Central Bank sees no reasons for domestic debt restructuring

Central Bank Governor Dr. Nandalal Weerasinghe expressed the belief that there was no need to restructure domestic debt at present as the monetary authority has taken measures towards debt sustainability.

Addressing a media conference in Colombo on Thursday, he noted that still there was no request for domestic debt restructuring and the Central Bank is fully convinced that it would be able to make it sustainable.

 “The government position is to re-structure external debt,” Dr Weerasinghe said adding that the banks liquidity position will be affected by domestic debt restructuring. President Ranil Wickremesinghe in recent times has spoken on the possibility of domestic debt restructuring.

The Central Bank is holding one- toone talks with banks to discuss ways and means to minimise the impact on the local banking system and maintain debt sustainability, he said.

Total outstanding domestic debt was Rs. 12 trillion as at the end of March 2022 while the gross domestic borrowings of the Government surpassed Rs 1.6 trillion in the first four months of 2022, Finance Ministry data shows.

Around 60 per cent of the domestic borrowing (over Rs. 1 trillion) was raised from Treasury bonds, 31 per cent (Rs. 518.2 billion) from Treasury bills, and 4.4 per cent (Rs 73.8 billion) through provisional advances from the Central Bank, and Rs. 65.6 billion was raised from Sri Lanka development bonds.

However domestic debt has already received upfront hair cut via over 60 per cent inflation and inclusion debt restructure could cause financial instability, several economic experts warned. (Bandula)