Government strictly adheres to prudential financial management
The Government will strictly adhere to prudential financial management and monitoring in obtaining foreign loans for development projects specially focusing attention on the repayment capacity.
The Finance Ministry has planned external borrowings of project and programme loans mostly through bilateral and multilateral sources amounting to around US$1.8 billion, as well as foreign commercial loans around $1.4 billion for budgetary support.
Long term loans to the Government recorded a net outflow of $156 million in January 2021. Gross inflows to the Government amounted to $55 million in January 2021 compared to $143 million in January 2020.
Special attention will be paid to the ability of repaying foreign loans when seeking funds for development projects, the Prime Minister has said at a recent meeting.
The External Resources Department of the Ministry of Finance has been directed to be more cautious in foreign exchange transactions and money transfers while keeping an eye on money laundering, informed sources said.
The significant remittance inflows beside a decline in imports due to restrictions have been able to maintain Sri Lanka’s current account deficit from worsening in 2020.
The ministry anticipates the current account deficit to remain manageable at 2 -3 per cent of GDP in 2021 and 2022 as import restrictions are in place.
The deficit in the trade account narrowed in January 2021 by $63 million to $667 million from $730 million recorded in January 2020, with a larger decline in imports compared to the decline in exports. In December 2020, the trade deficit was $562 million.
This was revealed in a progress review meeting of the External Resources Department at the Ministry of Finance recently.
The Ocean University Expansion Project is in the pipeline with China Harbour Engineering Company (CHEC) that built the Colombo Port City, which has entered into $1billion agreement in December 2020.
This was followed by the approval given to set up a $300 million Chinese tyre factory in close proximity to the Hambantota Port while a decision on the West Container Terminal project deal with India is still pending.
Sri Lanka is encouraging public-private partnerships (PPPs) in infrastructure development and created a new government body focused on facilitating more private sector involvement in public projects.
In terms of foreign direct investment (FDI), Sri Lanka is trying to counterbalance its reliance on its principal investors in infrastructure projects by focusing on partnerships with other countries in the region.
Foreign remittances increased by 16.3 per cent in January 2021, year-on-year, to $ 675 million from $581 million recorded in January 2020.
Foreign investment in the government securities market recorded a marginal net inflow in January 2021. The net inflow during the month amounted to $3 million.
The total outstanding exposure of foreign investment in the rupee denominated government securities market remained low at $38 million by end January 2021.
Net outflows of $44 million were recorded from the secondary market of the stock market during the month of January 2021.