Sri Lanka’s Foreign Reserves Decreased By $1 Billion During Political Crisis – PM

Sri Lanka’s Foreign Reserves were depleted by $1 billion within the 51-day political crisis, completely upsetting the debt management plans of the country, Prime Minister Ranil Wickremesinghe said.

The Prime Minister, making a Ministerial Statement in Parliament, briefly analysed the economic impact of the political crisis and the challenges before the country in its immediate aftermath.The Prime Minister was however confident of overcoming all the challenges in the economic front, and stressed that the Government would present a “people-friendly budget” amidst the difficulties.

Prime Minister Wickremesinghe said that prime focus has now been given to stabilize the Rupee.“The rupee depreciated by 3.8 percent within the 51 days of the crisis while other currencies gained in value. From October 26 to December 16, 2018, USD 312.9 million in Treasury Guarantees, USD 29.1 million in Treasury Bills and USD 29.8 million in Treasury Bonds flowed out of the country,” the Prime Minister said. “We previously had a target of reaching USD 8 billion foreign reserves by the end of this year.

“We had USD 7,991 million Foreign Reserves as at October 26, but this had dropped to USD 6,985.4 million amidst the political crisis. As per the estimates, we need a total of USD 5,900 billion to pay for foreign loans and interests this year. Sri Lanka’s highest ever loan installment of USD 2,600 million is due on January 14. Our effort was to manage this debt in a manner that it does not burden the ordinary masses. That is why we had made far-sighted plans, but now we have to start again,” the Premier analyzed.

The Prime Minister said the Reserve Bank of India has agreed to provide USD 400 million under the SAARC swap facility. Responding to concerns raised by NFF Leader Wimal Weerawansa as to whether the Government has promised to lease out the China Bay and Kankasanturei ports, the Mattala airport and Colombo Port’s East Terminal to India in return, the Prime Minister plainly refuted any such promise, adding that only the terms and conditions of the SAARC swap facility would apply to it.

The Prime Minister also said that another USD 500 million is expected from Chinese Panda Bonds and Japanese Samurai Bonds. He said that USD 1 billion is expected to be obtained from the international monetary market, adding that Finance and Mass Media Minister Mangala Samaraweera would fly to Washington next week to discuss about it.

The Premier expressed his confidence that these would help to arrest the depreciation of the Rupee and stabilize it in the market.The Premier also said that the Government has paid urgent attention to bring down the cost of living and also to develop the tourism sector and the export market.

“All our mid-term plans stalled due to the political crisis. The political instability for 51 days was a severe blow to our economy which was gradually recovering. The economic growth stalled, the rupee further depreciated, Sri Lanka downgraded in international ratings and it failed to secure any aid or loan from any country or international monetary institution during that period. The Government projects and programmes came to a standstill. The total damage to the economy is vast and it will take time to bounce back. We need to win back the confidence of the investors and international community. The political instability occurred just after Sri Lanka was named a best tourist destination. Some countries imposed travel bans to Sri Lanka and many foreigners cancelled their trips as a result. This deprived us a lot of foreign exchange,” the Prime Minister explained.

The Prime Minister, recapping his own words in Parliament on October 27, 2016 where he urged to think about the country before personal and political motives, said that double down of effort is the need of the hour to confront the challenges before the country in the aftermath of 51 days of political instability.

“We are ready to rebuild the economy shattered by the 51-day long crisis. It is not an easy task, but as Sri Lanka upheld the people’s sovereignty and democracy overcoming all the challenges against them, we are confident that we can uplift the economy,” the Prime Minister stressed.