SJB lawmaker Eran Wickramaratne said that the public and the private sector workforce who are contributors to the EPF and ETF funds are badly affected by the government’s Domestic Debt Restructuring (DDR) programme, whilst the affluent and their cronies are allowed to get windfall gains within a short period.
Addressing the media recently, he said the Government debt that needs to be restructured was around Rs. 12.8 trillion, of which around Rs. 4 trillion were from Treasury Bills and the remaining Rs. 8.7 trillion were from Treasury Bonds.
He pointed out that the Government’s immediate solution was to extend the maturity of CBSL bills, transforming them into long term Bonds and that the government used the word debt optimizing to mislead people when it comes to treasury bonds.
Speaking further, he said;
"Of the Rs. 8.7 Trillion Treasury Bonds, the government was selective. 36.5 % of Treasury Bonds to be restructured belongs to the EPF fund - a big blow to the EPF fund and its members.
The IMF has directed the government to bring down its foreign debt servicing to 4.5 % and the government endeavoured to get bilateral and multilateral support to restructure the foreign debt of the country. The total debt stock of the country is now 128% of the GDP, whereas it should be around 60% for a middle-income country and the IMF had suggested bringing down the debt to at least 95% of GDP as a medium-term solution.
The Central Bank states that Sri Lanka owes US$ 7.1 billion to bilateral creditors, of which $3 billion is owed to China, $2.4 billion to the Paris Club and $1.6 billion to India - the Government is yet to reach a final agreement with its bilateral and multilateral partners on its Debt Restructuring.
In the meantime, the Gross Financing Need is still very high at 34% and needs to be brought down to 13% between 2027 and 2032. Gross financing needs are fiscal deficit, debt amortization and non-debt financing needs to be financed through sources including government securities as well as domestic and foreign loans. Sri Lanka is trying to reduce its overall debt by $17 billion in the medium term through restructuring.
The government had earlier announced that it will opt for foreign debt restructuring, instead of a DDR. It appears that the government does not have international confidence to pursue this outline and has now turned its gun towards DDR.
The DDR affects the EPF and ETF beneficiaries, but bank owners, corporate investors and affluent individuals have a windfall gain on treasury bonds. The SJB opposed the government’s DDR as it burdens the EPF fund and heavily affects 90% of its members whose only saving in life is the said fund."
Wickramaratne questioned as to why the government confined the restructuring programme to the EPF and ETF alone, when it took the decision to restructure Treasury Bonds, adding that in the recent past, the yield rate went up to 28-30% on Treasury Bonds and the private investors are not affected by the DDR as restructuring has no effect on private Treasury bonds, even the bank owners are benefitted as the banks are exempted from the DDR.
