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Sri Lanka’s central bank governor says IMF relief is not necessary

CNBC spoke with the governor of Sri Lanka’s central banks, who said that Sri Lanka doesn’t require an economic support from the International Monetary Fund.

Ajith Nivard said Monday on CNBC’s “SquawkBox Asia” that “we don’t need relief, if we can have an alternate strategy.”

He said that Sri Lanka can finance its debts, including international sovereign bonds, without causing pain to its creditors.

Recently, credit agencies warned Sri Lanka that it may require support in order to mitigate the effects of inflation and other foreign exchange headwinds. However Cabraal rejected this assessment.

He argued the government does not need to approach the IMF, especially if it is successful in finding government-to-government as well as central bank solutions in the short term. 

Cabraal explained, “And that we have a plan to transform it into something a lot better sustainable within the next one or two years.” 

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Credit downgrades

Inflationary pressures

Inflationary issues in Sri Lanka are causing concern to analysts. You can find it hereThe ability to get foreign currency could amplify what Hey said.

If a deal of $1.5bn is reached, we believe this will cause inflationary fears to continue. In addition, increased energy prices as well as the risk of additional administered adjustments in order to curb losses within the electricity sector continue to loom,” Citi analysts noted.

Although the government will likely avoid IMF assistance at the moment, they said that “we believe there will continue to be high pressures going into the July bond maturity.”

According to the Reuters, Sri Lanka’s benchmark inflation rate increased to 14% from 11.1% in November. data published Friday.

According to the central bank, food inflation reached 21.5% in December. This was due to price increases for green chilies, vegetables and rice. In December, non-food inflation rose by 7.6%. The central bank blamed price increases at restaurants, hotels and for alcoholic drinks, such as tobacco.

Cabraal however, the governor of Sri Lanka’s central banks, dispelled concerns over shortages.

“We have no fuel shortage” It is not a lack of medicine. He said that $870 million of medicine was imported last year.

Sri Lanka is not short of any food, although only one or two have been mentioned. There are all foods available. Cabraal said that he doesn’t see any need to add anything. 

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.