Current Affairs
Sri Lanka needs debt restructuring to prevent the recurring problem
June 03, 2021
Presently Sri Lanka has a serious debt problem and it looks like there has to be some kind of debt restructuring in order to prevent the problem occurring year on. Professor Shanta Devarajan of the Georgetown University said.
Professor Devarajan is also the Acting Chief Economist of the World Bank.
However he insisted that he was not speaking on behalf of the World Bank.
Addressing a Webinar organized by the Pathfinder Organisation on “what can Sri Lanka, World Bank and the IMF can learn from each other”, Professor Devarajan Said
“The IMF is actually well placed to provide technical assistance of different options for debt restructuring or different combination of policy that will lead to restructured debt profile. They did the same thing for Argentina, and queried as to why Sri Lanka doesn’t follow the Chinese example who always yielding to advice and expertise from the World Bank.
When you are graduated from low income status there would not be any concessional money. What countries like Sri Lanka should do is to take advantage of the expertise provided by the two institutions and consult the people. The knowledge is there they should do what the Chinese do.”
He was of the opinion that public discussions are important prior to structured reforms are introduced. “The electricity tariffs and fuel and gasoline subsidies are some of these areas”.
Tracing the history of the two financial institutions he said
“The word Bank and the IMF were born out of the chaos following the Second World War. The global economy was in shambles soon after the war. Several countries were devastated by the war itself.
There was a conference in Hampshire where the need for two institutions had been emphasized,
One was to keep the world safe from capital account crisis the other was to re-construct the economy that was devastated like what happened in 2008.
The IMF was created to keep the global financial system stable, the World Bank was created for reconstruction of the Economy. The World Bank was initially known as the International Bank for reconstruction.
Former Governor of the Central Banka Dr. Indrajit Coomaraswamy also spoke and pose many important questions for the benefit of the participants.
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