Rethinking Debt: Alternatives for Sri Lanka’s Future

Yukthi Research Collective Shares Key Insights on Debt Restructuring and IMF Negotiations

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Experts Discuss Debt Solutions at Yukthi Forum in Colombo, June 10, 2024

The Yukthi Research Collective hosted a significant public forum titled “Is There Another Way? Debt Restructuring, IMF, and the Future of Sri Lanka,” on June 10, 2024, at the Sri Lanka Foundation Institute in Colombo. The event brought together international experts to discuss global experiences in debt restructuring and negotiations with the International Monetary Fund (IMF), providing valuable insights for Sri Lankan civil society, politicians, and the media.

The forum featured presentations by renowned economists, including Professor Martín Guzmán, former Minister of Economy of Argentina and current faculty member at Columbia University; Professor Jayati Ghosh of the University of Massachusetts, Amherst and co-founder of International Development Economics Associates (IDEAs); and Charles Abugre, Executive Director of IDEAs.

Drawing from their extensive experience and research, the speakers shared comparative analyses of debt restructuring in various countries, highlighting the challenges and strategies involved. Professor Guzmán discussed Argentina’s economic turmoil due to high external debt and detailed his role in leading the country’s substantial debt restructuring in 2020, achieving a notable fifty-five percent reduction in sovereign bond debt.

Charles Abugre compared Ghana’s debt crisis with Sri Lanka’s, noting both countries’ recurrent reliance on IMF programmes. He emphasized the political dimensions of the IMF’s operations, arguing that Sri Lanka should approach debt restructuring with a national development agenda, rather than unquestioningly accepting IMF conditionalities.

Professor Guzmán further elaborated on the importance of debtor countries conducting their own debt sustainability analyses to effectively negotiate with creditors. He underscored the necessity of having robust national policies on monetary, fiscal, and productivity matters to strengthen bargaining power, challenging the notion that countries must strictly adhere to IMF directives.

Professor Ghosh highlighted the IMF’s role in encouraging Sri Lanka to engage with international capital markets, leading to the issuance of high-yield sovereign bonds. She argued that the high returns on these bonds should be considered in debt haircuts and stressed that the IMF’s economic reforms often disproportionately affect vulnerable populations, particularly women. Ghosh advocated for Sri Lanka to collaborate with other debtor nations to resist the IMF’s influence and seek fairer solutions to economic crises.

The Yukthi Research Collective’s forum provided a platform for critical discussions on Sri Lanka’s economic future, emphasizing the need for independent, nationally driven strategies in debt restructuring and IMF negotiations. The insights shared by the international experts underscored the importance of equitable and just approaches to resolving debt crises, highlighting the potential for alternative pathways beyond the conventional IMF framework.

Sri Lanka Guardian

The Sri Lanka Guardian is an online web portal founded in August 2007 by a group of concerned Sri Lankan citizens including journalists, activists, academics and retired civil servants. We are independent and non-profit. Email: editor@slguardian.org

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