Sri Lanka’s economic woes likely to worsen in 2022
Sri Lanka is heading towards a major economic crisis in 2022 amidst dwindling foreign reserves and pressure on the monetary system with no immediate signs of recovery, official statistics and estimates computed by government agencies with the use of financial modeling has revealed.
While Sri Lanka is due to repay close to US$1 billion worth of debt next month (January) and a total of over $7 billion for 2022, the Sri Lanka economy has contracted by 1.5 percent year-on-year in the third quarter of 2021, following a 12.3 percent expansion in the previous period, according to the Census and Statistics Department (DCS).
It was the first drop in economic output since the second quarter of last year, as the country re-imposed quarantine curfews and other restrictions amid its worst virus wave since the onset of the pandemic.
Further the Treasury coffers had to spend a massive Rs. 2.5 trillion in nominal terms per year, bringing the total loss of economic output during the two years of COVID-19 pandemic to Rs.5 trillion, Finance Ministry data revealed.
The official reserves and assets of Sri Lanka as at last November were US$ 1.58 billion, State Minister of Samurdhi, Household Economy, Micro Finance, Self-Employment and Business Development Shehan Semasinghe told the Business Times.
The Central Bank and the whole banking system’s Net Foreign Assets (NFA) which refers to the difference between gross foreign reserve assets and liabilities related to foreign reserves exceeded – $3.6 billion, provisional data shows.
According to latest statistics, the total debt burden will be over $7 billion in 2022 while the country has to pay bilateral debt of donor countries amounting to $947 million in January alone next year.
The January 2022 payments included $500 million of International Sovereign Bonds, $247 million of International Development Bonds and $200 million in terms of bilateral and multilateral loans
The foreign debt situation of 2022 includes January payments for debt at $947 million; multilateral debt of international financial agencies = $604 million; debt owed to creditors overseas and related external debt = $514 million; international sovereign bond maturities = $1.5 billion out of which $500 million should be repaid in January 2022; further repayment for international sovereign bond interest and other debt charges =$ 1.08 billion; Sri Lanka Development bond repayment = $ 1.44 billion; other repayments = around $1.2 billion; and Bangladesh SWAP repayment = $150 million all of which totals = $7.43 billion.
Central Bank Governor Ajith Nivard Cabraal has rejected claims that the country is having an acute foreign exchange crisis saying that foreign inflows expected by end 2021 would be around $3 billion.
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