The government is working on new targets to accelerate economic growth which will not create any need for borrowing which only increased the debt component of the country which is now on a recovery path, said State Minister of Finance Ajith Nivard Cabraal.
He said that there is absolutely no need to seek funding from foreign donors as the country has passed the worst storms in recent years and is on a path to recovery backed by sound macro-prudential policies geared towards stimulating economic growth.
“We will focus on attracting and promoting foreign direct investments which will have trickle down effects on job creation and lifting the rural economy,” Cabraal said, adding that the Opposition which is trying to make a mountain out of a molehill and sees a storm in every tea cup, plunged the country further debt during its tenure.
The State Minister is confident that Sri Lanka could comfortably settle its debt this year and thereafter, as foreign investments for the Colombo Port City project amounting to around USD 1 billion has been pledged and with the revival of the tourism industry and improvement in foreign remittances.
However, the Opposition claims that the best option is to seek a bail out from the International Monetary Fund as the country’s foreign reserves are fast depleting and foreign exchange inflows from exports and tourism has dried up. Economists said debt management, fiscal consolidation and exchange rate stability are crucial to stay afloat and steer the economy to a recovery path.
Sri Lanka has to repay around USD 6.8 billion in foreign debt this year with a similar amount repaid last year.
Fitch Ratings downgraded Sri Lanka’s long-term foreign currency issuer default rating reflecting the country’s increasingly challenging external debt repayment status in the medium term. The Rupee hit Rs 192 against the US dollar last week.During the initial outbreak of Covid-19 in the country, the Rupee had hit a record low of Rs. 200 in April – just two weeks after it started depreciating in March.
However, the Central Bank noted that the recent increase in volatility of the exchange rate is unwarranted and unacceptable and accordingly took steps last week to contain the volatility in the domestic foreign exchange market.
The Central Bank expects that these actions, with the continuation of the curtailment of non-essential imports, will enable the Rupee to appreciate within the next few days towards the levels of below Rs. 185 per US dollar observed in November last year.
The Central Bank reiterates that official reserves remain at sufficient levels. At present, gross official reserves are at US dollars 5.6 billion.