May 23, 2019
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    No intention to deviate from fiscal discipline - NEC SG

    November 23, 2018

    National Economic Council (NEC) Secretary General Prof. Lalith Samarakoon reiterated that there is no question about Sri Lanka’s capacity as well as willingness to service its debt obligations on time.“There is no intention to deviate from our fiscal discipline either which we have agreed with the financial institutions in our medium term framework.

    If there are minor deviations with respect to revenue shortfall or increase in expenditure we will be able to come up with counter balancing adjustments to maintain the target,” he told the media yesterday. Samarakoon stressed that Sri Lanka’s commitment to service debt obligations as well as the capacity as well as fiscal discipline will stay without change and will be strong.
    Samarakoon was commenting about Moody's Investors Service downgrading the Government of Sri Lanka's foreign currency issuer and senior unsecured ratings from B1 (Negative) to B2 (Stable) on November 20.
    Speaking to the media at the Government Information Department, Prof.Samarakoon said he and the Central Bank Governor and the Finance and Economic Development Ministry Secretary had briefed the Cabinet of Ministers about the country’s economic situation.
    Prof.Samarakoon went on to say that Moody’s decision to downgrade Sri Lanka is primarily based on two factors. “The first is the tightening of financial conditions worldwide with US treasury expected to increase interest rates in December.There is an idea the financial situation outside Sri Lanka can become more tighter and Moody’s believe when this happens Sri Lanka will face challenges when raising funds outside to meet the debt requirement.Second is the slower pace of fiscal consolidation” he added.
    “We have more than adequate capacity to pay our debt obligations.We have sovereign bonds which are maturing next year to the tune of 1.5 billion USD. We already have 650 million USD remaining from the Hambantota Port transaction lying in the treasury accounts.
    The CBSL and the Finance Ministry are working to raise up to one billion USD by way of investing in Sri Lanka development bonds through the People's Bank, Bank of Ceylon and National Savings Bank.In addition we plan to raise 500 million USD by way of bonds issued to the China Development Bank. These are only a few initiatives. We have in excess of 2 billion USD that are clearly available over the next few months.Therefore there is no question whatsoever about our ability to service 1.5 billion USD sovereign bonds which are outstanding” he added.
    He also said the Central Bank has initiated negotiations with Central Banks of friendly nations with regard to obtaining foreign currency SWAP facilities of sizeable amounts. These measures will further strengthen the country's foreign reserve adequacy, and would enable timely servicing of external obligations” he added.

    Prof.Samarakoon revealed that it was in last July that the Moody’s had informed their intention to the Central bank. According to the Professor, Moody’s main concerns were high external risk, balance of payment, low economic growth and high political risk.
    He said the macro economic imbalances in the country had not developed overnight and were the result of long term effects.Prof.Samarakoon went on to point out that the country’s debt had grown 49 percent from 2014 and debt which was Rs.7,391 billion in 2014 had risen to Rs.10,994 billion at present. He said the budget deficit too had grown since 2014 and the economic growth was one of the lowest after several years in 2017 and 2018.
    Minister Mahinda Samarasinghe said some UNP members led by former Finance Minister Mangala Samaraweera were trying to create a bleak picture on the country’s economy to the international community to gain petty political mileage.

    Minister Samarasinghe said the UNP was trying to spread canards in order to curtail foreign investments and tarnish the country’s reputation.

    Last modified on Friday, 23 November 2018 18:37

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