Sri Lanka, on Thursday (June 29) began a five-day bank holiday as the crisis-hit nation is in the midst of restructuring $42 billion in domestic debt. Analysts say that this long bank closure will help absorb any shocks to the country’s market after the restructuring process is over.&nbsp;

<h2>The IMF and World Bank funding&nbsp;</h2>

Sri Lanka was able to get a nearly $3 billion bailout package from the International Monetary Fund (IMF) in March, to ease the overall public debt load which stood at a whopping $83.6 billion, nearly 130 per cent of the country’s GDP&nbsp;last year. This also followed the World Bank’s approval of $700 million in budgetary and welfare support for the island nation.

The aim is to use the funds to reduce this domestic debt to below 95 per cent of the GDP by 2032. The funding also comes months after India extended a $1 billion credit line for Sri Lanka. Around $500 million of the funds from the World Bank will be allocated for budgetary support, while the remaining $200 million will be for welfare support earmarked for those worst hit by the crisis. &nbsp;

ALSO READ |&nbsp;<a href="https://www.wionews.com/south-asia/sri-lanka-gets-imf-support-months-after-indias-credit-line-extension-for-economic-recovery-609961">Sri Lanka gets $700mn World Bank's support months after India's credit line extension for economic recovery</a>

In a statement, World Bank’s country director for Sri Lanka, Faris Hadad-Zervos, said, “Through a phased approach, the World Bank Group strategy focuses on early economic stabilisation, structural reforms, and protection of the poor and vulnerable.” He added, “If sustained, these reforms can put the country back on the path towards a green, resilient and inclusive development.”&nbsp;

<h2>What is this financial restructuring about?</h2>

The debt restructuring could involve the extension of the period over which the loan is repaid. This comes as Sri Lanka has been witnessing its worst economic crisis after it defaulted on its debt with international lenders for the first time since its independence from the British in 1948. &nbsp;

Recently, the government also reportedly pushed forward to reworking its foreign debt with bondholders and bilateral creditors, including China, Japan and India.&nbsp;

ALSO READ |&nbsp;<a href="https://www.wionews.com/south-asia/economy-on-the-road-to-recovery-says-sri-lanka-president-599338">Economy on the road to recovery, says Sri Lanka president</a>

Meanwhile, the $42 billion domestic debt will be worked on by exchanging shorter-term treasury bills for longer-term bonds in the overhaul, said Sri Lanka’s central bank chief, Nandalal Weerasinghe, last week, in a press conference.&nbsp;

<h2>What have the analysts said about the long bank holiday?</h2>

Local media reports citing analysts said that the long bank holiday was announced to help absorb any possible shocks from market reactions to significant financial announcements. “The government’s action to call an extended public holiday means it obviously saw the risk of bank runs,” Alex Holmes, a senior economist at Oxford Economics, told the BBC.

The process of restructuring involves the announcement of the strategy to its implementation following the approval from the cabinet and the parliament.

ALSO READ |&nbsp;<a href="https://www.wionews.com/business-economy/india-steps-up-rupees-internationalisation-for-sri-lankas-economic-recovery-589593">India steps up rupee's internationalisation for Sri Lanka's economic recovery</a>

“The long holiday would allow any day one loss – as the cash flows are adjusted in the banks – to be pushed to the next quarter,” said Udeeshan Jonas, chief strategist for Sri Lankan investment bank CAL, as quoted by the South China Morning Post.&nbsp;

Earlier this month, Weerasinghe, said that the government expects the “entire process to conclude while the markets are closed during these five days.” He also said that the internal analysis indicates that any shocks from the central bank's planned restructuring of the financial bills would be “manageable”.&nbsp;

(With inputs from agencies) 
 
 
&nbsp;

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Sri Lanka, on Thursday (June 29) began a five-day bank holiday as the crisis-hit nation is in the midst of restructuring $42 billion in domestic debt. Analysts say that this long bank closure will help absorb any shocks to the country’s market after the restructuring process is over.

Sri Lanka, on Thursday (June 29) began a five-day bank holiday as the crisis-hit nation is in the midst of restructuring $42 billion in domestic debt. Analysts say that this long bank closure will help absorb any shocks to the country’s market after the restructuring process is over. The IMF and World Bank funding Sri Lanka was able to get a nearly $3 billion bailout package from the International Monetary Fund (IMF) in March, to ease the overall public debt load which stood at a whopping $83.6 billion, nearly 130 per cent of the country’s GDP last year. This also followed the World Bank’s approval of $700 million in budgetary and welfare support for the island nation. The aim is to use the funds to reduce this domestic debt to below 95 per cent of the GDP by 2032. The funding also comes months after India extended a $1 billion credit line for Sri Lanka. Around $500 million of the funds from the World Bank will be allocated for budgetary support, while the remaining $200 million will be for welfare support earmarked for those worst hit by the crisis. ALSO READ | Sri Lanka gets $700mn World Bank's support months after India's credit line extension for economic recovery In a statement, World Bank’s country director for Sri Lanka, Faris Hadad-Zervos, said, “Through a phased approach, the World Bank Group strategy focuses on early economic stabilisation, structural reforms, and protection of the poor and vulnerable.” He added, “If sustained, these reforms can put the country back on the path towards a green, resilient and inclusive development.” What is this financial restructuring about? The debt restructuring could involve the extension of the period over which the loan is repaid. This comes as Sri Lanka has been witnessing its worst economic crisis after it defaulted on its debt with international lenders for the first time since its independence from the British in 1948. Recently, the government also reportedly pushed forward to reworking its foreign debt with bondholders and bilateral creditors, including China, Japan and India. ALSO READ | Economy on the road to recovery, says Sri Lanka president Meanwhile, the $42 billion domestic debt will be worked on by exchanging shorter-term treasury bills for longer-term bonds in the overhaul, said Sri Lanka’s central bank chief, Nandalal Weerasinghe, last week, in a press conference. What have the analysts said about the long bank holiday? Local media reports citing analysts said that the long bank holiday was announced to help absorb any possible shocks from market reactions to significant financial announcements. “The government’s action to call an extended public holiday means it obviously saw the risk of bank runs,” Alex Holmes, a senior economist at Oxford Economics, told the BBC. The process of restructuring involves the announcement of the strategy to its implementation following the approval from the cabinet and the parliament. ALSO READ | India steps up rupee's internationalisation for Sri Lanka's economic recovery “The long holiday would allow any day one loss – as the cash flows are adjusted in the banks – to be pushed to the next quarter,” said Udeeshan Jonas, chief strategist for Sri Lankan investment bank CAL, as quoted by the South China Morning Post. Earlier this month, Weerasinghe, said that the government expects the “entire process to conclude while the markets are closed during these five days.” He also said that the internal analysis indicates that any shocks from the central bank's planned restructuring of the financial bills would be “manageable”. (With inputs from agencies) WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

Sri Lanka takes five-day bank holiday for domestic-debt restructuring amid economic crisis

Sri Lanka&#39;s previous government hid debts of at least 1.36 trillion rupees on the books of some state and semi-government institutions, aggravating the debt crisis, Prime Minister Ranil Wickremesinghe said on Wednesday. 
 
He said the global economic downturn was also making it more difficult for Sri Lanka to boost state finances. 
 
The International Monetary Fund, which approved a $1.5 billion, three-year loan in May, said a durable reduction of the fiscal deficit and public debt through a growth-friendly emphasis on revenue generation should be a priority for the nation&#39;s fiscal policy. 
 
Total debt stood at 8.77 trillion rupees ($60.29 billion) as of March 31, the latest central bank data showed. 
 
The prime minister told parliament: &quot;We still don&#39;t know the exact total debt number.&quot; He said it would only become clear after a three-member committee reported following an investigation. It was not immediately clear when that would be. 
 
The previous government of Mahinda Rajapaksa, in office for nine years until January 2015, borrowed heavily on commercial terms to fund infrastructure projects after a 26-year war ended in 2009. 
 
Total government debt rose more than three-fold to 7.39 trillion rupees under Rajapaksa&#39;s government, central bank data showed. 
 
Rajapaksa has rejected the allegation that he hid debts and said his government borrowed money to develop the country. 
 
The central bank estimates government debt will fall to 74 per cent of gross domestic product this year from last year&#39;s 76 per cent. 
 
Wickremesinghe said the government had to increase revenue, streamline taxes and create jobs through foreign investment. 
 
(Reuters)

The Sri Lankan PM said the exact total debt number would become clear only after a three-member committee investigated the matter

Sri Lanka's previous government hid debts of at least 1.36 trillion rupees on the books of some state and semi-government institutions, aggravating the debt crisis, Prime Minister Ranil Wickremesinghe said on Wednesday. He said the global economic downturn was also making it more difficult for Sri Lanka to boost state finances. The International Monetary Fund, which approved a $1.5 billion, three-year loan in May, said a durable reduction of the fiscal deficit and public debt through a growth-friendly emphasis on revenue generation should be a priority for the nation's fiscal policy. Total debt stood at 8.77 trillion rupees ($60.29 billion) as of March 31, the latest central bank data showed. The prime minister told parliament: "We still don't know the exact total debt number." He said it would only become clear after a three-member committee reported following an investigation. It was not immediately clear when that would be. The previous government of Mahinda Rajapaksa, in office for nine years until January 2015, borrowed heavily on commercial terms to fund infrastructure projects after a 26-year war ended in 2009. Total government debt rose more than three-fold to 7.39 trillion rupees under Rajapaksa's government, central bank data showed. Rajapaksa has rejected the allegation that he hid debts and said his government borrowed money to develop the country. The central bank estimates government debt will fall to 74 per cent of gross domestic product this year from last year's 76 per cent. Wickremesinghe said the government had to increase revenue, streamline taxes and create jobs through foreign investment. (Reuters)

Sri Lankan PM Wickremesinghe says financial crisis aggravated by hidden debt

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Sri Lanka takes five-day bank holiday for domestic-debt restructuring amid economic crisis

Sri Lankan PM Wickremesinghe says financial crisis aggravated by hidden debt