Financial Times

OPEC funds to retire public debt
By Feizal Samath
Finance Minister Sarath Amunugama and Jayantha Dhanapala, a former UN diplomat, fly to Vienna this week for talks with top officials from the OPEC Fund including its Director General to seek a special loan facility from the fund to tide over a cash crisis.

The duo is expected to urge the OPEC Fund to help Sri Lanka particularly at this time when the country is facing twin shocks of rising oil prices and a severe drought, in addition to the depreciating rupee value.

The OPEC Development Fund provides concessionary financial assistance through loans for development projects and programmes, and for balance of payments support. It also provides grants in addition to participating in the financing of private sector activities in developing countries. All developing countries are eligible for Fund assistance with the least developed countries accorded higher priority.

"I think the initial response has been positive from OPEC member countries for some soft loan facility to cushion the impact of high oil prices and its impact on the economy," a Treasury source said. Dhanapala, now the Secretary-General of the government's Peace Secretariat, has been having informal contacts with some key oil industry figures and OPEC in a bid to woo support for Sri Lanka's case.

Treasury sources said the government hope to use the "to-be-obtained" facility to retire foreign debt and petroleum liabilities and reduce the burden on the economy arising out of rising oil prices. In a related move, Dr Amunugama said recently that Iran has agreed to a request to differ payments on oil purchases.

The Sunday Times FT learns that Saudi Arabia and Kuwait are among some oil-producing countries that may offer some kind of support to Sri Lanka during this crisis - again through deferred payments on purchases.

The sources said Amunugama's meeting with OPEC officials was likely to be followed by a more strenuous negotiation process between Sri Lankan government and OPEC officials on terms, conditions, repayments periods and the quantum.

A private sector economist said obtaining a facility to retire debts would reduce the government debt burden but wouldn't directly have an impact on the high cost of living.

According to Central Bank data, the country's total outstanding debt last year was Rs. 1,864 billion out of which Rs. 1,020 billion represented domestic debt and Rs. 844 billion foreign debt. The repayment due to OPEC alone is Rs 538 million.

Treasury officials have said in the past that the OPEC facility was being sought to cushion the impact from rising oil prices. Spokespersons for both the Saudi and Kuwaiti embassies in Colombo declined to comment on whether their governments have offered to help Sri Lanka in this crisis.

Meanwhile some civil society groups like MONLAR, a grassroots organization working for the rights of farmers and peasants, are expected to meet with the IMF in the next two weeks at a discussion on the budget, due to be presented in parliament on November 10.

This is in line with requests by the government for civil society participation in the pre-budget presentation process. Recently the Treasury invited public representations on the budget while separately a group of UPFA MPs including Wimal Weerawansa asked the public to send in their comments/ proposals/ suggestions on how the next budget should be drafted or what it should include.

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