Yesterday (26) was indeed a milestone in contemporary Sri Lankan history, as Sri Lanka managed to finalise an agreement with its bilateral creditors via the Official Creditor Committee of the Paris Club, while signing another agreement with China's Exim Bank.
The agreements, signed in Paris and Beijing are an indication of the global nature of the issue Sri Lanka has to navigate to move towards recovery. The restructuring of the island’s bilateral debt is a stepping stone to finalise the large debt issue of commercial debt, which is largely held by Government-issued International Sovereign Bonds (ISBs) holders.
The path to restructuring debt is a painful one, and began with domestic debt restructuring in 2023. Credit for securing the bilateral debt restructuring needs to be given to the Government, State agencies, Sri Lanka’s advisors and all the countries who helped out. Credit must also be given to the Sri Lankan citizen for enduring the many austerity measures and crises – the role the public play, and what they endure for a podium finish for governments are often forgotten. Addressing the nation yesterday, the President said that this is not the end of the journey. He is correct, we are embarking on a long road, with significant changes necessary to reach end goals. In that journey, Sri Lanka needs to somehow find a national narrative, and sell it to all its citizens and anyone else who’d listen. Now is the time for transparency, unity and reform.
The agreements entered into will no doubt give Sri Lanka a much needed boost in international confidence. It will also ensure that Sri Lanka can continue with the International Monetary Fund (IMF) programme. It will also enable Sri Lanka to set aside approximately 4.5% of its GDP for debt repayment between 2027 and 2032. Once the debt of the commercial creditors (ISBs and term loans) are restructured with an acceptable hair cut for Sri Lanka, ratings agencies may upgrade the island’s outlook, thereby building investor confidence. It is understood that the Government aims to do that within the next few months, or as early as possible. With elections around the bend, such achievements will undoubtedly be a feather in the caps of the State. The President said yesterday that Sri Lanka had won. While some may agree with him, many Sri Lankans who are below the poverty line and many who hover just above will question what was won? This is due to the fact that those masses are yet to ‘feel’ the effects of the achievements the Government is keen to showcase.
It is expected that the Government will present both agreements to the Legislature once the Parliament is reconvened next week. In this period, transparency is paramount. The Government must be forthright with the public and disclose what’s in the agreements. This is vital for the good governance Sri Lanka requires, as the public, and more so, Sri Lanka’s future, our youth, harbour a deep distrust of the State. They cannot be blamed, as they have grown up with little cause to put faith in the State or the political leadership of the country. It is imperative that the Government build awareness about the rest of the process and give a clear picture about the roadmap ahead. This needs to be done, void of political grandstanding, otherwise, many will simply chalk it down to political propaganda before the elections. Let us hope that the President will be able to build trust in the governance structures of Sri Lanka in the eyes of our citizenry, and uphold faith in the Justice system, following the debt restructuring achievement, while international trust in the island grows. Both are equally important.
Today, there is also an opportunity for the decaying Sri Lankan political class to redeem itself to an extent. Having played a principal part in running the country to ruin, and making masses of youth to believe ‘better anywhere else than here’, the Sri Lanka polity have the opportunity to discard petty self-interest, and work ‘together’ to help Sri Lanka chart a course to a better future. This journey will be difficult, it will also need to involve some measure of justice to be meted out to those politicians and State officials who put the nation in a tailspin. Rebuilding Sri Lanka, will also need a change in political culture, and a significant change in attitudes. It will also require healing between communities and better access to resources and justice.
Yes, the President is right, we do have a long road ahead.