Sri Lanka’s forex increases to $3 billion; former PM urges government to approach IMF

Sri Lanka’s foreign reserve exchange reached $3.1 billion dollars in December, up from $1.5 billion recorded last month, the Central Bank of Sri Lanka informed on Wednesday

Dec 29, 2021
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Former PM urges government to approach IMF

Sri Lanka’s foreign reserve exchange reached $3.1 billion dollars in December, up from $1.5 billion recorded last month, the Central Bank of Sri Lanka informed on Wednesday. It added the foreign reserves are expected to remain at such a level by end of 2021. As the country’s economy struggles, former prime minister Ranil Wickremesinghe has urged the government to seek assistance from the International Monetary Fund (IMF).

Last month, the Central Bank had announced a slew of measures to improve foreign exchange liquidity in the domestic market, and offered incentives for workers’ remittances, and the rules covering the repatriation and conversion of exports proceeds. These measures, along with a slight recovery in tourism, helped boost the reserves.

“The welcome robust recovery in the tourism sector and the strong performance in exports are further buttressing the external sector. Accordingly, the Government and the Central Bank are confident that the reserve position will remain at comfortable levels throughout the year 2022,” the Central Bank said in a statement on Wednesday. 

Fitch Ratings has recently downgraded the country’s sovereign rating to “CCC” from earlier “CC” —a move the central had criticized, terming it “hasty”. The rating agency also expressed the increased possibility of the island nation defaulting on its external repayment obligations.  

“In this background, it is unfortunate that the hasty and inexplicable decisions of certain rating agencies to downgrade the Sovereign, even in the face of clear reassurances of impending forex inflows had caused unnecessary losses in the secondary market to investors in International Sovereign Bonds issued by the Government of Sri Lanka,” the central bank said.

It also added that these hasty negative moves could result in “undue delays in certain expected foreign currency inflows which may have materialized earlier, if not for such unwarranted and questionable rating actions.”

Meanwhile, the former prime minister and the leader of the United National Party, Ranil Wickremesinghe, has warned of food shortage by April next year and urged the Rajapaksa government to seek assistance from the International Monetary Fund (IMF).

“The government has a duty to go to the International Monetary Fund immediately and seek assistance or come up with an acceptable alternative. Both have not happened,” he was quoted as saying by Colombopage. 

Last week, a top official of the agriculture ministry had also issued similar warnings. 

He also informed that the Sri Lankan government has been in talks with India to borrow oil and food, and suggested concluding talks early. Otherwise, he warned, people would get angry and that would have ramifications for both, the government and parliament. 
(SAM)

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