FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com


Join the forum, it's quick and easy

FINANCIAL CHRONICLE™
Dear Reader,

Registration with the Sri Lanka FINANCIAL CHRONICLE™️ would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc..

All information contained in this forum is subject to Disclaimer Notice published.


Thank You
FINANCIAL CHRONICLE™️
www.srilankachronicle.com
FINANCIAL CHRONICLE™
Would you like to react to this message? Create an account in a few clicks or log in to continue.
FINANCIAL CHRONICLE™

Encyclopedia of Latest news, reviews, discussions and analysis of stock market and investment opportunities in Sri Lanka

Latest topics

» PEOPLE'S INSURANCE PLC (PINS.N0000)
by ErangaDS Today at 11:50 am

» LOLC FINANCE PLC (LOFC.N0000)
by Rational Investor Today at 7:10 am

» Are you a PVT LTD company owner?
by N W Today at 3:52 am

» CENTRAL INDUSTRIES PLC (CIND.N0000)
by ErangaDS Yesterday at 11:02 pm

» EXTERMINATORS PLC (EXT.N0000)
by K.R Yesterday at 12:04 pm

» CONSTRUCTION SECTOR
by K.R Yesterday at 9:07 am

» PMB/PLC/PINS
by K.R Tue Jan 31, 2023 7:02 pm

» What will happen tomorrow?
by ErangaDS Tue Jan 31, 2023 6:50 pm

» $18 a dozen: how did America’s eggs get absurdly expensive?
by target1 Mon Jan 30, 2023 12:06 pm

» Govt. to sell listed shares for short-term liquidity
by GOSL Mon Jan 30, 2023 7:44 am

» Don't Catch Falling Knives!!!
by DeepFreakingValue Sun Jan 29, 2023 6:33 pm

» BLUE CHIP COMPANIES - Comparative Analysis
by DeepFreakingValue Sun Jan 29, 2023 3:23 pm

» PRIME LANDS RESIDENCIES PLC (PLR.N0000)
by DeepFreakingValue Sat Jan 28, 2023 9:48 pm

» Who actually own BROWNS INVESTMENTS (BIL)?
by DeepFreakingValue Sat Jan 28, 2023 4:18 pm

» AAIC රු 12 බැගින් අත්පත් කරගත් කොටස් 51% ඇති SCAP වෙත විශාල මූල්‍ය ලාභයක් හිමිවෙන බවට කටකතා ?
by sanjayapeiris351 Sat Jan 28, 2023 10:13 am

» EXPO සහ LOLC කොටස් මිල වැටුනත් කොළඹ කොටස් මාර්කට් එක ශක්තිමත් වෙයි ඉදිරියේ දී ?
by sanjayapeiris351 Sat Jan 28, 2023 10:10 am

» Flu, Feed, And Fuel Have Made Eggs Really Expensive
by target1 Sat Jan 28, 2023 8:03 am

» Why Investors are worried about LOLC Group?
by Beyondsenses Sat Jan 28, 2023 7:54 am

» EXPOLANKA HOLDINGS PLC (EXPO.N0000)
by God Father Fri Jan 27, 2023 11:07 pm

» Where is Harry J's looted wealth?
by rajini Fri Jan 27, 2023 6:28 pm

LISTED COMPANIES

Submit Post
ADVERTS

Poll

EXCHANGE RATE PREDICTION: 2022

Statement by academics on dealing with Sri Lankan debt, January 2023 Vote_lcap16%Statement by academics on dealing with Sri Lankan debt, January 2023 Vote_rcap 16% [ 43 ]
Statement by academics on dealing with Sri Lankan debt, January 2023 Vote_lcap21%Statement by academics on dealing with Sri Lankan debt, January 2023 Vote_rcap 21% [ 58 ]
Statement by academics on dealing with Sri Lankan debt, January 2023 Vote_lcap30%Statement by academics on dealing with Sri Lankan debt, January 2023 Vote_rcap 30% [ 83 ]
Statement by academics on dealing with Sri Lankan debt, January 2023 Vote_lcap34%Statement by academics on dealing with Sri Lankan debt, January 2023 Vote_rcap 34% [ 93 ]

Total Votes : 277

ශ්‍රී ලංකා මූල්‍ය වංශකථාව - සිංහල
Submit Post


CONATCT US


Send your suggestions and comments

* - required fields

Read FINANCIAL CHRONICLE™ Disclaimer



EXPERT CHRONICLE™

MARKET CHAT


ECONOMIC CHRONICLE

GROSS DOMESTIC PRODUCT (GDP)


CHRONICLE™ YouTube

LATEST TWEETS

You are not connected. Please login or register

FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Statement by academics on dealing with Sri Lankan debt, January 2023

Statement by academics on dealing with Sri Lankan debt, January 2023

Reply to topic

Go down  Message [Page 1 of 1]

CHRONICLE™

CHRONICLE™
Admin

Sri Lanka, along with many other low- and middle-income countries, has experienced a series of financial shocks due to both external and internal factors. Global forces have caused food and energy import costs to soar and interest rates to rise, even as the currency has devalued significantly. These shocks, along with a history of policy mismanagement—and specifically the deregulation and openness that encouraged irresponsible borrowing, enabled illicit financial flows out of the country and assisted political corruption—have intensified external debt and balance of payments crises.

Over the last decade of liquidity expansion and low interest rates in the world economy, private lenders provided loans to low- and middle-income countries, at higher interest rates than for advanced countries. These higher rates were purportedly due to greater risk exposure that could make debt repayment more difficult in such countries. That risk has now materialised, firstly through a global pandemic, and then the price shocks and interest rate increases of 2022.

Private creditors own almost 40% of Sri Lanka’s external debt stock, mostly in the form of International Sovereign Bonds (ISBs), but higher interest rates mean that they receive over 50% of external debt payments. Such lenders charged a premium to lend to Sri Lanka to cover their risks, which accrued them massive profits and contributed to Sri Lanka’s first ever default in April 2022. Lenders who benefited from higher returns because of the “risk premium” must be willing to take the consequences of that risk. Indeed, ISBs are now trading at significantly lower prices in the secondary market. In this context, giving private bondholders an upper hand relative to sovereign debtors in the Paris Club and the IMF’s required debt negotiations violates the basic principles of natural justice.

In addition, the lack of transparency of the debt negotiation process and accountability of the holders of ISBs underscores the concern that risky lending to corrupt politicians (leading to what is now recognised as “odious debt”) was a significant element in generating the current debt crisis. Apart from revealing the identity of ISB holders, it is also important to disclose how ISBs were deployed, and the use of those funds.

Debt negotiations in Sri Lanka are now at a crucial stage. All lenders—bilateral, multilateral, and private—must share the burden of restructuring, with assurance of additional financing in the near term. However, Sri Lanka on its own cannot ensure this; it requires much greater international support. Instead of geopolitical manoeuvring, all of Sri Lanka’s creditors must ensure debt cancellation sufficient to provide a way out of the current crisis.

The role of multilateral organisations, particularly the international financial institutions (IFIs), such as the IMF and the World Bank, is also significant. They were founded to assist sovereign nations, particularly in contexts in which financial markets would not deliver, to ensure financial stability and prevent or reduce the impact of financial crises, and to provide resources for crucial investments required to meet social and developmental needs.

The IFIs are not currently living up to these responsibilities, at a time when they are most urgently required. In Sri Lanka they encouraged the very policies of more open capital accounts and deregulation that have led to the current crisis. They have been slow to respond to the crisis, and are apparently requiring onerous policy and fiscal conditionalities, such as moving to a primary fiscal surplus in a very short time, even as the economy continues to plunge.

The implications are already evident in the recent Budget of the Sri Lankan government, which has unrealistic revenue assumptions that are unlikely to be met. Revenue shortfalls would then necessitate further “austerity” and likely cuts in essential public spending. The Budget also proposes public asset stripping and privatization of strategic lands, marine resources, energy, transport and telecom infrastructure and public enterprises. These policies will harm the most vulnerable groups in Sri Lanka, exacerbate poverty and inequality, and lead to further economic decline. Instead the focus should be on legal and regulatory changes to stem the illicit outflow of capital through transfer pricing and trade mis-invoicing over the past 15 years, which is estimated to be far more than the aggregate foreign debt of Sri Lanka, and on taxation of wealth and consumption of the super-rich.

The Sri Lankan case will provide an important indicator of whether the world—and the international financial system in particular—is equipped to deal with the increasingly urgent questions of sovereign debt relief and sustainability; and to ensure a modicum of justice in international debt negotiations. It is therefore crucial not only for the people of Sri Lanka, but to restore any faith in a multilateral system that is already under fire for its lack of legitimacy and basic viability.

https://debtjustice.org.uk/wp-content/uploads/2023/01/Sri-Lanka-debt-statement.pdf

https://www.srilankachronicle.com

Back to top  Message [Page 1 of 1]

Reply to topic

Permissions in this forum:
You can reply to topics in this forum