Sri Lanka Will Meet All Debt Repayments And Also Rebuild Forex Reserves, Its Central Bank Chief Says

Sri Lanka’s central bank chief Ajith Nivard Cabraal said tourism, hit by the pandemic, is expected to pick up in next 2-3 months and that would help rebuild forex reserves.

File image of Ajith Nivard Cabraal, Governor of the Central Bank of Sri Lanka, speaking during a Bloomberg Television interview in London, UK, in 2014 | Photo: Getty

New Delhi: Sri Lanka will meet all debt repayments in 2022, and work on a comprehensive plan to rebuild its foreign exchange reserves, the country’s central bank Governor Ajith Nivard Cabraal said on Wednesday.

Fund allocations have already been made for repayment of a $500 million International Sovereign Bond (ISB) that is maturing on January 18, news agency Reuters quoted Cabraal as saying at an event organised by the Department of Government Information.  

Sri Lanka’s total debt repayment burden this year is about $4.5 billion.

"Not paying debt will push us into bigger challenges," Cabraal said.

He added: "We need a more comprehensive, longer term plan to address debt and other issues in the Sri Lankan economy." 

Tourism Expected To Pick Up In 2-3 Months: Cabraal  

Sri Lanka has been facing an economic crisis as a result of the Covid pandemic, which poorly affected tourism, a mainstay of the country’s economy.

The island nation lost about $9 billion tourism revenue in the last two years, Cabraal said, but added that he expected the sector to pick up in the next 2-3 months, which he said help rebuild reserves.    

Sri Lanka’s forex reserves got a boost to $3.1 billion in December-end after a yuan currency swap worth $1.5 billion with China, its fourth biggest lender after international financial markets, the Asian Development Bank and Japan.

Cabraal said they could look at a fresh loan from China.

The government is currently in talks with India and Qatar for credit lines and a currency swap arrangement, totalling around 2.9 billion, the Reuters report said. 

Cabraal said negotiations with India were at advanced stages, with Sri Lanka seeking a $1 billion credit line, and a $400 million currency swap, besides a $500m credit line for fuel involving Indian Oil Corporation, which operates in the country.

Discussions are also underway with Qatar for a $1 billion credit line.