SOE reforms, including in electricity sector, are vital for Sri Lanka - IMF's Srinivasan

Marrakech (News 1st); Krishna Srinivasan, the Director of the Asia-Pacific Department of the IMF said that if private creditors have put forward a proposal which includes GDP linked bonds, that is for Sri Lankan authorities and advisors, to engage with them. 

Sri Lanka's private creditors have sent a proposal on how to restructure $12 billion of overseas debt, including a new type of bond designed to ease repayments in case of future economic pressure, said two sources with direct knowledge of the matter, as reported by Sri Lankan media on Friday (13) morning.

The Director of the Asia-Pacific Department of the IMF said the role of the fund comes in terms of to see how any kind of agreement  is consistent with the debt targets. 

SOE Reforms:

The IMF and the Wold Bank is pushing ahead with reforms of SOEs, including the electricity sector, said Krishna Srinivasan, the Director of the Asia-Pacific Department (IMF).

"Efficiency in the energy and electricity sectors could be increased, with structural reforms. In general, SOE reforms are important to Sri Lanka and that is part of the program that we have. The IMF and the Wold Bank is pushing ahead with reforms of SOEs, including the electricity sector, he noted"

Subsidies for the Poor and Vulnerable:

"We fully sympathize with and understand the hardships of the people in terms of falling wages, cost of living increases, and so on. We are fully sympathetic to that. But again, the program, we do have prices reflecting cost recovery. It is important because, otherwise, the electricity sector, faces losses, and that becomes a public problem down the road," said Srinivasan on Friday (13).

He also said the country should not provide subsidies for everyone. "It should be more progressive. We believe that targeted support to the poor and vulnerable is the way to go."

IMF Review on Sri Lanka: 

"As part of the review, what will be required is financing assurances. In that context we will look to see how much progress has been made on debt restructuring efforts. If there are any agreements, how do they square with the debt targets, and so on. It is part of the process of the second review. You talk about one creditor, by the review will look at what restructuring the other creditors, including the private creditors, the OCC, and so on," said Srinivasan.

"We don't get involved in these debt restructuring efforts between creditors and the debtor. If private creditors have put forward a proposal which includes GDP linked bonds, that is for Sri Lankan authorities and advisors, to engage with them. Our role comes in terms of to see how any kind of agreement  is consistent with the debt targets," he added.