Sri Lankan president pledged support for debt restructuring by Japan and other countries

ECONOMYNEXT – Sri Lanka’s debt restructuring efforts were backed by Japan, France and other countries at an ambassadors’ forum with President Ranil Wickremesinghe, an official said.

“Several missions, including Japan and France, have given their countries’ support to Sri Lanka and its debt restructuring efforts,” said Dinouk Colombage, director of international affairs for President Wickremesinghe.

President Wickremesinghe briefed ambassadors from 23 Paris Club and non-Paris Club countries on the current economic crisis in the country.

He had promised transparency and fairness in seeking debt restructuring, the president’s media office said.

Sri Lanka experienced a severe currency crisis in 2022 and defaulted on its external debt, having borrowed large volumes of commercial debt during two currency crises from 2015 to 2018, under flexible lending targeting. inflation with stimulus.

Government spending also rose by 17 to around 20 percent after spending-based consolidation was abandoned under a politically naïve strategy called revenue-based fiscal consolidation. In 2020, tax cuts were added to monetary stimulus to target and narrow the output gap.

Sri Lanka has already hiked rates to slow private credit and raised taxes and energy utility prices to reduce public domestic credit to reduce outflows and stabilize the currency as part of the deal. a staff-level agreement with the International Monetary Fund

Sri Lanka needs assurances from creditors to secure US$2.9 billion from the IMF and also unlock credit from others.

Sixteen Colombo-based missions and six New Delhi-based missions participated virtually. (Colombo/September 22, 2022)

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