CB Governor calls for consistency in reforms to avoid another DDO

The Central Bank of Sri Lanka has cautioned that the country must continue with its ongoing reform efforts to avoid the need for another Domestic Debt Optimisation (DDO) exercise. Central Bank Governor Dr Nandalal Weerasinghe emphasized the importance of staying on track to prevent a second DDO, as the current plan is considered vital and aligned with expectations.

 

 

After thoroughly analyzing available options, the proposed DDO arrangement was announced at the end of June. Dr Weerasinghe stressed that this plan would minimize the burden on citizens while ensuring the stability of the banking system and the well-being of the Employees' Provident Fund.

 

 

The key expected outcomes of the DDO process and foreign debt restructuring are to reduce the gross financing need to below 13 per cent of GDP and bring down public debt to below 95 per cent of GDP during 2027-2032.

 

 

The Central Bank is actively collaborating with the government to establish macroeconomic stability as part of the broader macroeconomic framework under the International Monetary Fund Extended Fund Facility. Fiscal consolidation, debt restructuring, and state-owned enterprise reforms aim to reduce government borrowing in the medium term and improve credit availability for private sector investment, fostering a positive growth impact.

 

 

Dr Weerasinghe stressed that economic growth is crucial in post-debt restructuring to ensure the country can meet debt obligations even after restructuring. He clarified that the 2023 borrowing limit is not for further borrowing but to facilitate the DDO process.