ECONOMYNEXT – Sri Lanka has appointed a committee to look into renegotiate all the cancelled projects with bilateral loans after the last week debt restructuring deal, Cabinet Spokesman Bandula Gunawardena said.

The island nation reached US$10 billion debt restructuring deal with the members of Paris Club and China last week and President Ranil Wickremesinghe announced the success in the bilateral loans after the deal signed.

A raft of infrastructure projects started with bilateral loans prior to Sri Lanka’s declaration of bankruptcy in April 2022 have been suspended as bilateral creditors stopped the funding due to the island nation’s sovereign debt default.

“The government has appointed a separate committee to discuss these changes including financial experts and institutions. A single person cannot decide on this,” Gunawardena told reporters at a media briefing in Colombo on Monday (01).

“Once you get the recommendations from this committee, the cabinet will decide on each project. Most of the conditions related to financial management and fiscal discipline are there in the IMF agreement. We have to act in line with that agreement.”

However, he declined to give a timeline on the resumption of the suspended projects and said: “We don’t know the time frame.”

He said no country including India was giving for bilateral project loans until Sri Lanka reached agreement with its bilateral creditors.

He said the country has to renegotiate some of the project funding from the bilateral creditors as the economic conditions have completely changed now from when it was signed.

“We won’t be able to complete the same project with the same contracts we had signed,” he said.

“When we signed the contract, the exchange rate could have been 131 rupees against the US dollar or 200. Later it went up to 400 and now it has come to 300. This exchange rate change should be reflected,” he said.

“Inflation also went beyond 70%. Now only it has come to a single digit. The interest rate which was more than 30 percent now has come down to a single digit.” (Colombo/July 01/2024)