Sri Lanka’s Central Bank Governor Affirms Domestic Debt Optimization Strategy for Debt Sustainability

During the CEO Forum 2023 held in Colombo on Friday (July 21), Dr. Nandalal Weerasinghe, the governor of the Central Bank of Sri Lanka (CBSL), addressed the nation’s economic plans and prospects. He emphasized that if the targets of the current plan are not met, the country will have to undergo another Domestic Debt Optimization (DDO) strategy.

Dr. Weerasinghe expressed confidence in the effectiveness of the DDO strategy recently announced by the government, stating that it holds the potential to restore the country’s debt sustainability. However, he warned that any deviation from the current path could lead to the need for a second DDO, potentially resulting in a default and bankruptcy situation.

Highlighting the importance of fiscal policy, structural reforms, and a growth-oriented approach, the central bank governor emphasized that all these aspects must align with the domestic debt optimization plan to achieve success.

On a positive note, Dr. Weerasinghe expressed his belief in the Sri Lankan economy’s potential to overperform, projecting growth levels of 4% – 5%. He confidently stated that such growth could lead to restoring the country’s debt sustainability within five years, rather than waiting until 2032.

Additionally, the central bank governor shared his optimism about the country’s inflation situation, expressing confidence that Sri Lanka will witness single-digit inflation by the end of the current month.