively under control as opposed to the rates recorded in 2022.

“We have, in fact a 11.2% gain on the dollar which has helped us to stabilise our prices, and with that of course the migrant worker are sending the money through the normal channels”, he said, adding that although it is possible to see a further recession in the coming few months, “we should be able to see some sort of growth” next year.

Meanwhile, when questioned on Sri Lanka’s readiness for the first review of the Extended Fund Facility (EFF) approved by the International Monetary Fund (IMF), which is due to take place in September, the Minister assured that there is a sense of stability in the country, and that all queues and shortages have been eliminated.

Thus, he noted that lots of progress has been made with regard to several necessary actions and prerequisites which were due to be taken prior to the approval of the EFF, despite a few minor exceptions.

Speaking on the debt restructuring process as a whole, Sabry emphasised that the process should be one that is equal for all, with ‘a universal application of debt relief’.

He further highlighted the benefits of debt restructuring, adding that without it, Sri Lanka’s debts will no longer be sustainable, which will ultimately affect both investors and creditors as no proper investment will be made against such a backdrop.

Therefore, he emphasised that the longer the restructuring process takes, the more adverse the impact will be on the investors.

“But they all understand that”, he said with regard to Sri Lanka’s investors and creditors.

“I know some tough negotiations are around the corner, but so far, the signs are encouraging from our friends, both bilateral and otherwise”.

Commenting on the ongoing conflict between Ukraine and Russia and its impact on Sri Lanka, the Foreign Affairs Minister noted that since the island nation received its main coal supply from Russia, they are currently looking for alternatives for the short term.

He explained, however, that measures are underway to establish a steady source of renewable energy within the country by 2030, as there is a very good catchment for both wind and solar power with Sri Lanka being an island.

He noted, however, that nearly 35% of the island’s electricity generation is powered by coal, and thus, the government is currently looking for alternate suppliers.

Meanwhile, Foreign Affairs Minister Ali Sabry also addressed recent concerns as to whether China’s latest investment would give the country a naval advantage to use Sri Lanka as a military hub, asserting that the matter was “completely out of the question”.
“We will not let anyone use Sri Lanka as a military hub or port for anyone that is very, very clear”, he said, adding that the investment was solely a commercial arrangement.