• Shanta Devarajan says all they want is ‘some assurance’
• Says Rajapaksa administration policies ‘truly reckless’

The International Sovereign Bond (ISB) holders are “very interested” in coming back to Sri Lanka to reinvest on the assurance of continuous economic improvement in the country, Prof. Shanta Devarajan said.

Speaking in an interview with TV Derana on Sunday (16), the former World Bank Chief Economist, who is part of the Sri Lankan team discussing with the creditors, said that in some of the discussions Sri Lanka had with the creditors last week, ISB holders have said that they are very interested in reinvesting in Sri Lanka.

“They just want some assurance if they do reinvest in Sri Lanka, that the economy will continue to improve, that there won’t be this kind of disastrous economic policies of the Rajapaksa administrations that were truly reckless and that ruined Sri Lanka's reputation in the international capital market,” he said.

Moreover, he said that the main reason foreign direct investors are attracted to a country is the macroeconomic stability and not tax holidays.

He noted that providing tax holidays to foreign investors has actually worked against Sri Lanka because they have been contributing to macroeconomic instability.

“The more we can do to show prudent macroeconomic management, that is lower fiscal deficit and greater tax to GDP ratios, the more confidence investors will have that the Sri Lankan economy is on a path to cover it,” Prof. Devarajan said.

Sri Lanka owns about $ 12.1 billion in ISBs which are included in the external debt restructuring process, $ 1.5 billion out of the total ISBs are held by nine local private banks.

Last Friday (14), Reuters reported that a committee of Sri Lanka's international private creditors sent its first debt rework proposal to the country's authorities regarding over $ 12 billion ISB outstanding. 

The group consists of 30 creditors including global investment companies Amundi Asset Management, BlackRock, HBK Capital Management, and T. Rowe Price Associates.