IMF has shown the way and now Sri Lanka has to dig itself out of the mess, says Governor
by Sanath Nanayakkare
Central Bank Governor Dr. Nandalal Weerasinghe recently said that Sri Lanka needs to build and keep a ‘comfortable level’ of currency reserves in order to maintain the country’s balance-of-payments situation in the event of any external shocks or unforeseeable emergencies.
The Governor made this comment during an interview with Sri Lanka Rupavahini Corporation’s Big Question’ programme.
“Foreign debt restructuring will be a key pillar in this exercise. Sri Lanka’s foreign loan repayments currently stand at USD 6 billion per year. If a part of these debt repayments can be restructured, that will give the country more space to secure the funds it needs to repay its loans and pay for its essential imports going forward. Say, for example, if it can be restructured to pay USD 2 billion per year, then the balance USD 4 billion will remain in our reserves. Thus we should be able to gradually increase our reserves within 3-4 years to build it up to USD 8-10 billion. If this could be achieved, it would be a relatively strong position because in case of an oil price shock or any other unforeseeable emergency, we would have enough reserves to face it. This is why bringing the currency reserves to a comfortable and safe level while repaying our foreign debt is important,” he said.
“The depletion of currency reserves was the main cause for going into the crisis last year. When I was appointed Governor of the Central Bank in April 2022, there was only USD 20 million usable reserves. Once we paid our loans, there was no money left in hand to import essential commodities. Those days we had to depend on daily inflows to tide us over. That’s not a good situation. For the economy to stabilize, we need to increase our reserves up to at least USD 8 billion,” he said.
According to the Governor, country’s currency reserves would reach close to USD 3 billion at the end of this month with the Chinese SWAP of USD 1.6 billion.
However, the Governor emphasized that there are two main pillars the country must prioritize in building foreign reserves before looking at foreign debt restructuring.
“We have to increase our export earnings by diversifying our exports and increase our expatriate workers’ remittances. Keeping our imports at a manageable level as against our exports is another key element. Thirdly, working proactively to increase our tourism earnings would help increase our reserves. These should be our prime targets. Yes, then as you mentioned, if we receive a loan from the IMF, the World Bank or the Asian Development Bank, that will also help boost our reserves. It’s important to methodically reduce the import expenditure and increase export earnings, then the surplus would add to our reserves.
When asked whether the IMF would really dig Sri Lanka out of the mess, the Governor said,” What is the need for IMF to dig Sri Lanka out of the mess? It’s not a problem of the IMF. The government now has to keep its pledges on fiscal discipline and fiscal consolidation and move ahead in the right direction with consistency, without veering away from the agreed upon benchmarks for political reasons. India, Korea, Thailand and Indonesia also went to IMF post- Asian financial crisis. They didn’t go to IMF again because they implemented the programmes and there was no need to go again. IMF gives its members’ money and that is why it took a long for them to give us money as our debt was unsustainable. They help member countries facing balance of payment issues with members’ funds and show them the way to stabilize themselves. So it is up to us to dig ourselves out of the mess,” the Governor said.
David Cameron kicks off Port City Colombo’s global investment drive
Representatives of top corporates in the UAE, accompanied by high-potential investors, property developers, hotel owners, and leaders in the hospitality and real estate industries, converged on the iconic settings of the Ritz Carlton in Abu Dhabi and the Armani Hotel at Burj Khalifa in Dubai to explore, understand, and assess the investment potential of Sri Lanka, with particular emphasis on the transformative Port City Colombo project, a press release said.
The release adds: ‘This elite gathering took place in the presence of the ruling families of the UAE, engaging in a structured conversation led by David Cameron, former British Prime Minister, who outlined a compelling case for investing in Sri Lanka. The discussion was moderated by Niranjan de S Deva Aditya, a former British and European MP, currently serving as the Presidential Advisor to the President of Sri Lanka, Ranil Wickremesinghe.
‘The event was held in partnership with Port City Colombo’s regulatory authority, the Colombo Port City Economic Commission, and the primary developer, CHEC Port City Colombo, with the invaluable support of the Sovereign Wealth Fund Institute, representing an astounding $12 trillion in assets.
‘David Cameron, the former Prime Minister of the United Kingdom, engaged the audience in an interactive session with his insights on the fast-evolving trade and investment trends in the South-Asian region, the role of the UAE, and the pivotal role of Port City Colombo in transforming the global business landscape.
‘Commenting on Sri Lanka’s recovery over the last few years, Cameron stated that while the country has had its share of challenges, these challenges have also presented ample opportunity, with Port City Colombo at the center of such opportunity. Further commenting on the UAE, Cameron stated, “The UAE is a good case for the potential that can be reached if the right environment is created. I strongly believe Sri Lanka has the potential to reach this, particularly at this point, with all the right reforms taking place and supported by the commitment of President Wickramesinghe.”
Public Finance Committee calls for report on wheat stocks
SJB MP Dr. Harsha de Silva has instructed the Auditor General’s Department to estimate the stock of wheat flour currently available in warehouses and submit an audit report within 2 months. He said that if a pricing formula for wheat flour had been adopted, unscrupulous elements would not have been able to exploit consumers.
The matter was discussed when the Committee on Public Finance met recently under the Chairmanship of Dr. de Silva.
The members of the Committee pointed out that wheat flour was sold at different prices. However, according to the prices declared by the Ministry of Finance, one kilo of wheat flour had to be sold at Rs 198.
Recalling the efforts made to prepare a price formula for gas and milk powder last season, the chairman pointed out the need for a price formula for regulating the price of wheat. The Committee emphasised that a price formula should be prepared immediately.
‘Sri Lanka’s Banking Guide for Investors & BOI Companies’ launched
Sampath Bank PLC, in collaboration with the Board of Investment of Sri Lanka (BOI) and the Ministry of Investment Promotion, unveiled a comprehensive Banking Guide titled, ‘Sri Lanka’s Banking Guide for Investors and BOI Companies’, a Sampath Bank press release said.
The release adds: ‘The event was held at the Sampath Bank’s corporate office on August 28 with the participation of senior dignitaries from the BOI and Sampath Bank PLC.
‘This Banking Guide serves as a strategic initiative to support the nation’s drive to attract foreign direct investments. It further offers comprehensive banking insights tailored for investors and BOI companies, addressing key areas such as investment accounts, operational banking, borrowing solutions, and related financial services.’
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