INSUBCONTINENT EXCLUSIVE:
President Ranil Wickremesinghe has urged business leaders to educate their employees on Domestic Debt Optimization (DDO), a crucial step
aimed to ensure that individuals and industries comprehend the significance of this financial maneuver.The President made this remark while
addressing members of the Chambers, business leaders and unions regarding the DDO, during meetings held yesterday (29) at the Presidential
grasp the nuances of the restructuring and gauge its influence on their livelihoods by engaging in widespread explanations.Wickremesinghe
also noted that the foremost effect of this restructuring endeavour is the anticipated reduction in interest rates, providing a glimmer of
hope for individuals burdened by financial obligations
While the exact timeline remains uncertain, experts predict a noticeable decline in interest rates within a matter of months, the PMD
This is about the best that we can achieve
With this comes the fact that our interest rates will come down
part of this restructuring, an injection of development assistance is on the horizon, poised to breathe new life into the construction
This infusion of support has the potential to stimulate growth, create employment opportunities, and invigorate the overall
economy.Meanwhile, during the meeting with trade union representatives, President Ranil Wickremesinghe emphasized the importance of
implementing the Domestic Debt Optimization program
He warned that failure to do so could lead to a potential increase in interest rates for loans obtained by small businesses
He emphasized that domestic debt optimization must be conducted simultaneously with foreign debt optimization to mitigate this
risk.President Wickremesinghe assured the trade union representatives that the law guarantees the continuation of the 9% annual interest
He urged them not to harbour any doubts regarding future benefits.Following are excerpts of the discussion with members of Chambers and the
There will be an impact on the banking system
So in our discussions, we ensured the banking system stability.Next is the protection of all bank deposits
This is going to have a huge social impact compared to the superannuation funds
So there is a very reasonable and fair solution
Our argument is that banks have already made a huge contribution to the Treasury in terms of 50% taxation and their contribution to the
economy in terms of debt moratoriums, and state loan provisioning, which has already been affected
As a result, we wanted to exclude the banking system or deposit-taking institutions from restructuring their treasury bonds.Treasury bills
obviously have no impact at all as was already announced by the Central Bank
Treasury bills will be restructured
On the superannuation funds, it is also a fair solution where we would be able to assure that they will receive the interest or return of 9%
every year.Next several years they will be assured of a 9% return as well as no reduction in their balances
No re-statement of balances
The current balance would be protected
They will continue to get a 9% return going forward.And those treasury bonds would be restructured and would be exchanged for new bonds
That will be launched on the first working day on Tuesday (04) morning
There will be a launching notice
From there that will be the cut-off date.Any bonds held by superannuation funds will be exchanged including EPF, ETF and all superannuation
There are a number of private-sector superannuation funds
Those will be restructured
The main justification why only superannuation funds is basically because they are paying their liable 14% tax compared to the banking
At least 30% of the corporate are paying 30% income tax
Any income out of Treasury bonds or interest income are paid back to the government in terms of taxes.However, superannuation funds are
paying only 14% which is a concessionary rate
Still, they can continue to enjoy that 14% if they participate in the bond exchange
Otherwise, they have the option to go for higher tax rates
Then obviously they will not be better off.So, it is up to the superannuation funds to decide on their choice
We would expect that choice will be indicated when we complete the bond exchange within the month of July
Then the government will get a big relief in terms of their liquidity
And the key instrument is that in bond exchange, there will be a five-year grace period during which interest will only be paid for exchange
bonds.And then maturity starts from 2032 to 2038 on a gradual basis and yearly basis
Any new bonds will be traded in the market and new issuance will be under a new series
So those will continue as usual.And then this will provide a huge relief for the government in terms of its liquidity position
There will be interest payment relief
So that fiscal consolidation and fiscal position will be relieved
From our side, the Central Bank, our involvement, and interest is to protect the financial stability on one hand and the banking sector and
deposit-taking institutions
On the other hand, as the custodian of the EPF, we wanted to get the best-optimized deal for EPF holders and superannuation funds.We expect
the DDO to be submitted to Parliament and discussed at the committee stage
And then on Saturday (01), hopefully, it will be approved by Parliament
welcomes the classification or excluding banks from the DDO
is a huge debt relief from a cash outflow perspective
The only challenge, the way I look at it, from a revenue standpoint and expenditure standpoint, is that the government will have a serious
concern in terms of paying interest for the domestic debts.So the revenue broadening would be critical for the government
We have to increase tax files
protecting the banking system, because otherwise, with the already struggling economy, we would have struggled with the banks having to deal
I think that has not been coming forth, so we really look forward to that happening
This way investment can continue.I think everything came to a standstill during the last 18 to 24 months
Association Forum:I would like to congratulate the government for having pulled this off
And I think the question we have to ask you is, how can we help? What help does the government need from us? What are the things that we
Chamber of Commerce (CCC):We believe that bringing in some kind of relief for the capital of interest payments that we are making right now,
will definitely add value and promote the investments and continuity of the private sector because right now we see many small, medium and
them internally because we have seen a number of large companies that have been in the trade for more than 30, or 40 years, closing down
So we will have to address something here, particularly when you look at the energy sector
We will have to give some kind of solution there and restructuring of the CEB must take a primary role within the next couple of months
This will give some consolation to the private sector for them to continue their business in an affordable and internationally competitive
