Sri Lanka able to meet foreign debt obligations 2019: Treasury secy

ECONONOMYNEXT – Sri Lanka is able to meet remaining foreign debt obligations in 2019, with most of the payments due for the year already made, Treasury Secretary R H S Samaratunga said as the country reeled from a devastating attack by Islamist extremists.

In 2019, Sri Lanka had 5.9 billion US dollars of foreign debt and domestic dollar denominated debt to be repaid.

"Most of the payments had been made," Samaratunga said. "We only have about 1.3 billion US dollars to repay."

Sri Lanka sold 2.4 billion US dollars of bonds early in 2019 after a political crisis ended in January 2019.

"We front loaded the financing," Finance Ministry Advisor Deshal de Mel said.

Sri Lanka’s rupee came under pressure in 2018 as the Central Bank printed money to cut rates, just as the economy recovered, despite warnings by analysts that it will recreate the situation of a Weimar Republic.

When money is printed, triggering a cascading expansion in domestic credit, outflows of foreign exchange exceed inflows.

Credit turned negative in January, partly due a confidence shock from a political crisis and severe currency collapse.

A pegged Central Bank can build up reserves when credit slows, which also slows imports.

An import slowdown will hit revenues, but the government can usually expand the deficit without printing money when private credit-collapse in a so-called Keynesian stimulus.

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Samaratunga said he had not made any assessments on the deficit.

Sri Lanka brought down the budget deficit to 5.3 percent of gross domestic product in 2018, from 7.6 percent in 2015 and was planning a 4.4 percent deficit for 2019.

The International Monetary Fund has said it is expecting to approve a resumption of its program in mid May. (Colombo/Apr26/2019-SB)
 

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