News
Significant amount of ‘confirmed’ forex flows failed to materialise: Finance Ministry responds
View(s):Right of reply
The Finance Ministry has drawn attention to an article published in the Business section of the Sunday Times last week under the headline ‘New revelations over SL’s foreign debt default’
The response said:
The above news article claimed, citing a ‘top government official’ that “there was an expected forex inflow of over US$ 10.7 billion in the pipeline as of April 4 to boost foreign reserves,” referring to “an official forex inflow status report based on Central Bank data submitted to the Treasury”. Further, the said news article reported, citing the same report that, “the confirmed inflows were India – $ 1.5 billion, India ACU facility $ 500 million and China $ 2.5 billion while expected inflows included West Coast Power investment $ 250 million, Hilton divestment $ 500 million, tourism inflows $ 900 million, green bonds $2 billion, People’s Bank of China facility $1.5 billion and Qatar $1 billion.”
Accordingly, the news article claims that “These forex receipts would have enabled the Government to settle the maturing payments due in 2022, while also rolling over several other existing loans, including Sri Lanka Development Bonds and Foreign Currency Banking Unit (FCBU) loans”.
The Ministry of Finance categorically denies the premise of this news article, which attempts to claim that there were significant confirmed and expected inflows of foreign exchange to the Government of Sri Lanka (GOSL), hence the maturing foreign currency debit obligations could have been met in 2022. The Ministry of Finance would like to reiterate that a significant amount of the ‘confirmed’ flows failed to materialise and none of the ‘expected flows’ materialised before the April 2022 payment.
In addition, the Ministry of Finance, by exercising its right to respond, would like to make the following clarifications:
The GOSL announced the “Interim Policy Regarding the Servicing of Sri Lanka’s External Public Debt” (the Interim Debt Policy) following lengthy consultations with the highest political authorities, including the then President, the then Minister of Finance; the Secretary to the Treasury, the Governor of the Central Bank, the Monetary Board of the Central Bank and other senior officials. The Interim Debt Policy and the text of the announcement were approved by the Cabinet of Ministers on 16th April 2022. The Interim Debt Policy was necessary because Sri Lanka had insufficient liquid reserves to meet the debt servicing obligations due on 18th April 2022.
Sri Lanka did not make this decision because it was unwilling to pay its external public debt. Sri Lanka had, and still has, the willingness to pay its external public debt to the extent possible. Instead, the decision was necessary because Sri Lanka lacked the liquid foreign exchange reserves necessary to meet the immediate external debt service obligations.
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