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Sunday December 10th, 2023

Sri Lanka targeting US$32bn inflows to repay debt: Minister

ECONOMYNEXT – Sri Lanka is expecting 32 billion US dollars in inflows from exports of goods and services and financial inflows and outflows of 27.6 billion US dollars leaving a 4.4 billion surplus to service debt, State Minister for Money and Capital Markets, Nivard Cabraal said.

“We can comfortably repay all the debt that is falling due,” Minister Cabraal said. “We are monitoring that carefully to ensure that they happen.”

Sri Lanka’s central bank Governor W D Lakshman said there was 3.7 billion US dollars of net debt to be paid, after discounting dollar debt held by residents.


Sri Lanka is targeting exports of 13 billion US dollars in exports in 2021 up from 10.7 billion dollars in 2020 when shipments dropped 15 amid a Coronavirus shutdown.

Strong growth is expected in boat building, minerals and gems, he said.

Sri Lanka exported about 300 million dollars in gems but most were getting re-exported out of Thailand which had 12 billion in exports, he said.

“We have removed export taxes it will be tax free,” he said. “That will be a proper incentive we will have exports of around one billion dollars each year.”

A committee under Basil Rajapaksa, brother of President Gotabaya Rajapaksa was working to help achieve export targets.

With a 2 rupee per dollar incentive for remittances, Sri Lanka is expecting 8.0 billion dollars in 2021 up from 7.1 billion dollars.

Services, including tourism, shipping and information technology is expected to bring in 6.1 billion US dollars, he said.

Though Sri Lanka’s tourism receipts were 4.5 billion US dollars in 2018, only 1.5 billion dollars are expected in 2021 he said.

In 2021, 2.5 billion US dollars of foreign direct investment was targeted.

A committee under Treasury Secretary S R Attygalle was clearing impediments and fast-tracking the investments.

“If here are problem we will solve the problems,” Cabraal said.

In addition to inflows into the Port City and industrial zone in Hambantota, there was strong interest in a pharmaceutical industrial zone in the area, he said.


Imports are expected to go up to 17.5 billion US dollars in 2021. FDIs will also trigger about a billion US dollars in imports.

There are expected to be about 4 billion dollars in service outflows. About 1.4 billion US dollars are expected to flow out as dividends and returns on capital he said.

Oil imports are expected to increase by billion dollars more in 2021, he said.

Outflows of around 27.6 billion dollars will leave 4.4 billion in excess allowing Sri Lanka to service the 3.7 billion dollars in debt owed to external parties.

Domestic debt holders will be repaid in dollars, he said.

The numbers will be adjusted to take into account changes and “diligently” reach the target he said.

“We will be more liberal or tighten it,” he said.

Sri Lanka recently tightened exporter repatriation rules and imposed surrender requirements on remittances and exports.

Treasury Secretary Attygalle said many imports had already been liberalized.

Sri Lanka has controlled imports in a bid to ‘save foreign exchange’.

In 2020 Sri Lanka printed over 650 billion rupees and 2.3 billion dollars flowed out as debt repayments in the biggest balance of payments deficit in the island’s history, though credit was muted after April allowing imports to fall amid a lockdown.

In 2020, bond auctions are failing.

Analysts have warned that as long bond auctions fail and new money is injected into the banking system as rupee reserves, outflows will tend to outpace inflows and interventions in trade and the payment system will worsen regime uncertainty.

Under Sri Lanka’s soft-pegged monetary set up of injecting rupees when credit picks up to keep rates down, the credit system is vulnerable to currency pressure and balance of payments deficits, payment deficits.

Sri Lanka has also fixed oil retail prices which means total imports will not be crowded out through consumption and disposal income.

Instead the adjustment has to come through the credit system as the government cuts taxes and borrows more which may trigger more money printing as the yield curve is targeted with failed Treasuries auctions leading to forex losses. (Colombo/Feb26/2021)

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  1. Ashok Swamy says:

    Why discount dollar debt held by residents. Whats the effect to the loyal citizens. Need more transparency on this statement.

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  1. Ashok Swamy says:

    Why discount dollar debt held by residents. Whats the effect to the loyal citizens. Need more transparency on this statement.

ADB USD200mn loan for Sri Lanka economic stabilization efforts

ECONOMYNEXT – The Asian Development Bank (ADB) has approved a US 200 million dollar concessional loan to Sri Lanka to help stabilize the country’s finance sector.

The Financial Sector Stability and Reforms Program comprises two subprograms of IS 200 million dollars each, according to a statement by the ADB.

“The program’s overarching development objective is fully aligned with the country’s strategy of maintaining finance sector stability, while ensuring that banks are well-positioned for eventual recovery,” ADB Country Director for Sri Lanka Takafumi Kadono was quoted as saying in the statement.

“The expected development outcome is a stable financial system providing access to affordable finance for businesses in various sectors of the economy.”

The ADB statement continues:

“Subprogram 1 targets short-term stabilization and crisis management measures that were implemented in 2023, while subprogram 2 is planned to be implemented in 2024 and focuses on structural reforms and long-term actions to restore growth in the banking sector.

The program will help strengthen the stability and governance of the country’s banking sector; improve the banking sector’s asset quality; and deepen sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.

According to the International Monetary Fund’s (IMF) latest review, Sri Lanka’s economy is showing tentative signs of stabilization, although a full economic recovery is not yet assured.

The program is a follow-on assistance from ADB’s crisis response under the special policy-based loan that was approved for Sri Lanka in May 2023.

It is aligned with the fourth pillar of the IMF’s Extended Fund Facility provided to Sri Lanka to help the country regain financial stability.

It is also in line with the government’s reform agenda, including strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and its designation as the country’s macroprudential authority.

In designing this subprogram 1 loan, ADB has maintained close coordination and collaboration with the IMF to design targeted regulatory reforms for the banking sector—including the asset quality review—and with the World Bank on strengthening the deposit insurance scheme.

“The loan is accompanied by a $1 million grant from ADB’s Technical Assistance Special Fund to provide advisory, knowledge, and institutional capacity building for Sri Lanka’s Ministry of Finance and CBSL.”

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Sri Lank in blackout as power grid hit by cascading failure

ECONOMYNEXT – Sri Lanka suffered a blackout as Saturday evening as the state-run Ceylon Electricity Board grid was hit by a cascading power failure.

The cascading failure is believed to have been triggered by the failure of the Kothmale-Biyagama transmission line.

“The Ceylon Electricity Board wishes to inform our customers that due to the failure of Kotmale – Biyagama main transmission line, an island wide power failure has occurred,” CEB Spokesman Noel Priyantha said.

“Step by step restorations are underway and it may take few hours to completely restore the power supply.”

With hydro plants running flat out, a outage of the line tends to create a big imbalance in the demand and supply, leading to tripping of more lines and generators.

Lines can trip due to lightening strikes, or equipment failures.

Sri Lanka last suffered a cascading failure in December 2021, due to the failure of the same transmission line.

RelatedSri Lanka power blackout as grid hit by cascading failure

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Sri Lanka to host regional Food and Agriculture Organization conference

ECONOMYNEXT – Sri Lanka will host the 37th session of the Asia Pacific Regional Conference (APRC) of the United Nations Food and Agriculture Organization (FAO), from February 19-22, 2024 in Colombo.

The Conference will bring together agriculture ministers and officials from 46 countries across the region to discuss challenges in food and agriculture.

“The 37th APRC will provide a vital platform for regional collaboration, benefitting the agricultural landscape, fisheries sector and environment of Sri Lanka,” Minister Mahinda Amaraweera said at a press briefing on Friday (8) to announce the conference.

FAO has had an active presence in Sri Lanka for over 40 years. “FAO has supported the country in the implementation of Good Agricultural Practices (GAP), and the development of the fisheries sector for growth and climate resilience,” Vimlendra Sharan, FAO Representative for Sri Lanka and the Maldives said.

“The APRC conference will be an opportunity to highlight the innovative approaches introduced in partnership with the government.”

By hosting APRC, Sri Lanka hopes to demonstrate the country’s dedication to the growth of sustainable agriculture, and showcase its commitment to sustainable agricultural development.

The APRC agenda will include a forum on agritourism, especially requested by the Sri Lankan government.

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