Cabraal responds to allegations on ISB settlement

COLOMBO (News 1st); Sri Lanka's Former Central Bank governor Ajith Nivard Cabraal on Wednesday (12) dismissed claims that state the maturing International Soveriegn Bond of USD 500 Million settled at his sole discretion in 2022.

"There have been absured claims by various persons that the settlement of the maturing ISB of USD 500 million on 18th January 2022 was done at my sole discretion, as the Central Bank Governor," he said in a statement while adding that " Some persons even alleged that such settlement was done in order to enable certain investors to make undue profits."

Ajith Nivard Cabraal said that he categorically denies such malicious and unsubstantiated innuendo.

He said that if that ISB was defaulted by the Government, several Sri Lankan banks (Bank of Ceylon, Commercial, NDB, PanAsia, Sampath, Peoples, HNB and HSBC Colombo), who were among the January 2022 ISB investors, would have suffered huge losses.

But fortunately, because the ISB was duly honoured by the Government, such losses were not suffered by the Sri Lankan banks and their stakeholders," he said.

"In any event, at the time in question (January 2022), the official Government policy was to pay its sovereign debt, which policy, the Ministry of Finance and the Central Bank had followed faithfully, since independence. If, therefore, for any reason, the Government wanted to default on its debt repayments, that would have to be a decision of the Government, and not that of the Central Bank. Such position was clearly confirmed by the fact that it was the Ministry of Finance that announced the “Debt Standstill” on 12th April 2022, whereby it was announced that forex debt payments were to be stopped immediately, and restructured eventually. Unfortunately, that default announcement led to the relegation of Sri Lanka to a state of bankruptcy." he elaborated in a press statement.

The Former Central Bank Governor said that had the CBSL not made arrangements for the Government to honour its legal commitment to settle the ISB of USD 500 million on 18th January 2022, catastrophic outcomes would have occurred from that time onwards.

Cabrall said that the  the same MP and others who are now claiming vociferously that the payment of the ISB should not have been made, may very well have accused him and others who were in office at that time, of causing grievous harm to the country and the economy, by not settling the forex debt.

"Ironically however, those MPs and others seem to be very reluctant to acknowledge the massive damage that has now been inflicted on the economy as a result of the default announcement on 12th April 2022, but seem to be to very keen to lay blame on those who endeavoured to somehow prevent such catastrophic consequences from taking place by making arrangements to settle the ISBs and
other forex debts," he added.

Ajith Nivard Cabraal also said that over an year ago, on 5th September 2022, he urged the President to initiate an inquiry into the hurried and unauthorized Sovereign Debt Default announcement of 12th April 2022.