• Strap: Siyamabalapitiya strictly rules off write-off

Sri Lanka’s domestic debt will not be subjected to a haircut under Domestic Debt Optimisation (DDO) as the Government ensures that bank depositors will not face any issue related to their savings, State Minister of Finance Ranjith Siyambalapitiya said.

Speaking in an interview with TV Derana on Monday (19), he said that domestic debt would only be subjected either to a maturity extension, an interest rate reduction or an extension of the grace period.

“In any kind of situation, we do not expect to write off domestic debt,” he said.

Moreover, he said that bank depositors have nothing to fear as the government will neither take part in their deposits nor there will be any delay in withdrawing their deposits back from the banks after the DDO.

Also, he said that member funds in the superannuation funds will not face any reduction in member savings or interest rate reductions following the DDO.

He noted that bilateral debt also will not be subjected to a haircut while options such as a haircut, maturity extension, interest rate reduction and extension of grace period are open for the commercial debt. 

“We expect to extend the repayment of $ 17 billion (of external debt) in the next five years through the restructuring and bring it to the level where Sri Lanka can repay those debts,” he said. 

He said restructuring external debt is not sufficient for Sri Lanka to reduce the Gross Financing Needs (GFNs) to 13% by 2027 from 32% in 2022, and therefore domestic debt must also be restructured.

However, the State Minister of Finance, Shehan Semasinghe in a press conference on Monday said that no final decision has been made yet on the DDO and that the government will approach sensitive issues responsibly.

He said that the Central Bank and the Ministry of Finance have provided clarifications on their stance and that their focus is on finding solutions for optimizing the banking and financial system of the country without negatively impacting stability.