The country has adequate foreign reserves exceeding US$ 7 billion to manage imports for the rest of the year bearing no pressure on the Balance of Payment (BoP), said a top official of the Treasury on Friday responding to an indication by a multi-national donor that Sri Lanka’s worker remittances would decline sharply this year.
According to the World Bank (WB), global remittances are projected to decline by about 20 percent this year due to the economic crisis. The projected decline in recent history is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country. Remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 percent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
“There is absolutely no reason to worry about the status of foreign reserves in the country as there has been worker remittance flow supporting the country’s reserve base,” Treasury Secretary S.R Attygalle said.
According to him foreign reserves of the country has not depleted as shown by certain global indicators and rating bodies as measures were taken to stop imports of non essential items such as cars and household appliances.
“ Oil imports which account for a larger share of the expenditure has been curtailed too given the sharp drop in demand in the country which has helped save foreign exchange to a large extent,” Attygalle said adding that anyone can make predictions but the fact remains the country has taken steps to maintain growth levels and strengthen the macroeconomic fundamentals.
Remittance flows are expected to fall across all World Bank Group regions, most notably in Europe and Central Asia (27.5 percent), followed by Sub-Saharan Africa (23.1 percent), South Asia (22.1 percent), the Middle East and North Africa (19.6 percent), Latin America and the Caribbean (19.3 percent), and East Asia and the Pacific (13 percent).
The economic slowdown is likely to directly affect remittance outflows from the United States, the United Kingdom, and EU countries to South Asia. Falling oil prices will affect remittance outflows from GCC countries and Malaysia.
“What the country will need to grapple is the external debt repayment this year and the coming years,” Attygalle said.The country’s external foreign debt repayment in 2020 accounts for around US$ 4.8 billion increasing the outstanding debt to Rs. 12,863.5 billion by August last year according the Central Bank.
Central Bank Governor W.D. Lakshman said the current global crisis will exert certain pressure on the county’s foreign reserves which cannot be ruled out.
“The Central Bank has been able to keep exchange rates stable so far this year,” the governor said adding that the country must not lose confidence as the present administration of the country has taken steps to revive the economy.
The government hopes to secure USD 700 million through currency swaps to boost foreign reserves in the coming weeks