“Ambassador opened by noting his surprise that the Central Bank Governor had gone public so soon (March 3) about the Government’s intention to negotiate an agreement with the IMF. Cabraal responded that he had information that the Opposition UNP Party was about to leak the data with a hugely unfavorable spin, so the President had authorized him to clarify the Government’s motives for in search of IMF assistance. Cabraal stated the choice had been correct, and opposition criticism therefore far had been a lot more muted than expected” the US Embassy Colombo informed Washington.
The Colombo Telegraph discovered the connected leaked cable from the WikiLeaks database. The unclassified cable discusesSri Lanka’s debut sovereign bond problem. The cable was written by the Ambassador Robert O. Blake on march 12, 2009.
The US Embassy wrote “Ambassador observed that the IMF apparently would be looking for to support Sri Lanka strengthen and stabilize its reserves and reduce its spending budget deficit. Cabraal agreed those would be essential ambitions. With respect to the foreign exchange picture, Cabraal stated existing reserves are adequate to cover six weeks of imports, but the Government wants money flow. Therefore it is negotiating currency swaps with Malaysia and probably other nations. Cabraal stated Sri Lankan exports had declined by 10 percent in January 2009, but imports had dropped by 30 percent in worth due to lower oil rates. Asked about remittances, a traditionally strong source of foreign exchange for the government, Cabraal did not consider remittance revenues would drop substantially. He stated that his counterparts from India, Pakistan, and Nepal had all told him not too long ago that they also were not experiencing substantial drops in remittances. Moreover, far more of Sri Lanka remittances were coming by means of the banking system than informal means such as hawalas. Asked about the Central Bank’s efforts to raise foreign exchange by way of sovereign bonds, Cabraal mentioned there had been a ‘good’ response from the Sri Lankan Diaspora in Europe. He estimated that the Government had raised ‘tens of millions’ of US dollars as a result far towards its 2009 goal of 500 million dollars.”
“Cabraal stated the Government would address its fiscal deficit, both by raising revenues and cutting spending. He declined to specify what particular revenue measures Sri Lanka has in thoughts, noting only that new taxes on imports are beneath consideration, even though such taxes would adversely impact inflation, which recently had come down to 7 %. He also predicted the Government would comprehend savings from declines in defense spending as the war in northern Sri Lanka winds down. Cabraal told Ambassador that he expects the IMF group to come back to Sri Lanka in the really close to future with a view to negotiating an agreement in as tiny as one month’s time.” Blake additional write.