Halt foreign borrowings till polls are over – Opposition



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The Opposition has called upon the government to refrain from taking any further action with regard to foreign borrowings until the conclusion of the August 17 elections.


UPFA National list MP Prof G. L. Peiris, in a letter addressed to the Secretary to the Ministry of Finance and Governor of the Central Bank, yesterday asked them to "act in the best public interest and ensure that the management of public finance, the economy and external debt will not be permitted to get further deteriorated during the ensuing 6-8 weeks."


Full text of Prof Peiris’ letter: We observe, that the closing date of Request For Proposal (RFP) for the Government of Sri Lanka to raise US$ 500 million from foreign lenders, was on 26th June 2015, also being the date on which the President dissolved Parliament, announced the date of the General Election and the date on which the new Parliament will be convened.


We reliably understand that the related bids have been submitted by banks, with high margins - as high as 3 per cent over the interest rates along with other charges, with a 3 year maturity. Since the Parliament is vested with full control over Public Finance, a borrowing of the proposed scale at a time when the date for the next General Elections have been already announced which is only around 6 weeks away, will allow lenders to take undue advantage of the situation and capitalize on uncertainties and risks, to the detriment of the borrower.


Regrettably, the non-availability of the Report that was expected to be released by the Committee on Public Enterprises (COPE) on the recent Bond Issue would aggravate the situation while also raising issues of credibility gaps, causing negative sentiments in financial markets and banks.


In this context, you would certainly agree that the related Negotiations Committee will not be in the best position to secure better terms and conditions for this facility. Further, it is not the practice of a Caretaker Government to make such a commitment, even if the Negotiation Committee makes recommendations, since making further commitments in relation to external debt just before a General Election to elect a new Parliament is not acceptable. It is noted that as per the Fiscal Management (Responsibility) Act No. 03 of 2003, the Government is permitted to borrow only from the Central Bank by way of an advance, to meet any temporary difficulties. In this backdrop, we request the Secretary to the Treasury, who is the Chief Accounting Officer and the signatory to external borrowings for and on behalf of the Government, to ensure that said borrowing will not be proceeded with.


We hereby request the Secretary to the Treasury and the Governor of the Central Bank, both of whom are ex-officio members of the Monetary Board, to appraise the Monetary Board of this situation and issue relevant instructions to the Superintendent of Public Debt, to refrain from taking any further action with this borrowing, until the conclusion of the General Election, when suitable steps could be taken after a careful assessment.


We observe with serious concern, that Official Reserves of the Central Bank have declined to an alarming level, to around US$ 6.5 billion as of now; from US$ 8.5 billion in January this year and that Commercial Banks have restricted the release of foreign exchange to the general public for ordinary commercial transactions. We also note that no serious capital inflows have taken place through the Stock Market and that stock market transactions have remained depressed. Exports during the first four months of this year are reported to have declined. Prices of some essential goods particularly all varieties of lentil have risen substantially. In the background of the exchange rate depreciation, trade chambers have warned of possible implications on consumer prices with the Cost of Living rising sharply. The Ceylon Petroleum Corporation has reported large losses in the backdrop of higher international oil prices. Official statistics indicate that the growth in GDP has declined to 6.2 per cent in the first quarter 2015, compared  to 7.6 per cent in the first quarter 2014, with the contraction experienced in the external sector i.e. construction, plantation, trade etc. The economy may contract further in the second quarter of this year, due to the General Election. Therefore, managing this complex situation is the primary responsibility of the Secretary to the Treasury, as the Chief Accounting Officer.


We trust that both of you, being the Secretary to the Treasury and Governor of the Central Bank, will act in the best public interest and ensure that the management of public finance, the economy and external debt will not be permitted to get further deteriorated during the ensuing 6 - 8 weeks.


We also request both of you, who are holding highest levels of public office that, are responsible for the management of the economy, to keep His Excellency the President appraised of the serious economic conditions that the country is presently confronted with.


 
 
 
 
 
 
 
 
 
 
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