Sri Lanka has lined up cash flows into the country which will enable it to stabilise foreign reserves and boost the confidence level of businessmen and investors, said State Minister of Finance and Capital Market Development, Ajith Nivard Cabraal.
“Foreign reserves, the exchange rate, the capital market and resumption of business activities are all indicators of a stable growth. What more indicators do you need to prove economic stability that has been restored within a short time,” Cabraal said.
“For example, our external debt payment accounted for two billion dollars in 2013. It is U.S. $ 7 billion this year. The government is looking forward to having U.S. $ 3 billion currency swaps. We are supposed to settle them next year. It will amount to U.S. $ 10 billion with all accrued.
It means our debt servicing cost will have a fivefold increase within a decade since 2013. Our GDP has increased only by 20 percent.
The country’s foreign reserves dropped around US $ 4 billion this year exerting pressure on the balance of payment,” he said.
Economists speculate that the current level of reserves are adequate only to serve two and a half months of imports and that urgent measures are needed to boost reserves which had fallen drastically due to the impact of the global pandemic on tourism and exports two key foregn exchange earning sources to the country.
Sri Lanka settled USD 1 billion ISB that matured on July 27 this year and the outstanding foreign debt repayment for the year stands at US$ 2.4 billion.
The government has been harping that it will not borrow from international markets, rather it would focus on attracting foreign investments and enter into swap agreements with neighboring countries. According to the Governor of the Central Bank, Sri Lanka’s foreign reserves were at USD 4 billion as of July, excluding the standby SWAP agreement of approximately USD 1.5 billion with the People’s Bank of China.
Inflows to the country include the SWAP facility of USD 250 million from the Bangladesh Bank expected in July, the SAARC Finance SWAP facility from the Reserve Bank of India of USD 400 million expected in August 2021, and the special SWAP facility of USD 1,000 million being negotiated with the Indian counterpart.