Did Coomaraswamy’s $12 B Borrowings the root cause for the Crisis?
Dr. Indrajith Coomaraswamy is building himself as an economic savior. He became CBSL Governor thanks to his school mate Malik Samarawickrama. He is certainly a gentleman economist. His knowledge of financial markets according to CBSL sources was very shallow. So he depended on his officials. During his tenure it is now clear he persuaded the Government to obtain USD 12 billion in ISB loans. By doing so, Sri Lanka’s debt servicing became unsustainable. That was the origin of Sri Lanka’s external debt problem. That’s why in the IMF Article 4 Report, it was said that the Sri Lankan economy was VULNERABLE at the “eve” (that means at the beginning) of the Pandemic.
Nevertheless, Professor Lakshman, Cabraal and Attygalle somehow secured Forex inflows to pay loans and interest, as well as roll-over maturing debt. They also sourced Forex to buy fuel, coal, medicine, gas, and foodstuffs, and to clear the containers of imports, even with some delays.
During the month of March 2022 alone, the government paid back and rolled-over sovereign Forex debt payments of a staggering USD 1,166 million, out of the total amount of repayments of approximately USD 7,100 that was due in 2022. That was successfully done under the watch of Cabraal and Attygalle.
In April 2022, the Forex debt servicing was only USD 244 million, while the Forex debt servicing for May and June was only another USD 789 million, adding to a total of USD 1033 million. The repayment and roll-over of these amounts were comfortably manageable with the likely inflows into the CBSL from the 25% export conversions of about USD 750 million, and the roll-over of maturing SLDBs of about USD 363 million totalling USD 1,133 million.
In addition, Sri Lanka was also on the verge of receiving a significant inflow of the cash loan of USD 1 billion and trade loan of USD 1.5 billion from China that were expected to materialize towards the latter part of the month or early May 2022. In the meantime, negotiations were at a fairly advanced stage on the Indian line of credit of a further USD 1 billion, as well as a further accommodation of about an additional USD 500 million by India through the postponement of the Asian Clearing Union (ACU) settlements.
But, for the then “cow-boy” like new finance team of Ali Sabry, Nandalal Weerasinghe, Mahinda Siriwardene and behind-the-scenes Harsha de Silva, it was very convenient and easy claim to make that there was no other option but to default, and make an announcement to that effect on 12th April 2022. That decision to default which was an “over-turning” of a 74-year debt honouring government policy was done without even a Monetary Board recommendation or a Cabinet approval. There was no Parliamentary approval either, although Parliament had diligently voted the required funds for the repayment of all Forex debt when it approved the Budget 2022.
By taking that reckless and highly controversial decision to default, this adventurous quad put the entire country into a huge mess and an irrecoverable spin. As a consequence, today, although the Forex loans are not paid, there’s still no Forex for the country to buy any of the vital supplies, as claimed by Ali Sabry and Nandalal Weerasinghe. Shortages and queues are increasing with no end in sight, because no country or supplier wishes to do business with Sri Lanka without up-front payment, as the country has officially announced that it is bankrupt. Based on that announcement, the Ratings Agencies have also duly placed Sri Lanka’s sovereign debt at a “D” default status.
Simply consider the situation as to what happens when a person defaults on a loan to a bank and gets his name into the CRIB. Everyone knows that such person won’t be able to get any more loans from that bank or any other bank or from other lenders. Obviously, the same principle applies to defaulting countries also. Surely, Ali Sabry and Nandalal Weerasinghe should have anticipated and known that would happen to the country, when they decided by themselves to default on Sri Lanka’s sovereign debt?
However, even in this pathetic background which has been created by Coomaraswamy, Ali Sabry, Weerasinghe, Siriwardene and Harsha Silva, it’s still Cabraal, P B Jayasundara, Attygalle and Lakshman who are being targeted and humiliated by news presenters, government ministers, opposition politicians, etc., as being the persons who are responsible for this current crisis.
Remember also that Coomaraswamy, Weerasinghe and Siriwardene, together with Harsha Silva were at the helm of affairs of the economy, until the “eve” of the Pandemic (as described by the IMF), and therefore they must definitely take responsibility for the creation of the vulnerability of the economy (as also stated by the IMF) by that time. Thereafter, under Lakshman and Attygalle, both Weerasinghe and Siriwardene served as Deputy Governors. Even under Cabraal, Siriwardene functioned as a Deputy Governor, although Weerasinghe had, by then retired as a Senior Deputy Governor, as late as April 2021.
If so, how is it that Weerasinghe and Siriwardene are now attempting to wash their hands off from blame and trying to shift the blame for the current crisis for which they should be blamed, more than anyone else?
It’s therefore time that people begin to understand the true situation which has arisen from the hasty and reckless decision to default on the debt, and hold these actual culprits who have put Sri Lanka into this trouble by defaulting debt, responsible.
The current situation also raises a suspicion as to whether there’s a specially cleverly absolve the real culprits including Coomaraswamy, Weerasinghe and Siriwardene from being held responsible for the fallout of the present economic crisis.
We need to identify the true culprits who actually led Sri Lanka into this irrecoverable mess by their reckless actions. That’s why it’s now time that the popular journalists and citizens start asking the right questions from the current authorities, without blindly believing what they are saying for public consumption..