The government explained to creditors at their presentation on Friday, September 23^rd, that Sri Lanka will receive loans the IMF is to provide the country within the next 3-4 months, and that to receive it, debt restructuring is a must.

However, we must regretfully point out that we cannot hold out hope that we will get this money in three to four months like the government says. This is because, many creditors must agree to the debt restructuring. Creditors will not agree to this so easily, and it is difficult to expect that it can be done soon.

The Sri Lankan government had met with the creditors online and explained the debt crisis. The purpose of this process is to re-arrange the loan repayment periods with our creditors and to obtain concessions such as interest reductions, loan write-offs, etc., and getting the lenders to agree to this.

The government had indicated that while it has come to an agreement with Sri Lanka, the IMF considers ‘debt sustainability’ a crucial condition for Sri Lanka to release the debt installments that have not yet released.

The public is in deep fear as the rupee has fallen by 80 percent and high inflation is continues to increase.

During the presentation, the Governor of the Central Bank and the Secretary of the Ministry of Finance, who spoke on behalf of Sri Lanka, requested international creditors to reach an agreement on debt restructuring by mid-November. They said that afterwards, the IMF board of directors would give approval for loans in mid-December.

It is still unclear whether this can be done. It is a difficult target to come to an agreement with many different creditors within a month and a half.

The fact that only the basic conditions must be met within two months is a relief. What is expected now is to reach basic agreements, establish debt stability, obtain money from the IMF, and gradually enter into legal agreements with creditors for restructuring. Accordingly, even if we reach basic agreements in November, we must continue negotiations with creditors until the second quarter of next year.

Sri Lanka owes $46.6 billion in foreign currency. Rupee debts amount to 34 billion dollars, making up a total of 80 billion dollars. Therefore, the 2.9 billion dollars The IMF will provide will not be enough for us to escape the debt trap but will be a new loan added to this mountain of debt that will make future borrowing necessary. Remember that debt is not the solution to this crisis. Also, Sri Lanka is currently focusing on restructuring debt worth thirty billion dollars. Even if that amount is restructured, it will still not be enough.

Among our foreign loans, 18.8 billion dollars are ‘private’ loans. These include14.5 billion dollars in international sovereign bonds and development bonds.

Arriving at preliminary agreements will not be the same for every creditor. Official and private creditors have sought agreements in two different ways.

Official creditors’ financial agreement is a collective one integrated with the IMF program and adapted to Sri Lanka’s macroeconomic framework and credit stability. A collective platform of temporary creditors is being created for that. Those parties can discuss and debate collectively and present their agreement to the IMF. Among the official parties that have given bilateral loans this way, there are countries that belong to the collective of creditors called ‘Paris Club’ and those that do not. China, which owns 52 percent of our bilateral loans, and India, which owns 12 percent, are not members of the Paris Club.

Behind these creditors are the politics of each country. Each country has its own interests and competitions. We still don’t know what kind of conditions will be made officially and unofficially when reaching agreements, given each country’s political agenda. China, especially, has still not given us a word. Diplomatic experiences and expert opinions point out that China does not like debt restructuring because many countries in debt to China may attempt debt restructuring in the future. The total amount of loans that China has given to countries around the world is about one and a half trillion dollars. Therefore, China does not like the idea of debt restructuring. Without China’s agreement, it will not be easy for Sri Lanka to move forward in debt restructuring. Nevertheless, China has currently offered alternative proposals, should they be agreed in the interim.

Private creditors are showing an interest in entering into debt restructuring agreements with Sri Lanka with ‘good intention’. Accordingly, it will be sufficient for now if initial discussions begin and the necessary information is exchanged as required.

Negotiating with private creditors is not as simple as you’d think. Lenders aim to earn a maximum profit. They are not necessarily moved by compassion for the people of Sri Lanka. Creditors will organize themselves and try to make agreements they can profit from. Next, when negotiating with those parties, they will also group together and state their ideas.

Apparently, Sri Lankan bondholders are currently organized as two main committees. One of them consists of 100 international investors. The first pool holds 55 percent of international sovereign bonds not held by domestic investors. They are supported by the consulting firms Rothschild and White & Case.

The second committee consists of eight private banks. They are advised by Baker McKenzie.

Currently, restructuring debt as soon as possible is not just the wish of a few government leaders. Therefore, we are left to pray to some god that this will be done soon.

At present, if we compare diplomatic work regarding debt during the Basil Rajapaksa-Ajith Nivard Cabral era, it is clear that something more is being done at present. But it wouldn’t solve all problems. As the former Governor of the Central Bank Professor W. A. Wijewardena has pointed out, even the debt restructuring plan has its problems.

Even if they are resolved, the problem is not only in debt restructuring. The problem lies elsewhere.

Even if we borrow more and restructure the debt, we must pay debts worth 80 billion dollars and find money for people’s essential needs. We need sources of income. Our processes will have to be efficient without letting anyone steal revenues. Because Sri Lanka is weak, it needs to work for the benefit of the people without getting trapped in external conditions of various parties. Every minister, head of institution, consultant has to work very efficiently, intelligently, and creatively in their respective fields. They must be responsible to the people.

People will not have an easy time either. As the belts tighten, people will have to put up with it. The common man will have to have faith that his suffering is for the common good of the country.

The citizens of Sri Lanka should deeply feel a new beginning. They must understand real progress.

Accordingly, the question is not only whether negotiations with the IMF or creditors will be successful or not. Even its success will simply result in one more loan and a postponement of the old loan repayment period.

To solve the real crisis in the country, we need a new beginning. The rights of the public must also be protected. Not just an economic solution; economic, political, social, and cultural change is necessary for the development of the country.

A small government led by the Ranil Wickramasinghe-Rajapaksa clan cannot create that real change.

(Facts presented here are excerpts from the Daily Mirror)