The Asian Development Bank ‘s (ADB) country representative said this week that Sri Lanka has always paid its debts on time and there has been no question of a default – at any stage. Speaking during a briefing to mark 10 years of the ADB office in Colombo and 40 years of ADB operations in the world, Country Director Richard Vokes told reporters that Sri Lanka paid its debts on time. “If a country gets into trouble, we don’t re-schedule loans just like what commercial banks do,” he said when confronted with a variety of questions on sovereign debt and repayments.
The issue of sovereign debt has figured prominently in the controverial oil hedging case where former Ceylon Petrolem Corporation Chairman Asantha de Mel told reporters that any default on payments to foreign banks could be considered as sovereign debt.
The ABD set up its office in Sri Lanka in 1998 but Sri Lanka is one of its founder members when the institution was launched in 1966. Sri Lanka’s financial contribution is however very, very small.
Since 1966, the country has received US$ 4.48 billion as 142 public and private sector loans and US$ 96.2 million for 229 Technical Assistance projects. As of October 2008, there were 40 on-going public sector loans for a total loan amount of US$ 1.95 billion. In addition, a US$ 150 million grant was provided for tsunami rehabilitation.
The first ADB loan -- US$ 2 million - to Sri Lanka was given in 1968 to modernise tea factories.
Dr Vokes gave an extensive briefing on the advent of the ADB, its objectives and achievements so far.
Asked whether the ADB restricts loans in cases where government or private institutions are not in conformity with the Bank’s stated policies on the environment and corruption, among other policies, the ADB country director said, “We don’t insist that our policies are in place as a precusor for a loan.”
But he said the Bank recently cancelled some small road projects because the quality of the work was bad.
Responding to many queries about the global economic crisis and how the ADB was handling this situation. Dr Vokes said the economic crisis is likely to remain at least for another 12 to 18 months.
He said ADB country offices have been asked to make an assesssment of the possible impact on each of these countries and what kind of support is required.
“A number of countries have approached us for support and all this is under consideration,” he said, adding that they are working with governments on ways of tackling the crisis. He said a possible drop in migrant remittances for countries like Sri Lanka, the Philippines and Nepal is a worrying factor. “We expect stresses and strains in Asian economies due to the crisis.”
The crisis is expected to hit countries in Asia in exports, remittances and migrant remittances, among others matters. Dr Vokes said the Central Bank should not keep the exchange rates at an unsustainable level.
The Central Bank, some weeks back, allowed a marginal float of the rupee but since then the rupee hasn’t depreciated much compared to other main export competitors – India and China – where the currencies have been devalued to help exports.