The government has now gone against its stand of not restructuring domestic debt and is fulfilling an IMF precondition for restructuring foreign debt, charged MP Udaya Gammanpila.
Addressing the media on May 04, he said the staff level agreement signed in September 2022 did not mention a domestic debt restructuring, but that agreement still remains a mystery.
In the final pact with the IMF itself, page 17 says – “The authorities and their financial advisors are weighing different options and their associated legal procedures to optimize the design of a Local Law Local Currency debt treatment while preserving financial stability,” he quoted.
Instead of the word ‘restructure’, it says ‘optimize’, but to deceive whom? Gammanpila asked.
Optimizing could mean anything and bankers and depositors alike are in a deep quandary, he claimed.
Commercial banks, from whom most of the domestic borrowings were made, have given debt holidays to their customers, while bad debt has gone up considerably due to the financial crisis.
In this situation, commercial banks will be adversely affected if the state restructures its domestic debt, the MP warned.
He urged the government to avoid it if possible, or else take a decision in consultation with the commercial banks.