A press briefing on the economic stabilization process and the proposed relief packages for the public was held today (26) at the Presidential Media Center (PMC).
Minister of Labor and Deputy Minister of Economic Development, Dr. Anil Jayantha Fernando, along with Deputy Minister of Finance and Planning, Dr. Harshana Suriyapperuma, attended the briefing.
The media statement released during the press briefing is as follows:
Press Statement on the Economic Stabilization Process and Relief Packages to People
Economic stabilization is key to taking the country out of the abyss created by past regimes. At the time the government assumed office those who are responsible for the crisis had unilaterally suspended external debt servicing in April 2022, entered into IMF program for an Extended fund facility (EFF) of approximately USD 3 billion over a period of 4 years to be received in 8 installments, and paddled through the IMF program and debt restructuring process connected to in line with debt sustainability analysis connected to it. The delayed and complex nature of the debt restructuring process incurred additional costs to the country and created additional burdens on the people. However, after, considering both the pros and cons of the context that prevailed at that time in terms of social, political and economic perspective, the government proceeded with the options in the best interest of the people of the country.
Accordingly, it was possible to reach the staff-level agreement of the third review on 26th November 2024, in line with the program parameters, and government revenue measures with appropriate engagement, and timely facilitation. In the lead-up to the board approval from the IMF, the government is engaging with necessary stakeholders to obtain the next tranche of the EFF.
Debt Restructuring
It consists of both domestic and external restructuring. Domestic debt restructuring was completed in July 2023. External restructuring excludes multilateral creditors on various grounds and arguments. The rest consists of official bilateral debt and private ISB holders.
Bilateral Debt
The bilateral debt is dealt with the Official Creditor Committee (OCC) co-chaired by France, India and Japan representing 17 countries, China Exim Bank, China Development bank, other official creditors (Kuwait, Saudi Arabia, Iran and Pakistan) and other commercial creditors.
OCC had agreed to the terms and conditions in June 2024 and the loans with China Exim Bank had already been restructured in October 2023 within the agreed framework, ensuring comparability of treatment (CoT). Except for the other official creditors (Kuwait, Saudi Arabia, Iran and Pakistan) accounting for roughly USD 300 million representing about 1% of total external debt subject to restructuring, all other bilateral creditors have already agreed to restructure within the agreed framework.
Much delayed ISB restructuring had passed several stages of negotiations with agreements, disagreements, changes to proposals, and adjustments in line with DSA and IMF consents, had finally agreed in principle (AIP) on 19 September 2024 just two days prior to the presidential election. Ad Hoc Group (AHG) and Local banking consortium represent ISBs which account for USD 14.2 billion including a past due interest of USD 1.7 billion.
By prioritizing and facilitating actions in a timely manner, the new government has demonstrated a strong political commitment to steering the country toward economic stability. These efforts toward financial stability have been independently acknowledged by third parties, including rating agencies which have upgraded the ratings by several notches, which was only possible due to the correct prioritization and implementation of economic stabilization measures. Hence, the government continued with the restructuring process and facilitated it to ensure the successful completion of the issuance of new bonds for the exchange of existing ones on 20th December 2024 in order to achieve the critical objective of stabilizing the economy in pursuit of navigating the country with the growth and development trajectory towards a thriving nation and beautiful life.
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2.a.1. Parate Extension
Instead of merely postponing the Parate execution date, the government engaged with stakeholder groups to ensure acceptable solutions were found for this long-standing issue. As a result, the Parate execution has now been extended until 31st March 2025.
2.a.2. Relief Package
The relief for businesses is not only in the form of an extension of time. Based on data provided by the Central Bank, 99% of borrowers with outstanding capital of less than 25 million rupees in restructured loans have been granted a 12-month extension to renegotiate with banks and agree on a settlement path. Borrowers with debts between 25,000,000 and 50,000,000 rupees have been granted a 9-month extension, while all other borrowers are entitled to a 6-month extension. This relief package, proposed by the government and to be implemented through the Central Bank, also includes several other important measures, such as easing the credit rating status, extending the repayment period, offering low interest rates for restructured debt, and providing a transparent mechanism to resolve valuation disputes.
This package aims to ensure that the SME sector can actively contribute to the economy.
2.b. School Stationery Assistance for School Children
2.b.1. Children in the Aswesuma Families
To ease the burden on parents from vulnerable groups in society, Rs. 6,000 per child has been allocated to purchase essential school books and stationery for the upcoming school term. Children from Aswesuma recipient families will begin receiving this benefit shortly.
2.b.2. Children Not Receiving Aswesuma
Children from families who are not currently receiving Aswesuma but are facing economic hardship will also be provided with this benefit, based on recommendations from the Ministry of Education. It is expected that the process will be finalized soon, and the disbursement scheme will start within a few days, ensuring that all deserving children facing economic hardship receive assistance.
