The Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Finance and Planning

¶ 01 LEGAL BASIS OF DECLARING FINANCIAL BANKRUPTCY IN APRIL, 2022: STATEMENT BY DEPUTY MINISTER OF FINANCE AND PLANNING

¶ 02 Hon. Speaker, on behalf of the Hon. Prime Minister, I answer the Question raised by the Hon. Ravi Karunanayake under Standing Order No. 27(2) on 11.11.2025.

¶ 03 1) Dr. P. N. Weerasinghe was the Governor of the Central Bank of Sri Lanka at that time. Details of past Governors of the Central Bank are available on its official website.

¶ 04 2) The “Interim debt standstill” was declared on 12 April, 2022 in line with international experience and the prevailing situation in the country. A debt standstill refers to the full or partial cessation of debt servicing in the event of a debt crisis as part of an orderly workout procedure to provide leeway for a restructuring during a predefined and limited time.

¶ 05 3) Yes. The Monetary Board recommended the debt standstill to the Ministry of Finance on 11 April, 2022. The debt standstill was announced by the Ministry of Finance on 12 April, 2022. Under the provisions of the Monetary Law Act, the Governor or the Monetary Board of the Central Bank of Sri Lanka had no direct communication channel to Parliament. The following members were in the Monetary Board at the time the Ministry of Finance announced the debt standstill: Dr. P. N. Weerasinghe, Mr. S. P. Jayawardena, PC, Dr. R. Jayamaha and Mr. K. M. M. Siriwardana.

¶ 06 4) On several occasions, prior to the announcement of the debt standstill by the Government of Sri Lanka, the Monetary Board of the Central Bank of Sri Lanka had provided detailed reports to the former Ministers of Finance on the precarious economic condition of the country, the reasons thereof and remedial measures to be taken to address such conditions, acting in terms of Sections 64 and 68 of the Monetary Law Act. Those reports explain the depleted positions of the gross official reserves of the country and the country’s challenges in honouring its external debt obligations.

¶ 07 Since the power to enter into foreign loans and guarantees related to the Government of Sri Lanka was vested with His Excellency the President and the Minister of Finance under the Foreign Loans Act, No. 29 of 1957, which has now been repealed, the announcement of the debt standstill was initially approved by the former President and the former Minister of Finance on 11 April, 2022, pending debt restructuring supported by an IMF programme. At the time of granting the said approval, the Minister of Finance agreed to submit a Cabinet Memorandum for ratification at the earliest possible Cabinet meeting. Based on the approvals given by the then Hon. President and the Minister of Finance on recommendations of the Monetary Board of the Central Bank of Sri Lanka, the Ministry of Finance took steps to publish the "Interim Policy regarding the servicing of Sri Lanka’s External Public Debt" on 11 April, 2022 in a note to the Cabinet, which can be provided as an Annex.

¶ 08 The then Minister of Finance submitted a note to the Cabinet of Ministers on the said policy and the same was ratified by the said Cabinet of Ministers on 16 April, 2022. That Annex can be provided.

¶ 09 On 4 May, 2022, the then Minister of Finance made a statement at the Parliamentary session on the current economic situation and negotiations with the IMF and informed Parliament of the debt standstill and the debt restructuring process. If there were any objections by Parliament, there was still time for Parliament before 18 May, 2022 to reverse the debt standstill with alternative measures, as the debt service suspension would be formally effective only after a grace period of one month from the scheduled date of suspended debt service payment. All subsequent external debt restructuring agreements and the IMF Agreement were approved by successive Ministers of Finance.

¶ 10 As explained in Answer to Question No. 2, the initial decision on the debt standstill approved by the former President and the then Minister of Finance was ratified by the Cabinet of Ministers.

¶ 11 It is observed that the Attorney-General had been informed of the said Cabinet decision, which ratified the Interim Policy regarding the servicing of Sri Lanka’s external public debt including the debt standstill.

¶ 12 The Central Bank of Sri Lanka reiterates that the decision to make the announcement of the debt standstill was a decision taken by the Government of Sri Lanka considering the precarious macroeconomic conditions that prevailed in the country during the period under review. The Interim Policy of the Government regarding the servicing of Sri Lanka’s external public debt explains prime reasons to take such decision by the Government of Sri Lanka.

¶ 13 The following relevant documents and approvals are available for reference: - Paper No. CP 22/0568/304/042 - Central Bank Letter dated 11 April, 2022 - Cabinet Decision No. CP 22/0568/304/042