The economy will generate Forex Inflows of around USD 32 billion this year and possibly about USD 2-3 billion more than that amount, each year thereafter, said State Minister of Finance Ajith Nivard Cabraal.
He said as of now (February 2021), the total ISBs outstanding is USD 14 billion, which is only 16.7 percent of Sri Lanka’s total debt. None of the other creditors who hold 83.3 percent of Sri Lanka’s debt seem to show any sign of concern or stress about its repayment ability. “We have to re-pay only around USD 1.0 to 1.5 billion each year until 2029 in its ISB amortisations for the next eight years,” Cabraal said, adding that in this background, will the authorities default on a payment of around USD 1.0 to 1.5 billion per annum and risk its entire economy and impeccable credit history.
Meanwhile Central Bank Governor Prof. W.D. Lakshman at a media briefing last week said the country has maintained an unblemished record in debt repayment and it will continue to maintain this status contrary to the doomsday predictions. He said the country will not seek bailouts from foreign donors, while stressing on putting a halt to foreign financing for the deficit.
On seeking assistance from the IMF, he said, “It is not advisable to do so and obtain guidance from the donor,” the Governor said.
Rather the government hopes to raise foreign exchange inflows through currency swap arrangements with overseas agencies.
Negotiations in this regard are in progress according to the Central Bank.
According to the regulator, import restrictions on non essential commodities to manage the balance of payment will continue for a certain period. The country’s foreign reserves stood at USD 4.8 billion as at end January 2021.
Foreign reserves stood at USD 5.7 billion towards the end of 2020.
However, with USD 1 billion of foreign debt repayment coming this year the level of reserves is speculated to be inadequate to manage the balance of payments.
However, according to the regulator economic growth is expected to be in the range of 5.5 to 6 percent this year.
Treasury Secretary S.R. Attygalle on a previous occasion said the country was quite comfortable with the level of reserves which is expected to grow this year with exports picking up and foreign direct investments starting to come in.
Sri Lanka has to repay USD 6,865 million in foreign debt this year and arrangements have been made to pay it, co-Cabinet spokesman Minister Udaya Gammanpila said early this year.
However, several rating agencies downgraded the country’s sovereign credit ratings indicating Sri Lanka’s low debt repayment capacity.
Sri Lanka’s sovereign credit ratings were downgraded to CCC+/C from B-/B by Standard and Poor’s Moody’s downgraded Sri Lanka’s ‘ long term foreign currency issuer and senior unsecured ratings’ to Caa1 from B2.