Euan Rocha and Uditha Jayasinghe

COLOMBO (Reuters – Sri Lanka’s Central Bank Governor Ajith NIVARD Cabraal stated on Wednesday that Sri Lanka was confident it will be able “seamlessly” repay its sovereign debt due 2022. The Central Bank governor said this while exploring alternative instruments that would make the debt profile of Sri Lanka more sustainable.

We are certain that the repayments for 2022 will be processed smoothly and we will make those payments in due time. Cabraal stated that there is no need to be concerned about this in an interview with Reuters.

“At the exact same time, we’re taking several steps to address our debt sustainablely and not depend solely on one instrument. We’re developing many new instruments, multiple new inflows which will keep us better positioned over the long-term. This is the entire plan that we initiated.”

Sri Lanka aims to shore up its shrinking reserves over the next few months from a range of sources including bilateral swaps, government-to-government loans and the securitisation of remittances to bolster investor sentiment and ensure timely debt servicing, he said.

According to two sources, the Sri Lankan finance minister Basil Rajapaksa met Nirmala Sitharaman from India on Wednesday in New Delhi. They discussed securing $500 million of credit and making new investments.

At the end October, Sri Lanka’s foreign exchange reserves fell to $2.3 Billion. Both tourism and remittances were affected by the coronavirus epidemic. Finance Ministry data show that Sri Lanka needs to make payments of $4.5 billion for its sovereign bonds by 2022.

WE SEE OTHER OPTIONS!

Cabraal claimed that Sri Lanka’s debt has been reassessed because of the pandemic.

The pandemic revealed the weaknesses, which is good. Otherwise, we might have fallen into a rut and not looked for alternative options. We now have so many other options we can pursue, which are extremely good for our economy,” said he.

In a way I don’t regret that we had to endure some hardship, but I feel confident we’ll be more stable going forward.”

Cabraal indicated that he remains confident in growth rebounding by 2022. This will boost the government’s finances.

We expect that GDP growth will trend higher than 5.5% by 2022. It would be great if tourism could return to pre-pandemic levels.

He stated that it was not too soon to say whether the Omicron coronavirus variant would cause a decline in tourism.

Cabraal indicated that the policy rate would be held unchanged at January’s monetary board meeting, even though inflation has risen to its highest point in over a decade. This was due to skyrocketing food costs.

He said, “I don’t see any reason to modify that in the immediate term as it seems appropriate.”