Sri Lanka’s Central Bank Governor, Ajith Nivard Cabraal, has claimed that Sri Lanka will be able to pay off the country’s debt “seamlessly”, as inflation on the island has reached an all-time high for the past 12 years in November.
“The repayments will go through seamlessly; we are confident we’ll be making those payments on time. There is absolutely no worry about that” Cabraal claimed.
He further asserted that the pandemic was positive for exposing the vulnerabilities of the country and highlighting the need for alternatives.
“I’m not unhappy that we’ve had to go through some pain but confident going forwards we will be a lot more stable as a result” he asserted.
Sri Lanka is required to pay $4.5 billion to service its sovereign bonds in 2022. This comes as the country’s foreign currency reserves plummeted to $2.3 billion at the end of October. Over the past two years, Sri Lanka’s central bank has printed 1.48 trillion rupees leading the country to hit a 12-year inflation high of 9.9%. This is despite Cabraal’s previous pledge to keep inflation between 4-6%.
Responding to the escalating food prices, the United Nation’s Food and Agriculture Organisation has issued a high alert warning for the country. Tamil villages across the North-East have suffered the most being pushed to the point of starvation and not receiving promised government aid.
Searching for a way out
Commenting on the island’s financial strategy, Cabraal claimed that the country was “taking many steps to deal with our debt” and was “not just dependent on a single instrument”.
He highlighted how Sri Lanka’s Finance minister had secured a $500 million credit line from India and noted that the government would turn to bilateral swaps, government to government loans and securitising remittances to strengthen investment and support the country’s finances.
He further projected a GDP growth of over 5.5% in 2022 and claimed that a return to tourism, “to even half of the pre-pandemic levels” could see an increase to 6 to 6.5%.
However, concerns have been raised over the impact of the new Omicron variant which has been detected in Sri Lanka.
Responding to the country’s economic turmoil Sri Lankan government Minister, Vasudeva Nanayakkara has insisted that “even if we die, we will not seek assistance from the IMF”.
Cabraal has supported this position warning that the IMF’s proscriptions would violate the country’s sovereignty.
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