COLOMBO: Sri Lanka must look at restructuring a $1 billion sovereign debt due for payment in July, the outgoing finance minister told parliament on Thursday, urging an end to demands for a change in government amid the worst economic crisis.
The opposition and some partners of the ruling coalition rejected calls this week for a unity government from President Gotabaya Rajapaksa after he disbanded his cabinet, hoping to quell weeks-long street protests over shortages of fuel, power, food and medicine.
Sabry’s resignation was submitted just days ahead of scheduled talks with the International Monetary Fund for emergency loans. Reserves dropped 16% to $1.93 billion in March from a month earlier, central bank data showed.
“We must look at how to structure the $1 billion international sovereign bond payment maturing in July. We must go to the IMF, there is no other solution that I can see,” said Ali Sabry, who sent his resignation to Rajapaksa on Tuesday, a day after he was moved to finance from the justice ministry.
The $1 billion bond maturing on July 25 was trading at 54 cents in the dollar, its lowest level since spring 2020. Other dollar-denominated sovereign bonds traded at even more stressed levels, with most changing hands around 40 cents in the dollar.
“We must have political stability to find solutions to the financial crisis,” Sabry said. “We must discuss with the World Bank and we must have a bridge-financing plan with the ADB (Asian Development Bank). If we don’t have stability, who will conduct these talks?,” he said,
Opposition lawmakers continued to call for the president to step down. At least 41 parliamentarians withdrew from the ruling coalition this week to become independents, though they could still support the government in the house and the opposition has not called for a no-confidence vote.
Foreign Minister G. L. Peiris told diplomats that the government still held a majority in parliament and that “despite the agitation”, there was no consensus on who could replace the president, prime minister and parliament.
Assistance from the IMF would likely come with some tough political choices including policy reforms. J.P. Morgan analysts estimated this week that Sri Lanka’s gross debt servicing would amount to $7 billion this year, with the current account deficit coming in around $3 billion.
As the search for a replacement for Sabry at the finance ministry continues, P. Nandalal Weerasinghe took over as the central bank governor, succeeding Ajith Nivard Cabraal.
Weerasinghe, a former senior deputy governor of the Sri Lankan central bank who has worked with the IMF, will hold a monetary policy meeting on Friday.
