Sri Lankan MPs Call: Postpone Debt Repayment Now
(3) The ratio of interest on debt to government revenue was above 70% in 2020, an all-time high for Sri Lanka and among the highest in the world.
(4) Sri Lanka’s public debt to value of domestic production (GDP) ratio is also the highest on record, at 120%. It has skyrocketed, almost 25 percentage points, over the past two years.
Each of these situations would in itself constitute a serious economic challenge. Occurring simultaneously, they threaten our short and long term future.
In this context, the Central Bank’s policy has been to hoard scarce dollars to pay creditors in full and on time. This has fueled a shortage of dollars for the needs of our own people and reduced imports of essential items such as food, medicine and fuel. We see the shortage manifesting itself in long queues for essential items and frequent power outages. The situation will only get worse over the course of the year if the government does not urgently shift gears and ensure that sufficient funds are available for the Sri Lankan economy.
Already, the government’s reckless chemical fertilizer policy has impacted farmers across Sri Lanka, leaving us with a looming food crisis. The government’s current debt management policy, as it was with the fertilizer policy, is exacerbating the crisis, with no sensible or workable solution in sight.
Our recent meeting provided a platform for political leaders to share their constituents’ concerns and identify critical issues that require urgent attention. It was widely recognized that the hoarding of dollars by the Central Bank to make lump sum debt payments was causing a shortage of dollars to procure essential supplies in the country. This causes severe economic hardship for the people of Sri Lanka and long-term damage to the economy while delivering windfall gains to Sri Lankan sovereign bondholders.
We agreed that Sri Lanka should take immediate action to protect the poor from the adverse effects of this economic crisis and postpone repayment of its debt as a first step. Participating MPs also felt that we need strong national economic policy reform to tackle the root causes of the crisis and ensure lasting solutions.
This group of political leaders agreed to continue to engage and work together to secure justice for the people of Sri Lanka, through durable solutions. We must lead the country out of this unprecedented economic crisis and forge a fair and just future for our future generations.