No effect on EPF-ETF and bank deposits | Sunday Observer
State Minister of Finance Ranjith Siyambalapitiya on Domestic Debt Restructuring

No effect on EPF-ETF and bank deposits

2 July, 2023

Domestic Debt Restructuring (DDR) will not pose any risks to provident funds or bank deposits, State Minister of Finance Ranjith Siyambalapitiya said in an interview with the Sunday Observer.

“The current discussions involve proposing a deferment of around US$ 17 billion of the nearly US$ 30 billion debt for five years. Additionally, there are deliberations regarding a potential debt write-off as part of the overall debt management strategy. Given the current circumstances, it is crucial to address our debt obligations, both domestically and internationally. As a result, we have found it necessary to implement domestic debt restructuring measures to manage the situation effectively,” State Minister Siyambalapitiya said. 

Excerpts from the interview

Q: How will the Government face the challenge of debt restructuring? 

A: The answer for our inability to service our debt was to restructure it in a manner that we can pay it. As of the end of 2022, our overall state debt will reach US$ 83 billion, comprising US$ 41 billion in foreign debt and US$ 42 billion in domestic loans. A significant portion of the foreign debt, about US$ 11.5 billion, is owed to multilateral organisations. It is imperative that we honour our debt obligations and avoid defaulting on these crucial financial commitments. Out of the total debt, US$ 29.13 billion corresponds to commercial debt, while the remaining balance is in the form of bilateral loans.

The discussion surrounding debt restructuring arises primarily to address the repayment of these debts. In collaboration with the International Monetary Fund (IMF), we have devised a plan to address our debt situation. The current discussions involve proposing a deferment of approximately US$ 17 billion of the nearly US$ 30 billion debt for five years.

Additionally, there are deliberations regarding a potential debt write-off as part of the overall debt management strategy. Given the current circumstances, it is crucial to address our debt obligations both domestically and internationally. As a result, we have found it necessary to implement domestic debt restructuring measures to manage the situation effectively. 

Q: As the Minister of State for Finance, how can you assure the public that the restructuring of domestic debt will not negatively impact bank deposits, pensions, and employee provident funds?

A: The Government has provided clear assurances that the debt restructuring process will not pose any risks to bank deposits. There will be no reduction in interest rates, ensuring the stability and security of these deposits. Similarly, the Government is fully committed to safeguarding the interests of individuals regarding their pensions and employee (EPF) funds. There will be no adverse impact on the balance and interest to be received by the members of these funds. These matters are treated with the utmost sensitivity, and the Government is dedicated to preserving their integrity and ensuring the financial well-being of the people.

The proposed debt restructuring plan was officially presented to Parliament yesterday, following all legal procedures and frameworks as previously mentioned. It is important to emphasise that all actions taken are within the established legal boundaries. Therefore, there is no justification for people to harbour unnecessary fears or concerns. 

Q: But the Opposition continues to voice criticism of this program?

A: Can we expect anything more? They tend to criticise everything. Despite the current positive developments such as the depreciation of the US Dollar, strengthening of the Rupee, and declining prices of goods, along with a decrease in overall instability in the country, the Opposition seems unwilling to acknowledge these achievements. The rise in foreign remittances and increased tourist arrivals also seem to be overlooked by the Opposition. Indeed, it is understandable that we need not be overly concerned about the criticism from the Opposition. The Government is making sincere efforts to implement the program while ensuring that it does not impose undue pressure on the public. 

Q: There is concern among certain groups that the domestic debt restructuring could potentially lead to the collapse of the country’s banking system? 

A: There is no need to fear the stability of the banking system. Given the prevailing conditions in the country in mid-2022, a potential crisis could have emerged if bank liquidity had significantly decreased. However, the present situation does not warrant such concerns. Under the exclusive oversight of the Central Bank of Sri Lanka (CBSL), the banks are advancing steadily and robustly. The domestic debt restructuring program serves to reinforce the strength of the banks, further bolstering their stability and resilience. As our nation continues to gain credibility and build strong relationships with the international community, it is evident that the concerns that may have existed in the past are gradually dissipating.

Q: What progress has been made in the preparations for the second phase of the IMF EFF and what specific goals have been achieved in that regard by the Government?

A: The Government’s approach to achieving its goals in the second phase of the IMF program is characterised by a systematic and goal-oriented journey. Multiple stages have been successfully traversed, indicating significant progress. As we enter the final stages, slated for completion by next September, considerable strides have been made, with completion percentages ranging from 75 to 90 for various objectives. However, certain challenges lie ahead, including the imperative of enhancing Government revenue and the passage of the Central Bank Bill. These remaining goals necessitate focused attention and concerted efforts.

Q: To what extent has the Government’s claim about an influx of foreign loan investments into the country, following its engagement with the IMF, been realised and deemed successful thus far?

A: The engagement with the IMF has significantly boosted confidence in our country among various nations and institutions. As a result, we have been able to secure financial support from esteemed organisations such as the Asian Development Bank (ADB) and the World Bank (WB). This progress affirms that we are heading in the right direction, solidifying the trust placed in us and propelling us forward. The foreign and domestic debt restructuring program stands out as a significant milestone in this regard, demonstrating our commitment to address our financial challenges effectively.

Q: What are the underlying reasons behind the ongoing protests against the Government’s proposed social welfare program Aswesuma?

A: Subsidies have been a longstanding practice in Sri Lanka, with the Samurdhi Subsidy program lasting for 28 years. The primary objective of subsidisation is to empower the recipients and foster a more inclusive society. However, it is crucial to assess whether the anticipated goals have been effectively achieved through these subsidy programs.

Q: If the Government is sincerely addressing the concerns, what could be the underlying reasons behind the significant number of appeals and protests, including over 400, 000 appeals and 6,000 objections, from individuals who were not included in the beneficiary list of the Aswesuma welfare benefit program, as reported by the Welfare Benefit Board on June 29?

A: To address the impact of the economic recession, it was necessary to identify and assist those who had fallen below the poverty line. Given that 370,000 families out of 580,000 families in the country were requesting support, a thorough assessment of eligibility became imperative. Skilled officers were deployed to conduct door-to-door checks, resulting in the withdrawal of subsidies from around 500,000 of those families who themselves acknowledged their ineligibility for the subsidy program.

We have now presented the document obtained by gathering information from officials and voluntary groups to prevent many ineligible people from receiving these benefits. That is what those objections and appeals are for. There is no need to worry, because this is not the final document. People should make proper appeals and objections. Filtering this document from them is the next thing to do.

Q: But there are allegations that qualified people have been removed from the list?

A: It is important to address the challenges that may arise when ineligible individuals lose their access to subsidies after the implementation of a more targeted system. The focus should be on ensuring that the list of beneficiaries is prepared meticulously, allowing only deserving individuals to receive benefits. By prioritising fairness and accuracy in the selection process, the Government can overcome these challenges and establish a system that truly supports those in need.

Q: Doesn’t the Government have a plan to go beyond providing subsidies and uplift the lives of those people?

A: Indeed, it is crucial to have well-defined goals and periodic reviews for the subsidy program. By setting different durations for the four subsidised categories, the Government can ensure that the program remains effective and aligns with the recipients’ evolving needs. Additionally, the focus on not only providing subsidies but also promoting self-sufficiency and livelihood development empowers individuals to earn for themselves, contributing to their long-term economic well-being. The aim is to empower individuals and uplift them towards becoming a resilient and prosperous community.

Q: What is the expected procedure for tax recovery from tax evaders? 

A: The Government is attempting to encourage volunteering and ensure the efficient implementation of the program. Investing in human resources and technological advancements will contribute to the smooth functioning and overall success of the program, ensuring that the benefits reach those who truly need them.

Q: Many Government institutions are loss-making. What steps has the government taken to restructure them?

A: The issue of continuous losses incurred by over 4,000 Government institutions is indeed a concern. It is not sustainable to rely on taxpayer money to maintain these institutions indefinitely. The Government recognises the need for change and is exploring various methods of restructuring to address this issue. However, it is important to note that restructuring does not necessarily mean selling these institutions off to unreliable parties. There are different approaches and strategies that can be implemented to improve their efficiency and financial sustainability.

The Government’s aim is to find viable solutions that will ensure the long-term viability and effectiveness of these institutions while minimising the burden on public finances. Certainly, there are several methods that can be considered for restructuring government institutions, such as transferring them to the private sector with transparency, consolidation, Government management with private sector administration, and leasing.

These approaches aim to alleviate the burden on public finances and create opportunities for the public to benefit from the funds saved. Many countries have successfully developed their economies through such restructuring efforts. The Government is committed to approaching this process systematically and implementing appropriate strategies to achieve these goals.

Sri Lanka has faced significant economic challenges in recent times, and the journey to recovery is not an easy one. It requires a careful and steady approach to navigate the path towards stability and growth.

It is crucial for all stakeholders, including political parties and the Opposition, to understand the gravity of the situation and refrain from resorting to traditional criticism that may hinder progress. It is the collective responsibility of all individuals to comprehend the realities at hand and actively contribute to addressing the challenges faced by the country.