Sri Lanka’s Central Bank is in negotiations with the International Monetary Fund for a $1 billion Stand By Arrangement (SBA) in order to boost foreign reserves, confirmed Special Assignments Minister Sarath Amunugama.

“Sri Lanka’s annual debt service amounts to a mammoth US$ 4 billion or more which is a big burden on the economy,” said the minister at a weekly SLFP news briefing.

“Foreign remittances have remained relatively stagnant in recent times, which has aggravated the situation,” he added.

His comments come just weeks after Sri Lanka’s Central Bank Governor Arjuna Mahendran said the government was in “informal consultations”, though claimed foreign reserves were “comfortable”.

Sri Lanka’s Prime Minister Ranil Wickremesinghe is also at the World Economic Forum’s Annual Meeting in Davos, where he outlined his vision for Sri Lanka’s development, claiming the government had “revived the economy”.

Yet, the IMF had warned  Sri Lanka in December that the “economic outlook remains uncertain” and said there was continued weakness in the structure of Sri Lanka’s public finances. It also cited Sri Lanka’s fiscal deficit is a key concern for 2015 and the medium term in their annual report on Sri Lanka.

“Unfortunately, our economy depends on global economic situation,” continued Mr Amunugama.

“There is a huge gap between the inflow and outflow of capital as a result of the prices of our traditional exports of tea, rubber and coconut have been low in the last couple of years,” he said.

Last month it was reported Sri Lanka’s exports fell for the seventh successive month in September 2015, with tea export earnings slumping 20.4%.

Also see our earlier posts:

‘Is Sri Lanka’s Fiscal House in Order?’ – IMF mission chief (09 Dec 2015)