The question why External debt restructuring was not undertaken in 2019 has been raised:
At that time, we had access to international capital markets.
There was sufficient confidence in SL for the issuance of a USD 2.4 bn ISB only three months after the constitutional crisis (March 2019).
Then two months after the Easter bombings (June 2019) there was still confidence in Sri Lanka’s debt management to raise another USD 2 bn ISB.
The objective was to build a buffer going into the election season when policy slippage was inevitable in the SL context.
Reserves were USD 7.6 bn at end 2019 not USD 6.5 bn as sometimes mentioned.
If there had been debt restructuring, in 2019, we would have promptly lost access to international capital markets which had sufficient confidence to invest in SL ISBs worth USD 4.4 bn in that year.
Today, we have been downgraded and have no access to international capital markets.
So, we have very little to lose by restructuring the international debt stock (except multilateral debt).
It would buy us time to put our house in order.
Also the Medium-term debt management strategy published in April 2019.
It sets out how the debt could have been managed prior to the pandemic.
In addition, the Active Liability Management Act (2018) provided for more tools to manage the debt.
It was these two measures that helped to give markets sufficient confidence to invest USD 4.4 bn in ISBs, in 2019.
It was just as well this amount of money was raised as the worst fears about the repeating effects of elections on policy were realized.
(The author is a respected Banker of yore)
