Foreign financing stabilises amid debt restructuring
View(s):Sri Lanka’s foreign financing situation in 2024 has shown signs of improvement, supported by increased foreign reserves and international assistance, primarily from the Asian Development Bank (ADB) and the International Monetary Fund (IMF).
By the end of September 2024, Sri Lanka’s foreign exchange reserves had reached about $5.94 billion, covering approximately four months of imports.
However, when excluding currency swaps, “usable” reserves remain lower, offering just over two months of import coverage, which signals continued vulnerability to external pressures should fiscal and structural reforms falter.
Negotiations with private creditors remain ongoing, a critical step since private entities hold a significant portion of Sri Lanka’s external debt.
According to Krishna Srinivasan, IMF’s Director for the Asia and Pacific Department, the new Sri Lankan government broadly supports the current reform agenda, aiming to strengthen recent economic gains.
He noted positive economic trends, with growth improving over the past four quarters and inflation decreasing.
Meeting the IMF programme terms and successfully restructuring debt is essential for Sri Lanka to maintain its access to foreign financial support.
The implications of a stable foreign financing position are significant; while it could encourage economic growth, addressing underlying structural issues like high inflation and inefficient revenue collection remains crucial.
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