The Central Bank yesterday said it was seeking support from multiple sources to manage Sri Lanka’s upcoming debt repayments and reiterated commitment to meeting its obligations even as reserves slipped to $ 4.1 billion at the end of March.
Central Bank Governor Prof. W.D. Lakshman, responding to questions said high level officials of the monetary institution were visiting a country in the Middle East (ME) to discuss support. He declined to name the country or the kind of support that is being sought but confirmed that discussions were also underway with Bangladesh.
The overtures come after Prime Minister Mahinda Rajapaksa visited Bangladesh last month and met with the Governor of Bangladesh Bank, which functions as their Central Bank. Prof. Lakshman also said they were awaiting confirmation from the China Development Bank (CDB) for a long-delayed loan of about $ 700 million. The Government has been in negotiations with CDB since last year when it approved a $ 500 million loan to prop-up reserves.
Sri Lanka has two large debt repayments in May and July with the former expected to be about $ 720 million and the latter, $ 1 billion.
“The Central Bank and the Government continues to engage with investment and lending partners to secure foreign financing and remain committed to honouring foreign currency debt service obligations on time,” the Governor said.
He also reiterated the Government’s intention to not seek assistance from the International Monetary Fund (IMF).
Recently, the Central Bank entered into a bilateral currency swap arrangement with the People’s Bank of China (PBOC) amounting to CNY 10 billion (equivalent to approximately $ 1.5 billion).
“Although the rupee experienced some volatility recently, the continuation of the existing restrictions on non-essential imports and certain foreign exchange outflows, among others, is expected to help cushion pressures in the domestic foreign exchange market.”
The Governor emphasised Central Bank involvement in the currency market has been minimal with its role largely limited to instructing banks.
Gross official reserves were estimated at $ 4.1 billion (excluding the swap facility with the PBOC), with an import cover of three months, at the end of March.
(FT)